<PAGE>
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 22, 2000
REGISTRATION NO. 333-94337
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PARTSBASE.COM, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
TEXAS 7379 76-0604158
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
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7171 N. FEDERAL HIGHWAY, SUITE 100
BOCA RATON, FL 33487
(561) 443-3302
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
ROBERT A. HAMMOND, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PARTSBASE.COM, INC.
7171 N. FEDERAL HIGHWAY, SUITE 100
BOCA RATON, FL 33487
(561) 443-3302
(Name and address, including zip code, and telephone number, including area
code, of agent for service)
------------------------------
Copies to:
<TABLE>
<S> <C>
ROBERT M. STEINBERG, ESQ. JEFFREY R. HOULE, ESQ.
JEFFER, MANGELS, BUTLER & MARMARO LLP DANIEL S. BERGER, ESQ.
2121 AVENUE OF THE STARS, 10TH FLOOR GREENBERG TRAURIG, LLP
LOS ANGELES, CALIFORNIA 90067 1750 TYSONS BOULEVARD, SUITE 1200
(310) 203-8080 MCLEAN, VA 22102
FAX (310) 203-0567 (703) 749-1300
FAX (703) 749-1301
</TABLE>
------------------------------
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, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
Pursuant to Rule 416, there are also being registered hereby such additional
indeterminate number of shares of such Common Stock as may become issuable by
reason of stock splits, stock dividends and similar adjustments as set forth in
the provisions of the Representative's Warrant. / /
CALCULATION OF REGISTRATION FEE
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<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
4,936,250 shares Common Stock, no par value (2)............. $69,107,500 $18,244.40
1 Representative's Warrant.................................. $50.00
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Consists of (i) 3,000,000 shares to be offered by the Registrant,
(ii) 450,000 shares subject to the underwriters' over-allotment option,
(iii) 150,000 shares issuable upon exercise of the Representative's Warrant,
and (iv) 1,336,250 shares issuable upon conversion of outstanding
convertible promissory notes and Series A convertible preferred stock which
are being registered on behalf of the holders thereof but which are not
being underwritten.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This registration statement contains two prospectuses.
The first prospectus forming a part of this Registration Statement is to be
used in connection with the underwritten initial public offering of 3,450,000
shares of the Registrant's common stock (including 450,000 shares of common
stock subject to the underwriters' over-allotment option), and immediately
follows this page.
The second prospectus forming a part of this Registration Statement is to be
used in connection with the sale from time to time by certain stockholders of
(i) 481,250 shares of common stock issuable upon the automatic conversion of
convertible promissory notes, and (ii) 855,000 shares of common stock issuable
upon the automatic conversion of Series A convertible preferred stock.
The second prospectus will consist of (i) pages SS-1 and SS-2 (the front
cover page and inside front cover page of the second prospectus), (ii) pages 3
through 49 of the first prospectus (other than the sections entitled "Use of
Proceeds" and "Underwriting") and pages F-1 through F-18 of the first
prospectus, (iii) page SS-5 (which will appear in place of the section entitled
"Underwriting"), (iv) pages SS-3 and SS-4, and (v) page SS-6 (which is the back
cover page of the second prospectus).
<PAGE>
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 22, 2000
PROSPECTUS
PARTSBASE.COM [LOGO]
3,000,000 SHARES OF COMMON STOCK
$ PER SHARE INITIAL PUBLIC OFFERING PRICE
PartsBase.com, Inc. is offering 3,000,000 shares of its common stock in an
initial public offering. Prior to this initial public offering, there has been
no public market for our common stock. We expect our initial public offering
price to be between $11.00 and $13.00 per share. We have filed an application
for our common stock to be quoted on the Nasdaq National Market under the symbol
"PRTS."
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 7 FOR RISKS THAT YOU SHOULD CONSIDER BEFORE INVESTING IN THE SHARES OF
OUR COMMON STOCK.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
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.
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- --------
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds, before expenses, to PartsBase.com................. $ $
</TABLE>
We have granted the underwriters a 45-day option to purchase up to an
additional 450,000 shares of common stock to cover over-allotments. The
underwriters expect to deliver shares of common stock to purchasers on or about
, 2000.
ROTH CAPITAL PARTNERS, INC.[LOGO] PENNSYLVANIA MERCHANT GROUP [LOGO]
The date of this prospectus is , 2000.
<PAGE>
The inside front cover includes:
THE E-COMMERCE MARKETPLACE FOR THE AVIATION INDUSTRY.
[A PICTURE OF THE PARTSBASE.COM WEB SITE'S HOME PAGE]
[A PICTURE OF THE PARTSBASE.COM WEB SITE'S PARTS SEARCH PAGE]
with the following text to the right of the picture:
THE PARTS YOU NEED @ YOUR FINGERTIPS!
- 24 hour global services
- Multiple search options
- Remote inventory management
[A PICTURE OF THE PARTSBASE.COM WEB SITE'S PARTS SEARCH RESULTS PAGE]
The inside back cover includes:
[A PICTURE OF THE PARTSBASE.COM WEB SITE'S AUCTION PAGE]
with the following text to the left of the picture:
XCHANGEBASE
- Auction off excess inventory
- Purchase at the lowest available price
[A PICTURE OF THE PARTSBASE.COM WEB SITE'S JOB SEARCH PAGE]
with the following text to the right of the picture:
JOBSBASE
- Find a job in the aviation industry
- Find the right employee
[A PICTURE OF THE PARTSBASE.COM WEB SITE'S AIRCRAFT SEARCH PAGE]
with the following text to the left of the picture:
AIRCRAFTSALESBASE
- Buy, sell and trade aircraft
At the bottom center of the inside back cover is the following text:
http://www.partsbase.com/
<PAGE>
TABLE OF CONTENTS
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<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 7
Use of Proceeds............................................. 16
Dividend Policy............................................. 16
Capitalization.............................................. 17
Dilution.................................................... 18
Selected Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20
Business.................................................... 23
Management.................................................. 33
Certain Relationships and Related Transactions.............. 40
Principal Stockholders...................................... 41
Description of Capital Stock................................ 43
Shares Eligible for Future Sale............................. 46
Plan of Distribution........................................ 47
Legal Matters............................................... 49
Experts..................................................... 49
Where You Can Find More Information......................... 49
Index to Financial Statements............................... F-1
</TABLE>
"PARTSBASE" is a registered trademark of PartsBase. We have applied for
federal trademark registration for "PARTSBASE.COM". All other trademarks or
service marks appearing in this prospectus are the property of their respective
holders.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS
AND MAY NOT CONTAIN ALL THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND
OUR BUSINESS AND THIS OFFERING FULLY, YOU SHOULD READ THIS ENTIRE PROSPECTUS
CAREFULLY, INCLUDING THE FINANCIAL STATEMENTS AND THE RELATED NOTES BEGINNING ON
PAGE F-1. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM
THAT CONTAINED IN THIS PROSPECTUS.
OUR BUSINESS
PartsBase.com is an online provider of Internet business-to-business
e-commerce services for the aviation industry. Our global e-commerce
marketplace, sometimes referred to as our "e-marketplace" or our "solution,"
provides a means for our over 13,000 members in more than 115 countries to buy
and sell new, used and overhauled aviation parts and products in an efficient,
competitive and cost-effective manner. We estimate that our e-marketplace
utilizes a database of approximately 1,200 suppliers, which we believe
constitutes one of the largest independent databases of inventory and
information in the aviation industry. Current members of our e-commerce
marketplace include Boeing, Honeywell, Federal Express, Pratt & Whitney,
Northrup Grumman Aviation and United Parcel Service.
The worldwide market for aviation parts and products is highly fragmented
and includes many types of suppliers, such as airlines, original equipment
manufacturers, also known as OEMs, numerous independent distributors, on-site
airport maintenance providers, also known as fixed base operators, Federal
Aviation Administration certified facilities, traders and brokers. Aerospace
Industries Association estimates that total exports and imports of aircraft
parts and products were approximately $29 billion in 1999. Furthermore, in
recent years, the airline industry has experienced rapid growth in business and
leisure travel. As a result, the world fleet of aircraft is projected to
increase from 12,600 aircraft in 1998 to 28,400 aircraft in 2018, according to
Boeing's 1999 Current Market Outlook. The increase in travel and the number of
aircraft have likely contributed to demand for aviation parts and products as
aircraft must be serviced at scheduled intervals. In addition, management
believes that as the age of the world fleet of aircraft increases, demand for
new, used and overhauled parts and products may increase. Forrester Research
estimates that the business-to-business e-commerce market will grow from
$43 billion in 1998 to $1.3 trillion by 2003.
Our goal is to solidify a position as a leading aviation industry e-commerce
marketplace in order to capitalize on the continued expansion of the market for
aviation parts and products. Our solution takes advantage of the growth,
pervasiveness, low costs and community building nature of the Internet as a
basis for e-commerce for the broad, highly fragmented aviation industry. We
believe that the value of our e-marketplace grows substantially as each new
member brings additional parts, products, information and buying power to our
community.
OUR SOLUTION
Our solution is designed to streamline the procurement cycle for our members
by enabling them to source, bid parts and products, and eventually manage their
order payment online. Our target members are primarily the businesses that buy
and sell aviation parts, supplies and components in the global marketplace, and
our current members vary from small businesses to Fortune 500 companies such as
General Electric, Honeywell, AMR and Boeing. We have designed our e-marketplace
to meet the needs of these customers and their industry. With a standard
Internet connection, a Web browser and a PartsBase.com membership, each of our
e-marketplace members can immediately participate as both a buyer and a seller.
Our e-marketplace is designed to provide advantages over traditional
procurement processes, including:
- reduced procurement costs;
3
<PAGE>
- more efficient pricing and improved access to sellers for buyers;
- ability to locate the most geographically desirable parts;
- expanded distribution opportunities for sellers; and
- ease of use and better access to information.
Our current Web site features include:
- online buying and selling utilizing advanced parts search features,
inventory listings, and requests for quotations, also known as RFQs,
member access to detailed information regarding current transactions;
- online auctions for aviation parts and products;
- procurement controls providing members with the ability to monitor
corporate purchasing; and
- community-building information such as industry job and aircraft sales
listings, as well as links to members and other industry Web sites.
In addition, we have recently signed an agreement with Tradex
Technologies, Inc., a subsidiary of Ariba, Inc., to install and implement
customized software that will allow for seamless online transactions. We have
also contracted with Trading Dynamics, Inc., another subsidiary of Ariba, Inc.,
to provide software for our auction platform. We expect that such software will
further enable online negotiating, pricing and bidding, as well as allow us to
act as a clearing house for products, and to allow our members to complete their
transactions online.
We have a limited operating history, have limited revenues and have never
been profitable. In 1999, we generated revenues of $362,224 and incurred a net
loss attributable to holders of common stock of $7,815,409.
OUR BUSINESS STRATEGY
Our objective is to establish our e-marketplace as the preferred aviation
industry business-to-business e-commerce solution. The key elements of our
strategy include:
- Achieving growth through transaction fees and other sources of
revenues;
- Strengthening the PartsBase.com brand;
- Increasing membership and market penetration;
- Establishing and expanding strategic sales and marketing relationships;
- Expanding our international presence; and
- Attracting and retaining members with new content, features and
services.
The successful implementation of our strategy will be subject to many risks
and will depend on many factors, including but not limited to the continued
growth and acceptance of e-commerce in the aviation industry as a whole, and the
acceptance of our business model in particular. We may be adversely affected by
a variety of risks and difficulties. For a detailed description of these risks,
please refer to the "Risk Factors" section contained in this prospectus.
OUR HISTORY
We began operations in April 1996 under the name Aviation Parts Base, a
division of Aviation Laboratories, Inc. While our Web site was operational in
1996, we did not begin charging subscription fees until November 1998. In
April 1999, the assets of the division were conveyed to Robert A. Hammond, Jr.
in connection with the sale of Mr. Hammond's equity interest in Aviation
Laboratories, Inc. On April 27, 1999, Mr. Hammond transferred the assets of the
division into and incorporated PartsBase.com, Inc. as a Texas corporation. Our
headquarters are located at 7171 N. Federal Highway, Boca Raton, Florida 33487
and our telephone number is (561) 443-3302. Our Web site address is
WWW.PARTSBASE.COM. The information contained on our Web site is not a part of
this prospectus.
4
<PAGE>
THE OFFERING
Unless otherwise indicated, the following information assumes that the
underwriters do not exercise the over-allotment option to purchase up to 450,000
additional shares in the offering and reflects the automatic conversion of all
outstanding shares of preferred stock and all outstanding convertible notes into
shares of our common stock upon completion of this offering.
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<S> <C>
COMMON STOCK OFFERED BY US................... 3,000,000 shares
COMMON STOCK OUTSTANDING AFTER THIS 13,587,500 shares (1)
OFFERING...................................
USE OF PROCEEDS.............................. We intend to use substantially all the
proceeds of this offering for general
corporate purposes, including working
capital, information technology, expansion of
sales and marketing activities and possible
acquisitions. We may also use a portion of
the net proceeds for the development of
business-to-business e-commerce solutions for
other industries.
SHARES BEING REGISTERED FOR THE ACCOUNT OF
CERTAIN STOCKHOLDERS....................... An additional 1,336,250 shares are being
registered pursuant to the registration
statement of which this prospectus is a part
on behalf of certain stockholders. These
shares may not be sold, transferred or
assigned without the consent of the
underwriters during the 180 day period
following the effective date of this
offering. These shares are not being
underwritten by the underwriters and we will
not receive any of the proceeds from their
sale.
</TABLE>
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(1) Excludes:
- 175,000 shares issuable upon exercise of outstanding stock purchase
warrants;
- 2,000,000 shares reserved for issuance under our stock option plan, under
which options to acquire 987,875 shares are outstanding as of the date of
this prospectus; and
- 150,000 shares of common stock issuable upon exercise of stock purchase
warrants to be issued to Roth Capital Partners, Inc., the representative
of the underwriters, upon completion of the offering at an exercise price
equal to 120% of the initial public offering price.
5
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 1, 1996
(INCEPTION)
TO YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------------
1996 1997 1998 1999
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue............................................ $ -- $ 2,861 $ 3,504 $ 362,224
Cost of revenue........................................ 16,842 104,041 43,462 1,412,532
Noncash compensation expense........................... -- -- -- 1,799,139
---------- ---------- ---------- -----------
Total cost of revenue.................................. 16,842 104,041 43,462 3,211,671
---------- ---------- ---------- -----------
Gross loss............................................. (16,842) (101,180) (39,958) (2,849,447)
Operating expenses
General and administrative........................... 55,064 90,452 108,163 1,293,091
Noncash compensation expense......................... 899,821
---------- ---------- ---------- -----------
Total operating expenses........................... 55,064 90,452 108,163 2,192,912
---------- ---------- ---------- -----------
Operating loss..................................... (71,906) (191,632) (148,121) (5,042,359)
Other income (expense)
Interest expense..................................... -- -- -- (881,652)
Interest income...................................... -- -- -- 10,977
-----------
Total other income (expense)....................... -- -- -- (870,675)
---------- ---------- ---------- -----------
Net loss (1)....................................... (71,906) (191,632) (148,121) (5,913,034)
Value of preferred stock beneficial conversion
feature.......................................... -- -- -- (1,902,375)
---------- ---------- ---------- -----------
Net loss applicable to common stockholders......... $ (71,906) $ (191,632) $ (148,121) $(7,815,409)
========== ========== ========== ===========
Net loss per common share--basic and diluted (1)....... $ (0.84)
Weighted average common shares outstanding--basic and
diluted.............................................. 9,251,250
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 735,276 $ 735,276 $32,305,276
Working capital (deficit)................................... (687,172) (687,172) 30,882,828
Total assets................................................ 4,729,295 4,729,295 36,299,295
Convertible notes payable................................... 962,500 -- --
Total stockholders' equity.................................. 1,541,916 2,504,416 34,074,416
</TABLE>
The pro forma balance sheet data gives effect to the mandatory conversion of
all outstanding convertible notes into common stock under the terms of the
June 9, 1999 private placement, the mandatory conversion of the convertible
notes issued on November 10, 1999, and the issuance and mandatory conversion of
outstanding convertible preferred stock into common stock. Additionally, the pro
forma as adjusted balance sheet data gives effect to the sale of 3,000,000
shares of our common stock at an assumed initial public offering price of $12.00
per share after deducting underwriters discounts and commissions and estimated
offering expenses.
- ------------------------
(1) Since we have incurred net losses since inception, we would not have
incurred any income tax liabilities during the periods prior to
incorporation on April 27, 1999, and any deferred tax assets would have had
a corresponding valuation allowance and therefore pro forma presentation is
not required.
6
<PAGE>
RISK FACTORS
You should carefully consider the following risks, in addition to the other
information contained in this prospectus, before making any investment decision.
As a result of any of the risks we encounter, our business, financial condition
and results of operations could be materially adversely affected. In addition,
any of these adverse effects could cause the trading price of our common stock
to decline and you may correspondingly lose all or some portion of your
investment.
RISKS RELATED TO OUR BUSINESS
WE CANNOT PREDICT OUR SUCCESS BECAUSE OUR BUSINESS MODEL IS UNPROVEN AND WE HAVE
OPERATED OUR BUSINESS FOR ONLY A SHORT PERIOD OF TIME.
Our business model is new to the aviation industry and our ability to
generate revenues or profits is unproven. We have a limited operating history,
which will make it difficult for you to evaluate our performance. Our prospects
will be dependent upon our ability to effectively implement our business model
and adapt to changes in the business-to-business e-commerce market. If our
business model is not viable or if we are unable to identify and address changes
in our markets, we will not be able to grow our business, compete effectively or
achieve profitability. These factors could cause our stock price to fall
significantly.
WE PRIMARILY RELY ON REVENUE FROM SUBSCRIPTIONS AND WE MAY NOT BE ABLE TO
SUCCESSFULLY EXPAND OUR MEMBERSHIP BASE OR ESTABLISH ADDITIONAL REVENUE SOURCES.
We currently generate revenues from e-commerce customers in the aviation
industry who subscribe to our service. Our success will be dependent on our
ability to expand our membership base within the aviation industry. While we
have experienced increases in our subscriber base, there can be no assurance
that our recent growth in subscriber base can be continued. In addition, our
success will depend on our ability to generate additional revenues through the
introduction of a transaction-based model and/or the expansion into new markets
and industries. We cannot assure you that we will be successful in any efforts
to generate additional revenues.
WE HAVE NEVER BEEN PROFITABLE, ANTICIPATE CONTINUED LOSSES AND CANNOT GUARANTEE
PROFITABILITY IN THE FUTURE, AND THEREFORE YOUR INVESTMENT CANNOT BE VALUED ON
THE BASIS OF OUR EARNINGS.
We have never been profitable and expect to continue to incur operating
losses on both a quarterly and annual basis for the foreseeable future. We may
be unable to ever achieve profitability in the future. We have incurred net
losses in each accounting period since we began operations in April 1996,
including a net loss attributable to holders of common stock of $7,815,409 for
the year ended December 31, 1999. We expect to continue to make significant
expenditures for sales and marketing, information technology and general and
administrative functions. As a result, we will need to generate significant
revenues to achieve profitability. There can be no assurance that our revenues
will grow in the future or that we will achieve sufficient revenues for
profitability. If our revenues grow more slowly than we anticipate, or if our
operating expenses exceed our expectations, our business would be severely
harmed.
WE RECEIVE SUBSTANTIALLY ALL OF OUR REVENUE FROM PARTICIPANTS IN THE AVIATION
INDUSTRY, SO A DOWNTURN IN THE AVIATION INDUSTRY COULD DAMAGE OUR BUSINESS.
We receive substantially all of our revenue from members associated with the
aviation industry, and we expect these revenues will account for substantially
all of our revenues for the foreseeable future. Our dependence on members
associated with the aviation industry makes us vulnerable to downturns in that
industry. Such a downturn could lead our members to reduce their level of
activity on our e-marketplace and cause some to cancel their subscription.
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<PAGE>
INTENSE COMPETITIVE PRESSURES IN THE BUSINESS-TO-BUSINESS E-COMMERCE MARKET MAY
IMPEDE OUR ABILITY TO ESTABLISH A SUBSTANTIAL MARKET SHARE THAT WOULD ALLOW US
TO BE PROFITABLE.
The business-to-business e-commerce market is new, rapidly evolving, and
intensely competitive, and we expect competition to further intensify in the
future. Barriers to entry are minimal, and competitors may develop and offer
services similar to ours in the future. We expect that additional companies will
offer competing e-commerce solutions in the future, and our business could be
severely harmed if we are not able to compete successfully against current or
future competitors. In addition, our members and partners may become competitors
in the future.
Increased competition is likely to result in price reductions, reduced gross
margins and/or loss of market share, any of which could harm our business. Our
actual and potential competitors vary in size and in the scope and breadth of
the services they offer.
IF WE FAIL TO EFFECTIVELY MANAGE OUR RAPIDLY EXPANDING OPERATIONS AND THE
INCREASING USE OF OUR SERVICES, WE MAY LOSE MEMBERS OR INCUR SIGNIFICANT
EXPENSES.
Our success depends on effective planning and growth management. We will
need to continue to improve our financial and managerial controls, reporting
systems, and procedures, and we will need to continue to expand, train and
manage our workforce. We continue to increase the scope of our operations and we
have grown our workforce substantially. Our rapid growth has placed, and will
continue to place, a significant strain on our management and operational
systems and resources. If we do not successfully implement and integrate these
new systems or if we fail to scale these systems to our growth, the performance
of our Web site may suffer which would cause us to lose members. In addition,
any failure could make us unable to operate with adequate, accurate and timely
financial and operational information which could result in us incurring
unnecessary and possibly damaging expenses.
FUTURE GROWTH OF OUR OPERATIONS MAY MAKE ADDITIONAL CAPITAL OR FINANCING
NECESSARY, SO YOU MAY BECOME SUBJECT TO DILUTION OF YOUR INVESTMENT AND YOUR
RIGHTS AS A STOCKHOLDER MAY BE SUBORDINATED TO OTHER INVESTORS.
We anticipate that the proceeds of this offering, cash on hand and cash
equivalents will be adequate to meet our working capital needs for at least the
next 12 months. However, beyond that period, we may need to raise additional
funds in order to:
- finance unanticipated working capital requirements;
- develop or enhance existing services or products;
- fund costs associated with strategic marketing alliances;
- respond to competitive pressures; and
- acquire complementary businesses, technologies, content or products.
We cannot be certain that we will be able to obtain such funds on favorable
terms, if at all. If we decide to raise funds by issuing additional equity
securities, purchasers in this offering may experience additional dilution.
Issuance of additional equity securities may also involve granting preferences
or privileges ranking senior to those purchasers in this offering.
WE MAY BE UNABLE TO OBTAIN SUFFICIENT FUNDS TO EFFECTIVELY OPERATE OUR BUSINESS
WHICH COULD DAMAGE OUR COMPETITIVE POSITION.
In the rapidly evolving and highly competitive e-commerce industry, our
future prospects will depend heavily on our ability to take advantage of new
business opportunities and respond to technological developments. There can be
no assurances that we will have sufficient capital resources to respond to
business opportunities, technological advancements and competitive pressures. A
lack of capital resources could seriously damage our competitive position and
prospects.
8
<PAGE>
OUR QUARTERLY RESULTS HAVE BEEN AND WILL LIKELY CONTINUE TO BE UNPREDICTABLE,
WHICH MAY NEGATIVELY AFFECT THE TRADING PRICE OF OUR COMMON STOCK AND HAMPER
YOUR ABILITY TO SELL YOUR STOCK ON FAVORABLE TERMS.
Our revenues and results of operations may fluctuate significantly in the
future as a result of a variety of factors:
- demand for and market acceptance of our solution;
- inconsistent growth, if any, of our subscriber base;
- introduction of new services or enhancements by us or our competitors;
- changes in our pricing policy or those of our competitors;
- amount and timing of capital expenditures and other costs relating to
the expansion of our operations;
- timing and number of new hires;
- technical difficulties with our Web site; and
- general economic conditions.
If fluctuations in our operations cause our operating results to fall below
market analysts' expectations in some future quarters, our stock price will
likely decline.
WE MAY NOT BE ABLE TO BUILD A CRITICAL MASS OF BUYERS AND SELLERS, WHICH WOULD
HARM OUR BUSINESS AND POTENTIAL FUTURE GROWTH.
Our success as a business will depend in large part on our ability to build
a critical mass of parts, products and sellers. If we are unable to increase the
number of sellers and draw more buyers to our e-marketplace, we will not be able
to benefit from any network effect, where the value to each member in our
e-marketplace increases with the addition of each new member. Additionally, our
public e-marketplace operates as a bidding process allowing buyers to compare
the prices of the same part or product offered by multiple sellers. Because of
the increased competition and comparisons created by a bidding environment, some
sellers may be reluctant to join or continue as a member of our e-marketplace.
To be an attractive venue for buyers, we must add and retain a substantial
number of sellers as members. If we are unable to do so, the overall value of
our e-marketplace may be harmed and our business, revenues, financial condition
and results of operations could be negatively effected.
BECAUSE OUR REVENUE IS DERIVED FROM PROVIDING E-MARKETPLACE ACCESS TO
SUBSCRIBERS FOR AN ANNUAL SUBSCRIPTION FEE, THE CANCELLATION OR NON-RENEWAL OF
THESE SUBSCRIPTIONS WOULD HURT OUR BUSINESS.
We have generated substantially all of our revenues to date through member
subscription fees for access to our e-marketplace. Generally, our subscription
fees are paid on an annual basis, and these subscriptions may be terminated on
short-term notice. We have expended significant financial and personnel
resources and have expanded our operations on the assumption that our
subscribers will renew these annual subscriptions. If these members fail to
continuously renew, or if they terminate, their subscriptions, our revenues
would be significantly reduced and our business could suffer dramatically.
THERE IS A FINITE NUMBER OF POTENTIAL SUBSCRIBERS AND WE MAY BE UNABLE TO
DEVELOP OTHER MEANS OF GENERATING REVENUE, SO OUR GROWTH MAY BE LIMITED.
A major element of our growth strategy is the expansion of our subscriber
base. Our potential subscriber base is limited by the number of participants in
the aviation market. Additionally, the barriers to entry which exist in the
aviation market may limit the entry of additional subscribers into our
e-marketplace. Accordingly, the number of potential subscribers to our
e-marketplace is likely
9
<PAGE>
finite, in which case our revenues may be similarly limited if we cannot
generate revenue through other means.
IF OUR SELLERS DO NOT PROVIDE TIMELY, PROFESSIONAL AND LAWFUL DELIVERY OF
PRODUCTS TO OUR BUYERS, OUR MEMBERSHIP MAY DECREASE AND WE MAY HAVE LIABILITY.
We rely on our sellers to deliver purchased parts and products to our buyers
in a professional, safe and timely manner. If our sellers do not deliver the
parts and products to our buyers in a professional, safe and timely manner, then
our service will not meet customer expectations and our reputation and brand
will be damaged. In addition, deliveries that are nonconforming, late or are not
accompanied by information required by applicable laws or regulations, could
expose us to liability or result in decreased adoption and use of our solution,
which could have a negative effect on our business, results of operations and
financial condition.
WE CANNOT GUARD AGAINST HARM TO OUR BUSINESS FROM THE FRAUDULENT ACTIVITIES OF
THIRD PARTIES ON OUR WEB SITE.
Our future success will depend largely upon sellers reliably delivering and
accurately representing their listed products and buyers paying the agreed
purchase price. We do not take responsibility for the delivery of payment or
goods to any member. We have received in the past, and anticipate that we will
receive in the future, communications from members who did not receive the
purchase price or the products that were to be exchanged. While we can suspend
the privileges of members who fail to fulfill their delivery or payment
obligations, we do not currently have the ability to require sellers to deliver
products or buyers to make payments. We do not compensate members who believe
they have been defrauded by other members. Any negative publicity generated as a
result of fraudulent or deceptive conduct by members of our e-marketplace could
damage our reputation and diminish the value of our brand name. We may in the
future receive requests from members for reimbursement or threats of legal
action against us if no reimbursement is made. Any resulting litigation could be
costly for us, divert management attention, result in increased costs of doing
business, lead to adverse judgments, or otherwise harm our business.
IF WE ARE UNABLE TO IMPLEMENT ADEQUATE MEASURES TO MAINTAIN THE VALUE OF OUR
INTELLECTUAL PROPERTY AND INTERNET DOMAIN NAME, OUR ABILITY TO COMPETE MAY BE
SEVERELY HARMED.
As an Internet company, our current and future copyrights, service marks,
trademarks, patents, trade secrets, domain name and similar intellectual
property, if any, are especially vital to our success. Despite our precautions,
unauthorized third parties may infringe or misappropriate our intellectual
property, copy certain portions of our services or reverse engineer or obtain
and use information that we regard as proprietary. Any infringement or
misappropriation of our intellectual property or proprietary information could
make it difficult for us to compete
In addition, we currently hold various Internet Web addresses relating to
our network, including the domain name "PARTSBASE.COM." If we are not able to
prevent third parties from acquiring Web addresses that are similar to our
addresses, third parties could acquire similar domain names which could create
confusion that diverts traffic away from our e-marketplace to other competing
Web sites.
OTHER PARTIES MAY ASSERT CLAIMS AGAINST US THAT WE ARE INFRINGING UPON THEIR
INTELLECTUAL PROPERTY RIGHTS, WHICH COULD HARM OUR FINANCIAL CONDITION AND
ABILITY TO COMPETE.
We cannot be certain that our services do not infringe upon the intellectual
property rights of others. Because patent applications in the United States are
not publicly disclosed until the patent is issued, applications may have been
filed which relate to services similar to those offered by us. We may be subject
to legal proceedings and claims from time to time in the ordinary course of our
business, including claims of alleged infringement of the trademarks and other
intellectual property rights of
10
<PAGE>
third parties. If our services violate third-party proprietary rights, we cannot
assure you that we would be able to obtain licenses to continue offering such
services on commercially reasonable terms, or at all. Any claims against us
relating to the infringement of third-party proprietary rights, even if not
meritorious, could result in the expenditure of significant financial and
managerial resources and for injunctions preventing us from distributing these
services. Such claims could severely harm our financial condition and ability to
compete.
IF WE ARE UNABLE TO LICENSE THIRD-PARTY TECHNOLOGIES OR EFFECTIVELY INTEGRATE
SUCH TECHNOLOGIES, WE MAY EXPERIENCE DELAYS IN DEVELOPMENT OR EXPANSION OF OUR
BUSINESS.
The e-commerce market is rapidly evolving and we have and will depend on
third-party software and other technology for the effective operation of our Web
site and business. We may not be able to license or renew the license for these
technologies on terms favorable to us or at all. Our inability to obtain
necessary third-party licenses could delay the continued development of our
business and services which could result in a loss of members, slow our growth
and severely harm our business. In addition, even if we are able to license
needed technology, we may not be able to successfully integrate such technology
into our operations which could also result in a loss of members, slow our
growth and severely harm our business.
RISKS RELATED TO THE INTERNET AND E-COMMERCE INDUSTRIES
OUR GROWTH MAY BE IMPAIRED IF THE INTERNET IS UNABLE TO ACCOMMODATE GROWTH IN
E-COMMERCE.
Our success depends on the widespread use of and growth in the use of the
Internet for retrieving, sharing and transferring information among buyers and
sellers in the aviation parts market. If the Internet cannot accommodate growth
in e-commerce or experiences periods of poor performance, the growth of our
business may suffer. Our ability to sustain and improve our services is limited,
in part, by the speed and reliability of the networks operated by third parties.
Consequently, the emergence and growth of the market for our services is
dependent on improvements being made to the Internet infrastructure to alleviate
overloading and congestion. Additionally, the possible slow adoption of the
Internet as a means of commerce by businesses may harm our prospects.
Even if the Internet is widely adopted as a means of commerce, the adoption
of our network for procurement, particularly by companies that have relied on
traditional means of procurement, will require broad acceptance of e-commerce
and online purchasing. In addition, companies that have already invested
substantial resources in traditional methods of procurement, or in-house
e-commerce solutions, may be reluctant to adopt our e-commerce solution, thus
impairing the growth of our member base and revenue potential.
THE SECURITY RISKS RELATED TO E-COMMERCE MAY CAUSE MEMBERS TO REDUCE THE USE OF
OUR SERVICES, AND ATTEMPTING TO GUARD AGAINST SUCH RISKS MAY CAUSE US TO INCUR
SIGNIFICANT COSTS AND EXPENSES.
A fundamental requirement to conduct business-to-business e-commerce is the
secure transmission of information over public networks. If our members are not
confident in the security of e-commerce, they may not effect transactions on our
e-marketplace or renew their subscriptions, which would severely harm our
business. There can be no guarantee that advances in computer capabilities, new
discoveries in the field of cryptography, or other developments will not result
in the compromise or breach of the algorithms that we use to protect content and
transactions on our e-marketplace or proprietary information in our databases.
We may be required to incur significant costs to protect against security
breaches or to alleviate problems caused by breaches. Further, a well-publicized
compromise of security could deter people from using the Internet to conduct
transactions that involve transmitting confidential information. Our failure to
prevent security breaches, or well-publicized security breaches affecting the
Internet in general, could adversely affect the willingness of our members to
use our services.
11
<PAGE>
IF OUR SELLERS FAIL TO PROVIDE TIMELY AND ACCURATE INFORMATION, OUR MEMBERSHIP
BASE AND POTENTIAL REVENUE MAY DECLINE.
Our members use our service in large part because of the comprehensive
breadth and accuracy of our databases. It is our responsibility to load seller
product information into our database and categorize the information for search
purposes. However, we are dependent on our sellers to provide us in a timely
manner with accurate, complete, and current information regarding inventory. If
our timely loading of this information is impaired, this could result in member
dissatisfaction and a loss of members.
WE MAY NOT BE ABLE TO KEEP UP WITH TECHNOLOGICAL ADVANCEMENTS, WHICH COULD
RESULT IN A LOSS OF MEMBERS AND HARM OUR ABILITY TO COMPETE.
The market for Internet commerce is characterized by rapid change, evolving
industry standards and the frequent introduction of new technological products
and services. The introduction of new technology, products, services or
standards may prove to be too difficult, costly or simply impossible to
integrate into our existing systems. Moreover, innovations could render obsolete
our existing or any future products and services. Our ability to remain
competitive will also depend heavily upon our ability to maintain and upgrade
our technology products and services. We must continue to add hardware and
enhance software to accommodate any increased content and use of our Web site.
If we are unable to increase the data storage and processing capacity of our
systems at least in pace with the growth in demand, our Web site may fail to
operate at an optimal level for unknown periods of time. Any difficulty keeping
pace with technological advancements could hurt our ability to retain members
and effectively compete.
WE MAY NOT BE ABLE TO ACCURATELY PREDICT THE RATE OF INCREASE IN THE USAGE OF
OUR E-MARKETPLACE, WHICH MAY AFFECT OUR TIMING AND ABILITY TO EXPAND AND UPGRADE
OUR SYSTEMS.
Traffic in our e-marketplace may increase to the point where we might need
to upgrade some of our network hardware and software. In the future we may not
be able to accurately predict the rate of increase in the usage of our
e-marketplace. This may affect our timing and ability to expand and upgrade our
systems and network hardware and software capabilities to accommodate increased
use of our e-marketplace. If we do not appropriately upgrade our systems and
network hardware and software capabilities, we may experience downgraded service
which could damage our members' perception of our business and thus harm our
business, financial condition and results of operation.
IF WE ENCOUNTER SYSTEM FAILURE, SERVICE TO OUR MEMBERS COULD BE DELAYED OR
INTERRUPTED, WHICH COULD SEVERELY HARM OUR BUSINESS AND RESULT IN A LOSS OF
MEMBERS.
Our ability to successfully maintain an e-commerce marketplace and provide
acceptable levels of customer service depends largely on the efficient and
uninterrupted operation of our computer and communications hardware and network
systems. Any interruptions could severely harm our business and result in a loss
of members. Our computer and communications systems are located in Boca Raton,
Florida. Although we periodically back up our databases to tapes and store the
backup tapes offsite, we have not maintained a redundant site. Our systems and
operations are vulnerable to damage or interruption from human error, sabotage,
fire, flood, hurricane, power loss, telecommunications failure, and similar
events. Although we have taken steps to prevent a system failure, we cannot
assure you that our measures will be successful and that we will not experience
system failures in the future. Moreover, we have experienced delays and
interruptions in our telephone and Internet access which have prevented members
from accessing our e-marketplace and customer service department. Furthermore,
we do not have a formal disaster recovery plan and do not carry sufficient
business interruption insurance to compensate us for losses that may occur as a
result of any system failure, and therefore the occurrence of any system failure
or similar event could harm our business dramatically.
12
<PAGE>
DEFECTS IN THE COMPLEX SOFTWARE ON WHICH OUR SERVICES DEPEND COULD CAUSE SERVICE
INTERRUPTIONS THAT COULD DAMAGE OUR REPUTATION AND HARM OUR BUSINESS.
Unlike many traditional suppliers and distributors of aviation parts, we are
wholly dependent on the error-free functioning of our Web site and its
associated software. Our e-marketplace depends on complex software developed
internally and by third parties. Software often contains defects, particularly
when first introduced or when new versions are released. Our testing procedures
may not discover software defects that affect our new or current services or
enhancements until after they are deployed. These defects could cause service
interruptions, which could damage our reputation or increase our service costs,
cause us to lose revenue, delay market acceptance, or divert our development
resources, any of which could severely harm our business, financial condition,
and results of operations.
WE COULD FACE LIABILITY FOR INFORMATION RETRIEVED FROM OR TRANSMITTED OVER THE
INTERNET AND LIABILITY FOR PRODUCTS SOLD OVER THE INTERNET.
We could be exposed to liability with respect to third-party information
that may be accessible through our Web site. If any third-party content
information provided on our Web site contains errors, consumers potentially
could make claims against us for losses incurred in reliance on such
information. In addition, we could be exposed to product liability claims
arising out of or relating to aviation parts and products sold through our Web
site. Such claims could result in us incurring substantial defense costs and, if
successful, liability, either of which could severely harm our business. We
currently carry no policies which would insure us against such product liability
claims.
RISKS RELATED TO THIS OFFERING
VOTING CONTROL BY INSIDERS COULD ADVERSELY AFFECT THE TRADING PRICE OF OUR
STOCK.
We anticipate that our executive officers, directors and principal
stockholders will, in the aggregate, beneficially own approximately 68.4% of our
outstanding common stock following the completion of this offering (66.2% if the
underwriters' over-allotment option is exercised in full). These stockholders
will be able to exercise substantial influence over all matters requiring
approval by our stockholders, including the election of directors and approval
of significant corporate transactions. This concentration of ownership may have
the effect of delaying or preventing a change in control of PartsBase.com, which
could impair our attractiveness as an acquisition target and, as a result,
adversely affect the trading price of our stock.
YOU WILL EXPERIENCE IMMEDIATE DILUTION WITH RESPECT TO YOUR SHARES AND
ADDITIONAL DILUTION IF WE NEED MORE CAPITAL OR IF PERSONS HOLDING OPTIONS TO
PURCHASE OUR STOCK EXERCISE THEIR OPTIONS.
You will incur immediate and substantial dilution of $9.65 per share in the
net tangible book value of your shares as a result of this offering. In
addition, if we raise additional funds through future financings or to the
extent that options or warrants to purchase common stock are exercised, you may
experience further dilution.
OUR STOCK HAS NOT BEEN PUBLICLY TRADED BEFORE THIS OFFERING, SO YOU MAY
EXPERIENCE SIGNIFICANT VOLATILITY IN THE MARKET VALUE OF YOUR SHARES AND MAY BE
UNABLE TO SELL OUR STOCK ON TERMS FAVORABLE TO YOU.
Our common stock has not been publicly traded, and an active trading market
may not develop or be sustained after this offering. We and the representative
of the underwriters have determined the initial public offering price. The price
at which our common stock will trade after this offering is likely to be highly
volatile and may fluctuate substantially due to factors such as:
- actual or anticipated fluctuations in our results of operations;
- changes in or failure by us to meet securities analysts' expectations;
13
<PAGE>
- announcements of technological innovations;
- introduction of new services by us or our competitors;
- developments with respect to intellectual property rights;
- conditions and trends in the Internet and other technology industries;
and
- general market conditions.
In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have affected the market prices for the
common stocks of technology companies, particularly Internet companies. These
broad market fluctuations may result in a material decline in the market price
of our common stock. In the past, following periods of volatility in the market
price of a particular company's securities, securities class action litigation
has often been brought against that company. We may become involved in this type
of litigation in the future, which could divert our management and financial
resources from more productive uses.
SHARES ELIGIBLE FOR FUTURE SALE BY OUR EXISTING STOCKHOLDERS MAY ADVERSELY
AFFECT OUR STOCK PRICE.
After this offering, 13,587,500 shares of common stock will be outstanding.
Of these shares, the 3,000,000 shares sold in this offering will be freely
tradable without restrictions under the Securities Act of 1933, except for any
shares purchased by our "affiliates," as defined in Rule 144 under the
Securities Act. The number of shares of common stock outstanding would increase
to 14,037,500 and the number of freely tradable shares would increase to
3,450,000 if the underwriters exercise their over-allotment option in full. The
market price of our common stock could drop due to the sales of a large number
of shares of our common stock or the perception that such sales could occur.
These factors could also make it more difficult to raise funds through future
offerings of common stock, which could in turn harm our business if such
additional funds become necessary. See "Shares Eligible for Future Sale" for a
more detailed discussion.
SIGNIFICANT OWNERSHIP BY INSTITUTIONAL SHAREHOLDERS MAY REDUCE LIQUIDITY IN OUR
SHARES AND INCREASE VOLATILITY IN THE TRADING PRICE OF OUR COMMON STOCK.
Because mutual funds and other institutional investors tend to acquire and
hold relatively large blocks of stock that are not easily saleable in the public
market, the acquisition of a substantial portion of the shares offered hereby by
a limited number of institutional investors could effectively reduce the number
of shares available for trading in the public market. Such concentration of
institutional ownership could adversely affect the liquidity of any public
market for our shares. Such reduced liquidity could make it more difficult for
you to sell your stock at favorable prices and could result in increased
volatility in the trading price of our common stock. Moreover, in the event that
any such institutional investor elects to dispose of a large block of stock in
the public market, such sale could have a significant adverse effect on the
trading price of our common stock.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS, INDEMNIFICATION AGREEMENTS,
AND TEXAS BUSINESS CORPORATION LAW COULD DELAY OR PREVENT A POSSIBLE TAKEOVER,
EVEN IF A CHANGE IN CONTROL WOULD BE BENEFICIAL TO SOME STOCKHOLDERS.
Our articles of incorporation and bylaws contain provisions that could
discourage potential acquisition proposals or proxy contests and might delay or
prevent a change in control. These provisions, our indemnification agreements
with our directors and executive officers and also some provisions of Texas
Business Corporation Law could make us less attractive to potential acquirers.
These provisions could also result in our stockholders being denied a premium
for, or receiving less for, their shares than they otherwise might have been
able to obtain in a takeover attempt.
14
<PAGE>
OUR STOCKHOLDERS MAY HAVE DIFFICULTY IN RECOVERING MONETARY DAMAGES FROM OUR
DIRECTORS.
Our articles of incorporation contain a provision which eliminates the
personal liability of our directors for monetary damages to be paid to us and
our stockholders for some breaches of fiduciary duties. In addition, we have
entered into indemnification agreements with each of our directors and executive
officers regarding certain claims that may be asserted against directors or
officers. As a result of this charter provision and the indemnification
agreements, our stockholders may be unable to recover monetary damages against
our directors for their actions that constitute breaches of fiduciary duties,
negligence or gross negligence. Inclusion of this provision in our charter may
also reduce the likelihood of derivative litigation against our directors and
may discourage lawsuits against our directors for breach of their duty of care
even though some stockholder claims might have been successful and benefited
stockholders.
WARNING REGARDING OUR USE OF FORWARD-LOOKING STATEMENTS.
This prospectus contains forward-looking statements which relate to possible
future events, our future performance and our future operations. In some cases,
you can identify forward-looking statements by our use of words such as "may,"
"will," "should," "anticipates," "believes," "expects," "plans," "future,"
"intends," "could," "estimate," "predict," "potential" or "continue," as well as
the negatives of these terms or other similar expressions. These forward-looking
statements are only our predictions. Our actual results could and likely will
differ materially from these forward-looking statements for many reasons,
including the risks described above and appearing elsewhere in this prospectus.
We cannot guarantee future results, levels of activity, performance or
achievements.
15
<PAGE>
USE OF PROCEEDS
Assuming a public offering price of $12.00 per share, the net proceeds to us
from the sale of 3,000,000 shares of common stock in this offering are
approximately $31,570,000 ($36,430,000 million if the underwriters'
over-allotment option is exercised in full), after deducting underwriting
discounts and commissions and estimated offering expenses.
We intend to use the net proceeds of the offering:
- for use in expansion of our business, including enhancements to our
infrastructure, information technology and the features and functionality
of our Web site;
- for expansion of our sales and marketing efforts; and
- to fund operating losses and as additional working capital for general
corporate purposes.
As of the date of this prospectus, we have made no specific plans for use of
the net proceeds from this offering. The amounts actually expended for each of
the purposes listed above may vary significantly depending on a number of
factors, including the growth of our membership base, capital spending
requirements and developments in the aviation parts and business-to-business
e-commerce markets. Therefore, we cannot specify with certainty the particular
uses of the net proceeds of this offering. Accordingly, our management will have
broad discretion over the use of the net proceeds.
We may use a portion of the net proceeds of this offering for the
development of business-to-business e-commerce solutions for other industries or
to acquire or invest in businesses, products, services or technologies
complementary to our current business through mergers, acquisitions, joint
ventures or otherwise. However, we have no specific agreements or commitments
and are not currently engaged in any negotiations with respect to any
transaction of this type. We have not yet established criteria for evaluating
acquisitions or investments. We intend to invest the net proceeds of this
offering in short-term, interest bearing, investment grade securities or
guaranteed obligations of the U.S. government pending the above uses.
DIVIDEND POLICY
We have never declared or paid dividends on our capital stock and do not
anticipate declaring or paying any dividends in the foreseeable future. We
currently intend to retain any future earnings for the expansion of our
business.
16
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of PartsBase.com as of
December 31, 1999:
- on an actual basis;
- on a pro forma basis after giving effect to the mandatory conversion of
all outstanding convertible notes and all outstanding Series A convertible
preferred stock under the terms of which they were issued; and
- on a pro forma basis as adjusted to reflect our receipt of the net
proceeds from the sale of the 3,000,000 shares of common stock in this
offering at an assumed initial public offering price of $12.00 per share,
after deducting underwriting discounts and commissions and estimated
offering expenses.
You should read the capitalization table together with the sections of this
prospectus entitled "Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements, including the notes thereto, included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-------------------------------------------------
ACTUAL PRO FORMA PRO FORMA AS ADJUSTED
----------- ----------- ---------------------
<S> <C> <C> <C>
Convertible notes payable.............................. $ 962,500 $ -- $ --
Stockholders' equity (deficit):
Series A convertible preferred stock, 2,000,000 shares
authorized, 855,000 issued and outstanding; pro
forma--2,000,000 shares authorized, none issued and
outstanding; pro forma as adjusted--2,000,000 shares
authorized, none issued and outstanding, liquidation
preference........................................... 1,902,375 -- --
Common stock, no par value; 30,000,000 shares
authorized, 9,251,250 shares issued and outstanding;
pro forma--30,000,000 shares authorized, 10,587,500
shares issued and outstanding; pro forma as
adjusted--30,000,000 shares authorized,
13,587,500 shares issued and outstanding(1).......... -- -- --
Additional paid-in capital............................. 15,178,497 18,043,372 49,613,372
Accumulated deficit.................................... (7,762,678) (7,762,678) (7,762,678)
Unearned compensation.................................. (7,776,278) (7,776,278) (7,776,278)
----------- ----------- -----------
Total stockholders' equity............................. 1,541,916 2,504,416 34,074,416
----------- ----------- -----------
Total capitalization................................... $ 2,504,416 $ 2,504,416 $36,774,416
=========== =========== ===========
</TABLE>
- --------------------------
(1) The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of December 31, 1999, and
does not include the following:
- 175,000 shares issuable upon exercise of an outstanding stock purchase
warrants;
- 2,000,000 shares reserved for issuance under our stock option plan, under
which options to acquire 987,875 shares are outstanding as of the date of
this prospectus; and
- 150,000 shares of common stock issuable upon exercise of stock purchase
warrants to be issued to Roth Capital Partners, Inc., the representative
of the underwriters, upon completion of the offering at an exercise price
equal to 120% of the initial public offering price.
17
<PAGE>
DILUTION
Purchasers of the common stock in this offering will experience immediate
and substantial dilution in the net tangible book value of the common stock from
the initial public offering price. Net tangible book value per share represents
the amount of our total tangible assets reduced by the amount of our total
liabilities, divided by the number of shares of common stock outstanding.
As of December 31, 1999, our pro forma net tangible book value was $346,557,
or $0.03 per share of common stock after giving effect to the issuance and
conversion of all outstanding Series A convertible preferred stock and
convertible notes into shares of common stock.
As of December 31, 1999, our pro forma net tangible book value as adjusted
for the sale of the 3,000,000 shares offered in this offering and application of
the net proceeds of $31,570,000 (at the assumed initial public offering price of
$12.00 per share and after deducting the underwriting discounts and commissions
and estimated offering expenses), would have been approximately $2.35 per share.
This represents an immediate increase of $2.32 per share to existing
stockholders and an immediate and substantial dilution of $9.65 per share to new
investors purchasing common stock in this offering. The following table
illustrates this per share dilution:
<TABLE>
<CAPTION>
PER SHARE OF
COMMON
STOCK
--------------
<S> <C> <C>
Assumed initial public offering price....................... $12.00
Pro forma net tangible book value as of December 31,
1999.................................................... $0.03
Increase attributable to new investors.................... 2.32
Pro forma net tangible book value after the offering........ 2.35
------
Dilution to new investors................................... $ 9.65
======
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1999, the differences between the total consideration paid and the average price
per share paid by the existing stockholders, including the conversion of
convertible notes and Series A convertible preferred stock into common stock,
and the new investors with respect to the number of shares of common stock
purchased from us based on the assumed initial public offering price of $12.00
per share and before deducting the underwriting discounts and commissions and
our estimated offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- -------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 10,587,500 77.9% $ 3,100,000 7.9% $ 0.29
New investors............... 3,000,000 22.1% 36,000,000 92.1 $12.00
---------- ----- ----------- -----
Totals.................... 13,587,500 100.0% $39,100,000 100.0%
========== ===== =========== =====
</TABLE>
The above discussion and tables exclude:
- 175,000 shares issuable upon exercise of an outstanding stock purchase
warrants;
- 2,000,000 shares reserved for issuance under our stock option plan, under
which options to acquire 987,875 shares are outstanding as of the date of
this prospectus; and
- 150,000 shares of common stock issuable upon exercise of stock purchase
warrants to be issued to Roth Capital Partners, Inc., the representative
of the underwriters, upon completion of the offering at an exercise price
equal to 120% of the initial public offering price.
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<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with the
financial statements and the related notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" appearing
elsewhere in this prospectus. The statement of operations data for the period
from April 1, 1996 (date of inception) to December 31, 1996 and the years ended
December 31, 1997, 1998 and 1999, and the balance sheet data at December 31,
1996, 1997, 1998 and 1999 has been derived from the audited financial statements
of PartsBase.com. The results of operations of prior periods are not necessarily
indicative of results that may be expected for any other period. Our predecessor
was founded in April 1996 under the name Aviation Parts Base, a division of
Aviation Laboratories, Inc., and began accepting members to the database at such
time. In April 1999, the assets of the division were conveyed to Mr. Robert A.
Hammond, Jr. in consideration for, among other things, Mr. Hammond's equity
interest in Aviation Laboratories, Inc. On April 27, 1999, Mr. Hammond
transferred the assets of the division into and incorporated PartsBase.com as a
Texas corporation. The accounting for the contribution of the division into
PartsBase.com has been reported in the accompanying financial statements as a
reorganization of entities under common control in a manner similar to a pooling
of interests.
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 1, 1996
(INCEPTION) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------------
1996 1997 1998 1999
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue............................................ $ -- $ 2,861 $ 3,504 $ 362,224
Cost of revenue........................................ 16,842 104,041 43,462 1,412,532
Noncash compensation expense........................... -- -- -- 1,799,139
---------- ---------- ---------- -----------
Total cost of revenue.................................. 16,842 104,041 43,462 3,211,671
---------- ---------- ---------- -----------
Gross loss............................................. (16,842) (101,180) (39,958) (2,849,447)
Operating expenses
General and administrative........................... 55,064 90,452 108,163 1,293,091
Noncash compensation expense......................... 899,821
---------- ---------- ---------- -----------
Total operating expenses........................... 55,064 90,452 108,163 2,192,912
---------- ---------- ---------- -----------
Operating loss..................................... (71,906) (191,632) (148,121) (5,042,359)
Other income (expense)
Interest expense..................................... -- -- -- (881,652)
Interest income...................................... -- -- -- 10,977
---------- ---------- ---------- -----------
Total other income (expense)....................... -- -- -- (870,675)
---------- ---------- ---------- -----------
Net loss (1)....................................... (71,906) (191,632) (148,121) (5,913,034)
Value of preferred stock beneficial conversion
feature.......................................... -- -- -- (1,902,375)
---------- ---------- ---------- -----------
Net loss applicable to common stockholders......... $ (71,906) $ (191,632) $ (148,121) $(7,815,409)
========== ========== ========== ===========
Net loss per common share--basic and diluted (1)....... $ (0.84)
Weighted average common shares outstanding--basic and
diluted.............................................. 9,251,250
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------------------------------
1996 1997 1998 1999
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........... $ -- $ -- $ -- $ 735,276
Working capital deficit............. (2,043) (1,709) (25,128) (687,172)
Total assets........................ 1,767 7,848 6,084 4,729,295
Convertible notes payable........... -- -- -- 962,500
Total stockholders' equity
(deficit)......................... (276) 6,139 (19,044) 1,541,916
</TABLE>
- ------------------------------
(1) Since we have incurred net losses since inception, we would not have
incurred any income tax liabilities during the periods prior to
incorporation on April 27, 1999, and any deferred tax assets would have had
a corresponding valuation allowance and therefore pro forma presentation is
not required.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read together with the consolidated financial statements
and the related notes included elsewhere in this prospectus and which are deemed
to be incorporated into this section. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our
actual results may differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including but not
limited to those set forth under "Risk Factors" and included elsewhere in this
prospectus.
OVERVIEW
PartsBase.com is an online provider of Internet business-to-business
e-commerce services for the aviation industry. Our e-commerce marketplace
provides a means for our members to buy and sell aviation parts and products in
an efficient, competitive and cost-effective manner. Our target members are
primarily the businesses that buy and sell aviation parts, supplies and
components in the global marketplace. We have designed our e-marketplace to meet
the needs of these customers and their industry.
We began operations in April 1996 as a division of Aviation
Laboratories, Inc. In April 1999, we incorporated PartsBase.com and acquired all
of the assets from Robert A. Hammond, Jr. In September 1999, we relocated the
company to Boca Raton, Florida. From April 1996 to October 1998, when we began
charging for our services, we were engaged in the development of our database
and developing our e-marketplace software and network infrastructure.
To date, substantially all of our revenue has come from annual subscription
fees for access to our e-marketplace. Most of our members are companies that
sell products and services to the aviation industry. Generally, our
subscriptions are entered into on an annual basis. Although we have executed a
few subscriptions of a longer duration, generally these contracts may be
terminated at any time.
In the future, we plan to derive revenue from sources other than
subscription fees within our e-marketplace, including transaction fees. In
addition, we intend to generate transaction fee revenue from transactions
consummated by our members with value added merchandise and service providers.
Also, we believe we will generate advertising fees from banner and classified
advertisements. We cannot assure you that we will be successful in generating
any of these additional revenue and fees.
Since we began operations in April 1996, we have incurred significant net
losses. For the years ended December 31, 1997, 1998 and 1999, our net losses
attributable to holders of common stock were $191,632, $148,121 and $7,815,409,
respectively.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1999
NET REVENUE. Our revenue consists of subscription fees charged to our
subscribers and, to a lesser extent, banner advertising revenue. Our net revenue
for the year ended December 31, 1998 was $3,504, which consisted of $800 in
banner advertising revenue and $2,704 in subscription revenue, compared to net
revenue of $362,224 for the year ended December 31, 1999, which consisted of
$357,724 of subscription revenue and $4,500 of banner advertising revenue. We
did not begin charging subscription fees until November 1998.
COST OF REVENUE. Our cost of revenue consists of compensation for our sales
and marketing personnel, telephone expenses, Web site development, a proportion
of rent and office expenses and, to a lesser extent, bank and credit card
processing charges. Our cost of revenue increased from $43,462 for the year
ended December 31, 1998, to $3,211,671 for the year ended December 31, 1999,
including noncash compensation expense of $1,799,139 related to the issuance of
our restricted stock. This
20
<PAGE>
increase is attributable to an increase in the size of our sales force from 1 at
December 31, 1998 to 51 at December 31, 1999. We plan to continue to increase
the size of our sales force. We expect that our sales and marketing expenditures
will increase significantly, both in absolute dollars and as a percentage of net
revenue, as we increase our marketing efforts and incur additional sales
commissions.
Our gross loss increased from $39,958 for the year ended December 31, 1998
to $2,894,447 for the year ended December 31, 1999 as a result of the factors
described above.
GENERAL AND ADMINISTRATIVE EXPENSES. Our general and administrative
expenses increased from $108,163 for the year ended December 31, 1998, to
$1,293,091 for the year ended December 31, 1999. Our general and administrative
expenses for the year ended December 31, 1998 consisted of personnel costs of
$65,458, costs allocated from our former parent of $39,153, and other costs
totalling $1,100, while expenses for the year ended December 31, 1999 consisted
of personnel costs of $455,268, amortization of deferred financing costs of
$364,925, advertising costs of $151,193 and other costs totaling $321,705
consisting of professional fees, rent, utilities, supplies and other related
administrative costs. The increase in personnel costs is attributable to the
increase in the number of our executive and administrative staff from one at
December 31, 1998 to 16 at December 31, 1999. The amortization of deferred
financing costs relates to our private placement of convertible notes which
began in June 1999. We did not begin incurring advertising costs until after
December 31, 1998. Our costs increased for the year ended December 31, 1999 over
the same period in 1998 due to our expansion of a fully operational office in
1999. During 1998 we were allocated costs incurred by our former parent. The
overall increase in costs corresponds to the increase in our revenues and
marketing efforts. We expect that our general and administrative expenses will
increase in absolute dollars as we continue to expand our operations but
decrease as a percentage of net revenues.
In connection with the issuance of our restricted stock, we recognized
noncash compensation expense of $899,821 which has been classified as a
component of operating expenses for the year ended December 31, 1999. We did not
have any noncash compensation expense for the same period of 1998.
INTEREST EXPENSE. Interest expense relates to the issuance of convertible
notes as part of our private placement from June 1999 through November 1999. Our
interest expense increased from $0 for the year ended December 31, 1998, to
$881,652 for the year ended December 31, 1999 including $850,000, representing
the beneficial conversion feature applicable to such convertible notes. Prior to
June 30, 1999, we did not have any debt.
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1998
NET REVENUE. Net revenue increased from $2,861 for 1997, which represented
banner advertising revenue, to $3,504 for 1998, which consisted of $800 in
banner advertising revenue and $2,704 in subscription revenue. We did not begin
charging subscription fees until November 1998.
COST OF REVENUE. Our cost of revenue decreased from $104,041 for the year
ended December 31, 1997, to $43,462 for the year ended December 31, 1998. Our
cost of revenue consisted of Web site development costs and communication
expenses. In 1998, we continued to upgrade our network capacity and
functionality. However, such activity was lower than in 1997.
GENERAL AND ADMINISTRATIVE EXPENSES. Our general and administrative
expenses increased from $90,452 for 1997 to $108,163 for 1998. Expenses
consisted of general and administrative personnel costs and an allocation of
costs from our former parent. The increase was attributable to more costs being
allocated from our former parent in 1998 than in 1997.
LIQUIDITY AND CAPITAL RESOURCES
We have had significant negative cash flows from our operations. For the
years ended December 31, 1997, 1998 and 1999, we used $168,373, $83,096 and
$596,498 of cash, respectively, in our operating activities. Cash used in
operating activities in each period resulted from net losses in
21
<PAGE>
those periods. For the year ended December 31, 1999, our cash used in operating
activities included increases in our trade accounts receivable of $297,884. This
reflects our efforts to expand the subscription base by allowing for payment
terms up to 60 days. For the years ended December 31, 1997, 1998 and 1999, we
used $8,476, $688 and $1,238,124, respectively, of cash for investing activities
which have consisted of expenditures for computer hardware and software,
furniture and fixtures, communication equipment and leasehold improvements as
well as deposits on various equipment leases.
Since inception, we have financed our operations from the collection of
subscription fees, proceeds of $962,500 from issuance of convertible
subordinated notes and proceeds of $1,902,375 from issuance of convertible
preferred stock. Robert A. Hammond, Jr., our principal stockholder and Chief
Executive Officer, loaned us $80,900 which was repaid prior to December 31,
1999.
As of December 31, 1999, our principal source of liquidity was approximately
$735,276 of cash and cash equivalents. As of December 31, 1999, we had no
material commitments for capital expenditures.
We believe that we have sufficient cash and cash equivalents to fund our
operating and investing activities for at least the next 12 months. Our future
long-term capital needs will depend significantly on the rate of growth of our
business, the timing of extended service offerings and the success of these
services once they are launched. Any projections of future long-term cash needs
and cash flows are subject to substantial uncertainty. We may need to raise
additional funds in future periods through public or private financings, or
other arrangements. Any additional financings, if needed, might not be available
on reasonable terms or at all. Failure to raise capital when needed could harm
our business, financial condition and results of operations. In addition, such a
failure to raise needed capital could impair our future plans to expand our
e-marketplace, attract new members, and provide new and upgrade current services
to our members. If additional funds are raised through the issuance of equity
securities, additional dilution could result. In addition, any equity securities
issued might have rights, preferences or privileges senior to our common stock.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our convertible notes payable have a fixed rate and, therefore, do not
expose us to risk of earnings loss due to changes in market interest rates. The
market value of the convertible notes payable was $5,793,641 based on the market
value of the underlying common stock on December 31, 1999 plus unpaid interest
as of December 31, 1999.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities," which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. SFAS No. 133, as amended by SFAS No. 137, is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. We currently do
not engage in, nor expect to engage in, derivative or hedging activities, and
therefore we anticipate there will be no impact to our consolidated financial
statements.
In March 1998, the American Institute of Certified Public Accountants, or
the AICPA, issued SOP 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. SOP 98-1 requires that entities
capitalize certain costs related to internal use software once certain criteria
have been met. We adopted SOP 98-1 for the year ending December 31, 1999.
Adoption of SOP 98-1 did not have a material impact on our financial condition,
results of operations or cash flows.
In April 1998, the AICPA issued SOP No. 98-5, Reporting on the Costs of
Start-Up Activities. SOP 98-5 requires that all start-up costs related to new
operations must be expensed as incurred. In addition, all start-up costs that
were capitalized in the past must be written off when SOP 98-5 is adopted. We
adopted SOP 98-5 on January 1, 1999. The adoption of SOP 98-5 did not have a
material impact on our financial position, results of operations or cash flows.
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<PAGE>
BUSINESS
INDUSTRY BACKGROUND
GROWTH OF E-COMMERCE. The growth of the Internet and related technologies
has resulted in drastic changes in the way businesses and consumers communicate,
share information and conduct business. As Internet usage has increased, the
Internet has expanded from a medium primarily for publishing information to one
that enables more complex business-to-business communications and commerce. At
the same time, in response to increasing competitive pressures to lower costs,
decrease inventories and improve sales and marketing productivity, businesses
are increasingly replacing paper-based transactions with more efficient Internet
e-commerce solutions. Forrester Research estimates that the business-to-business
e-commerce market will grow from $43 billion in 1998 to $1.3 trillion by 2003.
AVIATION PARTS INDUSTRY. The worldwide market for aviation parts and
products is highly fragmented and parts are supplied by many types of suppliers,
including airlines, OEMs, numerous distributors, on-site airport maintenance
providers, also known as fixed base operators, FAA certified facilities, traders
and brokers. Aerospace Industries Association estimates that total exports and
imports of aircraft parts and products were approximately $29 billion in 1999.
Furthermore, in recent years, the airline industry has experienced rapid growth
in business and leisure travel. As a result, the world fleet of aircraft is
projected to increase from 12,600 aircraft in 1998 to 28,400 aircraft in 2018,
according to the Boeing Report. The increase in travel and the number of
aircraft have likely contributed to demand for aircraft parts and products as
aircraft must be serviced at scheduled intervals. In addition, management
believes that as the age of the world fleet of aircraft increases, demand for
new, used and overhauled aircraft parts and products may increase.
Historically, airlines have controlled the majority of the aviation parts
and products inventory. Management believes airlines are beginning to reduce the
size of their parts inventories in an effort to reduce inventory carrying costs.
These inventory reductions have increased reliance by airlines on suppliers of
new, used and overhauled parts and products, many of which may be difficult to
obtain from manufacturers on a timely basis, if at all. If airlines demand time
responsive inventory procurement processes, responsibility for inventory storage
and handling may shift to suppliers.
Suppliers of aviation parts and products are geographically disperse and
because of the specialized and complex nature of such parts and products, the
particular part or product desired by a buyer may not be easily accessible.
Buyers often search for a specific part or product to meet the parameters for a
specific aircraft at a particular location. Buyers may spend several hours
examining multiple paper catalogs and other information from different suppliers
to identify the most appropriate part or product. After locating the desired
part or product, buyers place orders by telephone, fax, or e-mail and typically
must place orders with multiple suppliers in order to obtain parts or products
related to a single aircraft. Orders for aviation parts or products are
typically handled through internal, paper-based processes that require manual
preparation, written approval by purchasing managers and manual order tracking,
and billing and reporting across multiple departments within an organization. We
view current paper-based procurement processes as complex, cumbersome and
time-consuming. Paper-based orders also tend to be costly for buyers and sellers
to track and bill, and the decentralized order process does not facilitate the
collection of data that is necessary for efficient pricing and delivery.
OPPORTUNITY FOR BUSINESS-TO-BUSINESS E-COMMERCE SOLUTION. We believe the
fragmentation and complexities of the aviation industry and the current
paper-based purchasing processes create the need for a business-to-business
e-commerce solution that seamlessly brings together buyers and sellers of
aviation parts and products. To effectively address the needs of buyers and
sellers, it is important that the solution offers a neutral and fair marketplace
with accurate catalog descriptions of parts and products and such information
must also be fairly and accurately presented to buyers. In addition, the
solution should offer sellers an opportunity for incremental sales and the
ability to offer buyer-specific pricing.
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Traditional purchasing methods also present a number of challenges to
sellers trying to reach buyers of aviation parts and products. Due to the high
cost of printing and distributing paper catalogs, sellers cannot
cost-effectively manage frequent updates and distribution of time-sensitive
information. We view these catalogs as cumbersome to search and limited in their
ability to provide depth of product and seller content. Sellers who are small in
size may have limited resources available to support the growing challenge of
marketing and selling to the highly fragmented worldwide market for aviation
parts and products. As a result, we believe traditional procurement and sales
methods are inefficient in many respects for both buyers and sellers.
TRADITIONAL ELECTRONIC PURCHASING. We believe the current methods which use
information technology to reduce inefficiencies in corporate purchasing have
limitations that prevent widespread adoption. Two such methods currently used by
some of our competitors in the aviation parts industry are conventional
Electronic Data Interchange, also known as EDI, and Enterprise Purchasing
Software Systems. EDI systems allow computers to exchange information in uniform
formats across private networks without human intervention. Because EDI systems
rely on the execution of repetitive identical transactions, we believe they are
generally not well suited for dynamic procurement environments involving many
buyers and sellers of a wide variety of goods and services. By contrast, some
vendors have developed Enterprise Purchasing Software Systems designed to
improve the coordination of the purchasing function across large enterprises.
However, both EDI systems and Enterprise Purchasing Software Systems can be
expensive to license and/or install and may require users to pay ongoing
maintenance and/or transaction fees. Due to the expense and complexity of these
systems, they are generally unsuitable for all but the largest organizations.
Furthermore, we believe that neither EDI nor Enterprise Purchasing Software
Systems offer a full spectrum of online procurement functions.
THE PARTSBASE.COM ADVANTAGE
The Internet provides a cost-effective medium for businesses, regardless of
size, to link directly to their communities of customers and other business
partners. Our solution takes advantage of the low costs and community building
nature of the Internet to support our business-to-business e-commerce
marketplace. Our e-marketplace offers targeted content and services to meet the
specific needs of our members. With a standard Internet connection, a Web
browser and a PartsBase.com membership, each of our e-marketplace members can
immediately participate as both a buyer and a seller.
Our solution is comprised of an e-marketplace where our members can buy and
sell a wide range of aviation parts and products over the Internet in an
efficient and cost-effective manner. We estimate that our e-marketplace utilizes
a database of approximately 1,200 suppliers, which we believe constitutes one of
the largest independent databases of inventory and information in the aviation
industry. In addition, our advanced search functions enable users to quickly and
easily identify and locate the parts and products they need. We have designed
our e-marketplace to attract professionals responsible for selecting and
purchasing aviation parts and products. We believe our service enables our
members to quickly realize the benefits of increased efficiency, faster
turnaround and more timely information. Our solution is designed to provide the
following benefits to our members:
REDUCED PROCUREMENT COSTS. By eliminating many costly and time-consuming
functions of the traditional procurement process, we believe our e-marketplace
allows our members to reduce operating costs and shorten cycle times in the
buying and selling processes. Rather than searching through several paper-based
catalogs, buyers can identify and locate products through a single electronic
database. Our solution currently enables buyers to rapidly prepare and broadly
distribute bid requests and allows sellers to respond to these bid requests in a
timely and efficient manner. Moreover, our solution allows buyers and sellers to
immediately access our e-marketplace without incurring the cost of additional
software and system maintenance.
24
<PAGE>
MORE EFFICIENT PRICING AND BROADER PRODUCT CHOICES FOR BUYERS. By
automating the search and bid request process, our solution allows buyers to
identify sellers with desired inventory in our e-marketplace and to send out bid
requests efficiently. In addition, our e-marketplace allows buyers to expand the
number of sellers from which they request bids. Our database provides buyers
with the online ability to compare various products from an individual supplier
or multiple suppliers. As a result of increased access to sellers, product
availability and pricing information, we believe many of our members have
realized reductions in the cost of the parts and products they have purchased in
our e-marketplace.
ABILITY TO LOCATE THE MOST GEOGRAPHICALLY DESIRABLE PARTS. By providing
buyers access to a global e-marketplace for aircraft parts, we believe our
solution enables buyers to avoid the delays and costs associated with
traditional sourcing methods, which often require buyers to spend significant
time and resources searching for parts on a piecemeal basis via phone or fax
communication to regional suppliers. As a result, we believe that buyers are
often unable to quickly locate and receive needed parts at the best available
price. With our solution, we believe our members can locate and source needed
parts and products in a timely and cost-effective manner, regardless of where
the buyer is located.
EXPANDED DISTRIBUTION OPPORTUNITIES FOR SELLERS. We believe that our
e-marketplace enables sellers to receive RFQs from buyers to whom they might not
otherwise have access. Sellers in our e-marketplace, regardless of their size
and marketing resources, can receive RFQs from buyers throughout the world.
Sellers whose size would prohibit them from actively participating in a
traditional marketplace thus have access to expanded distribution channels. We
also believe that our solution enables many of our sellers to offer, for the
first time, their goods and services for sale over the Internet. In addition, we
offer sellers the capability to update product information and introduce new
products without being limited by specific catalog publication cycles. As a
result, we believe our e-marketplace is an effective tool for sellers to achieve
broader marketing and sales exposure in their primary markets and to enter new
geographic markets on a cost-effective basis.
EASE OF USE AND BETTER ACCESS TO INFORMATION. With a standard Internet
connection and Web browser, our members are provided quick and easy access to
our e-marketplace from anywhere in the world. Our e-marketplace solution allows
sellers to control pricing and descriptive information about the aviation parts
and products they offer, helping to ensure that potential buyers obtain accurate
information on a 24-hour, 7-day a week basis. Moreover, our solution encourages
sellers to update their inventory regularly by displaying the most recent
inventory entries at the top of a list of those sellers with a particular part
in stock.
OUR SOLUTION
We currently offer a variety of services to our members. The following
summarizes some of the current services and features of our e-marketplace:
ONLINE BUYING AND SELLING. Our global e-marketplace enables our members
worldwide to interact as buyers and sellers, streamlining their purchase and
sale process over the Internet. In addition to searching by part number, our
members are able to utilize advanced search functions, such as Wildcard search,
Smart search and Keyword search, each of which allow members to use either a
description or a partial part number to locate the desired part. Also, members
using our e-marketplace's posting function can send an RFQ, including requests
for line item price quotes, to sellers who respond electronically with pricing
and availability information.
25
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The RFQ process begins with suppliers submitting their inventories to us by
e-mail or disk, which we then upload on to our Web site. Using the search
methods described above, buyers are then able to use our Web site to identify
where and from whom needed parts can be purchased. The buyers may then elect to
transmit a pre-formatted RFQ via e-mail to selected suppliers, or they might
choose to print out a hard copy of the RFQ and fax it to the suppliers, at which
point the buyers will receive quotes from interested suppliers and can begin to
make their purchase decisions.
TRANSACTION INFORMATION. Our e-marketplace will allow members to update
their inventory database information. After sellers respond with bids, buyers
can analyze the responses and select one seller's bid or to select items from
specific sellers. We intend to design our solution so that after a bid is
accepted, our e-marketplace will allow buyers to complete the purchase by
creating and sending electronic purchase orders and finalizing the payment and
delivery instructions. In addition, sellers will be able to electronically
disseminate accurate information in a timely and cost efficient manner.
ONLINE AUCTIONS. Our e-marketplace will allow us to host and administrate
various types of online auctions for aircraft parts and products. We believe
such auctions will provide buyers and sellers an efficient means to purchase and
sell such parts and products.
PROCUREMENT CONTROLS. A client password file is checked at each member
login and whenever members access the database. In the future, we intend to
implement controls which will allow members to limit their employees' access to
selected sellers, specific items, quantities and service features. Through such
protocols, control over corporate purchasing will be significantly enhanced
without the installation of expensive enterprise purchasing software systems.
Members will also be able to monitor employee requests for proposals and
purchase orders. We will also maintain records of procurement activity by our
members that can be used to verify or validate transactions.
COMMUNITY. In addition to providing community-building information such as
industry job and aircraft sales listings, as well as links to members and other
industry Web sites, we will continue to expand our services to help foster
interaction among our members. We plan to introduce additional features such as
industry trade news, discussion forums, chat rooms and bulletin boards, all of
which foster active community participation among our members. We expect to
continue to add features, content and services that enhance the benefits of
membership in our e-marketplace.
FUTURE SERVICES. In addition to the foregoing, we have recently contracted
with Tradex Technologies, Inc., a multi-party e-commerce transaction software
developer and subsidiary of Ariba, Inc., for the installation and implementation
of software that will allow for online transactions among our members. We have
also contracted with Trading Dynamics, Inc., another subsidiary of Ariba, Inc.,
to provide software for our auction platform. Such additional services are
expected to enable us to offer competitive online negotiation, pricing and
bidding for products, and will allow us to act as a virtual clearing house for
products. In addition, once implemented, the transaction software will enable
our members to retrieve and review their purchase and sale activity through
keyword, date, seller or purchase order number searches. This will enable buyers
and sellers to utilize historical transaction data in making future pricing and
procurement decisions. In addition, our solution will automatically generate
inquiry and transaction records facilitating improved documentation and
auditing.
OUR BUSINESS STRATEGY
Our objective is to establish our e-marketplace as the preferred aviation
industry business-to-business solution. The key elements of our strategy
include:
ACHIEVING GROWTH THROUGH TRANSACTION FEES AND OTHER SOURCES OF
REVENUE. Substantially all of our current revenue is derived from subscription
fees from certain of our members. In order to expand our
26
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potential revenue base, we are in the process of installing and implementing
customized software that will allow for online transactions among our members.
We expect that such software will enable competitive online negotiating,
pricing, and bidding for products, and will allow us to act as a virtual
clearing house for parts and products. We believe that these features will allow
us to generate additional revenue through transaction fees charged to our
members. We may also generate additional revenue through the sale of banner
advertisements, classified advertisements and other electronic promotions, as
well as from fees for value-added services.
STRENGTHENING THE PARTSBASE.COM BRAND. We believe that the breadth of
features that we offer, the number of members in our e-marketplace and the goods
and services offered by these members provide us with an essential foundation
for a comprehensive e-commerce solution for the aviation industry. We plan to
expand and enhance our marketing initiatives to increase our brand awareness and
identity. These initiatives will include traditional and Internet-based
advertising targeted at selected audiences, interviews, articles in business
media and trade publications and direct sales and telemarketing.
INCREASING MEMBERSHIP AND MARKET PENETRATION. Since we began operations in
1996, we have grown our membership to over 13,000 by focusing on buyers and
sellers in all facets of the aviation industry. In order to continue our
membership growth and increase our worldwide market penetration, we intend to
expand our sales and marketing efforts through our multilingual internal sales
force, indirect sales channels and by making use of the community offered by our
network of existing members.
ESTABLISHING AND EXPANDING STRATEGIC SALES AND MARKETING RELATIONSHIPS. We
intend to pursue strategic sales and marketing relationships to expand our
membership, extend our marketing reach, and further develop our e-marketplace in
a rapid and cost-effective manner. These expanded relationships, if successful,
will increase the breadth of information, goods and services available to our
members, thereby enabling us to attract and retain additional members.
EXPANDING OUR INTERNATIONAL PRESENCE. Our goal is to become the leading
e-marketplace for the aviation parts industry. We believe the international
scope of the Internet, the global reach of many of our customers and the
worldwide demand for aviation parts and products present opportunities to
further expand our e-marketplace internationally. Presently, we estimate that
approximately 25% of our members are based internationally or have international
operations. We plan to take advantage of our technology, expertise, and existing
member relationships to further expand our e-marketplace in other parts of the
world.
ATTRACTING AND RETAINING MEMBERS WITH NEW CONTENT, FEATURES AND
SERVICES. We intend to continue increasing the number of members in our
e-marketplace by introducing additional services and features, such as our
online auction service, that appeal to the specific needs of our members. In
addition, we intend to offer e-commerce transaction services such as online
order payment processing.
OUR REVENUE SOURCES
To date, our primary source of revenue has been subscription fees paid by
certain of our members. In general, annual subscription fees are paid in advance
by credit card or other form of immediate payment. In lieu of immediate payment,
clients may submit a verified purchase order and receive payment terms of up to
60 days from the date of the initial order. In order to build our base of
e-marketplace members, we have and will continue to provide free trial
memberships. During the free trial membership period, the length of which is
determined by us on a customer-by-customer basis, our sales people attempt to
convert such trial memberships into paying memberships. In the event that a
trial member is unwilling to become a paying member, we will generally terminate
such membership. While we do not currently limit the features that our trial
members can access, we expect that as we broaden the scope of available
features, only paying members will have access to all available features.
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<PAGE>
We believe our revenue base will expand as a result of our agreements with
Tradex Technologies, Inc. and Trading Dynamics, Inc. for the installation and
implementation of transaction software that will allow us to implement an
auction feature whereby our members will be able to buy and sell aircraft parts
and products by engaging in competitive online negotiating, pricing and bidding.
This transaction software is designed to allow us to act as a virtual clearing
house for aviation parts and products sold in our e-marketplace. If such
auctions are successfully developed and implemented, we believe we will be able
to charge a negotiated fee that will vary based on the size, scope and price of
the offered parts and products, thereby generating additional revenues.
We also plan to expand our revenue sources over time to include fees for
classified advertising as well as increased revenue from banner advertisements.
In addition, we believe our sources of revenue will increase as we expand the
scope of our value-added services.
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<PAGE>
OUR E-MARKETPLACE MEMBERS
Our target members are primarily the businesses that buy and sell aircraft
parts and products in the global marketplace. We have over 13,000 members
representing over 115 countries. Our members vary from small businesses and
individual aircraft owners to Fortune 500 companies. Some of our members
include:
A. J. Walter Aviation
Aero Group
AGES Group
Airborne Express
Air New Zealand
Alaska Airlines
Allied Signal
American Aircarriers Support
Amway Corp.
Arca Airlines
Atlantic Airlines, Inc.
Aviation Spares Ltd.
Avjet Trading
Banyan Air Service
Bell Helicopter
Bermuda Air Service
BF Goodrich Aerospace
Big Island Air
Boeing
Bombardier
British Aerospace
BAX Global
BWIA
California Propeller
Canadian Airlines
CASA
Chrysler Pentestar
Commander Aero Inc
Copenhagen Avionics A/S
Curtiss-Wright Accessory
Services
D & D Aircraft Supply
Dallas Aerospace
Dee Electronics
Del Monte Aviation
Dyn Corp (NASA Houston)
ELECTROSONICS
Embraer
Executive Air Taxi
Flight Safety international
Florida Jet Center
Galaxy Aerospace
Garrett Aviation Services
GE Engine Services Wales
Grimes Aviation
Hamilton Sundstrand
Hawker Pacific
Honeywell
Icelandair
Itapemirim Airlines
Jet Aviation
Kellstrom Industries
Keyson Airways
King Aerospace
KLM
KRN Aviation
Learjet, Inc.
Lider Taxi Aero
Lockheed Martin Services
Lone Star Mooney
Lord Corporation
Lufthansa
Luton Aerospace
Maine Aviation Group
Maritime Helicopters, Inc.
Marsh Aviation
Meggitt Safety Systems
Memphis Group
Messier Services
Middle River Aircraft Services
Million Air
Mitchell Aviation
Mobile Aerospace Engineering
Moog Aircraft Group
Norco
Ohio State University Airport
Omni Air Support
Pensacola Aviation Center
Pilatus Aircraft
Pilkington Aerospace
Raytheon Aircraft Services
Rockwell Collins
Rolls Royce
Saab
Sabreliner Corporation
Seneca Flight
Sentry Aerospace Corporation
Sikorsky
SkyBolt Aeromotive Corp.
Susquehanna Precision
Textron
Tinker Air Force Base
Toronto Sky
TPI Aviation
TRW
Turbine Controls
Tyler Jet Aviation
Ultra Electronics
United Airlines
United Parcel Service
Universal Jet Aviation
U.S. Coast Guard--Hawaii
U.S.A. Jet Airlines
Varig
VASP
Virgin Atlantic
Volvo Aero Corp.
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<PAGE>
SALES AND MARKETING
We market our solution through our direct internal sales force. Since our
potential members fall within a defined market segment, we are able to identify
and target the purchasing decision-makers and potential users who will influence
the decision to adopt our e-commerce solution.
Our sales and marketing approach is designed to help buyers and sellers
understand both the business and technical benefits of our e-marketplace, and to
promote adoption through one-on-one education and training. We intend to
continue to expand our direct sales force through the establishment of multiple
sales shifts per day, allowing us to reach geographically diverse markets.
However, competition for sales personnel is intense, and we may not be able to
attract, assimilate or retain additional qualified personnel in the future.
Our sales and marketing programs are designed to educate our target market,
create awareness and attract members to our e-marketplace. To achieve these
goals, we intend to take advantage of the community offered by our existing
membership base and engage in marketing activities such as trade shows, speaking
engagements and Web site marketing. Our targeted industry segment advertising
activities include on-line business media and print advertisements in industry
trade publications such as Avionics, Aviation Maintenance, Overhaul &
Maintenance, and Technology and Aviation Week.
We provide member service support from 6:00 am to 12:00 am, Eastern Standard
Time, Monday through Friday. Our customer support department is responsible for
day-to-day contact with members and responds to questions from members through
e-mail and a toll-free number. This department is responsible for retaining and
increasing use by existing members and is an important aspect of member
satisfaction. Our customer support and service personnel handle general member
inquiries and technical questions. We have automated some of the tools used by
our customer support and service staff, such as tracking screens that let our
support staff track a transaction through a variety of information sources.
Our worldwide sales and marketing group consisted of approximately 51
individuals as of December 31, 1999, all of whom are located at our Boca Raton,
Florida headquarters.
TECHNOLOGY AND OPERATIONS
Our e-marketplace technology serves as our enabling platform. Our Web site
technology resides on our server located in Boca Raton, Florida. Members access
our service using a standard Web browser.
Our Web site architecture is designed to allow us to accommodate membership
growth. This scalability permits us to quickly add new members to our
e-marketplace without those members incurring infrastructure costs.
Our Internet service providers currently maintain three high speed T3
Internet connections. The client connections are load balanced over our
presentation layer servers. Database servers are configured to be fault-tolerant
and their hard drives can be swapped while the system is operating. These
databases are replicated on additional back-up servers for quick access.
Our software makes significant use of standard software programming
languages, interfaces and protocols. The use of ODBC, or Open Database
Connectivity, compliant databases and plug-in technologies allows integration
with enterprise accounting and management systems such as Oracle and other ODBC
compliant systems. Many standard data transfer protocols are also supported.
We utilize firewalls and other restrictions and physical or electronic
separations to prevent harm to the service. Our servers add, update, and
retrieve data through procedures designed to prevent improper access to data.
Additionally, our staff has restricted access to our e-marketplace data and
network. Our servers are equipped with virus detection and removal software.
30
<PAGE>
In addition to the redundant database servers, all member data is backed-up
to tape on a daily basis.
We have designed our system to enable each member to maintain their
information on our databases so that other users can access the most current
data. In addition, by using custom interfaces, members can automate the process
of maintaining their data.
COMPETITION
The market for business-to-business e-commerce and Internet ordering and
purchasing is new and rapidly evolving, and competition is intense and is
expected to increase significantly in the future. We believe that companies in
our Internet business-to-business e-marketplace compete on the basis of:
- ease of use of technology;
- breadth and depth of product and service offerings;
- pricing of products and services;
- quality and reliability of the Internet purchasing solution; and
- quality and scope of customer service and support.
We currently compete almost solely in the market for aviation parts and
products, and we face competition from two main areas within this market: other
businesses with e-commerce offerings and traditional suppliers and distributors
of aviation parts. Because of the rapidly evolving nature of e-commerce, it is
difficult to objectively estimate the number of companies that compete directly
against us. However, we believe companies that primarily focus on creating
Internet purchasing solutions for the aviation parts industry include Inventory
Locator Service, a subsidiary of Aviall, Inc., and AVsupport, each of which
offers parts locating functions to customers. Traditional suppliers and
distributors, including the AGES Group and Boeing, currently sell aviation parts
through paper catalogs and Web sites.
Many of our current and potential competitors may have longer operating
histories, larger customer bases and greater brand recognition in business and
Internet markets and significantly greater financial, marketing, technical and
other resources than we do. In addition, other e-commerce service providers may
be acquired by, receive investments from or enter into other commercial or
strategic relationships with larger, well established and well-financed
companies as use of Internet and other online services increases. For example,
companies that control access to Internet service provider services that are
used to connect to our network could promote our competitors or charge our
clients substantial fees for Internet access. Therefore, current and potential
competitors may be able to devote significantly greater resources to marketing
and promotional campaigns, may adopt more aggressive pricing policies or may try
to attract users by offering services for free and devote substantially more
resources to product development than us.
Increased competition may result in reduced operating margins, loss of
market share and diminished value in our brand, any of which could materially
and adversely affect our business, financial condition and results of
operations. New technologies and the expansion of existing technologies may
increase the competitive pressures on us by enabling our competitors to offer a
similar but lower-cost service. We cannot assure you that we will be able to
compete successfully against current and potential competitors. Further, as a
strategic response to changes in the competitive environment or otherwise, we
may, from time to time, make certain pricing, service or marketing decisions or
acquisitions that could materially and adversely affect our business, financial
condition and results of operations.
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INTELLECTUAL PROPERTY
We rely on a combination of trademark and copyright law, trade secret
protection and confidentiality and/or license agreements with our employees,
customers and business partners to protect our proprietary rights in products,
services, know-how and information. We have a federal trademark registration for
"PARTSBASE" and we have applied for federal trademark protection for
"PARTSBASE.COM." We may seek additional trademarks in the future. Furthermore,
we may seek copyrights and patents in the future. Our means of protecting our
proprietary rights in the United States or abroad may not be adequate and
competitors may independently develop similar technology. We cannot be certain
that our services do not infringe patents or other intellectual property rights
that may relate to our services. Like other technology and Internet-based
businesses, we face the risk that we will be unable to protect our intellectual
property and other proprietary rights, and the risk that we will be found to
have infringed the proprietary rights of others.
GOVERNMENT REGULATION
Both domestic and foreign entities regulate the parts and products sold on
our Web site. The FAA is charged with regulating the manufacture, repair and
operation of all aircraft and aircraft equipment operated in the United States.
The FAA monitors safety by promulgating regulations regarding proper maintenance
of aircraft and aircraft equipment. Similar regulations exist in foreign
countries. Regulatory agencies specify maintenance, repair and inspection
procedures for aircraft and aircraft equipment. These procedures must be
performed by certified technicians in approved repair facilities on set
schedules. All parts must conform to prescribed regulations and be certified
prior to installation on any aircraft. Although we are not currently subject to
any governmental regulation regarding the parts and products sold on our Web
site, we may in the future become subject to FAA or other regulatory
requirements.
EMPLOYEES
As of December 31, 1999, we had 67 full time employees. Of these, 51 were in
sales and marketing, seven were in programming, technical and customer support
and operations and nine were in administration, including finance. None of our
employees is represented by a labor union. We have not experienced any work
stoppages, and we consider our relations with our employees to be good.
FACILITIES
Our corporate headquarters are located at 7171 N. Federal Highway, Suite
100, Boca Raton, Florida 33487, where we lease approximately 4,600 square feet
of office space for a monthly rental fee of approximately $6,500 under a lease
that expires May 31, 2001, with an option to renew for a two year period. This
facility houses all of our operations, including the executive staff,
e-marketplace operations, customer support and programming and development. We
maintain our Web site in Boca Raton, Florida.
LEGAL PROCEEDINGS
In the ordinary course of business, we may be subject to claims and legal
proceedings. We are not currently a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of PartsBase.com and their ages as of
December 31, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
Robert A. Hammond, Jr.(1)............ 45 President, Chief Executive Officer and Chairman
Steven R. Spencer.................... 45 Chief Operating Officer and Director
Michael W. Siegel.................... 37 Chief Financial Officer
Yves C. Duplan....................... 38 Chief Technology Officer
Kevin J. Steil....................... 28 Chief Information Officer
Louis W. Storms IV................... 25 Director
Thomas C. Van Hare(1)(2)............. 38 Director
David G. Fessler(1)(2)............... 32 Director Nominee
Pierre A. Narath(1)(2)............... 36 Director Nominee
</TABLE>
- ------------------------
(1) Member of the compensation committee of the board of directors effective
upon completion of this offering.
(2) Member of the audit committee of the board of directors effective upon
completion of this offering.
ROBERT A. HAMMOND, JR. Mr. Hammond has served as our President, Chief
Executive Officer and Chairman since our incorporation in April 1999. In
April 1996, Mr. Hammond founded our predecessor as a division of Aviation
Laboratories, Inc., a company for which he also served as Chief Executive
Officer from its inception in August 1985. From August 1985 until June 1999,
Mr. Hammond was the Chief Executive Officer and Chairman of Great Pines Water
Company, a publicly traded bottled water company that he sold to Suntory Bottled
Water Group in June 1999. Mr. Hammond received his Bachelor of Science degree in
Marketing from Syracuse University.
STEVEN R. SPENCER. Mr. Spencer joined us as Chief Operating Officer in
May 1999 and was elected to the board of directors in June 1999. Prior to
joining us, Mr. Spencer was a partner in Meridian Capital Group, Inc., where he
served as the Executive Vice President from December 1994 to March 1999.
Mr. Spencer left Meridian at the time it was purchased by E*Offering, an
Internet investment banking firm partially owned by E*Trade.
MICHAEL W. SIEGEL. Mr. Siegel joined us as Chief Financial Officer in
January 2000. From August 1997 through December 1999, Mr. Siegel served as
Director of Finance/Controller of Curtiss-Wright Flight Systems, Inc., a
subsidiary of Curtiss-Wright, Inc., a NYSE listed designer, manufacturer and
overhauler of precision components and systems and a provider of highly
engineered services to the aerospace and other industries. In addition, from
May 1997 through October 1999, Mr. Siegel served as a founder and vice president
of Mail Call, Inc., a developmental stage e-commerce company. From April 1995
through August 1997, Mr. Siegel served as the Chief Financial Officer of The
Protective Group, a manufacturer of protective products such as bulletproof
vests, armoring for automobiles and helicopters, and firefighter gear. From
March 1994 through April 1995, Mr. Siegel served as the Chief Financial Officer
of Universal Heights, Inc., a publicly traded manufacturer and distributor of
licensed sports and entertainment novelty products. Mr. Siegel is a Certified
Public Accountant and received a Bachelor of Science in economics from the
Wharton School, University of Pennsylvania, and a Master of Business
Administration from the University of Miami.
YVES C. DUPLAN. Mr. Duplan joined us in September 1999 as our Chief
Technology Officer, and has over 15 years of experience as a software developer
and project manager. From March 1996 to
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September 1999, he was a Senior Software Developer with Office Depot Corporation
where he was a member of a core development team responsible for the design,
evaluation, and implementation of new technologies for backroom applications
running in Office Depot stores. From May 1990 to March 1996, Mr. Duplan was a
Software Engineer/Project Leader for Analyst International Corp, a consulting
company, where he managed a team of software developers. Mr. Duplan holds a
Bachelor of Science in Computer Engineering from Nova University.
KEVIN J. STEIL. Mr. Steil joined us in August 1999 as Chief Information
Officer. From February 1996 to August 1998, Mr. Steil was a developer for the
AGES Group, a division of Volvo that sells parts and ground support equipment to
the aviation industry. Mr. Steil was responsible for the design and
implementation of the AGES transactional Web site, as well as maintaining their
enterprise network. From May 1994 to January 1997, Mr. Steil served as internet
consultant for Infrastructure Inc. Mr. Steil received his Bachelor of Science in
marine biology from Florida Atlantic University in 1994 and Associates Degree in
computer science from Panama Canal College in 1991.
LOUIS W. STORMS IV. Mr. Storms was elected to our board of directors in
June 1999. Mr. Storms has served as a consultant to us since February 1999 and
in such capacity served as our interim Director of Technology until
August 1999. Mr. Storms is an author and expert in developing multi-tiered
distributed applications using Microsoft Windows DNA. His book, MICROSOFT
WINDOWS DNA EXPOSED, was published in April 1999 by a subsidiary of Macmillan
Computer Publishing. Mr. Storms is a founder and partner in Plan Three
Solutions, L.L.C., a software development company. From April 1998 to
September 1998 Mr. Storms acted as a consultant for Deloitte and Touche LLP, and
from June 1996 to March 1998, he served as a consultant in business valuations
and as a software consultant for Arthur Andersen LLP. In 1996, Mr. Storms
received a Bachelor of Business Administration from the University of Texas, at
Austin.
THOMAS C. VAN HARE. Mr. Van Hare was elected to our board of directors in
November 1999 and has extensive experience in commercial design and Internet
marketing. Mr. Van Hare is the President and Chief Executive Officer of Capstone
Internet Services, Inc., a graphic design and marketing company which he founded
in early 1994. Mr. Van Hare is a commercial pilot with multi-engine and
instrument ratings and has over three years of search and rescue experience.
DAVID G. FESSLER. Mr. Fessler has been elected as a member of our board of
directors effective upon completion of this offering. Since September 1999,
Mr. Fessler has served as the President and owner of ADGrant Systems and
Networking Corporation, a networking integration services company that currently
services the AGES Group and the University of Connecticut. Since January 1999,
he has served as the Vice President of Novus Holding Corporation, a holding
company for interests in Magellan Aircraft Sales and Leasing Corp. and
Fairdinkum Construction Company. In addition, since May 1999, Mr. Fessler has
served as a board member of QODE.COM, an Internet bar coding company. From
May 1990 to August 1999, Mr. Fessler served as the Vice President of Technology
for the Information Systems Group of the AGES Group where he was responsible for
worldwide network and computer operations support.
PIERRE A. NARATH. Mr. Narath has been elected as a member of our board of
directors effective upon completion of this offering. Since January 1999,
Mr. Narath has served as the Chairman, Chief Executive Officer and President of
Touchstone Software Corp., an OTC Bulletin Board listed developer and publisher
of utility software used to set up, maintain, and manage personal computers and
networks. From May 1997 to November 1998, Mr. Narath served as Vice President of
Award Software International, Inc., a developer and marketer of system enabling
and management software for the global computing market that was acquired by
Phoenix Techologies, Inc., in 1998, and as President of Unicore Software, Inc.,
a software company acquired by Touchtone Software Corp. in 1999. From
February 1990 to May 1997, Mr. Narath founded and served as President of Unicore
Software, Inc.
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<PAGE>
BOARD COMMITTEES
We have established an audit committee and a compensation committee. The
audit committee recommends to the board of directors the independent certified
public accountants to be selected to audit our annual financial statements and
approves any special assignments given to such accountants. The audit committee
also reviews the planned scope of the annual audit and the independent
accountants' letter of comments and management's response thereto, any major
accounting changes made or contemplated and the effectiveness and efficiency of
our internal accounting staff. The compensation committee makes recommendations
to the board of directors regarding the compensation payable to our executive
officers, reviews general policies relating to the compensation and benefits of
our employees and administers the PartsBase.com, Inc. 1999 stock option plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee will be responsible for determining salaries,
incentives and other forms of compensation for our directors, officers and other
employees and administering various incentive compensation and benefit plans. We
did not have a compensation committee during 1999. Our board of directors was
responsible for these matters for that year. Upon completion of the offering,
our compensation committee will consist of Thomas Van Hare, David G. Fessler and
Robert A. Hammond, Jr. Mr. Hammond participates in all discussions and decisions
regarding salaries and incentive compensation for all employees and consultants
of PartsBase.com, except that he is excluded from discussions regarding his own
salary and incentive compensation. Other than Mr. Hammond, no member of the
compensation committee has at any time been an officer or employee of
PartsBase.com. No interlocking relationship exists between any member of our
compensation committee and any member of any other company's board of directors
or compensation committee. No interlocking relationship existed between any
member of our board of directors and any member of any other company's board of
directors or compensation committee in 1999.
See "Certain Relationships and Related Transactions" for a description of
certain transactions between us and members of our board of directors.
DIRECTOR COMPENSATION
Directors previously have received no cash compensation for serving on the
board of directors. Beginning upon completion of the offering, we will pay each
non-employee member of our board of directors a fee of $1,000 per board or
committee meeting attended, plus all out-of-pocket expenses incurred in
connection with attending board meetings. Mr. Storms received an option to
acquire 37,500 shares of our common stock at an exercise price of $0.63 per
share in November 1999. In addition, Mr. Van Hare received an option to acquire
10,000 shares of our common stock at an exercise price of $0.63 per share upon
his election to the board of directors in November 1999. With respect to
Mr. Fessler, Mr. Narath, or any future independent non-employee directors, upon
the effective date of their appointment to the board of directors, such
directors will be entitled to receive an option to purchase an aggregate of
10,000 shares of our common stock. The exercise price of such options shall be
the initial public offering price with respect to Mr. Fessler and Mr. Narath and
the fair market value of our common stock on the grant date with respect to any
future non-employee directors. Mr. Storms' options vested 21,875 at the time of
grant with the remainder vesting in five equal monthly installments following
the grant date. Mr. Van Hare's, Mr. Narath's and Mr. Fessler's options, as well
as any future independent non-employee director's options, shall become
exercisable as to one-third of the shares on the six-month anniversary of the
grant date, one-third on the first anniversary of the grant date, and the
remaining one-third on the second anniversary of the grant date. The options
will expire on the earlier of ten years from the date of grant or three months
after the optionee ceases to be a director. In addition, each of our
non-employee directors will be eligible to receive additional stock option
grants in the future at the discretion of the board of directors.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
during our fiscal year ended December 31, 1999 for our Chief Executive Officer.
No other executive officer received salary and bonus in excess of $100,000
during fiscal 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------
OTHER ANNUAL
SALARY BONUS COMPENSATION
NAME AND POSITION YEAR ($) ($) ($)
- ----------------- -------- -------- -------- ------------
<S> <C> <C> <C> <C>
Robert A. Hammond, Jr.
Chief Executive Officer
and President......................... 1999 81,250(1) -- --(2)
</TABLE>
- ------------------------
(1) Represents salary paid from June 1, 1999 through December 31, 1999. Mr.
Hammond's annual salary during such period was $150,000.
(2) Perquisites did not exceed the lesser of $50,000 or 10% of Mr. Hammond's
base salary in 1999.
STOCK OPTIONS
No stock options for our common stock were granted to Mr. Hammond during
fiscal 1999. However, certain of our executive officers were granted incentive
stock options in fiscal 1999. See "--Employee Benefit Plans" below.
EMPLOYMENT AGREEMENTS
In November 1999, we entered into employment agreements with each of our
executive officers other than Mr. Siegel, whose agreement is dated December 31,
1999. Such employment contracts have an initial term of two years but shall be
renewed for successive two year terms unless earlier terminated. The agreements
may be terminated by us or the employee with or without cause upon 30 days prior
written notice.
The employment contracts of the executive officers provide for the following
annual base salaries both prior and subsequent to completion of this offering:
<TABLE>
<CAPTION>
POST-OFFERING PRE-OFFERING
BASE SALARY BASE SALARY
------------- ------------
<S> <C> <C>
Robert A. Hammond, Jr................................ $250,000 $150,000
Steven R. Spencer.................................... $125,000 $ 84,000
Michael W. Siegel.................................... $141,000 $141,000(1)
Yves C. Duplan....................................... $ 95,000 $ 95,000
Kevin J. Steil....................................... $ 80,000 $ 80,000
</TABLE>
- ------------------------
(1) Excludes a $30,000 signing bonus.
The base salaries of each executive officer may be increased in the
discretion of the board of directors or the compensation committee of the board
of directors. In addition to the base salaries described above, each of the
executive officers is entitled to three weeks vacation, reimbursement of
business expenses and may, at our expense, participate along with his spouse and
dependents in any medical or other insurance plan maintained by us for salaried
employees. In addition, Mr. Hammond, Mr. Spencer and Mr. Siegel receive
automobile allowances of $1,000, $750, and $750 per month, respectively.
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<PAGE>
Each of the employment agreements contain non-compete covenants that
prohibit the employee from directly or indirectly participating in businesses in
competition with us following termination of his employment for a period of two
years.
Pursuant to the terms of his employment agreement, Mr. Siegel is entitled to
receive a severance payment equal to six months' salary in the event of a
termination of his employment for any reason other than cause, as defined in his
employment agreement.
KEY MAN INSURANCE
Prior to completion of this offering, we intend to acquire key man insurance
covering the life of Mr. Hammond in the amount of at least $2,000,000 and naming
PartsBase.com as beneficiary.
EMPLOYEE BENEFIT PLANS
STOCK OPTION PLAN
In November 1999, we adopted the PartsBase.com, Inc. 1999 stock option plan
for the purpose of promoting our long-term growth and profitability by providing
key people with incentives to improve stockholder value and contribute to our
growth and financial success.
The stock option plan provides for the award to eligible participants,
including employees, officers, directors and consultants, of stock options
including non-qualified options and incentive stock options under Section 422 of
the Internal Revenue Code. Under the stock option plan, 2,000,000 shares of
common stock are reserved for issuance. The stock option plan will terminate on
September 30, 2008 unless extended by our board of directors and, to the extent
required under applicable law, our stockholders. The stock option plan may be
amended or terminated by our board at any time provided that any significant
amendments must be approved by our stockholders.
Subsequent to this offering, the stock option plan will be administered by
our board of directors or the compensation committee of our board of directors.
The board or the compensation committee, as the case may be, will select the
participants and establish the terms and conditions of each option or other
rights granted under the stock option plan, including the exercise price, the
number of shares subject to options or other equity rights and the time at which
the options become exercisable. The exercise price of all "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code, granted
under the stock option plan must be at least equal to 100% of the fair market
value of the option shares on the date of grant. The term of any incentive stock
option granted under the stock option plan may not exceed ten years; however,
where the eligible stock option plan participant owns over 10% of the total
combined voting power of all classes of our stock, the exercise price must be at
least equal to 110% of the fair market value of the option shares on the date of
grant and the term cannot exceed five years.
To the extent required to comply with Rule 16b-3 under the Exchange Act, if
applicable, and in any event in the case of an incentive stock option, no award
granted under the stock option plan shall be transferable by a grantee otherwise
than by will or by the laws of descent and distribution. Other terms and
conditions of each award are set forth in the grant agreement governing that
award and determined by the board of directors or the compensation committee as
administrators of the stock option plan.
As of the date of this prospectus, non-qualified options to purchase a total
of 987,875 shares of common stock were outstanding under our stock option plan
at an exercise price of $0.63 per share and no options had been exercised. The
following of our executive officers and outside directors
37
<PAGE>
received non-qualified stock option grants in November 1999 except for
Mr. Siegel, whose grant was made in January 2000.
<TABLE>
<CAPTION>
NAME NO. OF SHARES OPTION PRICE VESTING
- ---- ------------- ------------ -------
<S> <C> <C> <C>
Michael Siegel.... 75,000 shares $0.63 24 equal monthly installments
Yves C. Duplan.... 35,000 shares $0.63 833 upon grant, remainder in 22 monthly
installments of approximately 1,458 shares
followed by 2 monthly installments of
approximately 1,045 shares
Kevin Steil....... 10,000 shares $0.63 1,875 upon grant; remainder in 9 monthly
installments of 625 shares followed by 12
monthly installments of approximately 208
shares
</TABLE>
In addition, each of our non-employee directors has received a non-qualified
stock option grant upon his appointment to the board of directors. See
"--Director Compensation" above.
RESTRICTED STOCK BONUS PLAN
In May 1999, we adopted the PartsBase.com, Inc. restricted stock bonus plan.
The stock bonus plan authorized us to award or grant to employees, consultants,
officers and directors (except persons serving as directors only) shares of our
common stock subject to a substantial risk of forfeiture. Our board of directors
had the sole authority to select participants, to establish the terms and
conditions of the stock and to grant the stock.
Employees, including officers, directors (except directors who are not
employees) and outside consultants selected by our board of directors, were
eligible to receive stock under the stock bonus plan. The maximum number of
shares of common stock which could have been granted under the stock bonus plan
was 1,200,000 shares. The vesting schedule of stock granted under the stock
bonus plan was determined by our board of directors.
Stock grants under the stock bonus plan vest in accordance with a schedule
established by our board of directors with respect to each individual grant. In
the event a stock grant recipient is terminated, any unvested portion of the
shares that were subject to the stock grant shall be canceled. Each such
recipient has all the rights of a shareholder with respect to stock received
pursuant to the stock bonus plan, including the right to vote such shares and
receive all dividends and other distributions.
We terminated the stock bonus plan in November 1999. Prior to termination,
stock grants totaling 1,108,500 shares were granted to an aggregate of 42
persons. Effective November 17, 1999, we entered into restricted stock
cancellation agreements with substantially all of the recipients who received
stock pursuant to the stock bonus plan. The agreement calls for cancellation of
any stock received by the recipient and termination of the restricted stock
agreement between the employee and us. An aggregate of 251,250 shares of
restricted stock remain outstanding under the stock bonus plan. Such stock is
held by a total of four persons, including 250,000 shares held by Steven
Spencer, a director and executive officer. Mr. Spencer's stock grant vested with
respect to 50,000 shares upon commencement of employment. The remaining 200,000
shares vest in 24 equal monthly installments; provided, however, that vesting
shall accelerate with respect to 100,000 shares upon completion of this
offering.
In connection with the cancellation of the stock grants under our stock
bonus plan, we issued an option to purchase one share of common stock for each
cancelled share of stock bonus plan stock. The replacement options were granted
pursuant to our 1999 stock option plan.
38
<PAGE>
LIMITATIONS ON LIABILITY OF DIRECTORS AND INDEMNIFICATION OF DIRECTORS AND
OFFICERS
As permitted by the Texas Business Corporation Act, we have included in our
articles of incorporation, as amended, a provision to eliminate the personal
liability of our directors for monetary damages for breach or alleged breach of
their fiduciary duties as directors, subject to exceptions. In addition, both
our articles of incorporation, as amended, and our bylaws provide that we are
required to indemnify our officers and directors, and we are required to pay
for, and may advance, expenses for our officers and directors as incurred in
connection with proceedings against them for which they may be indemnified. We
have entered into indemnification agreements with our officers and directors
containing provisions that are in some respects broader than the specific
indemnification provisions contained in the Texas Business Corporation Act. The
indemnification agreements require us, among other things, to indemnify our
officers and directors against liabilities that may arise by reason of their
status or service as officers and directors (other than liabilities arising from
willful misconduct of a culpable nature), to pay for their expenses incurred as
a result of any proceeding against them as to which they could be indemnified,
and to obtain directors' and officers' insurance if available on reasonable
terms. We have also obtained directors' and officers' liability insurance.
At present, we are not aware of any pending or threatened litigation or
proceeding involving a director, officer, employee or agent of ours in which
indemnification would be required or permitted. We are not aware of any
threatened litigation or proceeding that might result in a claim for
indemnification. We believe that our charter provisions and indemnification
agreements are necessary to attract and retain qualified persons as directors
and officers.
39
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with our incorporation in April 1999, Robert Hammond, our
President and Chief Executive Officer, contributed assets to us in exchange for
shares of our common stock. See "Summary--Our History" for a brief description
of this transaction.
From time to time, Mr. Hammond has made advances to us for expenses and
short-term working capital needs. As of December 31, 1999, such advances totaled
$80,900, all of which was repaid in full prior to December 31, 1999.
Metro Investments, LLC, a company controlled by Mr. Narath, one of our
director nominees, acquired 40,000 shares of Series A convertible preferred
stock at $2.50 per share in connection with our November 1999 private placement.
In addition, Touchstone Software Corp., a publicly traded company of which
Mr. Narath is an officer, director and significant stockholder, acquired an
additional 260,000 shares of Series A convertible preferred stock in our
November 1999 private placement. A description of the terms of the private
placement is contained in "Description of Capital Stock--Private Placements."
In May through October 1999, we made stock grants to certain of our
employees, most of which were cancelled on November 17, 1999. A summary of such
grants is contained in "Management--Employee Benefit Plans."
Plan Three Solutions, LLC, a company owned and operated by Louis Storms, one
of our directors, provided significant services designing and maintaining our
Web site. We pay this company for its continued services. During the year ended
December 31, 1999, we made total payments of $260,000 for Web site maintenance
services. An additional $33,550 was owed to this company as of December 31,
1999. We believe the terms of our contract wtih Plan Three Solutions, LLC, are
at least as fair as those we could have obtained from unrelated third parties in
arms-length negotiations.
Capstone Internet Services, Inc., a graphic design and marketing company
founded and operated by Thomas Van Hare, one of our directors, provided services
in connection with the design of our advertising brochures and other marketing
materials. During the year ended December 31,1999 we made total payments of
$53,263 for such services. We believe the terms of our engagement of Capstone
Internet Services, Inc. are at least as fair as those that we could have
obtained from unrelated third parties in arms-length negotiations.
40
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding shares of our common
stock beneficially owned as of December 31, 1999, and as adjusted to reflect the
offering, by:
- Each person or group known to us that beneficially owns more than five
percent of our outstanding common stock.
- Our directors and our Chief Executive Officer.
- All of our executive officers and directors as a group.
Beneficial ownership is calculated in accordance with Rule 13d-3(d) under
the Securities Exchange Act of 1934. Shares of common stock subject to options
and warrants that are currently exercisable or are exercisable within 60 days of
December 31, 1999, are deemed outstanding with respect to the person holding
those options but are not deemed outstanding for purposes of computing the
percentage ownership of any other person. Unless otherwise indicated, each
person possesses sole voting and investment power with respect to the shares
identified as beneficially owned. Except as otherwise indicated in the table,
the address of the stockholders listed below is that of our principal executive
office. Directors not included in the table below do not hold our securities.
Shares beneficially owned prior to the offering are as adjusted to reflect and
include the automatic conversion upon the completion of the offering of:
- All outstanding Series A convertible preferred stock into an aggregate
of 855,000 shares of common stock.
- All outstanding convertible notes into an aggregate of 481,250 shares
of common stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO THE SHARES BENEFICIALLY
OFFERING OWNED AFTER THE OFFERING
------------------------- --------------------------
NAME AND ADDRESS(1) NUMBER PERCENT(2) NUMBER PERCENT(2)
- ------------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Robert A. Hammond, Jr............................. 9,000,000(3) 85.00 9,000,000(3) 66.24
Steven R. Spencer................................. 250,000(4) 2.34 250,000(4) 1.84
Louis W. Storms IV(5)............................. 34,375(6) * 34,375(6) *
Thomas Van Hare(7)................................ -- -- -- --
David G. Fessler(8)............................... -- -- -- --
Pierre A. Narath(9)............................... 40,000(10) * 40,000(10) *
All directors and executive officers as a group
(10 persons)(11)................................ 9,341,667 87.80 9,341,667 68.49
</TABLE>
- ------------------------
* Represents less than 1% of the outstanding common stock.
(1) Except as otherwise indicated, the business address of each person listed is
c/o PartsBase.com, 7171 N. Federal Highway, Suite 100, Boca Raton, Florida
33487.
(2) Percentages based on 10,587,500 shares outstanding prior to the offering and
13,587,500 shares outstanding immediately after the offering.
(3) Includes 4,500,000 shares owned by Mr. Hammond individually and 4,500,000
shares owned by R. Hammond, L.P., a limited partnership of which Mr. Hammond
is the sole general partner and of which a trust established for the benefit
of Mr. Hammond's children is a 99% limited partner.
(4) Consists of 250,000 shares issued to Mr. Spencer pursuant to the terms of
our restricted stock bonus plan but which are subject to the vesting and
forfeiture provisions of such Plan.
(5) Mr. Storms' address is 777 Dunlavy #9205, Houston, Texas 77019.
41
<PAGE>
(6) Consists of shares subject to stock options that are currently exercisable
or will become exercisable within 60 days following December 31, 1999.
(7) Mr. Van Hare's address is c/o Capstone Studio, 200 West Palmetto Park Rd.
Ste. 201, Boca Raton, Florida 33432.
(8) Mr. Fessler's address is 18350 Long Lake Drive, Boca Raton, Florida 33496.
(9) Mr. Narath's address is 1538 Turnpike Street, North Andover, Massachusetts
01845.
(10) Consists of shares of Series A convertible preferred stock owned by Metro
Investments, LLC, a company controlled by Mr. Narath, which convert into
40,000 shares of our common stock upon completion of this offering. Excludes
10,000 shares that are the subject of stock options that are not currently
exercisable and 260,000 shares of Series A convertible preferred stock owned
by Touchstone Software Corp., a company of which Mr. Narath is an officer,
director and significant stockholder.
(11) Includes 51,667 shares subject to options that are currently exerciseable
or will become exerciseable within 60 days following December 31, 1999.
42
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
In our articles of incorporation, as revised, we are authorized to issue up
to 30,000,000 shares of common stock, no par value, and 2,000,000 shares of
preferred stock, no par value. Prior to this offering, 9,251,250 shares of
common stock were issued and outstanding and an additional 1,336,250 shares were
reserved for issuance upon conversion of 855,000 shares of outstanding Series A
convertible preferred stock and convertible notes. An additional 1,162,875
shares are reserved for issuance under the terms of outstanding options and
warrants. As of December 31, 1999, there were six record holders of our common
stock.
The following description of our capital stock is a summary and is qualified
in its entirety by the provisions of our articles of incorporation, bylaws and
applicable law. These documents have been filed as exhibits to the registration
statement, of which this prospectus is a part.
COMMON STOCK
The holders of common stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders. Holders of common stock are
entitled to share in any and all dividends that our board of directors, in its
discretion, declares from funds legally available for that purpose. In the event
of any liquidation or dissolution of PartsBase.com, the holders of common stock
are entitled to participate in and share pro rata in the assets available for
distribution to stockholders. Any distribution would be subsequent to payment of
our liabilities and may be subject to any preferential rights of any preferred
stock or other senior security then outstanding. The holders of common stock
have no cumulative voting, preemptive or other subscription rights, and there
are no conversion rights or redemption or sinking fund provisions with respect
to the common stock. The rights, preferences and privileges of the holders of
common stock are subject to, and may be adversely affected by, the rights of the
holders of any shares of preferred stock or senior securities which we may
designate in the future.
PREFERRED STOCK
Our board of directors is authorized, subject to any limitations prescribed
by Texas law, but without further action by our shareholders, to provide for the
issuance of up to 2,000,000 shares of preferred stock in one or more series, to
establish from time to time the number of shares to be included in each such
series and any qualifications, limitations, or restrictions thereof, and to
increase or decrease the number of shares of any such series (but not below the
number of shares of such series then outstanding) without any further vote or
action by the stockholders. The board of directors may authorize and issue
preferred stock with voting or conversion rights that could adversely affect the
voting power or other rights of common stockholders.
Simultaneously with the consummation of the offering, all 855,000 shares of
our outstanding Series A convertible preferred stock will be converted into
855,000 shares of common stock and no shares of our preferred stock will remain
outstanding.
PRIVATE PLACEMENTS
In June 1999, we completed a private placement of $900,000 in 8% convertible
secured subordinated notes due 2001. GunnAllen Financial, Inc. acted as the
placement agent with respect to the placement and, as a result, received
commissions equal to 10% of the gross proceeds, a non-accountable expense
allowance of 3% of the gross proceeds, and a warrant to purchase up to 175,000
shares of our common stock at an exercise price of $2.00 per share.
43
<PAGE>
In November 1999, we issued to two investors an aggregate of $62,500 of
notes having substantially identical terms to the notes issued in connection
with the June placement, including $50,000 sold to the father of Mr. Duplan, one
of our executive officers.
The notes issued in connection with the June placement bear interest at an
annual rate of 8% and are secured by substantially all of our assets. Interest
is payable in quarterly installments commencing September 30, 1999 with all
principal and interest due and payable on December 31, 2001 unless prepaid by us
or converted into our common stock. Both the notes issued in connection with the
June placement and the notes issued in November will automatically convert into
shares of our common stock at a conversion rate of $2.00 upon closing of this
offering. An aggregate of 481,250 shares will be issued in connection with the
conversion of said notes. Subject to a lock-up restriction pursuant to which
holders will not be permitted to sell or transfer shares for a period of
180 days following the effective date of this offering, each holder of notes was
granted piggy-back registration rights to register for resale the shares of
common stock issuable upon conversion of such notes.
In November 1999, we raised an additional $2,137,500 through a private
placement of 855,000 shares of Series A convertible preferred stock at $2.50 per
share. In connection with such private placement, we paid a total placement fee
of $235,125 to three broker-dealers. The shares of Series A preferred stock will
automatically convert into an aggregate of 855,000 shares of common stock upon
completion of the offering. Subject to a lock-up restriction pursuant to which
holders will not be permitted to sell or transfer shares for a period of
180 days following the effective date of this offering, each holder of Series A
preferred stock was granted piggy-back registration rights to register for
resale in connection with this offering the shares of common stock issuable upon
conversion of such shares.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF OUR ARTICLES OF INCORPORATION, BYLAWS AND
TEXAS LAW
Under the Texas Business Corporation Act, as amended, there are certain
provisions of our articles of incorporation and bylaws that may be deemed to be
"anti-takeover" in nature that will be immediately applicable. These provisions
are:
- the requirement that we indemnify our directors and officers to the
fullest extent permitted by Texas law;
- the power of the board of directors to authorize the issuance of up to
2,000,000 shares of preferred stock and to determine the designations,
preferences, limitations and relative rights, including voting rights,
of those shares without further vote or action by the stockholders; and
- the elimination of preemptive rights to common stock.
Upon completion of this offering, we will be subject to Part Thirteen of the
Texas Business Corporation Act. Subject to exceptions, Part Thirteen generally
prohibits a publicly held Texas corporation from engaging in any business
combination with any affiliated shareholder for a period of three years
following the date that such shareholder became an affiliated shareholder,
unless prior to such date, the corporation's board of directors approved either
the business combination or the transaction that resulted in the shareholder
becoming an affiliated shareholder, or the business combination is approved by
at least two-thirds of the outstanding voting shares that are not beneficially
owned by the affiliated shareholder or an affiliate or associate of the
affiliated shareholder at a meeting of shareholders called not less than six
months after the affiliated shareholder's share acquisition date.
In general, Part Thirteen defines an affiliated shareholder as any entity or
person beneficially owning 20% or more of the outstanding voting stock of the
issuing public corporation and any entity or person affiliated with or
controlling or controlled by such entity or person. Part Thirteen defines a
business combination to include, among other similar types of transactions, any
merger, share exchange, or conversion of an issuing public corporation involving
an affiliated shareholder. Part Thirteen may
44
<PAGE>
have the effect of inhibiting a non-negotiated merger or other business
combination that we may be involved in.
Our amended and restated articles of incorporation limit the liability of
our directors for monetary damages for an act or omission in the director's
capacity as a director, except to the extent otherwise required by the Texas
Business Corporation Act. Such limitation of liability does not affect the
availability of equitable remedies such as injunctive relief or rescission. Our
amended and restated articles of incorporation permit us to indemnify our
directors and officers to the fullest extent permitted by Texas law, including
in circumstances in which indemnification is otherwise discretionary under Texas
law.
Under Texas law, a corporation may indemnify a director or officer or other
person who was, is, or is threatened to be made a named defendant or respondent
in a proceeding because the person is or was a director, officer, employee or
agent of the corporation, if it is determined that such person:
- conducted himself or herself in good faith;
- reasonably believed, in the case of conduct in his or her official
capacity as a director or officer of the corporation, that his or her
conduct was in the corporation's best interests, and, in all other
cases, that his or her conduct was at least not opposed to the
corporation's best interests; and
- in the case of any criminal proceeding, had no reasonable cause to
believe that his or her conduct was unlawful.
Any such person may be indemnified against judgments, penalties (including
excise and similar taxes), fines, settlements and reasonable expenses actually
incurred by the person in connection with the proceeding. If the person is found
liable to the corporation or is found liable on the basis that personal benefit
was improperly received by the person, the indemnification is limited to
reasonable expenses actually incurred by the person in connection with the
proceeding, and must not be made in respect of any proceeding in which the
person is found liable for willful or intentional misconduct in the performance
of his or her duty to the corporation.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers or persons controlling us pursuant to the
foregoing provisions, we have 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. We have entered into indemnification agreements
with each of our directors that provide for indemnification and expense
advancement in addition to the indemnification provided by the amended and
restated articles and bylaws. We believe that these provisions and agreements
are necessary to attract and retain qualified directors.
The shares of preferred stock and the elimination of preemptive rights to
common stock were authorized for the purpose of providing the board of directors
with as much flexibility as possible to issue additional shares, without further
stockholder approval for proper corporate purposes, including financing,
acquisitions, stock dividends, stock splits, employee incentive plans and other
similar purposes. However, these additional shares may also be used by the board
of directors (if consistent with its fiduciary responsibilities) to deter future
attempts to gain control over PartsBase.com.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is U.S. Stock Transfer
Corporation.
45
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have outstanding 13,587,500 shares
of common stock. Of these shares, the 3,000,000 shares of common stock sold in
this offering will be freely tradable in the public market without restrictions
under the Securities Act. Any shares purchased in this offering by our
affiliates, as defined in Rule 144 under the Securities Act, may only be sold in
compliance with the applicable provisions of Rule 144 discussed below.
In general, under Rule 144, a person who has complied with the requirements
set forth below and has beneficially owned "restricted securities" for at least
one year, including a person who may be deemed an affiliate of us, is entitled
to sell, within any three-month period, the number of shares of common stock
that does not exceed the greater of:
- one percent of the then outstanding shares of our common stock; or
- the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of
a notice on Form 144 with the SEC.
Sales under Rule 144 are subject to restrictions relating to manner of sale,
notice obligations and the requirements as to the availability of current public
information about us. Generally, a person who is not an affiliate of ours at any
time during the 90 days preceding a Rule 144 sale and who has beneficially owned
the shares for at least two years can sell without complying with the manner of
sale, notice, and volume requirements. As of December 31, 1999, the one-year
holding period had not expired with respect to any shares of our common stock.
Stockholders holding 10,587,500 shares, representing all of our outstanding
shares immediately prior to the offering, have entered into lock-up agreements
pursuant to which they agreed not to sell, pledge, assign, or otherwise
transfer, or agree to sell, pledge, assign or otherwise transfer their shares
without the prior written consent of Roth Capital Partners, Inc. for a period of
180 days following the date of the final prospectus. Giving effect to these
lock-up agreements and applicable legal restrictions, the number of shares of
common stock and the dates when these shares will become freely tradeable or
saleable in the market (subject to volume limitations and other requirements of
Rule 144 applicable to affiliates and certain other stockholders) is as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- --------------------- ----
<C> <S>
3,000,000 At the date of this prospectus
10,587,500 180 days following the date of this prospectus
</TABLE>
Simultaneously with this offering, we have registered on behalf of certain
selling stockholders an aggregate of 1,336,250 shares of our common stock. Upon
expiration of the 180-day lock-up period, the shares registered on behalf of
private placement stockholders may be sold in the market pursuant to a selling
stockholder prospectus in the form accompanying the registration statement of
which this prospectus is a part. Shares subject to the 180-day lock-up period,
other than those that are registered on behalf of the private placement
stockholders, may be sold into the public market without registration under the
Securities Act in compliance with the volume limitations and other applicable
restrictions of Rule 144 under the Securities Act. Such shares must be held for
a period of at least one year before they are eligible for resale in the public
market pursuant to Rule 144.
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<PAGE>
PLAN OF DISTRIBUTION
GENERAL
Subject to the terms and conditions of our underwriting agreement, the
underwriters named below, for whom Roth Capital Partners, Inc. is acting as sole
representative, agreed to purchase from us, and we have agreed to sell to the
underwriters, the respective number of shares of common stock set forth opposite
each underwriter's name below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ------------ ----------------
<S> <C>
Roth Capital Partners, Inc..................................
Pennsylvania Merchant Group.................................
Total................................................. 3,000,000
=========
</TABLE>
Our underwriting agreement provides that the obligations of the underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in our business and the receipt of certificates,
opinions and letters from our counsel and independent public accountants. The
nature of the underwriters' obligation is such that they are committed to
purchase and pay for all the shares of common stock if any are purchased.
We have been advised by the representative that the underwriters propose to
offer the shares of common stock directly to the public on the terms set forth
on the cover page of this prospectus. The underwriters may allow selected
dealers a concession of not more than $. per share, and the underwriters may
allow, and such selected dealers may reallow, a concession of not more than $.
per share, to other dealers. After the initial public offering of the shares,
the public offering price and other selling terms may be changed by the
representatives. No change in such terms shall change the amount of proceeds to
be received by us as set forth on the cover page of this prospectus.
We have granted an option to the underwriters, exercisable for a period of
45 days after the date of this prospectus to purchase up to an additional
450,000 shares of common stock at the same price per share as the initial shares
to be purchased by the underwriters to cover overallotments, if any. To the
extent that the underwriters exercise this option, each of the underwriters will
be committed, subject to certain conditions, to purchase such additional shares
of common stock in approximately the same proportion as set forth in the above
table.
UNDERWRITERS' COMPENSATION
The representative of the underwriter has advised us that they do not expect
any sales of the shares of common stock offered hereby to be made to
discretionary accounts controlled by the underwriters.
We have agreed to pay the representative a nonaccountable expense allowance
equal to 3% of the aggregate price of the shares of common stock offered hereby
(including with respect to shares of common stock underlying the overallotment
option, if and to the extent it is exercised) set forth on the front cover of
this prospectus. The representative's expenses in excess of the nonaccountable
expense allowance, including legal expenses, will be borne by the
representative.
We have agreed to issue to the representative at the closing of the offering
warrants to purchase up to 150,000 shares of common stock at an exercise price
per share equal to 120% of the initial public offering price. The
representative's warrants are exercisable for a period of four years beginning
one year from the date of this prospectus.
The holder of the representative's warrants will have no voting, dividends
or other shareholder rights until the representative's warrants are exercised.
The terms of the representative's warrants were established as the result of
negotiations between the representative and us. If the representative's warrants
are exercised, the representative may realize additional compensation. By their
terms, the representative's warrants will be restricted from sale, transfer,
assignment or hypothecation, except to persons that are officers of either of
the representatives. The number of shares covered by the
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<PAGE>
representative's warrants and the exercise price are subject to adjustment to
prevent dilution. In addition, we have granted certain rights to the holder of
the representative's warrants to register the representatives' warrants and the
common stock underlying the representative's warrants under the Securities Act.
Total compensation to the representatives and the underwriters is as
follows:
- Commissions--$. per share of common stock sold;
- Nonaccountable expense allowance--$. per share of common stock sold; and
- Warrants to purchase up to 150,000 shares of common stock at 120% of the
per share offering
LOCK-UP AGREEMENTS
Our directors and officers and our shareholders have entered into lock-up
agreements which provide that they will not sell, pledge, assign or otherwise
transfer, or agree to sell, pledge, assign or otherwise transfer any of their
shares for an initial period of 180 days after the date of this prospectus
without the prior written consent of Roth Capital Partners, Inc., on behalf of
the underwriters. Roth Capital Partners, Inc. has no present intention to
release the locked-up shares prior to expiration of the lock-up period although
Roth Capital Partners, Inc. may release the locked-up shares prior to the
expiration of such period. The granting of any release would be conditioned, in
the judgment of Roth Capital Partners, Inc., on such sale not materially
adversely impacting the prevailing trading market for the common stock on the
Nasdaq National Market System. Specifically, factors such as average trading
volume, recent price trends, and the need for additional public float in the
market for the common stock would be considered in evaluating such a request.
DETERMINATION OF OFFERING PRICE
Prior to the offering, there has been no established trading market for the
common stock. Consequently, the initial public offering price for the common
stock offered hereby has been determined by negotiations between the
representatives and us. Among the factors considered in such negotiations were
the preliminary demand for the common stock, the prevailing market and economic
conditions, our results of operations, estimates of our business potential and
prospects, the present state of our business operations, an assessment of our
management, the consideration of these factors in relation to the market
valuation of comparable companies in related businesses, the current condition
of the markets in which we operate, and other factors deemed relevant. There can
be no assurance that an active trading market will develop for the common stock
or that the common stock will trade in the public market after the offering at
or above the initial public offering price.
MARKET STABILIZATION
The representative has advised us that, pursuant to Regulation M under the
Securities Act, some persons participating in the offering may engage in
transactions, including stabilizing bids, syndicate covering transactions or the
imposition of penalty bids, that may have the effect of stabilizing or
maintaining the market price of the shares of common stock at a level above that
which might otherwise prevail in the open market. A "stabilizing bid" is a bid
for or the purchase of shares of common stock on behalf of the underwriters for
the purpose of fixing or maintaining the price of the common stock. A "syndicate
covering transaction" is the bid for or purchase of common stock on behalf of
the underwriters to reduce a short position incurred by the underwriters in
connection with the offering. A "penalty bid" is an arrangement permitting the
representative to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with the offering if the common
stock originally sold by such underwriter or syndicate member purchased by the
representative in a syndicate covering transaction and has therefore not been
effectively placed by such underwriter or syndicate member. The representative
has advised us that such transactions may be effected on the Nasdaq National
Market System or otherwise and, if commenced, may be discontinued at any time.
48
<PAGE>
The underwriting agreement provides that we will indemnify the underwriters
and their controlling persons against liabilities under the Securities Act or
will contribute to payments the underwriters and their controlling persons may
be required to make in respect thereof.
DIRECTED SHARE PROGRAM
At our request, the underwriters have reserved up to 15 percent of the
shares offered by this prospectus for sale at the initial public offering price
to our employees, officers, directors and other individuals associated with us
and members of their families. The number of shares available for sale to the
general public will be reduced to the extent these individuals purchase or
confirm for purchase, orally or in writing, such reserved shares. Any reserved
shares not purchased or confirmed for purchase will be offered by the
underwriters to the general public on the same basis as the other shares offered
by this prospectus.
LEGAL MATTERS
The legality of the securities in this offering has been passed upon for
PartsBase.com by Jeffer, Mangels, Butler & Marmaro LLP, Los Angeles, California.
Agreed upon legal matters will be passed upon for the underwriters by Greenberg
Traurig, LLP, McLean, Virginia.
EXPERTS
The financial statements as of December 31, 1999 and 1998 and for each of
the three years in the period ended December 31, 1999 included in this
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the shares of common stock offered by this
prospectus. This prospectus does not contain all of the information set forth in
the registration statement, as some information is omitted in accordance with
the rules and regulations of the SEC. For further information with respect to us
and this offering, reference is made to the registration statement, including
the exhibits filed therewith, copies of which may be obtained at prescribed
rates from the SEC at the public reference facilities maintained by the SEC at
Judiciary Plaza Building, 450 Fifth Street, NW, Washington, D.C. 20549 and at
the SEC's regional offices located at Seven World Trade Center, Suite 1300, New
York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661. The SEC maintains a Web site on the Internet that will
contain all future reports, proxy and information statements and other
information that we are required to file electronically with the SEC. The
address of the SEC's Web site is HTTP://WWW.SEC.GOV. Further information
regarding the SEC's public reference facilities may be obtained by calling the
SEC at 1-800-SEC-0330.
This prospectus includes statistical data regarding Internet usage and
business-to-business e-commerce which were obtained from industry publications,
including reports generated by Forrester Research Inc., Boeing Corp. and
Aerospace Industries Association. These industry publications generally indicate
that they have obtained information from sources believed to be reliable, but do
not guarantee the accuracy and completeness of that information. While we
believe those industry publications to be reliable, we have not independently
verified the data included in the reports. We also have not sought, in all
instances, the consent of these organizations to refer to their reports in this
prospectus.
We will furnish our stockholders annual reports and make available unaudited
quarterly reports for the first three quarters of each fiscal year. Annual
reports will include audited consolidated financial statements prepared in
accordance with generally accepted accounting principles. The financial
statements included in the annual reports will be examined and reported upon,
with an opinion expressed, by our independent auditors.
49
<PAGE>
PARTSBASE.COM, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report................................ F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Stockholders' Equity (Deficit)................ F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of PartsBase.com, Inc.
Boca Raton, Florida
We have audited the accompanying balance sheets of PartsBase.com (the
"Company") as of December 31, 1998 and 1999 and the related statements of
operations, stockholders' equity (deficit), and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1998 and 1999
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1999 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Certified Public Accountants
January 28, 2000
Miami, Florida
F-2
<PAGE>
PARTSBASE.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
AS OF DECEMBER 31, EQUITY AT
----------------------- DECEMBER 31, 1999
1998 1999 (NOTE 2)
--------- ----------- ------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................... $ -- $ 735,276
Notes and accounts receivables..................... -- 297,884
Prepaids and other current assets.................. -- 504,547
-----------
Total current assets............................. -- 1,537,707
Property, Plant and Equipment........................ 12,660 1,034,123
Accumulated depreciation........................... (6,576) (24,646)
--------- -----------
Net property, plant and equipment................ 6,084 1,009,477
Deferred financing costs, net of amortization........ -- 1,937,677
Web site development costs, net of amortization...... -- 188,152
Other assets......................................... -- 56,282
--------- -----------
Total assets......................................... $ 6,084 $ 4,729,295
========= ===========
LIABILITIES
Current Liabilities:
Accounts payable................................... $ 2,469 $ 718,523
Other accrued liabilities.......................... -- 233,270
Deferred revenue................................... 22,659 1,263,978
Accounts payable--related party.................... -- 9,108
--------- -----------
Total current liabilities........................ 25,128 2,224,879
Convertible notes payable............................ -- 962,500
--------- -----------
Total liabilities.................................... 25,128 3,187,379
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, no par value; 2,000,000 shares
authorized, issued and outstanding December 31,
1999--855,000 shares, December 31, 1998--none,
liquidation preference........................... 1,902,375
Common stock, no par value; 30,000,000 shares
authorized, issued and outstanding December 31,
1999,--9,251,250 shares, December 31,
1998--none.......................................
Additional paid-in capital......................... 392,615 15,178,497 $18,043,372
Accumulated deficit................................ (411,659) (7,762,678) (7,762,678)
Unearned compensation.............................. -- (7,776,278) (7,776,278)
--------- ----------- -----------
Total stockholders' equity (deficit)................. (19,044) 1,541,916 $ 2,504,416
--------- ----------- ===========
Total liabilities & stockholders' equity (deficit)... $ 6,084 $ 4,729,295
========= ===========
</TABLE>
F-3
<PAGE>
PARTSBASE.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1998 1999
--------- --------- -----------
<S> <C> <C> <C>
Net revenue............................................... $ 2,861 $ 3,504 $ 362,224
Cost of revenue........................................... 104,041 43,462 1,412,532
Noncash compensation expense.............................. -- -- 1,799,139
--------- --------- -----------
Total cost of revenue................................... 104,041 43,462 3,211,671
Gross loss................................................ (101,180) (39,958) (2,849,447)
Operating expenses:
General and administrative.............................. 90,452 108,163 1,293,091
Noncash compensation expense............................ -- -- 899,821
--------- --------- -----------
Total operating expenses.............................. 90,452 108,163 2,192,912
--------- --------- -----------
Operating loss........................................ (191,632) (148,121) (5,042,359)
Other income (expense):
Interest expense........................................ -- -- (881,652)
Interest income......................................... -- -- 10,977
--------- --------- -----------
Total other income (expense).......................... -- -- (870,675)
--------- --------- -----------
Net loss.............................................. (191,632) (148,121) (5,913,034)
Value of preferred stock beneficial conversion
feature............................................. -- -- (1,902,375)
--------- --------- -----------
Net loss applicable to common stockholders............ $(191,632) $(148,121) $(7,815,409)
========= ========= ===========
Net loss per common share--basic and diluted.............. $ (0.84)
===========
Weighted average common shares outstanding--basic
and diluted............................................. 9,251,250
===========
</TABLE>
F-4
<PAGE>
PARTSBASE.COM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------------- ----------------------- ADDITIONAL UNEARNED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT PAID-IN-CAPITAL COMPENSATION DEFICIT
-------- ---------- --------- ----------- --------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996...... $ 71,630
Contribution from parent........ 198,047
Net loss........................
-----------
Balance, December 31, 1997...... 269,677
Contribution from parent........ 122,938
Net loss......................
-----------
Balance, December 31, 1998...... 392,615
Net loss (January 1--April 26,
1999).........................
Contribution from parent........ 22,659
Reorganization.................. (464,390)
Common stock issued............. 9,000,000
Restricted stock issued......... 1,075,250 5,859,383 $(5,859,383)
Preferred stock issued.......... 855,000 $1,902,375 1,902,375 $(1,902,375)
Exchange of restricted stock for
stock options................. (824,000) 3,531,441 (3,531,441)
Unearned compensation related to
stock options................. 1,084,414 (1,084,414)
Recognition of unearned
compensation.................. 2,698,960
Beneficial conversion feature of
convertible notes............. 850,000
Warrants issued................. 2,000,000
Net loss
(April 27--December 31,
1999)......................... (5,860,303)
-------- ---------- --------- ----------- ------------ -----------
Balance, December 31, 1999...... 855,000 $1,902,375 9,251,250 $15,178,497 $(7,776,278) $(7,762,678)
======== ========== ========= =========== ============ ===========
<CAPTION>
TOTAL
DIVISIONAL STOCKHOLDERS'
EQUITY EQUITY
(DEFICIT) (DEFICIT)
---------- -------------
<S> <C> <C>
Balance, December 31, 1996...... $ (71,906) $ (276)
Contribution from parent........ 198,047
Net loss........................ (191,632) (191,632)
--------- -----------
Balance, December 31, 1997...... (263,538) 6,139
Contribution from parent........ 122,938
Net loss...................... (148,121) (148,121)
--------- -----------
Balance, December 31, 1998...... (411,659) (19,044)
Net loss (January 1--April 26,
1999)......................... (52,731) (52,731)
Contribution from parent........ 22,659
Reorganization.................. 464,390
Common stock issued.............
Restricted stock issued.........
Preferred stock issued.......... 1,902,375
Exchange of restricted stock for
stock options.................
Unearned compensation related to
stock options.................
Recognition of unearned
compensation.................. 2,698,960
Beneficial conversion feature of
convertible notes............. 850,000
Warrants issued................. 2,000,000
Net loss
(April 27--December 31,
1999)......................... (5,860,303)
--------- -----------
Balance, December 31, 1999...... -- $ 1,541,916
========= ===========
</TABLE>
F-5
<PAGE>
PARTSBASE.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1998 1999
--------- --------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................ $(191,632) $(148,121) $(5,913,034)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization........................... 2,395 2,453 410,918
Loss on property disposals.............................. -- -- 583
Recognition of unearned compensation.................... -- -- 2,698,960
Noncash interest on convertible notes................... -- -- 850,000
Noncash costs allocated from former parent.............. 21,198 39,153 15,037
Changes in assets & liabilities:
Accounts receivable--trade, net....................... -- -- (297,884)
Prepaids and other current assets..................... -- -- (504,547)
Deferred charges & other assets....................... -- -- (56,282)
Accounts payable...................................... (334) 760 716,054
Other accrued liabilities............................. -- -- 233,270
Deferred revenue...................................... -- 22,659 1,241,319
Accounts payable--related party....................... -- -- 9,108
--------- --------- -----------
Net cash used in operating activities............... (168,373) (83,096) (596,498)
--------- --------- -----------
Cash flow from investing activities:
Capital expenditures.................................... (8,476) (688) (1,022,049)
Web site development costs.............................. -- -- (216,075)
--------- --------- -----------
Net cash used in investing activities............... (8,476) (688) (1,238,124)
--------- --------- -----------
Cash flow from financing activities:
Issuance of convertible notes........................... -- -- 962,500
Debt issue costs........................................ -- -- (138,700)
Issuance of Preferred stock............................. -- -- 1,902,375
Deferred offering costs................................. -- -- (163,899)
Paid-in-capital....................................... 176,849 83,784 7,622
--------- --------- -----------
Net cash provided by financing activities........... 176,849 83,784 2,569,898
--------- --------- -----------
Net increase in cash and cash equivalents................. -- -- 735,276
Cash and cash equivalents at beginning of period.......... -- -- --
--------- --------- -----------
Cash and cash equivalents at end of period................ $ -- $ -- $ 735,276
========= ========= ===========
Noncash financing activities--
Warrants issued in connection with issuance of the
convertible notes....................................... -- -- $ 2,000,000
===========
</TABLE>
F-6
<PAGE>
PARTSBASE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
1. BACKGROUND AND ORGANIZATION
PartsBase.com, Inc. (the "Company") is a provider of an e-commerce
Business-to-Business solution to the aviation parts industry. The Company
enables global aviation parts buyers and sellers to efficiently buy and sell
aviation parts and products worldwide through the Partsbase.com Web site, an
Internet based procurement solution.
The Company was incorporated in Texas on April 27, 1999 and prior to such
date operated as a division (the "Division") of Aviation Laboratories, Inc.
("Aviation Labs"). During this period, the Division did not have significant
sales and operating activities except for expenditures related primarily to the
design and development of its online database and Web site and the establishment
of relationships with industry buyers and sellers of aviation parts. In April
1999, the assets of the Division were conveyed to Mr. Robert A. Hammond, Jr. in
consideration for, among other things, Mr. Hammond's equity interest in Aviation
Labs. On April 27, 1999, Mr. Hammond transferred the assets of the Division into
the Company. The Company has incurred operating losses to date and had an
accumulated deficit of $7,762,678 at December 31, 1999. The Company's activities
have been primarily financed through private placements of convertible
subordinated debt and convertible preferred stock. The Company is no longer in
the development stage.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accounting for the contribution of the Division into the Company has
been reported in the accompanying financial statements as a reorganization of
entities under common control in a manner similar to a pooling of interests. As
the Company has, in effect, reorganized from an S corporation to a C
corporation, additional paid-in capital has been reduced by the amount of the
accumulated deficit as of April 26, 1999 of $464,390.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of investments in bank certificates of deposit and
other interest bearing instruments with initial maturities of three months or
less. Such investments are carried at cost, which approximates fair value. At
December 31, 1998 and 1999, the Company did not have any cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to credit risk
consist primarily of uninsured cash and cash equivalents. Cash and cash
equivalents are deposited with a federally insured commercial bank in the United
States. At December 31, 1999 the Company had all of its cash and cash
equivalents in one financial institution of which the excess over $100,000 is
not covered by FDIC insurance and which, therefore, did not limit the Company's
amount of credit exposure. The Company believes it is not exposed to any
significant credit risk on cash and cash equivalents.
The Company sells primarily to aviation related companies and performs
ongoing credit evaluations of its customers but does not require collateral. The
Company analyzes the need for reserves for potential credit losses and records
reserves when necessary. The Company has not had significant write-offs of bad
debt. No reserves were recorded as of December 31, 1998 and 1999.
F-7
<PAGE>
PARTSBASE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company has members in more than 115 countries. Revenues from domestic
and foreign customers were $325,227 and $36,997, respectively, for the year
ended December 31, 1999. The Company did not derive more than 10% of its revenue
from any single foreign country during 1999. Prior to 1999, all of the Company's
revenue was derived from domestic customers.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Costs incurred for additions,
improvements and betterments are capitalized as incurred. Costs for maintenance
and repairs are charged to expense as incurred. Gains or losses on dispositions
of property and equipment are included in the determination of income.
Depreciation and amortization are computed using the straight-line method over
the following estimated service lives of the related assets:
<TABLE>
<S> <C>
Computer software........................................... 3 years
Computer equipment.......................................... 5 years
Communication equipment..................................... 7 years
Furniture and fixtures...................................... 7 years
</TABLE>
DEFERRED FINANCING COSTS
Issue costs associated with obtaining debt through the Company's Private
Placement, including the excess of the fair value over exercise price of
warrants issued to the underwriters of the debt, and the Initial Public Offering
("IPO") of its common stock, $2,302,602, are recorded as a deferred charge. All
fees and issue costs associated with the Private Placement are amortized over
the term of the related debt utilizing the straight-line method. Amortization of
financing costs related to the Private Placement amounted to $364,925 for the
year ended December 31, 1999.
WEB SITE DEVELOPMENT COSTS
The Company follows the provisions of SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1").
SOP 98-1 requires that entities capitalize certain costs related to internal use
software once certain criteria have been met.
Web site development costs which are enhancements intended to extend and or
improve significantly the marketability of the original product are capitalized,
all other costs are expensed as incurred and classified as cost of revenues. Web
site development costs of $216,075 were capitalized during the year ended
December 31, 1999. No Web site development costs were capitalized in prior
periods. As of December 31, 1999, capitalized Web site development costs, net of
amortization, was $188,152.
Amortization is computed on an enhancement-by-enhancement basis utilizing
the straight-line method over the estimated economic life of the enhancement,
which at December 31, 1999 is estimated to be 24 months.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, including cash and cash equivalents,
accounts receivable and accounts payable are carried at cost, which approximates
their fair value because of the short-term
F-8
<PAGE>
PARTSBASE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
maturity of these instruments. The Company's convertible notes payable are
carried at cost and have a fair value of $5,793,641 based on the market value of
the underlying common stock on December 31, 1999 plus unpaid interest as of
December 31, 1999.
PRO FORMA PRESENTATION
The unaudited pro forma presentation of shareholders' equity at
December 31, 1999 gives effect to the mandatory conversion of all outstanding
convertible notes under the terms of the private placement agreement into common
stock (see Note 5) and the mandatory conversion of the convertible preferred
stock issued on November 22, 1999 into common stock (see Note 6) .
Since the Company has incurred net losses since inception, it would not have
incurred any income tax liabilities during the period prior to incorporation on
April 27, 1999, and any deferred tax assets would have had a corresponding
valuation allowance therefore pro forma presentation on net loss per share is
not required.
REVENUE RECOGNITION
Revenues are recognized, net of discounts, over the period services are
provided to subscribers. The Company does not charge initial sign-up fees to new
subscribers.
ACCOUNTING FOR STOCK-BASED COMPENSATION PLAN
The Company accounts for stock-based compensation arrangements in accordance
with the provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and complies with the disclosure
provisions of Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation." Under APB No. 25, compensation
expense is based on the difference, if any, on the date of the grant, between
the fair value of the Company's stock and the exercise price.
INCOME TAXES
The Company accounts for income taxes according to SFAS No. 109, "Accounting
for Income Taxes." Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount to be recovered.
Prior to April 27, 1999, the date of incorporation, the Company, with the
consent of its stockholders, elected to be taxed under Section 1362 of the
Internal Revenue Code (the "Code") as an S corporation, which provides that, in
lieu of corporate income taxes, the stockholders account for the pro rata share
of the Company's items of income, deductions, losses, and credits. In connection
with the incorporation of the Company (see Note 1), the Company, with the
consent of its stockholders, elected to be taxed under the provisions of
Subchapter C of the Code.
F-9
<PAGE>
PARTSBASE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS (LOSS) PER SHARE
The Company follows the provisions of SFAS No. 128, "Earnings Per Share." In
accordance with SFAS No. 128, basic earnings per share ("EPS") is computed by
dividing net loss applicable to common stock by the weighted average common
shares outstanding during the period. Shares of common stock, options, warrants
or other common stock equivalents are considered outstanding for all periods
presented in the computation of basic and diluted EPS if issued for nominal
consideration. For the year ended December 31, 1999, the weighted average common
shares outstanding used to compute basic and diluted EPS includes the effect of
restricted common stock issued to employees.
The EPS computation excludes warrants to purchase 200,000 shares of common
stock at an exercise price of $2.00 per share that were issued in August 1999
and outstanding as of December 31, 1999 because such warrants were issued at
fair market value and were antidilutive. The EPS computation also excludes
919,375 options to purchase shares of common stock at an exercise price of $0.63
per share issued in November 1999 and outstanding as of December 31, 1999
because such options were antidilutive.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards
for the reporting and display of comprehensive income and its components in a
full set of general purpose financial statements and is effective for fiscal
years beginning after December 15, 1997. The Company adopted SFAS No. 130 in the
year ended December 31, 1998. The Company had no comprehensive income items to
report for all periods presented.
SEGMENT INFORMATION
The Company follows the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No.131 changes the way
companies report selected segment information in annual financial statements and
requires companies to report selected segment information in interim financial
reports to stockholders. The Company operates solely in one operating segment,
the development and marketing of an online marketplace for the purchasing and
distribution of products.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities," which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. SFAS No. 133, as amended by SFAS No. 137, is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. The Company
currently does not engage in, nor does it
F-10
<PAGE>
PARTSBASE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
expect to engage in, derivative or hedging activities, and therefore, the
Company anticipates there will be no impact to its consolidated financial
statements.
In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued SOP No. 98-5, "Reporting on the Costs of Start-Up Activities"
("SOP 98-5"). SOP 98-5 requires that all start-up costs related to new
operations must be expensed as incurred. In addition, all start-up costs that
were capitalized in the past must be written off when SOP 98-5 is adopted. The
Company implemented SOP 98-5 on January 1, 1999. The adoption of SOP 98-5 did
not have a material impact on the Company's financial position or results of
operations.
3. PROPERTY AND EQUIPMENT
Property and equipment, consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1999
-------- ----------
<S> <C> <C>
Computer equipment..................................... $12,660 $ 298,345
Computer software...................................... -- 675,000
Telephone equipment.................................... -- 42,379
Furniture and Fixtures................................. -- 18,399
------- ----------
12,660 1,034,123
Accumulated depreciation............................... (6,576) (24,646)
------- ----------
$ 6,084 $1,009,477
======= ==========
</TABLE>
Depreciation expense for the years ended December 31, 1997, 1998 and 1999
amounted to $2,395, $2,452, $18,070, respectively.
4. ADVANCES FROM STOCKHOLDER
In May and June 1999, The Company's principal stockholder and Chief
Executive Officer (the "Principal Stockholder") provided funds to finance
development of the Company's product. The advances were non interest bearing and
did not have a stated maturity date. The advances were repaid in November 1999.
5. CONVERTIBLE NOTES PAYABLE
For the period from June 9, 1999 to August 31, 1999, the Company, through a
Private Placement, sold and issued 8% Convertible Secured Subordinated Notes due
and payable December 31, 2001 totaling $900,000 (the "Convertible Notes") to
several investors. Terms of the Convertible Notes provide for interest at 8%
payable quarterly. All principal and unpaid interest is due and payable
December 31, 2001, if there is no conversion. Each note is convertible at any
time into common stock at a conversion price of $2.00 per share at the holder's
option. The Convertible Notes automatically convert upon the filing and closing
of an initial public offering of the Company's common stock with gross proceeds
of $5 million or more or upon certain mergers and consolidations of the Company.
Accrued interest payable on such notes at December 31, 1999 aggregated $18,641.
The Convertible Notes have a beneficial conversion feature totaling $787,500,
measured as the difference between the
F-11
<PAGE>
PARTSBASE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CONVERTIBLE NOTES PAYABLE (CONTINUED)
conversion price of $2.00 per share and the fair value of the underlying common
stock at the time of issuance limited to the amount of proceeds received. The
beneficial conversion feature has been recorded as a charge to interest expense
with a corresponding credit to additional paid-in capital. The value of the
beneficial conversion feature was recognized immediately because the Convertible
Notes are immediately convertible at the option of the holder. The Convertible
Notes are secured by substantially all of the Company's assets.
In November 1999, the Company issued an additional $62,500 of notes having
substantially identical terms to the Convertible Notes to an aggregate of two
investors, including $50,000 sold to the father of one of the Company's
executive officers. The Convertible Notes have a beneficial conversion feature
of $62,500 measured as the difference between the conversion price of $2.00 per
share and the fair value of the underlying stock at time of issuance, limited to
the amount of proceeds. At the time of issuance, the beneficial conversion
feature was recorded as a charge to interest expense and with a corresponding
credit to additional paid-in capital. The value of the beneficial conversion
feature was recognized immediately because the Convertible Notes are immediately
convertible at the option of the holder.
6. STOCKHOLDERS' EQUITY
CAPITAL STOCK
The Company has authorized the issuance of 30,000,000 shares of common
stock, without par value, and 2,000,000 shares of preferred stock, without par
value. The Board of Directors have authority to establish series of unissued
shares of any class by fixing and determining the designations, preferences,
limitations and relative rights, including voting rights, of the shares of any
series. The Board of Directors shall have the authority to increase or decrease
the number of shares of such series to the fullest extent of the law. The number
of common and preferred shares outstanding, including restricted stock, at
December 31, 1999, is 9,251,250 and 855,000, respectively.
PREFERRED STOCK
Between November 1, 1999 and November 17, 1999, the Company sold 855,000
shares of its Series A Convertible Preferred Stock ("Convertible Preferred
Stock") at $2.50 per share for aggregate net proceeds of $1,902,375 after
commissions of $235,125. All of the shares are convertible at any time into
855,000 shares of the Company's common stock. Such shares are convertible upon
the completion of the Company's IPO or at the discretion of the shareholder if
an IPO is not completed. The Convertible Preferred Stock has a beneficial
conversion feature totaling $1,902,375, measured as the difference between the
conversion price of $2.50 per share and the fair value of the underlying common
stock at the time of issuance, limited to the amount of the proceeds received
and was treated as a Preferred dividend which was a reduction to income
applicable to common shareholders at issuance.
WARRANTS
In connection with the closing of the 8% Convertible Secured Subordinated
Notes private placement in August 1999, the underwriters were granted warrants
to purchase 200,000 shares of common stock of the Company at an exercise price
equal to $2.00 per share until the expiration date of
F-12
<PAGE>
PARTSBASE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
September 1, 2002. The warrants had a fair market value upon issuance of
approximately $2,400,000. As of December 31, 1999, no warrants had been
exercised. Subsequent to December 31, 1999, an agreement was reached with the
underwriters that reduced the number of warrants from 200,000 to 175,000.
In the event of certain consolidations or sales affecting the Company, the
Company is required to call the warrants for cash at a price based on the
greater of the trading price of the Company's common stock or the value paid by
a purchaser of the Company's common stock.
1999 STOCK OPTION PLAN
On November 2, 1999 the Board of Directors adopted the PartsBase.com, Inc.
1999 Stock Option Plan. The plan is a qualified stock option plan in accordance
with Section 422 of the Internal Revenue Code and provides for the issuance of
both incentive and non-qualified stock options. The maximum number of shares of
common stock that may be issued upon the exercise of all options shall not
exceed 2,000,000 shares of common stock. The per share option price of the
common stock shall be determined by the Board. The per share price with respect
to any incentive stock options shall not be less than the fair market value of
the common stock on the date of grant. Each option granted vests in accordance
with a vesting schedule established by the Board of Directors or a Committee of
the Board of Directors. Absent a specific determination of vesting, options
granted shall vest over a twenty-four month period and the period of exercise of
each option shall not exceed ten (10) years from date of grant. On November 16,
1999, the Company granted 95,375 nonqualified stock options in addition to the
824,000 options exchanged for the terminated stock grants for a total issuance
of 919,375 nonqualified stock options at an exercise price of $0.63 per share
including options to acquire 35,000 and 10,000 shares of common stock at an
exercise price of $.63 per share to two executives of the Company, respectively.
One executive became vested in 833 options upon grant with the remainder vesting
in 22 monthly installments of approximately 1,458 options followed by 2 monthly
installments of approximately 1,045 options. The other executive became vested
in 1,875 options upon grant with the remainder vesting in 9 equal monthly
installments of 625 options followed by 12 monthly installments of approximately
208 options. Unearned compensation of $511,650 was charged to stockholders'
equity in November 1999 based on the market value of the Company's common stock
at the date of the award. Compensation expense of approximately $54,000 was
recognized in November and December 1999 related to these options. On
December 31, 1999, the Company entered into an employment agreement with an
executive of the Company that provides for the grant on January 19, 2000 of
options to acquire 75,000 shares of common stock at an exercise price of $0.63
per share. The options will vest over 24 equal monthly installments beginning on
the date of grant. Assuming the market value of the Company's stock on the date
of grant is equal to the market value on December 31, 1999, unearned
compensation of $852,750 will be charged to stockholders' equity in January
2000.
F-13
<PAGE>
PARTSBASE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
A summary of the status of the Company's stock option activity, and related
information for the year ended December 31, 1999 is presented below:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
-------- ----------------
<S> <C> <C>
Outstanding January 1, 1999......................... --
Granted............................................. 919,375 $ 0.63
Exercised........................................... --
Forfeited........................................... --
------- ------
Outstanding December 31, 1999....................... 919,375 $ 0.63
======= ======
Options exercisable at December 31, 1999............ 235,792 $ 0.63
Weighted-average fair value of options granted
during the year................................... $11.47
</TABLE>
The following table summarizes information about stock options outstanding
as of December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ------------------------------
NUMBER AVERAGE REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
RANGE OF PRICE OUTSTANDING CONTRACT LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- -------------- ----------- ----------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$0.63.................... 919,375 9.98 $0.63 235,792 $0.63
</TABLE>
The Company applies the provisions of APB No. 25 and its related
interpretations in accounting for its stock option plans. Accordingly,
compensation expense recognized was different than what would have been
otherwise recognized under the fair value based method defined in SFAS No. 123.
Had the Company accounted for these plans under SFAS No. 123, the Company's net
loss applicable to common stock and loss per share would have been reduced to
the following pro forma amounts:
<TABLE>
<S> <C>
Net loss
As reported............................................... $(5,913,304)
===========
Proforma.................................................. $(6,004,972)
===========
Basic and diluted loss per share
As reported............................................... $ (0.64)
===========
Proforma.................................................. $ (0.65)
===========
</TABLE>
Pro forma information regarding net loss and net loss per share is required
by SFAS 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method provided for in SFAS 123. The
fair value of options was estimated at the date of grant using a
F-14
<PAGE>
PARTSBASE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
minimum value option pricing model with the following weighted-average
assumptions for options granted during the year ended December 31, 1999:
<TABLE>
<S> <C>
Risk-free interest rate..................................... 5.88%
Expected life (in years).................................... 3
Volatility.................................................. 0%
Dividend yield.............................................. 0%
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the options using a
graded vesting method. The effects of applying SFAS 123 for pro forma
disclosures are not likely to be representative of the effects on reported net
loss for future years.
The option valuation models were developed for use in estimating the fair
value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
RESTRICTED STOCK BONUS PLAN
In May 1999, the Company adopted the PartsBase.com, Inc. Restricted Stock
Bonus Plan ("Stock Bonus Plan"). Under the Stock Bonus Plan, the Company was
authorized to award or grant to employees, consultants, officers and directors
(except persons serving as directors only) shares of common stock subject to a
substantial risk of forfeiture. The Board of Directors had the sole authority to
select participants, to establish the terms and conditions of the stock,
including vesting provisions, and to grant the stock. The maximum number of
shares of common stock which could have been granted under the Stock Bonus Plan
was 1,200,000 shares. In the event a stock grant recipient was terminated, any
unvested portion of the shares that were subject to the stock grant was
canceled. Each stock grant recipient has all the rights of a shareholder with
respect to stock received pursuant to the Stock Bonus Plan, including the right
to vote such shares and receive all dividends and other distributions.
On November 17, 1999 the Company entered into an agreement with all of the
employees who received restricted stock awards. The agreement calls for the
employee to return all shares received and the termination of the Restricted
Stock Agreement between the employee and the Company as it relates to the
restricted stock award. As part of the terminated restricted stock award each
employee participating in the restricted stock grant plan received one
(1) nonqualified option to purchase one (1) share of common stock for each
restricted stock terminated. The options granted are part of the
PartsBase.Com, Inc. 1999 Stock Option Plan and vest over a twenty-four month
period and the period of exercise shall not exceed ten (10) years from date of
the grant. The options were granted at $0.63 per share. The number of options
granted as part of this agreement totaled 824,000. As a result of the
termination of the restricted stock and issuance of the nonqualified stock
options, additional unearned compensation of approximately $3,500,000 was
charged to stockholders' equity in November 1999. The additional unearned
compensation was determined as the amount by which the intrinsic value of the
F-15
<PAGE>
PARTSBASE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
options issued exceeded the amount of unearned compensation recorded prior to
the termination of the restricted stock based on the market value of the
Company's common stock at the date of grant. Prior to termination, stock grants
totaling 1,075,250 were outstanding. An aggregate of 251,250 shares of
restricted stock remain outstanding under the Stock Bonus Plan. Such stock is
held by a total of four persons, including 250,000 shares held by Steven
Spencer, a director and executive officer. Mr. Spencer's stock grant vested with
respect to 50,000 shares upon commencement of employment. The remaining 200,000
shares vest in 24 equal monthly installments; provided, however, that vesting
shall accelerate with respect to 100,000 shares upon completion of an initial
public offering. The remaining 100,000 shares vest in equal monthly installments
over the two year period beginning with the commencement of Mr. Spencer's
employment.
The Company applies the provisions of APB No. 25 and its related
interpretations in accounting for its employee stock grant plan. As the stock
grants were recorded at their fair value at the date of grant, compensation
expense recognized was no different than what would have been otherwise
recognized under the fair value based method defined in SFAS No. 123.
UNEARNED COMPENSATION
Unearned compensation of $10,475,238 was charged to stockholders' equity in
1999 in connection with the issuance of stock options and restricted stock
grants based on the market value of the Company's common stock at the date of
grant. Compensation expense of $2,698,960 was recognized during 1999 related to
these options and grants.
7. INCOME TAXES
The Company did not record any provision (benefit) for income taxes for the
year ended December 31, 1999, because it experienced a net loss and generated a
net operating loss of approximately $2,464,000 since incorporation on April 27,
1999, which expires in 2019. The Company's utilization of its net operating loss
carryforward will be limited pursuant to Internal Revenue Code Section 382 due
to cumulative changes in ownership in excess of 50% within a three-year period.
Prior to April 27, 1999, the Company was not subject to Federal income taxes.
A reconciliation of income tax benefit provided at the Federal statutory
rate (34%) to income tax benefit is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-------------------------
<S> <C> <C>
Net loss............................................. $(5,913,034)
Income tax benefit at statutory rate................. (2,010,432) (34.00%)
Loss attributable to operations prior to inception... 19,774 0.33%
Permanent difference relating to stock
compensation....................................... (266,137) (4.5%)
State income taxes................................... (206,956) (3.50%)
Change in valuation allowance........................ 2,463,662 41.67%
Other................................................ 89 0.00%
----------- ------
$ -- 0.00%
=========== ======
</TABLE>
F-16
<PAGE>
PARTSBASE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
The major tax effected components of the Company's net deferred tax
liability are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999
-------------
<S> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 2,472,090
Valuation allowance....................................... (2,471,292)
-----------
798
Deferred tax liabilities--
Differences between book and tax basis of property........ (798)
-----------
Total net deferred taxes.................................... $ --
===========
</TABLE>
8. RELATED PARTY TRANSACTIONS
CONTRACT SERVICES
A company owned and operated by one of the Company's directors and minority
stockholders provided significant services designing and maintaining the
Company's Web site. The Company pays this company for its continued services.
Services performed totaling $0 and approximately $260,000 of which approximately
$220,000 has been capitalized as Web site development costs and approximately
$43,000 has been expensed as cost of revenue for the years ended December 31,
1998 and 1999, respectively. There was $37,350 owed to this company as of
December 31, 1999 which is included in accounts payables in the accompanying
balance sheets.
DUE TO/FROM OTHER COMPANIES
The company in which PartsBase.Com, Inc. had previously operated as a
division until April 26, 1999, collected sales revenues and paid certain costs
on its behalf. The other company then billed PartsBase.Com, Inc. for net amounts
owed. At December 31, 1999, the Company owed a net amount aggregating $9,108. At
December 31, 1998, there were no amounts due to the other company.
ALLOCATION OF COSTS INCURRED BY FORMER PARENT
The financial statements include costs incurred by Aviation Labs on the
Company's behalf. Such costs include administrative salaries, related payroll
taxes and benefits, utilities, office supplies and rent. These costs aggregated
$21,198, $39,153 and $15,037 the years ended December 31, 1997, 1998 and 1999,
respectively. The Company used a proportional cost allocation methodology based
on the ratio of the number of employees dedicated to the operations of the
Company to the total number of employees of Aviation Labs. Management believes
such allocation to be reasonable.
9. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company is party to several non-cancelable lease agreements for certain
equipment as well as its principal administrative offices. Rent expense under
non-cancelable operating leases totaled $0, $0
F-17
<PAGE>
PARTSBASE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
and $48,943 for the years ended December 31, 1997, 1998 and 1999, respectively.
Minimum future lease obligations under non-cancelable operating leases in effect
at December 31, 1999, are as follows:
<TABLE>
<S> <C>
2000........................................................ $ 73,596
2001........................................................ 49,064
2002........................................................ 0
2003........................................................ 0
2004........................................................ 0
--------
Total..................................................... $122,660
========
</TABLE>
10. INVESTMENT BANKING AGREEMENT
On October 7, 1999, the Company had entered into an agreement with an
investment banking group (the "Group") whereby such Group would act as the
exclusive financial advisor to the Company. Such services to be performed by the
Group would be in connection with the exploration of potential financing and
strategic transactions, including the private placement of debt or equity
capital, strategic mergers and acquisitions and or a public equity offering.
Immediately upon signing of the agreement the Group commenced work as the
Company's lead managing underwriter in a proposed public offering (the
"Offering") of the Company's common stock. In addition, the Group assisted the
Company, on a best efforts basis, in completing the private placement of the
Convertible Preferred stock.
The Company paid fees for services in connection with this agreement which
included a non-refundable initial cash fee of $35,000 which was intended to
offset non-accountable expenses related to the private capital offering, plus a
commission of $125,125 relating to the proceeds raised in the private placement
of equity and debt which is convertible into equity.
On or about December 3, 1999, this agreement was terminated. The Company is
currently working with a new investment banking firm in connection with a public
equity offering.
F-18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNTIL , 2000, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
[LOGO]
3,000,000 SHARES OF COMMON STOCK
-------------
PROSPECTUS
-------------
ROTH CAPITAL PARTNERS, INC. PENNSYLVANIA MERCHANGE GROUP
- --------------------------------------------------------------------------------
YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN
THIS PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE SALE OF COMMON
STOCK MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE
DATE OF THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION
OF AN OFFER TO BUY THE SHARES OF COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH
THE OFFER OR SOLICITATION IS UNLAWFUL.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(This page has been intentionally left blank.)
<PAGE>
INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT IS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SS-1
<PAGE>
SUBJECT TO COMPLETION DATED FEBRUARY 22, 2000
PROSPECTUS
PARTSBASE.COM, INC.
1,336,250 Shares of Common Stock
---------------------
This prospectus relates to the registration by PartsBase.com, Inc., at our
expense, for the account of certain selling stockholders of 1,336,250 shares of
our common stock. Prior to this offering, there has been no public market for
the Common Stock. [Our common stock has been approved for listing on the Nasdaq
National Market under the symbol "PRTS."]
The shares are not being underwritten in this offering and we will not
receive any proceeds from the sale of shares by the selling stockholders.
Subject to restrictions imposed on the selling stockholders by the managing
underwriter of our initial public offering, the shares may be sold by the
selling stockholders, or their respective transferees, beginning on the date of
this prospectus.
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 7 FOR RISKS THAT YOU SHOULD CONSIDER BEFORE INVESTING IN THE
SHARES OF OUR COMMON STOCK.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY 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
SS-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 7
Use of Proceeds............................................. 16
Dividend Policy............................................. 16
Capitalization.............................................. 17
Dilution.................................................... 18
Selected Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20
Business.................................................... 23
Management.................................................. 33
Certain Relationships and Related Transactions.............. 40
Principal Stockholders...................................... 41
Description of Capital Stock................................ 43
Shares Eligible for Future Sale............................. 46
Plan of Distribution........................................ 47
Legal Matters............................................... 49
Experts..................................................... 49
Where You Can Find More Information......................... 49
Index to Financial Statements............................... F-1
</TABLE>
SS-2
<PAGE>
SELLING STOCKHOLDERS
The following table provides information regarding the ownership of shares
of common stock by the selling stockholders as of the date of this prospectus
and as adjusted to reflect the sale of all of their respective shares. The
shares listed below represent shares of common stock issuable upon the mandatory
conversion of convertible promissory notes and/or Series A convertible preferred
stock. Such conversion occurred simultaneously with the effective date of the
registration statement of which this prospectus is a part.
Except as disclosed in footnote (5) to the table below, no selling
stockholder has had any position, office or other material relationship with us
within the past three years. The selling stockholders are participating in this
offering pursuant to rights granted to the selling stockholders in connection
with the private placement of convertible promissory notes and/or Series A
convertible preferred stock. In connection with such private placements, we
agreed to file and maintain the effectiveness of the registration statement of
which this prospectus is a part, and to pay all fees and expenses incident to
the registration of this offering, including all registration and filing fees,
all fees and expenses of complying with state securities laws, all costs of
preparation of the registration statement and fees and disbursements of our
counsel and independent public accountants.
<TABLE>
<CAPTION>
AMOUNT OF PERCENTAGE OF AMOUNT OF
SHARES OWNED SHARES OWNED AMOUNT OF SHARES OWNED
NAMES OF SELLING BEFORE BEFORE SHARES BEING AFTER
STOCKHOLDER(1) OFFERING OFFERING(2) REGISTERED OFFERING(3)
- -------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Jeff London................................ 12,500 * 12,500 0
Justina O. Kaduru.......................... 12,500 * 12,500 0
Blaize Kaduru.............................. 25,000 * 25,000 0
Jesse Greenfield IRA, Delaware Chart
Guarantee and Trust TTEE................. 100,000 * 100,000 0
Doublas L. Flaute.......................... 25,000 * 25,000 0
Boris L. Miles............................. 12,500 * 12,500 0
James M. Terrell........................... 12,500 * 12,500 0
Steven J. Schwartz and Traci Schwartz...... 12,500 * 12,500 0
Michael Turnamian.......................... 12,500 * 12,500 0
Richard Turnamian and Sonia Turnamian...... 6,250 * 6,250 0
Alex P. Macar, Trustee for the LeGreff
Trust.................................... 12,500 * 12,500 0
Phillip Walker............................. 6,250 * 6,250 0
William Metzger and Katharine Metzger...... 12,500 * 12,500 0
William H. Metzger MD, Inc Retirement
Trust.................................... 12,500 * 12,500 0
Duni Hebron................................ 22,500 * 22,500 0
Patrick E. Aneji........................... 12,500 * 12,500 0
Fred Goldin................................ 6,250 * 6,250 0
Nick A. Baki............................... 12,500 * 12,500 0
Kevin J. Walls............................. 75,000 * 75,000 0
Alvin Galuten (4).......................... 25,000 * 25,000 0
John T. Echols............................. 6,250 * 6,250 0
Richard S. Greene.......................... 12,500 * 12,500 0
Phillip Ward............................... 6,250 * 6,250 0
Harbor Consulting, Inc..................... 6,250 * 6,250 0
Moliere Duplan............................. 25,000 * 25,000
Scott R. and Deborah M. Dingle............. 6,250 * 6,250
Greenfield Children's Partnership.......... 100,000 * 100,000 0
Justin Wilber.............................. 5,000 * 5,000 0
Paul Bratsos............................... 5,000 * 5,000 0
</TABLE>
SS-3
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF PERCENTAGE OF AMOUNT OF
SHARES OWNED SHARES OWNED AMOUNT OF SHARES OWNED
NAMES OF SELLING BEFORE BEFORE SHARES BEING AFTER
STOCKHOLDER(1) OFFERING OFFERING(2) REGISTERED OFFERING(3)
- -------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Nick Gogas................................. 10,000 * 10,000 0
Executive Financial Associates, Inc........ 10,000 * 10,000 0
Tim Tellios................................ 5,000 * 5,000 0
Louis Freedlander.......................... 10,000 * 10,000 0
John Lovell................................ 5,000 * 5,000 0
Tech Coast Ventures, LLC................... 100,000 * 100,000 0
Metro Investments, LLC (5)................. 40,000 * 40,000 0
Touchstone Software Corp.(5)............... 260,000 2.46 260,000 0
Mark Kokowsky.............................. 120,000 1.13 120,000 0
NMR Enterprises, Inc....................... 60,000 * 60,000 0
Johnson Advisory Group, Inc................ 30,000 * 30,000 0
Richard Sandfer............................ 10,000 * 10,000 0
Steve S. McKeag............................ 20,000 * 20,000 0
Steve R. Dingle............................ 5,000 * 5,000 0
Spiro Gogas................................ 10,000 * 10,000 0
Jim Donnan................................. 10,000 * 10,000 0
Pierce Lieberman........................... 30,000 * 30,000 0
</TABLE>
- ------------------------
* Represents less than 1% of the outstanding common stock.
(1) Information set forth in the table regarding the selling stockholder shares
is provided to the best of our knowledge based on information furnished to
us by the selling stockholders and/or available to us through its stock
ledgers.
(2) Percentages based on 10,587,500 shares of common stock outstanding
immediately prior to the offering, assuming that all outstanding convertible
notes and Series A convertible preferred stock have been converted into an
aggregate of 1,336,250 shares of common stock.
(3) Assumes that each selling stockholder sells all of the shares held by such
selling stockholder.
(4) Includes 12,500 shares owned by Alvin Galuten IRA.
(5) Metro Investments, LLC is controlled by Pierre Narath, who has been
appointed as a member of our board of directors effective upon completion of
our initial public offering. Mr. Narath is an officer, director and
significant stockholder of Touchstone Software Corporation.
SS-4
<PAGE>
PLAN OF DISTRIBUTION
TRANSACTIONS. The selling stockholders may offer and sell the common stock
in one or more of the following transactions (which may incur block
transactions):
- in the over-the-counter market,
- in negotiated transactions, or
- in a combination of any of these transactions.
PRICES. The selling stockholders may sell their shares at any of the
following prices:
- fixed prices that may be changed,
- market prices prevailing at the time of sale,
- prices related to prevailing market prices, or
- negotiated prices.
DIRECT SALES; AGENTS, DEALERS AND UNDERWRITERS. The selling stockholders
may effect transactions by selling shares in any of the following ways:
- directly to purchasers, or
- to or through agents, dealers or underwriters designated from time to
time.
Agents, dealers or underwriters may receive compensation in the form of
underwriting discounts, concessions or commissions from the selling stockholders
and/or the purchasers of shares for whom they act as agent or to whom they sell
as principals, or both. The selling stockholders and any agents, dealers or
underwriters that act in connection with the sale of shares might be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act, and
any discount, concession or commission received by them and any profit on the
resale of shares as principal might be deemed to be underwriting discounts or
commissions under the Securities Act.
LOCK-UP AGREEMENTS. Each of the selling stockholders has entered into a
Lock-Up Agreement with Roth Capital Partners, Inc. pursuant to which the selling
stockholder has agreed not to sell, pledge, assign or otherwise transfer, or
agree to sell, pledge, assign or otherwise transfer any of their shares for an
initial period of 180 days after the date of this prospectus without the prior
written consent of Roth Capital Partners, Inc. on behalf of the underwriters.
Roth Capital Partners, Inc. has no present intention to release the locked-up
shares prior to expiration of the lock-up period although Roth Capital Partners,
Inc. may release the locked-up shares prior to the expiration of such date. The
granting of any release would be conditioned, in the judgment of Roth Capital
Partners, Inc., on such sale not materially adversely impacting the prevailing
trading market for the common stock on the Nasdaq National Market System.
Specifically, factors such as average trading volume, recent price trends, and
the need for additional public float in the market for the common stock would be
considered in evaluating such a request.
STATE SECURITIES LAW. Under the securities laws of some states, the selling
stockholders may only sell the shares in those states through registered or
licensed brokers or dealers. In addition, in some states, the selling
stockholders may not sell shares unless they have been registered or qualified
for sale in that state or an exemption from registration or qualification is
available and satisfied.
EXPENSES; INDEMNIFICATION. We will not receive any of the proceeds from the
sale of the common stock sold by the selling stockholders hereunder and will
bear all expenses related to the registration of this offering but will not pay
for any underwriting or brokerage commissions, fees or discounts, if any.
SS-5
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN
THIS PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE SALE OF COMMON
STOCK MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE
DATE OF THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION
OF AN OFFER TO BUY THESE SHARES IN ANY CIRCUMSTANCES UNDER WHICH THE OFFER OR
SOLICITATION IS UNLAWFUL.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PROSPECTUS SUMMARY............................. 3
RISK FACTORS................................... 7
USE OF PROCEEDS................................ 16
DIVIDEND POLICY................................ 16
CAPITALIZATION................................. 17
DILUTION....................................... 18
SELECTED FINANCIAL DATA........................ 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................... 20
BUSINESS....................................... 23
MANAGEMENT..................................... 33
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS................................. 40
PRINCIPAL STOCKHOLDERS......................... 41
DESCRIPTION OF CAPITAL STOCK................... 43
SHARES ELIGIBLE FOR FUTURE SALE................ 46
PLAN OF DISTRIBUTION........................... 47
LEGAL MATTERS.................................. 49
EXPERTS........................................ 49
WHERE YOU CAN FIND MORE INFORMATION............ 49
INDEX TO FINANCIAL STATEMENTS.................. F-1
</TABLE>
[LOGO]
1,336,250 SHARES OF
COMMON STOCK
---------------------
PROSPECTUS
---------------------
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SS-6
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table indicates the expenses to be incurred in connection with
the offering described in this registration statement, all of which will be paid
by us. All amounts are estimates, other than the Securities and Exchange
Commission registration fee, the National Association of Securities
Dealers, Inc. fee and the Nasdaq listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 18,245
National Association of Securities Dealers, Inc. fee........ $ 30,500
Nasdaq listing fee.......................................... $ 90,500
Representative's non-accountable expense allowance.......... $1,080,000
Accounting fees and expenses................................ $ 150,000
Legal fees and expenses..................................... $ 150,000
Director and officer insurance expenses..................... $ 100,000
Printing and engraving expenses............................. $ 90,000
Transfer agent and registrar fees and expenses.............. $ 15,000
Blue Sky fees and expenses (including counsel fees)......... $ 20,000
Miscellaneous expenses...................................... $ 165,755
Total................................................. $1,910,000
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 2.02A of the Texas Business Corporation Act, or TBCA, provides, in
relevant part, as follows:
"Subject to the provisions of Section B and C of this Article, each
corporation shall have the power:
(16) To indemnify directors, officers, employees, and agents of the
corporation, and to purchase and maintain liability insurance for those
persons."
As permitted by Section G of Article 2.02-1 of the TBCA or any successor
statute, the Company's articles of incorporation and bylaws (a) makes mandatory
the indemnification permitted under Section B of Article 2.02 as contemplated by
Section G thereof; (b) makes mandatory the payment or reimbursement of the
reasonable expenses incurred by a former or present director who was, is, or is
threatened to be made a named defendant or respondent in a proceeding upon such
director's compliance with the requirements of Section K of Article 2.02; and
(c) extends the mandatory indemnification referred to in Section (a) above and
the mandatory payment or reimbursement of expenses referred to in Section (b)
above (i) to all former or present officers of the Company and (ii) to all
persons who are or were serving at the request of the Company as a director,
officer, agent, employee, partner, member or trustee of another corporation,
partnership, limited liability corporation, joint venture, trust or other
enterprise, to the same extent that the Company is obligated to indemnify and
pay or reimburse expenses to directors.
Pursuant to policies of Directors and Officers Liability and Company
Reimbursement insurance with total limits of $5 million, the directors and
officers of the Company are insured, subject to the limits, retention,
exceptions and other terms and conditions of such policies, against liability
for any actual or alleged error or misstatement or misleading statement or act
or omission or neglect or breach of duty while acting in their capacities as
directors or officers of the Company.
II-1
<PAGE>
The Company has entered into indemnity agreements with its directors and
certain officers pursuant to which the Company generally is obligated to
indemnify its directors and such officers to the full extent permitted by the
TBCA, as described above.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In April 1999, the Company issued an aggregate of 9,000,000 shares of common
stock to Robert Hammond, Jr., the Company's CEO and President, and a limited
partnership controlled by Mr. Hammond is the sole general partner, in connection
with the formation of the Company. The consideration for such shares was the
contribution of the initial operating assets of the Company. The issuance of
such shares was exempt from the registration requirements of the Securities Act
of 1933, as amended, pursuant to Section 4(2) thereof.
In June 1999, the Company issued 250,000 shares of common stock to one
officer and director of the Company as a stock grant pursuant to the Company's
restricted stock bonus plan. The issuance of such shares was exempt from the
registration requirements of the Securities Act pursuant to Section 4(2)
thereof.
In August and September 1999, the Company issued an aggregate of 1,250
shares of common stock to three employees as a stock grant pursuant to the
Company's restricted stock bonus plan. The issuance of such shares was exempt
from the registration requirements of the Securities Act pursuant to Rule 701
thereof.
In November 1999 through January 2000, the Company issued options to
purchase an aggregate of 994,375 shares of common stock at an exercise price of
$0.63 per share. Such options were issued to an aggregate of 55 employees in
accordance with the Company's stock option plan. Such options were issued in
reliance on the exemption afforded by Rule 701 of the Securities Act.
In a private placement completed in August 1999, the Company raised $900,000
through the sale of convertible promissory notes to approximately 24 accredited
investors. Such promissory notes will be converted into an aggregate of 450,000
shares of the Company's common stock upon the closing of this offering. The
issuance of the promissory notes was exempt from the registration requirements
of the Securities Act pursuant to Rule 506 of Regulation D promulgated
thereunder.
In August 1999, in connection with the private placement of convertible
promissory notes described above, the Company issued a warrant to purchase up to
175,000 shares of its common stock at an exercise price of $2.00 to the
broker-dealer through which the private placement was conducted. The issuance of
such warrant was exempt from the registration requirements of the Securities Act
pursuant to Rule 506 of Regulation D promulgated thereunder.
In November 1999, the Company raised $62,500 through the sale of convertible
promissory notes to two accredited investors. Such promissory notes will be
converted into an aggregate of 31,250 shares of the Company's common stock upon
the closing of this offering. The issuance of these promissory notes was exempt
from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof.
In November 1999, the Company raised $2,137,500 through a private placement
of an aggregate of 855,000 shares of its Series A convertible preferred stock to
approximately 21 accredited investors. Such shares of preferred stock will be
converted into an aggregate of 855,000 shares of the Company's common stock upon
the closing of this offering. The issuance of the Series A preferred stock was
exempt from the registration requirements of the Securities Act pursuant to
Rule 506 of Regulation D promulgated thereunder.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation*
3.2 Amended and Restated Bylaws*
4.1 Form of Common Stock Certificate*
4.2 Form of Representative's Warrant*
4.3 Form of Warrant Agreement, dated as of August 31, 1999, in
favor of Gunn Allen
4.4 Form of Subscription Document for August 1999 Private
Placement
4.5 Form of Subscription Document for November 1999 Private
Placement
4.6 Form of Convertible Promissory Note
5.1 Opinion of Jeffer, Mangels, Butler & Marmaro LLP
10.1 PartsBase.com, Inc. Amended Restricted Stock Bonus Plan
10.2 PartsBase.com, Inc. Stock Option Plan**
10.3 Lease Agreement with respect to office space in Boca Raton,
Florida
10.4 Form of Indemnification Agreement*
10.5 Employment Agreement of Robert Hammond, Jr.
10.6 Employment Agreement of Steven Spencer
10.7 Employment Agreement of Kevin Steil
10.8 Employment Agreement of Michael Siegel
10.9 Employment Agreement of Yves Duplan
10.10 Consulting Agreement with Plan Three Solutions, L.L.C.
10.11 Software License Agreement with Tradex Technologies, Inc.
10.12 Software License Agreement with Trading Dynamics, Inc.
23.1 Consent of Jeffer, Mangels, Butler & Marmaro LLP (included
in Exhibit 5.1)
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Pierre A. Narath as Director Nominee**
23.4 Consent of David G. Fessler as Director Nominee**
24.1 Power of Attorney (included in Part II--Signatures of this
Registration Statement)**
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment
** Filed previously
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(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 forgoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering
price set forth in "Calculation of Registration Fee" table in
the effective registration statement: and
(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, 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.
(b) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it
was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boca Raton, State of
Florida, on February 11, 2000.
<TABLE>
<S> <C> <C>
PARTSBASE.COM, INC.
By: /s/ ROBERT A. HAMMOND, JR.
-----------------------------------------
Robert A. Hammond, Jr.,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons on behalf
of PartsBase.com, Inc. in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ROBERT A. HAMMOND, JR.
------------------------------------------- Director, Chief Executive February 11, 2000
Robert A. Hammond, Jr. Officer and President
/s/ STEVEN R. SPENCER
------------------------------------------- Director, Chief Operating February 11, 2000
Steven R. Spencer Officer
/s/ MICHAEL SIEGEL
------------------------------------------- Chief Financial Officer February 11, 2000
Michael Siegel
/s/ THOMAS VAN HARE*
------------------------------------------- Director February 11, 2000
Thomas Van Hare
/s/ LOUIS W. STORMS IV*
------------------------------------------- Director February 11, 2000
Louis W. Storms IV
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ STEVEN R. SPENCER
--------------------------------------
Steven R. Spencer
AS ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
EXHIBIT 4.3
Warrant No. __
Right to purchase
_______ shares
PartsBase.com, Inc.
Warrant to purchase Common Stock
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
OFFERED FOR SALE OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO
COUNSEL FOR THE CORPORATION THAT THE TRANSACTION SHALL NOT RESULT IN A VIOLATION
OF STATE OR FEDERAL SECURITIES LAWS.
Registered Owner: Gunn Allen Financial, Inc.
For value received, PartsBase.com, Inc., a Texas corporation (the
"Corporation"), grants the following rights to the registered owner of this
Warrant:
(a) ISSUE. Upon tender to the Corporation (as defined in paragraph (e)
hereof), the Corporation shall issue to the registered owner hereof the number
of shares specified in paragraph (b) hereof of fully paid and nonassessable
shares of Common Stock of the Corporation that the registered owner is otherwise
entitled to purchase.
(b) NUMBER OF SHARES. The number of shares of Common Stock of the
Corporation that the registered owner of this Warrant is entitled to receive
upon exercise of this Warrant is ______ shares. The Corporation shall at all
times reserve and hold available sufficient shares of Common Stock to satisfy
all conversion and purchase rights represented by outstanding convertible
securities, options and warrants, including this Warrant. The corporation
covenants and agrees that all shares of Common Stock that may be issued upon
the exercise of this Warrant shall, upon issuance, be duly and validly
issued, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the purchase and the issuance of the shares.
(c) EXERCISE PRICE. The exercise price of this Warrant, the price at which
the shares of stock purchasable upon exercise of this Warrant may be purchased,
is Two Dollars ($2.00) per share.
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<PAGE>
(d) EXERCISE PERIOD. This Warrant may only be exercised on or after
September 1, 1999, and on or before September 1, 2002 ("Exercise Period"). If
not exercised during this period, this Warrant and all rights granted under this
Warrant shall expire and lapse.
(e) TENDER. The exercise of this Warrant must be accomplished by actual
delivery of the Exercise Price in cash, certified check, or official bank draft
in lawful money of the United States of America, and by actual delivery of a
duly executed form, a copy of which is attached to this Warrant as Exhibit "1,"
properly executed by the registered owner of this Warrant, and by surrender of
this Warrant. The payment and exercise form must be delivered, personally or by
mail, to the offices of the Corporation at 7171 N. Federal Highway, Boca Raton,
Florida 33487. Documents sent by mail shall be deemed to be delivered when they
are received by the Corporation.
(f) CASHLESS TENDER. The registered owner in its sole and absolute
discretion may exercise this warrant without tender of the exercise price. The
registered owner shall receive the number of shares determined by (1)
subtracting the cumulative exercise price from cumulative fair market value of
the shares for which the warrant is exercised and (2) dividing the amount
determined in (1) by the fair market value of a share on the date of exercise.
For these purposes, the fair market value of a share of stock in the event
that the stock is traded on the NASDAQ National Market System, is equal to the
mean between the bid and asked quotation for the Common Stock as to any date (as
reported by a recognized stock quotation service) or, in the event that there
shall be no bid or asked quotations as to a date, then upon the basis of the
mean between the bid and asked quotations on the date nearest preceding that
date. If the stock is listed and traded upon a recognized securities exchange,
the fair market value shall be based upon the reported closing price at which
such shares were traded on such recognized exchange as to any date or, if the
stock was not traded on said date, upon the basis of the closing price on the
date nearest preceding that date. If the stock is neither (i) traded on the Over
the Counter market or (ii) listed on a recognized Securities Exchange, the fair
market value shall be based on the value of the stock as of that date according
to an independent appraiser.
(g) RECOGNITION OF REGISTERED OWNER. Prior to due presentment for
registration of transfer of this Warrant, the Corporation may deem and treat the
registered owner or owners for all purposes, as the person or persons
exclusively entitled to receive notices concerning this Warrant, and as the
person or persons otherwise entitled to exercise rights under this Warrant.
Except as otherwise provided herein, this Warrant and all rights under it
are transferable by the registered owner or owners in person or by duly
authorized attorneys on the books of the Corporation upon the surrender of this
Warrant to the Corporation with the transfer or assignment form, a copy of which
is attached to this Warrant as Exhibit "2," properly completed and executed. The
transfer or assignment form and this Warrant must
2
<PAGE>
be delivered, personally or by mail, to the offices of the Corporation at 7171
N. Federal Highway, Boca Raton, Florida 33487.
(h) NOTICE TO REGISTERED WARRANT HOLDERS. Any and all notices given to the
owner or owners of this Warrant must be given by first class mail, postage
prepaid, addressed to the registered owner or owners of this Warrant at the
address or addresses of the owner or owners appearing in the records of the
Corporation. No notice or notices to the owner or owners of this Warrant are
required except as specified in this Warrant.
(i) RESTRICTED STOCK; REGISTRATION. The shares of Common Stock of the
Corporation (or the shares into which the Common Stock has been changed or
converted) purchased upon exercise of this Warrant ("Restricted Stock") or
purchasable upon exercise of this Warrant ("Underlying Stock") shall not be
transferable except upon the conditions stated below, which are intended to
insure compliance with federal and state securities laws. The certificates
representing these shares of stock, unless the same are registered prior to
exercise of this Warrant, shall be stamped or otherwise imprinted with a legend
in substantially the following form:
"The securities represented by this Certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of any
state. The securities have been acquired for investment and may not be
sold, offered for sale or transferred in the absence of an effective
registration under the Securities Act of 1933, as amended, and any
applicable state securities laws or an opinion of counsel satisfactory in
form and substance to counsel for the Corporation that the transaction
shall not result in a violation of state or federal securities laws."
(j) LIMITED RIGHTS. This Warrant does not entitle the record owner of this
Warrant to any voting rights, to any other rights of a stockholder of the
Corporation, or to any other rights whatsoever, except for the rights that are
expressed as rights and set forth in this Warrant. No dividends are or shall be
payable, or shall accrue, on or with respect to this Warrant or any interest
represented by this Warrant or on the shares purchasable upon exercise hereof
until or unless, and except to the extent that, this Warrant is exercised.
(k) EFFECT OF STOCK CHANGES. If, at any time or from time to time the
Corporation, by stock dividend, stock split, subdivision, reverse split,
consolidation, reclassification of shares, or otherwise, changes as a whole its
outstanding Common Stock into a different number or class of shares, then,
immediately upon the occurrence of the change,
(1) the class of shares into which the Common Stock has been changed shall
replace the Common Stock, for the purposes of this Warrant and the
terms and conditions hereof, so that the registered owner or owners of
this Warrant shall be entitled to receive, and shall receive upon
exercise of this Warrant, shares of the class of stock into which the
Common Stock had been changed;
3
<PAGE>
(2) the number of shares purchasable upon exercise of this Warrant shall
be proportionately adjusted (for example, if the outstanding Common
Stock of the Corporation is converted into X stock at the rate of
(one) 1 share of Common Stock into (three) 3 shares of X stock, and
prior to the change the registered owner or owners of this Warrant
were entitled, upon exercise of this Warrant, to purchase one hundred
shares of Common Stock, then the registered owner or owners shall,
after the change, be entitled to purchase three hundred shares of X
stock for the total same exercise price that the owner or owners had
to pay prior to the change to purchase the one hundred shares of
Common Stock); and
(3) the purchase price per share shall be proportionately adjusted. (In
the above example, the purchase price per share would be reduced by
one-third.)
Irrespective of any adjustment or change in the number or class of shares
purchasable under this or any other Warrant or like tenor, or in the purchase
price per share, this Warrant, as well as any other warrant of like tenor, may
continue to express the purchase price per share and the number and class of
shares purchasable upon exercise of this Warrant as the purchase price per share
and the number and class of shares purchasable were expressed in this Warrant
when it was initially issued.
(l) EFFECT OF MERGER. If at any time while this Warrant is outstanding
another corporation merges into the Corporation, the registered owner or owners
of this Warrant shall be entitled, immediately after the merger becomes
effective and upon exercise of this Warrant, to obtain the same number of shares
of Common Stock of the Corporation (or shares into which the Common Stock has
been changed as provided in the paragraph of this Warrant covering changes) that
the owner or owners were entitled upon the exercise hereof to obtain immediately
before the merger became effective at the same exercise price. The Corporation
shall take any and all steps necessary in connection with the merger to assure
that sufficient shares of Common Stock to satisfy all conversion and purchase
rights represented by outstanding convertible securities, options and warrants,
including this Warrant, are available so that these convertible securities,
options and warrants, including this Warrant, may be exercised.
(m) EFFECT OF CONSOLIDATION OR SALE. Notwithstanding any provision of this
Warrant concerning the callability of this Warrant, if the Corporation
consolidates with or merges into another corporation or other entity in a
transaction in which the Corporation is not the surviving corporation, or
receives an offer to purchase or lease all or substantially all of the assets of
the Corporation or an offer to purchase fifty percent (50%) or more of the
issued and outstanding Common Stock of the Corporation, or if all or
substantially all of the assets of Company are sold or leased or fifty percent
(50%) or more of the issued and outstanding Common Stock of the Corporation is
purchased by any person or group of persons acting in concert, then this Warrant
shall be called by the Corporation. The right to exercise this
4
<PAGE>
Warrant shall terminate when it is called. The call price shall be determined by
the board of directors of the Corporation, but shall not be less than the
greater of the median value of the shares of Common Stock purchasable upon
exercise of this Warrant in the market in which the shares are principally
traded at the time the event triggering the call occurs, or the value of the
securities or the other consideration that shall be received in the transaction
by the owner of a number of outstanding shares of Common Stock equal to the
number of shares purchasable upon exercise of this Warrant. This call price
shall be payable to the registered owner or owners of this Warrant upon its
surrender for cancellation at the offices of the Corporation, together with the
transfer or assignment form which forms a part hereof, duly completed and
executed in blank.
(n) DISSOLUTION. In the event that a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation (other than in connection with a
merger where the Corporation is the surviving corporation as covered in this
Warrant, or a merger or consolidation with or into another corporation, a sale
or lease of all or substantially all of the assets of the Corporation, or a sale
of a specified portion or percentage or its stock as covered in this Warrant) is
at any time proposed during the term of this Warrant, the Corporation shall give
written notice to the registered owner or owners of this Warrant at least thirty
(30) days prior to the record date of the proposed transaction. The notice must
contain: (1) the date on which the transaction is to take place; (2) the record
date (which must be at least thirty (30) days after the giving of the notice) as
of which holders of the Common Stock entitled to receive distributions as a
result of the transaction shall be determined; (3) a brief description of the
transaction; (4) a brief description of the distributions, if any, to be made to
holders of the Common Stock as a result of the transaction; and (5) an estimate
of the fair market value of the distributions. On the date of the transaction,
if it actually occurs, this Warrant and all rights existing under this Warrant
shall terminate.
(o) NOTICE OF ADJUSTMENT. On the happening of an event requiring an
alteration or adjustment of the shares purchasable upon exercise of this
Warrant, or an alteration or adjustment of their number or designation, the
Corporation shall give written notice to the registered owner or owners of this
Warrant stating the adjusted number, designation and kind of securities or other
property obtainable upon exercise of this Warrant as a result of and following
the event. The notice shall set forth in reasonable detail the method of
calculation determining the securities or property obtainable after the event,
and the facts upon which the calculation is based. The Corporation's board of
directors, acting in good faith, shall determine the calculation.
(p) CHANGE OF ADDRESSES. Either party may change the address at which it is
to receive notices and written correspondence by providing written notice to the
other party of such change of address.
5
<PAGE>
IN WITNESS WHEREOF, the Corporation has signed this Warrant by its duly
authorized officers this _______ day of ___________, 2000.
PartsBase.com, Inc.
By:
-----------------------------
Robert A. Hammond,
President
6
<PAGE>
EXHIBIT 4.4
PARTSBASE.COM, INC.
SUBSCRIPTION DOCUMENTS
<PAGE>
SUBSCRIPTION AGREEMENT
PartsBase.com, Inc.
7171 N Federal Highway
Suite 100
Boca Raton, Florida 33487
Dear Sir:
1. SUBSCRIPTION. I hereby acknowledge receipt of the Confidential Private
Placement Memorandum dated June 9, 1999 ("Memorandum") of PartsBase.com, Inc., a
Texas corporation (the "Company"). I hereby subscribe to purchase the number of
Notes ( 8% Secured Subordinated Convertible Notes (the "Notes") described in the
last page of this Subscription Agreement at a purchase price of $25,000 per
Note. The Notes are being sold in increments of $25,000 with a minimum
investment of $25,000 subject to the Company's right to reduce such amounts in
its sole discretion.
2. ACCEPTANCE OF SUBSCRIPTION. I am herewith tendering payment in the
amount described on the last page of this Subscription Agreement for the Notes.
I have made my check or money order payable to "PartsBase.com, Inc." for the
full purchase price. I understand that the Company is offering the Notes on a
"best efforts" basis. There is no minimum number of Notes that must be sold and
no refund will be made if less than all 80 Notes are sold. The offering will
continue until the close of business on July 31, 1999, subject to an extension
in the discretion of the Company for an additional period of up to 30 days. The
offering period may be extended for up to 10 business days for bank collection
purposes only. All subscriptions for the Notes being offered through the Company
when, as, and if received, and accepted by the Company, are subject to prior
sale, allotment and withdrawal, and subject further to approval of certain legal
matters by counsel and the right to reject any order in whole or in part and to
certain further conditions.
3. REPRESENTATIONS AND WARRANTIES OF THE UNDERSIGNED. I hereby represent,
warrant and acknowledge to the Company as follows:
(a) I can bear the economic risk of this investment and can afford a
complete loss thereof. I (i) have sufficient liquid assets to pay the full
purchase price for the Notes, (ii) have adequate means of providing for my
current and presently foreseeable future needs, (iii) have no present need for
liquidity of my investment in the Notes and (iv) will not have an overall
commitment to non-marketable investments disproportionate to my net worth.
(b) I qualify as an "Accredited Investor" as defined in Regulation D,
under the Securities Act of 1933, as amended (the "Act") because I meet one or
more of the requirements which are set forth in Section 2 of Exhibit B which
follows this Subscription Agreement.
<PAGE>
(c) I and such other persons whom I have found it necessary or advisable
to consult, have sufficient knowledge and experience in business and financial
matters to evaluate the risks of the investment and to make an informed
investment decision with respect thereto.
(d) I have had the opportunity to ask questions of, and to receive answers
from, the Company and its representatives, with respect to the Company and the
terms and conditions of the offering. My representatives, if any, and I have
been offered access to the books and records of the Company relating to my
purchase of the Notes and which were necessary to verify the accuracy of any
information which was furnished to me. All materials and information requested
by either me or other persons representing me, including any information
requested to verify any information furnished, have been made available. The
only information which has been made available to me and upon which I have
relied is set forth in the Memorandum and in the information supplied to me to
verify same. I acknowledge that I have received no representations or warranties
from the Company, its employees or agents in making this investment decision.
(e) I am aware that the purchase of the Note(s) is a speculative
investment involving a high degree of risk and that there is no guarantee that I
will realize any gain from my investment and that I could lose the total amount
of my investment.
(f) I understand that the Company is not a public corporation, that it may
never become a public corporation and the Notes have not been registered under
the Act, nor pursuant to the provisions of the securities or other laws of any
other applicable jurisdictions. I understand that the Notes are being sold in
reliance upon the exemption for private offerings contained in Rule 506 of
Regulation D promulgated under Section 4(2) of the Act and the laws of such
jurisdictions, based upon the fact that this offering of Notes will only be made
to accredited investors (as defined in Rule 501 of Regulation D). I am fully
aware that the Notes to be acquired by me are acquired in reliance upon such
exemptions based upon my representations, warranties and agreements. I am fully
aware that I must bear the economic risk of my investment herein for the period
of time which is required by the Act because the offering has not been
registered under the Act and, therefore, the Notes cannot be offered or sold
unless subsequently registered under the Act or an exemption from such
registration is available. I understand that no federal or state agency has
passed upon or made any recommendation or endorsement of the Notes.
(g) I am making the investment hereunder for my own account and not for
the account of others and for investment purposes only and not with a view to or
for the transfer, assignment, resale or distribution thereof, in whole or in
part. I have no present plans to enter into any such contract, undertaking,
agreement or arrangement. I understand that the statutory basis on which the
Notes are being sold to me and others would not be available if my present
intention were to hold the Notes for a fixed period or until the occurrence of a
certain event. I realize that in the view of the Securities and Exchange
Commission ("SEC"), a purchase now with a present intent to resell by reason of
a foreseeable specific contingency or any anticipated change in the market
value, or in
<PAGE>
the condition of the Company, or that of the industry in which the business of
the Company is engaged or in connection with a contemplated liquidation, or
settlement of any loan obtained by the undersigned for the acquisition of the
Notes, and for which such Notes may be pledged as security or as donations to
religious or charitable institutions for the purpose of securing a deduction on
an income tax return, would, in fact, represent a purchase with an intent
inconsistent with my representations to you and the SEC would then regard such
sale as a sale for which the exemption from registration is not available. I
agree with the Company not to pledge, transfer or assign this Subscription
Agreement.
(h) PURSUANT TO THE TERMS OF THE MEMORANDUM AND THE SUBSCRIPTION
AGREEMENT, I WILL NOT BE PERMITTED TO SELL OR OTHERWISE TRANSFER THE NOTES
(AND/OR COMMON STOCK ISSUABLE UPON CONVERSION THEREOF) THAT I HAVE PURCHASED
FROM THE COMPANY WITHOUT THE CONSENT OF THE COMPANY AND THE TRANSFEREE AGREEING
TO BE BOUND BY THE PROVISIONS OF THIS AGREEMENT. FURTHER, IN THE EVENT THE
COMPANY COMPLETES AN INITIAL PUBLIC OFFERING OF ITS SECURITIES IN AN
UNDERWRITTEN OFFERING, THE UNDERSIGNED AGREES NOT TO SELL OR OTHERWISE TRANSFER
THE NOTES AND/OR COMMON STOCK ISSUABLE UPON CONVERSION THEREOF FOR A PERIOD OF
ONE YEAR FROM THE CLOSING DATE OF THE PUBLIC OFFERING WITHOUT THE PRIOR WRITTEN
CONSENT OF THE MANAGING UNDERWRITER OF SUCH OFFERING.
(i) The transferability of the Notes is restricted under the Federal and
state securities laws and will contain legends substantially as follows:
"NO SALE, OFFER TO SELL OR TRANSFER OF THE NOTES (AND/OR COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF) REPRESENTED BY THIS CERTIFICATE SHALL BE
MADE UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT OR AN EXEMPTION
FROM THE REGISTRATION REQUIREMENT OF SUCH ACT IS THEN IN FACT APPLICABLE TO
SUCH TRANSFER."
"THE SALE OR OTHER TRANSFER OF THE NOTES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED BY AGREEMENT WITH THE CORPORATION, A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF THE CORPORATION."
(j) I confirm that I have read the Memorandum in its entirety, including
the exhibits and risk factors contained therein.
(k) The undersigned (X) if an individual (i) is a citizen of the United
States, and at least 21 years of age, and (ii) is bona fide permanent resident
of and is domiciled in the state set forth on the signature page hereof and has
no present intention of becoming a resident of any other state or jurisdiction,
or (Y) if a partnership, trust, corporation or other entity, has a principal
place of business and is domiciled in the state set forth on the signature page
hereof and has no present intention of changing its principal place of business
or its domicile to any other state or jurisdiction.
(l) The undersigned represents that the funds provided for this investment
are either separate property of the undersigned, community property over which
the
<PAGE>
undersigned has the right of control, or are otherwise funds as to which the
undersigned has the sole right of management.
(m) FOR PARTNERSHIPS, CORPORATIONS, TRUSTS, OR OTHER ENTITIES ONLY: If the
undersigned is a partnership, corporation, trust or other entity, (i) the
undersigned has enclosed with this Subscription Agreement appropriate evidence
of the authority of the individual executing this Subscription Agreement to act
on its behalf (i.e., if a trust, copy of the trust agreement; if a corporation,,
a certified corporate resolution authorizing the signature and a copy of the
articles of incorporation; or if a partnership, a copy of the partnership
agreement), (ii) the undersigned represents and warrants that it was not
organized for the specific purpose of acquiring Notes, and (iii) the undersigned
has the full power and authority to execute this Subscription Agreement on
behalf of such entity and to make the representations and warranties made herein
on its behalf and this investment in the Company has been affirmatively
authorized by the governing board of such entity and is not prohibited by the
governing documents of the entity.
I understand the meaning and legal consequences of the foregoing
representations and warranties, which are true and correct as of the date hereof
and will be true and correct as of the date that my purchase of the Notes
subscribed for herein has been accepted by the Company. Each such representation
and warranty shall survive such purchase.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company is duly and validly incorporated and is validly
existing and in good standing as a corporation under the laws of the State of
Texas. The Company has all requisite power and authority, and all necessary
authorizations, approvals and orders required as of the date hereof to own its
properties and conduct its business as described in the Memorandum and to enter
into this Subscription Agreement and to be bound by the provisions and
conditions hereof.
(b) All corporate action required to be taken by the Company prior to
the issuance and sale of the Notes has been, or prior to the Closing of the sale
of the Notes, will have been taken. The Notes when issued and sold in accordance
with the Memorandum for the consideration expressed therein shall conform to the
descriptions thereof in the Memorandum and shall be duly and validly issued. The
Notes have been duly and validly authorized by proper corporate authority and
upon payment, will be validly issued, fully paid and non-assessable and free of
preemptive rights.
5. NO WAIVER. Except as otherwise specifically provided for hereunder, no
party shall be deemed to have waived any of his or its rights hereunder or under
any other agreement, instrument or papers signed by him or it with respect to
the subject matter hereof unless such waiver is in writing and signed by the
party waiving said right. Except as otherwise specifically provided for
hereunder, no delay or omission by any party in exercising any right with
respect to the
<PAGE>
subject matter hereof shall operate as a waiver of such right or of any such
other right. A waiver on any one occasion with respect to the subject matter
hereof shall not be construed as a bar to, or waiver of, any right or remedy on
any future occasion. All rights and remedies with respect to the subject matter
hereof, whether evidenced hereby or by any other agreement, instrument, or
paper, will be cumulative, and may be exercised separately or concurrently.
6. ENTIRE AGREEMENT. The parties have not made any representations or
warranties with respect to the subject matter hereof not set forth herein or in
the Memorandum. This Subscription Agreement, together with any instruments
executed simultaneously hereof, constitutes the entire agreement between the
parties with respect to the subject matter hereof. All understandings and
agreements heretofore had between the parties with respect to the subject matter
hereof are merged in this Subscription Agreement, which fully and completely
expresses their agreement.
7. INDEMNIFICATION. The undersigned acknowledges that he understands the
meaning and legal consequences of the representations and warranties contained
in Section 3 hereof, and he hereby agrees to indemnify and hold harmless the
Company and its officers and directors from and against any and all loss, damage
or liability (including costs and reasonable attorneys' fees) due to or arising
out of a breach of any representation, warranty or acknowledgment of the
undersigned contained in this Subscription Agreement or in the Confidential
Subscriber Questionnaire.
8. CHANGES. This Agreement may not be changed, modified, extended,
terminated or discharged orally, but only by an agreement in writing, which is
signed by all of the parties to this Agreement.
9. FURTHER DOCUMENTS. The parties agree to execute any and all such other
and further instruments and documents, and to take any and all such further
actions reasonably required to effectuate this Agreement and the intent and
purposes hereof.
<PAGE>
10. NOTICES. All notices or other communications required or permitted
hereunder shall be in writing and shall be mailed by Registered or Certified
Mail, Return Receipt Requested, postage prepaid, as follows:
To the Purchaser: To the Address listed at the end of
this Subscription Agreement
To the Company: PartsBase.com, Inc.
7171 N. Federal Highway
Suite 100
Boca Raton, FL 33487
Copy to: GunnAllen Financial, Inc.
1715 N. Westshore Blvd.
Seventh Floor
Tampa, FL 33607
or in each case to such other address as shall have last been furnished by like
notice. If mailing by Registered or Certified Mail is impossible due to an
absence of postal service, notice shall be in writing and personally delivered
to the aforesaid address. Each notice or communication shall be deemed to have
been given as of the date so mailed or delivered, as the case may be.
11. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Texas, without giving effect
to the principles of conflicts of law.
12. BINDING AGREEMENT. This Subscription Agreement shall be binding upon
and inure to the benefit of the parties hereto and their heirs, executors,
administrators, personal representatives and successors.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement the date specified below.
Date of Investment __________________,1999
Number of
Notes Subscribed ($25,000 per share): __________
_____________________________ _______________________________
Signature of Investor Signature of Spouse
(or Joint Investor, if any)
_____________________________ _______________________________
Print Name of Investor Print Name of Spouse
(or Joint Investor, if any)
_____________________________ _______________________________
Social Security Number of Investor Social Security Number
of Spouse (or Joint Investor, if any)
Investor Spouse (or Joint Investor, If any)
Address: ____________________ _______________________________
____________________ _______________________________
____________________ _______________________________
ACCEPTED AND AGREED TO
THIS ____ DAY OF ________, 1999
PartsBase.com, Inc.
By:___________________________
Title:________________________
Number of Notes accepted by the
Company _______________________
<PAGE>
SIGNATURE PAGE
(For Non-Individuals)
IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement the
date indicated in the space below.
Name of Entity (Print): _________________________
Address: ________________________________________
________________________________________
________________________________________
State of Organization: __________________________
Tax Identification Number: ______________________
By: ______________________________
Name: ________________________ ________________________
Title: _______________________ Date of Investment
NUMBER OF NOTES SUBSCRIBED FOR:
$ ($25,000 per Note)
---------------------------------
NUMBER OF NOTES ACCEPTED BY
THE COMPANY ___________________________
AGREED AND ACCEPTED TO THIS ___________
DAY OF ____________________, 1999
PARTSBASE.COM, INC.
By ____________________________________
(name and title)
<PAGE>
EXHIBIT E
PARTSBASE.COM, INC.
CONFIDENTIAL SUBSCRIBER QUESTIONNAIRE
In order to comply with the requirements of federal and state securities
laws, Notes of PARTSBASE.COM, INC. (the "Company"), may be sold only to persons
or entities meeting the suitability standards established by the Company.
The purpose of this Statement is to obtain information from each
prospective investor relating to the investor's knowledge and experience in
financial and business matters and to the investor's ability to bear the
economic risks of the proposed investment. Such information is required in order
to determine whether or not the suitability standards have been met by the
prospective investor. Please answer questions concerning prior business and
financial experience and investment decision-making in detail.
By signing this Statement you agree that it may be shown to such authorized
persons as the Company may deem appropriate to establish that the offer and/or
sale of this investment in the Company will not result in any violation of any
laws or regulations of any jurisdiction. Attach additional sheets if necessary
to fully answer any question. A separate Statement must be completed for each
co-owner of Notes, except that spouses may complete a joint Statement. You make
the following representations with the intent that they may be relied upon by
the Company and other persons designated by the Company.
(PLEASE PRINT OR TYPE)
1. BIOGRAPHICAL INFORMATION
(IF JOINT SUBSCRIBER, PROVIDE INFORMATION FOR BOTH.)
(a) Name(s): ___________________________ Birthdate: _______
___________________________ Birthdate: _______
(b) State of Residence: ________________
(c) Employer or business association and position: ______________________
_____________________________________________________________________
(d) Business address and telephone: _____________________________
_____________________________
_____________________________
_____________________________
<PAGE>
(e) Business and/or professional education and degrees:
School Location Degree Received Year Received
1. ----------------- ----------------- ------------------- -----------------
2. ----------------- ----------------- ------------------- -----------------
3. ----------------- ----------------- ------------------- -----------------
(f) Employment during the past five years:
Employer Position, Nature of Date:
(or other association): Responsibility: (from - to)
to
1. ------------------------ ------------------------ ------------------------
to
2. ------------------------ ------------------------ ------------------------
to
3. ------------------------ ------------------------ ------------------------
to
4. ------------------------ ------------------------ ------------------------
(g) References:
Reference Name Address Account Number(s)
(if applicable)
Bank
------------------- ------------------------------ ---------------------
------------------------------ ---------------------
------------------------------ ---------------------
(tel)
------------------------------ ---------------------
Broker
----------------- ------------------------------ ---------------------
------------------------------ ---------------------
------------------------------ ---------------------
(tel)
------------------------------ ---------------------
Accountant
(Individual)
----------------- ------------------------------ ---------------------
----------------- ------------------------------ ---------------------
(Firm)
----------------- ------------------------------ ---------------------
----------------- ------------------------------ ---------------------
(tel)
------------------------------ ---------------------
<PAGE>
Attorney
(Individual)
----------------- ------------------------------ ---------------------
----------------- ------------------------------ ---------------------
(Firm)
----------------- ------------------------------ ---------------------
----------------- ------------------------------ ---------------------
(tel)
------------------------------ ---------------------
2. ACCREDITED INVESTOR STATUS
PLEASE CHECK OR INITIAL ALL THAT APPLY:
______(1) the investor is a natural person whose net worth, or joint net worth
with spouse, at the time of purchase, exceeds $1,000,000 (including the value of
home, home furnishings and automobiles).
______(2) the investor is a natural person whose individual gross income
(excluding that of spouse) exceeded $200,000 in each of the last two calendar
years, and who reasonably expects individual gross income exceeding $200,000 in
the current calendar year; or for such periods, the combined income of the
investor with spouse exceeded and is expected to exceed $300,000.
______(3) the investor is an employment benefit plan within the meaning of the
Employment Retirement Income Security Act of 1974 and either (A) the employee
benefit plan has total assets in excess of $5,000,000, or (B) if a self-directed
plan, then the investment decisions are made solely by persons that qualify as
accredited investors as defined in (i) or (ii) above.
______(4) the investor is a trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the securities offered whose
purchase is directed by a sophisticated person as described in Rule 506
(b)(2)(ii) under the Securities Act of 1933.
______(5) the investor is an entity in which all the equity owners qualify as
accredited investors.
______(6) the investor is an organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000.
<PAGE>
______(7) the investor is a bank as defined in section 3(a)(2) of the Securities
Act of 1933 (the "Act"), or savings and loan association or other institution as
defined in section 3(a)(5)(A) of the Act whether acting in its individual or
fiduciary capacity; a broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934; an insurance company as defined in section
2(13) of the Act; an investment company registered under the Investment Company
Act of 1940 or a business development company as defined in section 2(a)(48) of
that Act; a Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; a plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, and such plan has total
assets in excess of $5,000,000; an employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 and the investment decision
is made by a plan fiduciary, as defined in section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or the employee benefit plan has total assets in excess of
$5,000,000 or, a self-directed plan, with investment decisions made solely by
persons that are accredited investors.
______(8) The investor is a private business development company as defined in
section 202(a)(22) of the Investment Advisers Act of 1940.
3. PRIOR INVESTMENT EXPERIENCE OF INVESTOR (OR TRUSTEE)
(a) Indicate by check mark which of the following categories best describes the
extent of your prior experience in the areas of investment listed below:
<TABLE>
<CAPTION>
More than
5 years 2 to 5 years 1 Year No
Experience Experience Experience Experience
<S> <C> <C> <C> <C>
Corporate Stocks __________ __________ __________ __________
Corporate Bonds __________ __________ __________ __________
Limited
Partnerships __________ __________ __________ __________
Stock in Privately
Held Companies __________ __________ __________ __________
</TABLE>
(b) Have you invested in any Bridge Loans within the last 12 months?
Yes___ No____
If Yes, how many? ______
(c) Do you make your own investment decisions with respect to the investments
listed above? Yes________ No________
<PAGE>
(d) What are the principal sources of investment knowledge or advice? (check
all that apply):
___First hand experience ___Financial publication(s)
___Broker(s) ___Investment Advisor(s)
___Attorney(s) ___Accountant(s)
(e) Please list all financial Publications that you read regularly:
1. _____________________
2. _____________________
3. _____________________
(f) Please list any conferences or other presentations regarding financial or
investment matters that you have attended in the last 5 years:
Conference Sponsor Dated Attended
1. _____________________ _____________________ _____________________
2. _____________________ _____________________ _____________________
3. _____________________ _____________________ _____________________
4. FINANCIAL AND INVESTMENT STATUS INFORMATION
(a) NET WORTH
Please indicate your estimated net worth and its components:
1. Estimated net worth, EXCLUSIVE of principal residence, furnishings of
principal residence and personal automobiles (computation of net worth may be
accomplished with reference to fair market value of assets): $_____________
2. Estimated net worth, INCLUDING principal residence, furnishings of
principal residence and personal automobiles (computation of the value of the
subscriber's principal residence may be accomplished with reference to fair
market value of residence): $____________
<PAGE>
(b) GROSS INCOME
Please provide your actual or projected individual annual adjusted gross income
(including that of spouse) and joint marginal tax bracket for following years:
Investor's Spouse's
Gross Gross
Income* Income*
1997 $ $
------------ ------------
1998 $ $
------------ ------------
1999** $ $
------------ ------------
* Gross income for these purposes means adjusted gross income (as
reported for federal income tax purposes) increased by the following
amounts: (i) the amount of any tax exempt interest income received and
(ii) the amount of losses claimed for depletion.
** Reasonably expected.
5. NASD ASSOCIATION OR AFFILIATION
a. Are you or any member of your family a member of the NASD or a person
associated with a member or do you have any association or other
affiliation through share ownership, loans or otherwise with a member of
the NASD or with an underwriter or related person.
Yes______ No_____ (If yes, describe.)
b. Do you have any oral or written agreements with any NASD member or any
associated persons of such member concerning the disposition of any
securities of PartsBase.com beneficially owned by you.
Yes______ No_____ (If yes, describe.)
If the investor answering this form is not an individual, please answer
question c below.
c. Do you know of any director, officer or holder of any class of securities
of the investor (including a member of their family) who is (i) a member of
the NASD, (ii) a controlling stockholder of a member of the NASD, (iii)
associated or affiliated with a member of the NASD, or (iv) associated or
affiliated with any placement agent or financial or legal advisor involved
in the PartsBase.com offering.
Yes_____ No_____ (If yes, describe.)
<PAGE>
SIGNATURE PAGE
(For Individuals)
This page constitutes the signature page for INDIVIDUALS for the Confidential
Statement of Investor Suitability.
IN WITNESS WHEREOF, the undersigned has executed the Confidential Statement of
Investment Suitability the date indicated below.
__________________________________, 1999
Date
________________________________________ _____________________________________
Signature of Investor Signature of Spouse
(or Joint Investor, if any)
________________________________________ _____________________________________
Print Name of Investor Print Name of Spouse
(or Joint Investor, if any)
________________________________________ _____________________________________
Social Security Number Social Security Number
of Investor of Spouse (or Joint Investor, if any)
Investor Spouse (or Joint Investor, If any)
Address:________________________________ _____________________________________
________________________________ _____________________________________
________________________________ _____________________________________
________________________________ _____________________________________
<PAGE>
SIGNATURE PAGE
(For Non-Individuals)
This page constitutes the signature page for NON-INDIVIDUALS for the
Confidential Statement of Investor Suitability.
Attached hereto are true, correct and complete copies of resolutions adopted by
the investor authorizing the individual signing below to execute this
questionnaire on behalf of the investor.
IN WITNESS WHEREOF, the undersigned has executed the Confidential Statement of
Investor Suitability the date indicated below.
Name of Entity (Print): ______________________________
Address: _____________________________________________
_____________________________________________
_____________________________________________
State of Organization: _______________________________
Tax Identification Number: ___________________________
By: __________________________________________________
Name:_____________________________________________
Title:____________________________________________
Date: __________________________________________, 1999
(Attach resolutions described above)
<PAGE>
EXHIBIT 4.5
PARTSBASE.COM, INC.
SUBSCRIPTION DOCUMENTS
<PAGE>
SUBSCRIPTION AGREEMENT
PartsBase.com, Inc.
7171 N Federal Highway
Suite 100
Boca Raton, Florida 33487
Dear Sir:
1. SUBSCRIPTION. I hereby acknowledge receipt of the Confidential
Private Placement Memorandum dated November 1, 1999 ("Memorandum") of
PartsBase.com, Inc., a Texas corporation (the "Company"). I hereby subscribe to
purchase the number of shares of Series A Preferred Stock of the Company (the
"Shares") described in the last page of this Subscription Agreement at a
purchase price of $2.50 per Share. The Shares are being sold in increments of
10,000 shares with a minimum investment of $25,000 subject to the Company's
right to reduce such amounts in its sole discretion.
2. ACCEPTANCE OF SUBSCRIPTION. I am herewith tendering payment in the
amount described on the last page of this Subscription Agreement for the Shares.
I have made my check or money order payable to "PartsBase.com, Inc." for the
full purchase price. I understand that the Company is offering the Shares on a
"best efforts" basis. There is no minimum number of Shares that must be sold and
no refund will be made if less than all of the 1,000,000 Shares offered are
sold. The offering will continue until the close of business on December 31,
1999, subject to earlier termination or an extension of up to sixty days in the
discretion of the Company. All subscriptions for the Shares being offered
through the Company when, as, and if received, and accepted by the Company, are
subject to prior sale, allotment and withdrawal, and subject further to approval
of certain legal matters by counsel and the right to reject any order in whole
or in part and to certain further conditions.
3. REPRESENTATIONS AND WARRANTIES OF THE UNDERSIGNED. I hereby
represent, warrant and acknowledge to the Company as follows:
(a) I can bear the economic risk of this investment and can afford a
complete loss thereof. I (i) have sufficient liquid assets to pay the full
purchase price for the Shares, (ii) have adequate means of providing for my
current and presently foreseeable future needs, (iii) have no present need for
liquidity of my investment in the Shares and (iv) will not have an overall
commitment to non-marketable investments disproportionate to my net worth.
(b) I qualify as an "Accredited Investor" as defined in Regulation D,
under the Securities Act of 1933, as amended (the "Act") because I meet one or
more of the requirements which are set forth in Section 2 of the Confidential
Subscriber Questionnaire which follows this Subscription Agreement and is
incorporated herein.
<PAGE>
(c) I and such other persons whom I have found it necessary or
advisable to consult, have sufficient knowledge and experience in business and
financial matters to evaluate the risks of the investment and to make an
informed investment decision with respect thereto.
(d) I have had the opportunity to ask questions of, and to receive
answers from, the Company and its representatives, with respect to the Company
and the terms and conditions of the offering. My representatives, if any, and I
have been offered access to the books and records of the Company relating to my
purchase of the Shares and which were necessary to verify the accuracy of any
information which was furnished to me. All materials and information requested
by either me or other persons representing me, including any information
requested to verify any information furnished, have been made available. THE
ONLY INFORMATION WHICH HAS BEEN MADE AVAILABLE TO ME AND UPON WHICH I HAVE
RELIED IS SET FORTH IN THE MEMORANDUM AND IN THE INFORMATION SUPPLIED TO ME TO
VERIFY SAME. I acknowledge that I have received no representations or warranties
from the Company, its employees or agents in making this investment decision.
(e) I am aware that the purchase of the Share(s) is a speculative
investment involving a high degree of risk and that there is no guarantee that I
will realize any gain from my investment and that I could lose the total amount
of my investment.
(f) I understand that the Company is not a public corporation, that it
may never become a public corporation and the Shares have not been registered
under the Act, nor pursuant to the provisions of the securities or other laws of
any other applicable jurisdictions. I understand that the Shares are being sold
in reliance upon the exemption for private offerings contained in Rule 506 of
Regulation D promulgated under Section 4(2) of the Act and the laws of such
jurisdictions, based upon the fact that this offering of Shares will only be
made to accredited investors (as defined in Rule 501 of Regulation D). I am
fully aware that the Shares to be acquired by me are acquired in reliance upon
such exemptions based upon my representations, warranties and agreements. I am
fully aware that I must bear the economic risk of my investment herein for the
period of time which is required by the Act because the offering has not been
registered under the Act and, therefore, the Shares cannot be offered or sold
unless subsequently registered under the Act or an exemption from such
registration is available. I understand that no federal or state agency has
passed upon or made any recommendation or endorsement of the Shares.
(g) I am making the investment hereunder for my own account and not for
the account of others and for investment purposes only and not with a view to or
for the transfer, assignment, resale or distribution thereof, in whole or in
part. I have no present plans to enter into any such contract, undertaking,
agreement or arrangement. I understand that the statutory basis on which the
Shares are being sold to me and others would not be available if my present
intention were to hold the Shares for a fixed period or until the occurrence of
a certain event. I realize that in the view of the Securities and Exchange
Commission ("SEC"), a purchase now with a present intent to resell by reason of
a foreseeable specific contingency or any anticipated change in the market
value, or in the condition of the Company, or that of the industry in which the
business of the Company
<PAGE>
is engaged or in connection with a contemplated liquidation, or settlement of
any loan obtained by the undersigned for the acquisition of the Shares, and for
which such Shares may be pledged as security or as donations to religious or
charitable institutions for the purpose of securing a deduction on an income tax
return, would, in fact, represent a purchase with an intent inconsistent with my
representations to you and the SEC would then regard such sale as a sale for
which the exemption from registration is not available. I agree with the Company
not to pledge, transfer or assign this Subscription Agreement.
(h) I AGREE THAT PRIOR TO THE COMPLETION OF AN INITIAL PUBLIC OFFERING
BY THE COMPANY, I WILL NOT BE PERMITTED TO SELL OR OTHERWISE TRANSFER THE SHARES
(AND/OR COMMON STOCK ISSUABLE UPON CONVERSION THEREOF) THAT I HAVE PURCHASED
FROM THE COMPANY WITHOUT THE CONSENT OF THE COMPANY, WHICH SHALL NOT BE
UNREASONABLY WITHHELD, AND THE TRANSFEREE AGREES TO BE BOUND BY THE PROVISIONS
OF THIS AGREEMENT. FURTHER, IN THE EVENT THE COMPANY COMPLETES AN INITIAL PUBLIC
OFFERING OF ITS SECURITIES IN AN UNDERWRITTEN OFFERING, THE UNDERSIGNED AGREES
NOT TO SELL, PLEDGE, ASSIGN OR OTHERWISE TRANSFER OR AGREE TO SELL, PLEDGE
ASSIGN OR TRANSFER THE COMMON STOCK ISSUABLE UPON CONVERSION THE SHARES FOR A
PERIOD OF 180 DAYS YEAR FROM THE CLOSING DATE OF THE PUBLIC OFFERING WITHOUT THE
PRIOR WRITTEN CONSENT OF THE MANAGING UNDERWRITER OF SUCH OFFERING.
(i) The transferability of the Shares is restricted under the Federal
and state securities laws and will contain legends substantially as follows:
"NO SALE, OFFER TO SELL OR TRANSFER OF THE SHARES (AND/OR COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF) REPRESENTED BY THIS CERTIFICATE SHALL BE
MADE UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT OR AN EXEMPTION
FROM THE REGISTRATION REQUIREMENT OF SUCH ACT IS THEN IN FACT APPLICABLE TO
SUCH TRANSFER."
"THE SALE OR OTHER TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE
IS RESTRICTED BY AGREEMENT WITH THE CORPORATION, A COPY OF WHICH IS ON FILE
AT THE PRINCIPAL OFFICE OF THE CORPORATION."
(j) I confirm that I have read the Memorandum in its entirety,
including the exhibits and risk factors contained therein.
(k) The undersigned (X) if an individual (i) is a citizen of the United
States, and at least 21 years of age, and (ii) is bona fide permanent resident
of and is domiciled in the state set forth on the signature page hereof and has
no present intention of becoming a resident of any other state or jurisdiction,
or (Y) if a partnership, trust, corporation or other entity, has a principal
place of business and is domiciled in the state set forth on the signature page
hereof and has no present intention of changing its principal place of business
or its domicile to any other state or jurisdiction.
(l) The undersigned represents that the funds provided for this
investment are either separate property of the undersigned, community property
over which the
<PAGE>
undersigned has the right of control, or are otherwise funds as to which the
undersigned has the sole right of management.
(m) FOR PARTNERSHIPS, CORPORATIONS, TRUSTS, OR OTHER ENTITIES ONLY: If
the undersigned is a partnership, corporation, trust or other entity, (i) the
undersigned has enclosed with this Subscription Agreement appropriate evidence
of the authority of the individual executing this Subscription Agreement to act
on its behalf (i.e., if a trust, copy of the trust agreement; if a corporation,,
a certified corporate resolution authorizing the signature and a copy of the
articles of incorporation; or if a partnership, a copy of the partnership
agreement), (ii) the undersigned represents and warrants that it was not
organized for the specific purpose of acquiring Shares, and (iii) the
undersigned has the full power and authority to execute this Subscription
Agreement on behalf of such entity and to make the representations and
warranties made herein on its behalf and this investment in the Company has been
affirmatively authorized by the governing board of such entity and is not
prohibited by the governing documents of the entity.
I understand the meaning and legal consequences of the foregoing
representations and warranties, which are true and correct as of the date hereof
and will be true and correct as of the date that my purchase of the Shares
subscribed for herein has been accepted by the Company. Each such representation
and warranty shall survive such purchase.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company is duly and validly incorporated and is
validly existing and in good standing as a corporation under the laws of the
State of Texas. The Company has all requisite power and authority, and all
necessary authorizations, approvals and orders required as of the date hereof to
own its properties and conduct its business as described in the Memorandum and
to enter into this Subscription Agreement and to be bound by the provisions and
conditions hereof.
(b) All corporate action required to be taken by the Company
prior to the issuance and sale of the Shares has been, or prior to the Closing
of the sale of the Shares, will have been taken. The Shares when issued and sold
in accordance with the Memorandum for the consideration expressed therein shall
conform to the descriptions thereof in the Memorandum and shall be duly and
validly issued. The Shares have been duly and validly authorized by proper
corporate authority and upon payment, will be validly issued, fully paid and
non-assessable and free of preemptive rights.
5. NO WAIVER. Except as otherwise specifically provided for hereunder,
no party shall be deemed to have waived any of his or its rights hereunder or
under any other agreement, instrument or papers signed by him or it with respect
to the subject matter hereof unless such waiver is in writing and signed by the
party waiving said right. Except as otherwise specifically provided for
hereunder, no delay or omission by any party in exercising any right with
respect to the subject matter hereof shall operate as a waiver of such right or
of any such other right. A waiver on any one occasion with respect to the
<PAGE>
subject matter hereof shall not be construed as a bar to, or waiver of, any
right or remedy on any future occasion. All rights and remedies with respect to
the subject matter hereof, whether evidenced hereby or by any other agreement,
instrument, or paper, will be cumulative, and may be exercised separately or
concurrently.
6. ENTIRE AGREEMENT. The parties have not made any representations or
warranties with respect to the subject matter hereof not set forth herein or in
the Memorandum. This Subscription Agreement, together with any instruments
executed simultaneously hereof, constitutes the entire agreement between the
parties with respect to the subject matter hereof. All understandings and
agreements heretofore had between the parties with respect to the subject matter
hereof are merged in this Subscription Agreement, which fully and completely
expresses their agreement.
7. INDEMNIFICATION. The undersigned acknowledges that he understands
the meaning and legal consequences of the representations and warranties
contained in Section 3 hereof, and he hereby agrees to indemnify and hold
harmless the Company and its officers and directors from and against any and all
loss, damage or liability (including costs and reasonable attorneys' fees) due
to or arising out of a breach of any representation, warranty or acknowledgment
of the undersigned contained in this Subscription Agreement or in the
Confidential Subscriber Questionnaire.
<PAGE>
8. CHANGES. This Agreement may not be changed, modified, extended,
terminated or discharged orally, but only by an agreement in writing, which is
signed by all of the parties to this Agreement.
9. FURTHER DOCUMENTS. The parties agree to execute any and all such
other and further instruments and documents, and to take any and all such
further actions reasonably required to effectuate this Agreement and the intent
and purposes hereof.
10. NOTICES. All notices or other communications required or permitted
hereunder shall be in writing and shall be mailed by Registered or Certified
Mail, Return Receipt Requested, postage prepaid, as follows:
To the Purchaser: To the Address listed at the end of
this Subscription Agreement
To the Company: PartsBase.com, Inc.
7171 N. Federal Highway
Suite 100
Boca Raton, FL 33487
or in each case to such other address as shall have last been furnished by like
notice. If mailing by Registered or Certified Mail is impossible due to an
absence of postal service, notice shall be in writing and personally delivered
to the aforesaid address. Each notice or communication shall be deemed to have
been given as of the date so mailed or delivered, as the case may be.
11. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Texas, without giving effect
to the principles of conflicts of law.
12. BINDING AGREEMENT. This Subscription Agreement shall be binding
upon and inure to the benefit of the parties hereto and their heirs, executors,
administrators, personal representatives and successors.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement the date specified below.
Date of Investment ,1999
------------
Number of
Shares Subscribed ($2.50 per share):
---------------
- ----------------------------- ----------------------------------------
Signature of Investor Signature of Spouse
(or Joint Investor, if any)
- ----------------------------- ----------------------------------------
Print Name of Investor Print Name of Spouse
(or Joint Investor, if any)
- ----------------------------- ----------------------------------------
Social Security Number of Investor Social Security Number
of Spouse (or Joint Investor, if any)
Investor Spouse (or Joint Investor, If any)
Address:
--------------------- -----------------------
--------------------- -----------------------
--------------------- -----------------------
ACCEPTED AND AGREED TO
THIS DAY OF , 1999
------ -------
PartsBase.com, Inc.
By:
--------------------------
Title:
------------------------
Number of Shares accepted by the
Company
----------------------
<PAGE>
SIGNATURE PAGE
(For Non-Individuals)
IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement the
date indicated in the space below.
Name of Entity (Print):
----------------------
Address:
--------------------------------
--------------------------------
--------------------------------
--------------------------------
State of Organization:
------------------
Tax Identification Number:
-------------
By: -----------------------------
Name:
------------------- ----------------------------
Title: Date of Investment
-------------------
NUMBER OF SHARES SUBSCRIBED FOR:
$ ($25,000 per Share)
---------------------------------
NUMBER OF SHARES ACCEPTED BY
THE COMPANY
------------------------
AGREED AND ACCEPTED TO THIS
---------
DAY OF , 1999
------------------
PARTSBASE.COM, INC.
By
-----------------------------------
(name and title)
<PAGE>
PARTSBASE.COM, INC.
CONFIDENTIAL SUBSCRIBER QUESTIONNAIRE
In order to comply with the requirements of federal and state securities
laws, Shares of PARTSBASE.COM, INC. (the "Company"), may be sold only to persons
or entities meeting the suitability standards established by the Company.
The purpose of this Statement is to obtain information from each
prospective investor relating to the investor's knowledge and experience in
financial and business matters and to the investor's ability to bear the
economic risks of the proposed investment. Such information is required in order
to determine whether or not the suitability standards have been met by the
prospective investor. Please answer questions concerning prior business and
financial experience and investment decision-making in detail.
By signing this Statement you agree that it may be shown to such authorized
persons as the Company may deem appropriate to establish that the offer and/or
sale of this investment in the Company will not result in any violation of any
laws or regulations of any jurisdiction. Attach additional sheets if necessary
to fully answer any question. A separate Statement must be completed for each
co-owner of Shares, except that spouses may complete a joint Statement. You make
the following representations with the intent that they may be relied upon by
the Company and other persons designated by the Company.
(PLEASE PRINT OR TYPE)
1. BIOGRAPHICAL INFORMATION
(IF JOINT SUBSCRIBER, PROVIDE INFORMATION FOR BOTH.)
(a) Name(s): Birthdate:
----------------------------------- ------------
Birthdate:
----------------------------------- ------------
(b) State of Residence:
--------------------
(c) Employer or business association and position:
-----------------------
------------------------------------------------------------
(d) Business address and telephone:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
<PAGE>
(e) Business and/or professional education and degrees:
School Location Degree Received Year Received
1.
- ---------------- ---------------- ---------------- ----------------
2.
- ---------------- ---------------- ---------------- ----------------
3.
- ---------------- ---------------- ---------------- ----------------
(f) Employment during the past five years:
Employer Position, Nature of Date:
(or other association): Responsibility: (from - to)
1. to
- ----------------------- --------------------- ----------------------
2. to
- ----------------------- --------------------- ----------------------
3. to
- ----------------------- --------------------- ---------------------
4. to
- ----------------------- --------------------- ----------------------
(g) References:
Reference Name Address Account Number(s)
(if applicable)
Bank
------------------ --------------------- ----------------------
--------------------- ----------------------
--------------------- ----------------------
(tel)
--------------------- ----------------------
Broker
------------------ --------------------- ----------------------
--------------------- ----------------------
--------------------- ----------------------
(tel)
--------------------- ----------------------
Accountant
(Individual)
------------- ---------------------
------------- ---------------------
(Firm)
------------- ---------------------
------------- ---------------------
(tel)
---------------------
<PAGE>
Attorney
(Individual)
------------- ---------------------
------------- ---------------------
(Firm)
------------- ---------------------
------------- ---------------------
(tel)
---------------------
2. ACCREDITED INVESTOR STATUS
PLEASE CHECK OR INITIAL ALL THAT APPLY:
______(1) the investor is a natural person whose net worth, or joint net worth
with spouse, at the time of purchase, exceeds $1,000,000 (including the value of
home, home furnishings and automobiles).
______(2) the investor is a natural person whose individual gross income
(excluding that of spouse) exceeded $200,000 in each of the last two calendar
years, and who reasonably expects individual gross income exceeding $200,000 in
the current calendar year; or for such periods, the combined income of the
investor with spouse exceeded and is expected to exceed $300,000.
______(3) the investor is an employment benefit plan within the meaning of the
Employment Retirement Income Security Act of 1974 and either (A) the employee
benefit plan has total assets in excess of $5,000,000, or (B) if a self-directed
plan, then the investment decisions are made solely by persons that qualify as
accredited investors as defined in (i) or (ii) above.
______(4) the investor is a trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the securities offered whose
purchase is directed by a sophisticated person as described in Rule 506
(b)(2)(ii) under the Securities Act of 1933.
______(5) the investor is an entity in which all the equity owners qualify as
accredited investors.
______(6) the investor is an organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000.
<PAGE>
______(7) the investor is a bank as defined in section 3(a)(2) of the Securities
Act of 1933 (the "Act"), or savings and loan association or other institution as
defined in section 3(a)(5)(A) of the Act whether acting in its individual or
fiduciary capacity; a broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934; an insurance company as defined in section
2(13) of the Act; an investment company registered under the Investment Company
Act of 1940 or a business development company as defined in section 2(a)(48) of
that Act; a Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; a plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, and such plan has total
assets in excess of $5,000,000; an employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 and the investment decision
is made by a plan fiduciary, as defined in section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or the employee benefit plan has total assets in excess of
$5,000,000 or, a self-directed plan, with investment decisions made solely by
persons that are accredited investors.
______(8) The investor is a private business development company as defined in
section 202(a)(22) of the Investment Advisers Act of 1940.
3. PRIOR INVESTMENT EXPERIENCE OF INVESTOR (OR TRUSTEE)
(a) Indicate by check mark which of the following categories best describes the
extent of your prior experience in the areas of investment listed below:
<TABLE>
More than
5 years 2 to 5 years 1 Year No
EXPERIENCE EXPERIENCE EXPERIENCE EXPERIENCE
----------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Corporate Stocks
------ ------ ------ -------
Corporate Bonds
------ ------ ------ -------
Limited
Partnerships
------ ------ ------ -------
Stock in Privately
Held Companies
------ ------ ------ -------
</TABLE>
(b) Have you invested in any Bridge Loans within the last 12 months?
Yes___ No____
If Yes, how many? ______
(c) Do you make your own investment decisions with respect to the investments
listed above?
Yes________ No________
<PAGE>
(d) What are the principal sources of investment knowledge or advice? (check
all that apply):
___First hand experience ___Financial publication(s)
___Broker(s) ___Investment Advisor(s)
___Attorney(s) ___Accountant(s)
(e) Please list all financial Publications that you read regularly:
1.
-------------------
2.
-------------------
3.
-------------------
(f) Please list any conferences or other presentations regarding financial or
investment matters that you have attended in the last 5 years:
Conference Sponsor Dated Attended
1.
------------------------ ----------------------- -----------------------
2.
------------------------ ----------------------- -----------------------
3.
------------------------ ----------------------- -----------------------
4. FINANCIAL AND INVESTMENT STATUS INFORMATION
(a) NET WORTH
Please indicate your estimated net worth and its components:
1. Estimated net worth, EXCLUSIVE of principal residence, furnishings
of principal residence and personal automobiles (computation of net worth
may be accomplished with reference to fair market value of assets):
$_____________
2. Estimated net worth, INCLUDING principal residence, furnishings of
principal residence and personal automobiles (computation of the value of
the subscriber's principal residence may be accomplished with reference to
fair market value of residence): $____________
<PAGE>
(b) GROSS INCOME
Please provide your actual or projected individual annual adjusted gross income
(including that of spouse) and joint marginal tax bracket for following years:
Investor's Spouse's
Gross Gross
Income* Income*
------------- -------------
1997 $ $
------------ ------------
1998 $ $
------------ ------------
1999** $ $
------------ ------------
* Gross income for these purposes means adjusted gross income (as
reported for federal income tax purposes) increased by the following
amounts: (i) the amount of any tax exempt interest income received and (ii)
the amount of losses claimed for depletion.
** Reasonably expected.
5. NASD ASSOCIATION OR AFFILIATION
a. Are you or any member of your family a member of the NASD or a person
associated with a member or do you have any association or other
affiliation through share ownership, loans or otherwise with a member of
the NASD or with an underwriter or related person.
Yes______ No_____ (If yes, describe.)
b. Do you have any oral or written agreements with any NASD member or any
associated persons of such member concerning the disposition of any
securities of PartsBase.com beneficially owned by you.
Yes______ No_____ (If yes, describe.)
If the investor answering this form is not an individual, please answer
question c below.
c. Do you know of any director, officer or holder of any class of
securities of the investor (including a member of their family) who is (i)
a member of the NASD, (ii) a controlling stockholder of a member of the
NASD, (iii) associated or affiliated with a member of the NASD, or (iv)
associated or affiliated with any placement agent or financial or legal
advisor involved in the PartsBase.com offering.
Yes_____ No_____ (If yes, describe.)
<PAGE>
SIGNATURE PAGE
(For Individuals)
This page constitutes the signature page for INDIVIDUALS for the Confidential
Statement of Investor Suitability.
IN WITNESS WHEREOF, the undersigned has executed the Confidential Statement of
Investment Suitability the date indicated below.
, 1999
- ----------------------
Date
- --------------------------------- -------------------------------
Signature of Investor Signature of Spouse
(or Joint Investor, if any)
- --------------------------------- -------------------------------
Print Name of Investor Print Name of Spouse
(or Joint Investor, if any)
- --------------------------------- -------------------------------
Social Security Number Social Security Number
of Investor of Spouse (or Joint Investor, if any)
Investor Spouse (or Joint Investor, If any)
Address:
--------------------- -----------------------
--------------------- -----------------------
--------------------- -----------------------
<PAGE>
SIGNATURE PAGE
(For Non-Individuals)
This page constitutes the signature page for NON-INDIVIDUALS for the
Confidential Statement of Investor Suitability.
Attached hereto are true, correct and complete copies of resolutions adopted by
the investor authorizing the individual signing below to execute this
questionnaire on behalf of the investor.
IN WITNESS WHEREOF, the undersigned has executed the Confidential Statement of
Investor Suitability the date indicated below.
Name of Entity (Print):
-------------------------
Address:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
State of Organization:
---------------------
Tax Identification Number:
----------------
By:
------------------------------------
Name:
--------------------------
Title:
--------------------------
Date: , 1999
----------------------------------
(Attach resolutions described above)
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
THESE SECURITIES SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, DESCRIBED IN A
SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND THE INITIAL HOLDER OF THESE
SECURITIES, COPIES OF WHICH ARE AVAILABLE UPON REQUEST FROM THE COMPANY.
PARTSBASE.COM, INC.
8% CONVERTIBLE SUBORDINATED NOTE
PartsBase.com, Inc., a Texas corporation (the "Company"), the principal
office of which is located at 7171 N. Federal Highway, Suite 100, Boca Raton,
Florida 33432, for value received, hereby promises to pay to
________________________, or registered assigns, the sum of
________________________ Dollars ($____________), or such lesser amount as shall
then equal the outstanding principal amount hereof on the terms and conditions
set forth hereinafter. The principal hereof and any unpaid accrued interest
hereon, as set forth below, shall be due and payable on December 31, 2001.
Payment for all amounts due hereunder shall be made by mail to the registered
address of the Holder. This Note is issued in connection with the transactions
described in that certain Subscription Agreement between the Company and the
purchaser(s) described therein, dated as of _______________________ (the
"Subscription Agreement"), and that certain Private Placement Memorandum dated
June 9, 1999 (the "Offering Date") related thereto. The Holder of this Note is
subject to certain restrictions set forth in the Subscription Agreement and
shall be entitled to certain rights and privileges set forth in the Subscription
Agreement. This Note is one of the Notes referred to as the "Notes" in the
Subscription Agreement.
The following is a statement of the rights of the Holder of this Note
and the conditions to which this Note is subject, and to which the Holder
hereof, by the acceptance of this Note, agrees:
1. DEFINITIONS. Unless the context otherwise requires, certain terms
used herein shall be ascribed the following meanings:
(a) "COMPANY" shall mean PartsBase.com, Inc., and any
corporation which shall succeed to or assume the obligations of the Company
under this Note.
-1-
<PAGE>
(b) "HOLDER," when the context refers to a holder of this
Note, shall mean any person who shall at the time be the registered holder of
this Note.
2. INTEREST. Until all outstanding principal and interest on this Note
shall have been paid in full, interest shall be payable from the date of this
Note on the outstanding principal balance of this Note, in arrears on a
quarterly basis, until December 31, 2001, on each March 31, June 30, September
30, and December 31, at the rate of eight percent (8%) per annum (the "Interest
Rate"). In the event that any portion of the principal amount of this Note is
not paid in full when such amount becomes due and payable, interest at the
Interest Rate shall continue to accrue on the balance of any unpaid principal
until such balance is paid.
3. EVENTS OF DEFAULT. If any of the events specified in this Section 3
shall occur (herein individually referred to as an "Event of Default"), the
Holder of this Note may, so long as such condition exists, declare the entire
unpaid principal and accrued interest hereon immediately due and payable, by
notice in writing to the Company, subject to Section 17 hereof.
(a) Default in the payment of the principal and interest of
this Note when due and payable if such default continues for forty-five (45)
days after the Holder has given the Company written notice of such default; or
(b) The institution by the Company of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to institution of
bankruptcy or insolvency proceedings against it or the filing by it of a
petition or answer or consent seeking reorganization or release under the
federal Bankruptcy Act, or any other applicable federal or state law, or the
consent by it to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee or other similar official of the
Company, or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the taking of corporate action by
the Company in furtherance of any such action; or
(c) If, within thirty (30) days after the commencement of an
action against the Company (and service of process in connection therewith on
the Company) seeking any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been resolved in favor of the Company or
all orders or proceedings thereunder affecting the operations or the business of
the Company stayed, or if the stay of any such order or proceeding shall
thereafter be set aside, or if, within sixty (60) days after the appointment
without the consent or acquiescence of the Company of any trustee, receiver or
liquidator of the Company or of all or any substantial part of the properties of
the Company, such appointment shall not have been vacated; or
(d) Any declared default of the Company under any indebtedness
that gives the Holder thereof the right to accelerate such indebtedness, and
such indebtedness is in fact accelerated by the Holder, but only if such
declared default and acceleration would have a material adverse effect on the
Company.
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<PAGE>
4. LIMITATION ON SENIOR DEBT. The Company will not incur, create,
assume, guarantee or otherwise become liable for any new Senior Debt after the
offering Date excepting that the Company may obtain a line of credit from a
commercial bank in the amount up to $2,000,000 which will be superior in right
of payment. In addition, if less than $1,000,000 is raised in this offering, the
Company has the right to raise an additional $1,000,000 through the issuance of
debt securities which securities would be superior to the note holders in this
offering. "Senior Debt" means any indebtedness for borrowed money incurred or
guaranteed by the Company including from a commercial lending institution.
5. PREPAYMENT. The notes may be prepaid ("redeemed") at the election of
the Company, as a whole or from time to time in part, at any time, upon not less
than thirty (30) days' advance written notice, at 100% of the principal amount
thereof at the time together with accrued interest. If less than all the Notes
are to be redeemed, the particular Notes to be redeemed shall be selected by the
Company by lot or other means of random selection. The Company may also provide
for the selection for redemptions of portions (equal to $1,000 or any integral
multiple thereof) of the principal amount of any Note. Any notice of redemption
shall state: (1) the date of redemption; (2) the redemption price; (3) if less
than all outstanding Notes are to be redeemed, the identification (and, in the
case of partial redemption, the principal amounts) of the particular Notes to be
redeemed; and (4) the place or places where Notes are to be surrendered for
payment of the redemption price. Notice of redemption having been given as
aforesaid, the Notes so to be redeemed shall, on the redemption date, become due
and payable, and from and after such date such Notes shall cease to bear
interest.
6. CONVERSION.
(a) VOLUNTARY CONVERSION. Any holder of this Note has the
right, at the Holder's option, prior to payment in full of the principal balance
of this Note, to convert this Note, in accordance with the provisions of Section
6 hereof, in whole or in part, into Common Stock, $.001 par value, of the
Company (the "Common Stock"). The number of shares of Common Stock into which
this Note may be converted ("Conversion Shares") shall be determined by dividing
the aggregate remaining principal balance together with all accrued interest to
the date of conversion by the Conversion Price (as defined below) in effect at
the time of such conversion. The initial Conversion Price shall be equal to two
dollars ($2.00) subject to adjustments as provided in Section 10 hereof.
(b) AUTOMATIC CONVERSION. The entire principal amount of this
Note shall be automatically converted into shares of Common Stock at the
Conversion Price at the time in effect immediately prior to (i) any
consolidation or merger of the Company with or into any other corporation or
other entity or person, or any other corporate reorganization in which the
Company shall not be the continuing or surviving entity of such consolidation,
merger or reorganization or any transaction or series of related transactions by
the Company in which in excess of fifty percent (50%) of the Company's voting
power is transferred, or a sale of all or substantially all of the assets of the
Company, in each case if the consideration to be received per share of Common
Stock shall be at
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<PAGE>
least Five Dollars ($5.00) per share or (ii) the consummation of a firmly
underwritten public offering pursuant to a registration statement filed by the
Company under the Securities Act of 1933, as amended (the "Act") generating
gross offering proceeds of at least $5,000,000.
(c) COMPLIANCE WITH SECURITIES LAWS. The Holder of this Note,
by acceptance hereof, acknowledges that the shares of Common Stock to be issued
upon conversion thereof are being acquired solely for the Holder's own account
and not as a nominee for any other part, and for investment, and that the Holder
will not offer, sell or otherwise dispose of any shares of Common Stock to be
issued upon conversion thereof except under circumstances that will not result
in a violation of the Act or any state securities laws. Upon conversion of this
Note, the Holder shall, if requested by the Company, confirm in writing, in a
form satisfactory to the Company, that the shares of Common Stock issued upon
conversion are being acquired solely for the Holder's own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale. All shares of Common Stock issued upon conversion
thereof shall be stamped or imprinted with a legend in substantially the
following form (in addition to any legend required by state securities laws):
THE SHARES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. SUCH SHARES MAY NOT
BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR UNDER SAID ACT OR OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. COPIES OF THE
AGREEMENT RESTRICTING THE TRANSFER OR SALE OF THESE SHARES MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY OF
THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
7. CONVERSION PROCEDURE.
(a) NOTICE OF CONVERSION PURSUANT TO SECTION 6(a). Before the
Holder shall be entitled to convert this Note into shares of Common Stock, it
shall surrender this Note at the office of the Company and shall give at least
ten (10) days' advance written notice by mail, postage prepaid, to the Company
at its principal corporate office, of the election to convert the same, if the
Holder is electing to convert pursuant to Section 6(a), and shall state therein
the name or names in which the certificate or certificates for shares of Common
Stock are to be issued. The Company shall, as soon as practicable thereafter,
issue and deliver at such office to the Holder of this Note a certificate or
certificates for the number of shares of Common Stock to which the Holder of
this Note shall be entitled as aforesaid.
(b) NOTICE OF CONVERSION PURSUANT TO SECTION 6(b). If this
Note is automatically converted, written notice shall be delivered to the Holder
of this Note at the address last shown on the records of the Company for the
Holder or given by the Holder to the Company for the purpose
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<PAGE>
of notice or, if no such address appears or is given, at the place where the
principal executive office of the Company is located, notifying the Holder of
the conversion to be effected, specifying the Conversion Price, the principal
amount of the Note to be converted, the amount of accrued interest to be
converted, the date on which such conversion will occur and calling upon such
Holder to surrender to the Company, in the manner at the place designated, the
Note.
8. DELIVERY OF STOCK CERTIFICATES. As promptly as practicable after the
conversion of this Note, the Company at its expense will issue and deliver to
the Holder of this Note a certificate or certificates for the number of full
shares of Common Stock issuable upon such conversion.
9. MECHANICS AND EFFECT OF CONVERSION. No fractional shares of Common
Stock shall be issued upon conversion of this Note. In lieu of the Company
issuing any fractional shares to the Holder upon the conversion of this Note,
the Company shall pay to the Holder the amount of outstanding principal and
accrued interest that is not so converted, such payment to be in the form as
provided below. Upon the conversion of this Note pursuant to Section 6(a) above,
the Holder shall surrender this Note, duly endorsed, at the principal office of
the Company. At its expense, the Company shall, as soon as practicable
thereafter, issue and deliver to such Holder at such principal office a
certificate or certificates for the number of shares of such Common Stock to
which the Holder shall be entitled upon such conversion (bearing such legends as
are required by the Subscription Agreement and applicable state and federal
securities laws in the opinion of counsel to the Company), together with any
other securities and property to which the Holder is entitled upon such
conversion under the terms of this Note, including a check payable to the Holder
for any cash prior to the close of business on the date of such surrender of
this Note, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. Upon
conversion of this Note, the Company shall be forever released from all its
obligations and liabilities under this Note, except ten (10) days after the date
of such conversion, any interest accrued and unpaid or unconverted to and
including the date of such conversion, and no more.
10. ADJUSTMENTS TO CONVERSION PRICE.
(a) In the event the Company should at any time or from time
to time after the date of issuance hereof fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock Equivalents (including the additional
shares of Common Stock issuable upon conversion or exercise thereof), then, as
of such record date (or the date of such dividend distribution, split or
subdivision if no record date is fixed), the Conversion Price of this Note shall
be appropriately decreased so that the number of shares of Common Stock issuable
upon conversion of this Note shall be increased in proportion to such increase
of outstanding shares.
-5-
<PAGE>
(b) If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such combination, the
Conversion Price for this Note shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion hereof shall be
decreased in proportion to such decrease in outstanding shares.
(c) Upon the occurrence of each adjustment of the Conversion
Price pursuant to this Section 6 the Company shall promptly compute such
adjustment in accordance with the terms hereof and prepare and furnish to the
Holder a certificate setting forth the facts upon which such adjustment is
based. In the case of an adjustment pursuant to Section 10(c), the Company shall
furnish to Holder a copy of its audited financial statements for such fiscal
year.
11. NOTICES OF RECORD DATE, ETC. In the event of
(a) any taking by the Company of a record of the holders of
any class of securities of the Company for the purpose of determining the
holders thereof who are entitled to receive any dividend (other than a cash
dividend payable out of earned surplus at the same rate as that of the last such
cash dividend theretofore paid) or other distribution, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right;
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all of the assets of the Company to any other
person or any consolidation or merger involving the Company; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, the Company will mail to the holder of this Note at
least fifteen (15) days prior to the earliest date specified therein, a notice
specifying:
i. The date of which any such record is to be
taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right; and
ii. The approximate date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding-up is expected to become effective and the record date
for determining stockholders entitled to vote thereon.
12. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at
all times reserve and keep available, out of its authorized but unissued shares
of Common Stock solely for the purpose of effecting the conversion of the Notes,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of the Notes; and if at any time the number
of authorized but unissued shares of Common Stock (and shares of its Common
Stock for
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<PAGE>
issuance on conversion of such Common Stock) shall not be sufficient to effect
the conversion of the entire outstanding principal amount of this Note, in
addition to such other remedies as shall be available to the Holder of this
Note, the Company will use its best efforts to take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes.
13. ASSIGNMENT. Subject to the restrictions on transfer described in
Section 15 below, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
14. WAIVER AND AMENDMENT. Any provision of this Note may be amended,
waived or modified upon the approval of the Company and the Holders of a
majority of the outstanding principal amount of all then outstanding Notes
issued pursuant to the Subscription Agreement.
15. TRANSFER OF THIS NOTE OR SECURITIES ISSUABLE ON CONVERSION HEREOF.
With respect to any offer, sale or other disposition of this Note or securities
into which such Note may be converted, the Holder will give written notice to
the Company prior thereto, describing briefly the manner thereof, together with
a written opinion of such Holder's counsel reasonably satisfactory to Company
and its counsel, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under any federal or state law
then in effect). Promptly upon receiving such written notice and opinion, the
Company, as promptly as practicable, shall notify such Holder that such Holder
may sell or otherwise dispose of this Note or such securities, all in accordance
with the terms of the notice delivered to the Company. If a determination has
been made pursuant to this Section 15 that the opinion of counsel for the Holder
is not reasonably satisfactory to the Company, the Company shall so notify the
Holder promptly after such determination has been made. The Company may issue
stop transfer instructions to its transfer agent in connection with such
restrictions.
16. NOTICES. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if telegraphed or mailed by registered or
certified mail, or overnight air courier, postage prepaid, at the respective
addresses of the parties as set forth herein. Any party hereto may by notice so
given, change its address for future notice hereunder. Notice shall conclusively
be deemed to have been given when personally delivered or when deposited in the
mail or with an air courier or telegraphed in the manner set forth above and
shall be deemed to have been received when delivered.
17. NO SHAREHOLDER RIGHTS. Nothing contained in this Note shall be
construed as conferring upon the Holder or any other person the right to vote or
to consent or to receive notice as a shareholder in respect of meetings of
shareholders for the election of directors of the Company or any other matters
or any rights whatsoever as a shareholder of the Company; and no dividends or
interest shall be payable or accrued in respect of this Note or the interest
represented hereby or the Conversion Shares obtainable hereunder until, and only
to the extent that, this Note shall have been converted.
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<PAGE>
18. REPLACEMENT OF NOTE. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Note, and,
in the case of loss, theft or destruction, on delivery of an indemnity agreement
reasonably satisfactory in form and substance to the Company or, in the case of
mutilation, on surrender and cancellation of this Note, the Company at its
expense shall execute and deliver, in lieu of this Note, a new note of like
tenor and amount.
19. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas excluding that body of law
relating to conflict of laws.
20. HEADING; REFERENCES. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except as otherwise indicated, all references herein to Sections refer to
Sections hereof.
IN WITNESS WHEREOF, the Company has caused this Note to be issued
this day of 1999.
PARTSBASE.COM, INC.
By:
------------------------------------
Name: Robert A. Hammond
Title: President
Name of Holder:
------------------------
Address:
-------------------------------
-------------------------------
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<PAGE>
[LETTERHEAD]
February 10, 2000 60871-0001
PartsBase.com, Inc.
7171 N. Federal Highway, Suite 100
Boca Raton, Florida 33487
Re: PartsBase.com, Inc. (the "Company") Registration
Statement For Offering of Common Stock, no par value
("Common Stock")
Gentlemen:
At your request, we have examined the Registration Statement on Form S-1,
as amended, Registration No. 333-94337 (the "Registration Statement"), filed by
the Company with the Securities and Exchange Commission in connection with the
registration under the Securities Act of 1933, as amended (the "Act"), of (i)
3,000,000 shares of Common Stock for sale by the Company (the "Company Stock"),
and (ii) 450,000 shares of Common Stock that may be sold by the Company upon
exercise of the underwriters' over-allotment option (the "Over-Allotment
Stock"), and (iii) 1,336,250 shares of Common Stock for resale by certain
selling stockholders that is not being underwritten in the initial public
offering by the Company contemplated by the Registration Statement (the "Selling
Stockholder Stock"). We are familiar with the actions taken and proposed to be
taken by the Company in connection with the authorization and proposed issuance
and sale of the Company Stock and the Over-Allotment Stock. The Company Stock,
the Over-Allotment Stock and the Selling Stockholder Stock are sometimes
collectively referred to herein as the "Registered Stock."
It is our opinion that when the Registration Statement has become effective
under the Act, subject to said actions being duly taken and completed by you as
now contemplated prior to the issuance of the Company Stock and the
Over-Allotment Stock and subject to the appropriate qualification of the
Registered Stock by the appropriate authorities of the various states in which
the Registered Stock will be sold, (i) the Company Stock and the Over-Allotment
Stock will, upon the issuance and the sale thereof in the manner referred to in
the Registration Statement, be legally issued, fully paid and non-assessable,
(ii) the Selling Stockholder Stock will, upon the sale thereof by the selling
stockholders in the manner referred to in the Registration Statement, be
legally issued, fully-paid and non-assessable.
<PAGE>
JEFFER, MANGELS, BUTLER & MARMARO LLP
PartsBase.com, Inc.
February 10, 2000
Page 2
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement, and we further consent to the use of our name under the
caption "Legal Matters" in the Registration Statement and in the Prospectus
which is a part thereof.
Respectfully submitted,
/s/ Jeffer, Mangels, Butler & Marmaro LLP
<PAGE>
EXHIBIT 10.1
PARTSBASE.COM, INC.
AMENDED RESTRICTED STOCK BONUS PLAN
1. PURPOSE
This plan's purpose is to keep Recipients and consultants of experience and
ability in the employ of PartsBase.com, Inc. and its Subsidiaries and to
compensate them for their contributions to the growth and profits of the
Company and its Subsidiaries and thereby induce them to continue to make
such contributions in the future.
2. DEFINITIONS
For purposes of this Plan, the following terms will have the definitions
set forth below:
1. "AGREEMENT." An agreement between the Company and the Recipient as to
vesting and other conditions restrictions as to the bonus stock award
for that Recipient.
2. "COMPANY." PartsBase.com, Inc.
3. "SUBSIDIARY" or "SUBSIDIARIES." A corporation or corporations of which
the Company owns, directly or indirectly, shares having a majority of
the ordinary voting power for the election of directors.
4. "BOARD." The Company's Board of Directors.
5. "DATE OF ISSUANCE." This term shall have the meaning supplied by
Section 6(c), below.
6. "PLAN." The PartsBase.com, Inc. Amended Restricted Stock Bonus Plan.
7. "BONUS SHARE." The shares of common stock of the Company reserved
pursuant to SECTION 3 hereof and any such shares issued to a Recipient
pursuant to this Plan.
<PAGE>
8. "RECIPIENT." A Recipient or consultant of the Company or a Subsidiary
to whom shares are allocated under this Plan, or such individual's
designated beneficiary, surviving spouse, estate, or legal
representative. For this purpose, however, any such beneficiary,
spouse, estate, or legal representative shall be considered as one
person with the Recipient.
9. "RESTRICTED PERIOD." This phrase shall have the meaning supplied by
SECTION 7(c), below.
3. BONUS SHARE RESERVE
1. BONUS SHARE RESERVE. The Company will establish a Bonus Share reserve
to which will be credited 1,000,000 shares of the common stock of the
Company, no par value. Should the shares of the Company's common
stock, due to a stock split or stock dividend or combination of shares
or any other change, or exchange for other securities, by
reclassification, reorganization, merger, consolidation,
recapitalization or otherwise, be increased or decreased or changed
into, or exchanged for, a different number or kind of shares of stock
or other securities of the Company or of another corporation, the
number of shares then remaining in the Bonus Share reserve shall be
appropriately adjusted to reflect such action. If any such adjustment
results in a fractional share, the fraction shall be disregarded.
2. ADJUSTMENTS TO RESERVE. Upon the allocation of shares hereunder, the
reserve will be reduced by the number of shares so allocated and, upon
the failure to make the required payment on the issuance of any Bonus
Shares pursuant to SECTION 6(a) or upon the reacquisition thereof
pursuant to SECTION 7(d)(i) or (ii), SECTION 8 or SECTION 10 hereof,
the reserve shall be increased by such number of shares, and such
Bonus Shares may again be the subject of allocations hereunder.
3. DISTRIBUTIONS OF BONUS SHARES. Distributions of Bonus Shares, as the
Board shall in its sole discretion determine, may be made from
authorized but unissued shares or from treasury shares. All authorized
and unissued shares issued as Bonus Shares in accordance with the Plan
shall be fully paid and non-assessable shares and free from preemptive
rights.
4. ELIGIBILITY AND MAKING OF ALLOCATIONS
1. ELIGIBLE PARTICIPANTS. Any salaried executive Recipient or consultant
of the Company or any Subsidiary (including officers and directors,
except for
<PAGE>
persons serving as directors only) shall be eligible to receive an
allocation of Bonus Shares pursuant to the Plan.
2. SELECTION BY BOARD. The Board will, in its discretion, allocate to the
Recipients or consultants the Board selects a number of Bonus Shares.
The date of such action by the Board shall be the "date of
allocation," as that term is used in this Plan.
3. PARTICIPATION IN OTHER STOCK OPTION PLANS. A person who has received
options to purchase stock under any stock option plan of the Company
or a Subsidiary may exercise the same in accordance with their terms,
and will not by reason thereof be ineligible to receive Bonus Shares
under this Plan. A person who has received Bonus Shares shall be
eligible to, and may, be granted any option or other rights to
purchase Common Stock pursuant to any stock option plan or stock
purchase plan of the Company presently in effect of hereafter adopted.
4. LIMIT ON NUMBER OF ALLOCABLE SHARES. The total number of Bonus Shares
which may be allocated pursuant to this Plan will not exceed the
amount available therefor in the Bonus Share reserve.
5. FORM OF ALLOCATIONS
1. NUMBER SPECIFIED. Each allocation shall specify the number of Bonus
Shares subject thereto, subject to the provisions of SECTION 4.
2. NOTICE. When an allocation is made, the Board shall advise the
Recipient and the Company thereof by delivery of written notice in the
form of Exhibit A hereto annexed.
6. AGREEMENT REQUIRED OF RECIPIENTS
1. ACCEPTANCE OF ALLOCATION. Within 15 days from the date of allocation,
the Recipient shall, if he desires to accept the allocation, execute
the Agreement applicable to the award.
2. INVESTMENT PURPOSE. The Company may require that, in acquiring any
Bonus Shares, the Recipient agree with, and represent to, the Company
that the Recipient is acquiring such Bonus Shares for the purpose of
investment and with no present intent to transfer, sell, or otherwise
dispose of such shares except for such distribution by a legal
representative as shall be required by will or the laws of any
jurisdiction in winding up the estate of any Recipient.
<PAGE>
Such shares shall be transferable thereafter only if the proposed
transfer is permitted under the Plan and if, in the opinion of counsel
(who shall be satisfactory to the Company), such transfer at such time
complies with applicable securities laws.
3. WRITTEN AGREEMENT/DATE OF ISSUANCE. On delivery of the Agreement to
the Company, the Company will promptly acknowledge its receipt
thereof. The date of such delivery and receipt shall be deemed the
"Date of Issuance," as that phrase is used in this Plan, of the Bonus
Shares to which the shares relate. The failure to make such payment
and delivery within 15 days from the date of allocation shall
terminate the allocation of such shares to the Recipient.
7. RESTRICTIONS
1. TRANSFER/ISSUANCE. Bonus Shares after the execution of the Agreement
required by SECTION 6, will be promptly issued or transferred and a
certificate or certificates for such shares shall be issued in the
Recipient's name. The Recipient shall thereupon be a shareholder of
all the shares represented by the certificate or certificates. As
such, the Recipient will have all the rights of a shareholder with
respect to such shares, including the right to vote them and to
receive all dividends and other distributions (subject to SECTION
7(b)) paid with respect to them, provided, however, that the shares
shall be subject to the restrictions in SECTION 7(d) and the
Agreement. Stock certificates representing Bonus Shares will be
imprinted with a legend stating that the shares represented thereby
may not be sold, exchanged, transferred, pledged, hypothecated, or
otherwise disposed of except in accordance with this Plan's terms and
the terms of the Agreement between the Company and the Recipient.
2. STOCK SPLITS, DIVIDENDS, ETC. If, due to a stock split, stock
dividend, combination of shares, or any other change or exchange for
other securities by reclassification, reorganization, merger,
consolidation, recapitalization or otherwise, the Recipient, as the
owner of Bonus Shares subject to restrictions hereunder, shall be
entitled to new, additional, or different shares of stock or
securities, the certificate or certificates for, or other evidences
of, such new, additional, or different shares or securities also shall
be imprinted with a legend as provided in SECTION 7(a). When the
event(s) described in the preceding sentence occur, all Plan
provisions relating to restrictions and lapse of restrictions will
apply to such new, additional, or different shares or securities to
the extent applicable to the shares with respect to which they were
distributed.
<PAGE>
3. RESTRICTED PERIOD. Subject to SECTION 10, the restrictions contained
in SECTION 7(d) hereof shall lapse as provided in the Agreement
between the Company and the Recipient.
4. RESTRICTIONS ON BONUS SHARES. The restrictions to which restricted
Bonus Shares shall be subjected are as provided in the Agreement
between the Company and the Recipient.
During the Restricted Period applicable to such shares and except as
otherwise specifically provided in the Plan or the Agreement, none of
such shares shall be sold, exchanged, transferred, pledged,
hypothecated, or otherwise disposed of.
8. FINALITY OF DETERMINATION
The Committee will administer this Plan and construe its provisions. Any
determination by the Committee carrying out, administering, or construing
this Plan will be final and binding for all purposes and upon all
interested persons and their heirs, successors, and personal
representatives.
9. LIMITATIONS
1. NO RIGHT TO ALLOCATION. No person will at any time have any right to
receive an allocation of Bonus Shares hereunder and no person will
have authority to enter into an agreement for the making of an
allocation or to make any representation or warranty with respect
thereto.
2. RIGHTS OF RECIPIENTS. Recipients of allocations will have no rights in
respect thereof other than those set forth in the Plan. Such rights
may not be assigned or transferred except by will or by the laws of
descent and distribution and if permitted under SECTION 6(b). If any
attempt is made to sell, exchange, transfer, pledge, hypothecate, or
otherwise dispose of any Bonus Shares held by the Recipient under
restrictions which have not yet lapsed, the shares that are the
subject of such attempted disposition will be deemed offered to the
Company for repurchase and the Company may, at its option, repurchase
the shares at the lower of the sale price to the third part or fair
market value as determined by an independent appraiser mutually
acceptable to the parties. If the Company and Recipient cannot agree
on a third party appraiser, each party shall appoint an appraiser and
the two appraisers shall appoint a third appraiser whose appraisal
shall be binding on all parties. Before issuance of Bonus Shares, no
such shares will be
<PAGE>
earmarked for the Recipients' accounts nor will such Recipients have
any rights as stockholders with respect to such shares.
3. NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Company's action in
establishing the Plan, nor any action taken by it or by the Board or
the Committee under the Plan, nor any provision of the Plan, will be
construed as giving to any person the right to be retained in the
employ of the Company or any Subsidiary.
4. LIMITATION ON ACTIONS. Every right of action by or on behalf of the
Company or by any shareholder against any past, present, or future
member of the Board, the Committee, or any officer or Recipient of the
Company arising out of or in connection with this Plan shall,
regardless of the place where the action may be brought and regardless
of the place of residence of any such director, committee member,
officer or Recipient, cease and be barred by the expiration of three
years from the later of:
(i) the date of the act or omission in respect of which such right of
action arises or
(ii) the first date upon which there has been made generally available
to shareholders an annual report of the Company and a proxy
statement for the annual meeting of shareholders following the
issuance of such annual report, which annual report and proxy
statement alone or together set forth, for the related period,
the amount of the allocations.
In addition, any and all right of action by any Recipient (past,
present or future) against the Company or any member of the Committee
arising out of or in connection with this Plan will, regardless of the
place where action may be brought and regardless of the place of
residence of any Committee member, cease and be barred by the
expiration of three years from the date of the act or omission in
respect of which such right of action arises.
10. AMENDMENT, SUSPENSION OR TERMINATION OF PLAN
The Board may amend, suspend or terminate the Plan in whole or in part at
any time; provided that such amendment will not affect adversely rights or
obligations with respect to allocations previously made; and provided
further, that no modification of the Plan by the Board without approval of
the stockholders will (i) increase the maximum number of Bonus Shares
reserved pursuant to SECTION 3; or (ii) change the provisions of SECTION 4
with respect to the total number of Bonus Shares that may be allocated
under the Plan.
<PAGE>
11. GOVERNING LAW
The Plan will be governed by the laws of the State of Texas.
12. EXPENSES OF ADMINISTRATION
All costs and expenses incurred in the operation and administration of this
Plan will be borne by the Company.
<PAGE>
EXHIBIT "A"
PARTSBASE.COM, INC. AMENDED RESTRICTED STOCK BONUS PLAN
To: 1. _________, Recipient, and
2. Treasurer, PartsBase.com, Inc.
This is to advise you that PartsBase.com, Inc.'s Board of Directors has on
the date of this notice allocated to the Recipient above named a total of six
thousand (6,000) Bonus Shares under and pursuant to the Amended Restricted Stock
Bonus Plan.
For these shares to be issued, you must execute and deliver to the
Treasurer of the Company an agreement in duplicate, in the form of Exhibit B
hereto, within 15 days from the date of this notice.
___________________________
For the Board
Date: August 3, 1999
<PAGE>
EXHIBIT "B"
PARTSBASE.COM, INC. AMENDED RESTRICTED STOCK BONUS PLAN
To: Treasurer, PartsBase.com, Inc.
I represent and agree that I am acquiring these Bonus Shares for investment
and that I have no present intention to transfer, sell or otherwise dispose of
such shares, except as permitted pursuant to the Plan and in compliance with
applicable securities laws. I agree further that I am acquiring these shares in
accordance with, and subject to, the terms, provisions and conditions of said
Plan, which I have read and to which I hereby expressly assent. These agreements
will bind and inure to the benefit of my heirs, legal representatives,
successors and assigns.
I agree to the following restriction as to the Bonus Shares: I shall not
sell, exchange, transfer, pledge, hypothecate or dispose of shares during the
Restricted Period. In the event of termination of my employment for any reason,
including death or disability, all shares subject to restrictions shall be
returned to or canceled by the Company and shall be deemed to have been
forfeited by the Recipient, unless and then only to the extent that the Board of
Directors shall, in its sole discretion, elect in writing to waive said return
and forfeiture.
The restrictions will lapse as to such shares in accordance with the
following times and number of shares. This period of time during which the
restrictions apply to a specific share of stock is the Restricted Period as to
that share of stock.
(i) Restrictions shall lapse with respect to one-twenty fourth (1/24) of
the restricted Bonus Shares awarded pursuant to a Restricted Stock
Award, on the first day of each month following the calendar month of
the Date of Issuance, but as to employees, only if on the date the
restrictions are to lapse the Recipient has been an employee of the
Company continuously from the Date of Issuance of the Restricted Stock
Award to such date of lapse. Temporary leaves of absence which are
approved by the Company shall not be considered a break in that
employee's continuous employment with the Company. The purpose of the
restriction is to provide an incentive to each employee who is a
Recipient to remain with the Company or one of its Subsidiaries and to
perform assigned tasks and responsibilities in a manner consistent
with the best interest of the Company and its stockholders. If
calculation of the lapse amount for any month would result
<PAGE>
in a fractional share interest, the number of shares shall be rounded
down to the next lowest number of full shares for each of the lapse
dates, with the balance on the last lapse date.
(ii) The Compensation Committee may at any time in its sole discretion
accelerate or waive all or any portion of the restrictions remaining
in respect to the Bonus Shares. This right may be exercised for any or
all of the Recipients.
(iii) Notwithstanding any other provisions of this Agreement, the Recipient
agrees to execute an agreement not to sell his shares even though
otherwise vested for a period of up to twenty-four months if an
underwriter of an initial public offering of the Company's stock
requests such a restriction. This provision shall lapse as to the
Restricted Stock Award to a Recipient two years after the restrictions
as to all of the shares of a Restricted Stock Award have lapsed.
My address of record is:
My Social Security Number is:
___________________________
Receipt of the above, together with the payment referred to, is hereby
acknowledged.
PartsBase.com, Inc. By:_________________________
Date:________________________________________
<PAGE>
Exhibit 10.3
BUILDING LEASE
THIS BUILDING LEASE is made on 28 day of May, 1999, by G.S. FUNDING GROUP,
L.C., ("Landlord"), and PARTSBASE.COM, a Florida Corporation ("Tenant").
1. AGREEMENT
Landlord Leases the premises (as that term is defined in paragraph 2) to
Tenant, and Tenant Leases the premises from Landlord, according to this Lease.
2. PREMISES
The premises are the land and building commonly known as: 7171 NORTH
FEDERAL HIGHWAY, BOCA RATON, FLORIDA, 33432, PALM BEACH COUNTY, STATE OF
FLORIDA, and more particularly described as: 1st Floor of said building
consisting of approximately 4600 s.f.+\-
The premises include the heating, ventilating, and air conditioning
systems and the mechanical, electrical, and plumbing systems serving the
premises. Tenant accepts the Premises in its' "As-Is" condition.
Landlord shall also provide Tenant with the use of 20 workstations for use
by Tenant throughout the Term of this Lease. The workstations shall be
installed by Tenant at Tenant's own cost. Tenant shall pay Landlord the sum of
One Dollar ($1.00) per month for the use of the workstations. Tenant shall
maintain the workstations and return same to Landlord in its current condition,
reasonable wear and tear excepted.
3. TERM
(a) Initial Term. The term of this Lease will be two years (2),
beginning on June 1, 1999, and expiring on May 31, 2001.
(b) Option to Extend. Tenant may extend the term for an additional two
year (2) period by written notice of its election to do so given to Landlord at
least ninety days (90) prior to the expiration date. The terms and conditions
of the Lease applicable at the expiration date will govern the extended term;
however, Tenant will have no further right to extend the term after the renewal
period. The renewal rate beginning on June 1, 2001 shall be $22.00 per square
foot annually during the two year (2) period. Tenant will not have any rights
under this paragraph 3(b) if (1) an event of default exists on the expiration
date or on the date on which the Tenant gives its notice.
(c) Option to Terminate. Tenant shall have the right to terminate
this Lease at any time after the first twelve months provide
that Tenant is not in default under the terms of this Lease as
described herein and upon first giving Landlord ninety (90)
days written notice of its intent to terminate and upon
payment of a twenty thousand ($20,000.00) dollar termination
fee.
<PAGE>
4. RENT
Tenant will pay Landlord the sum of $16.00 per square foot during the
first year of the Lease and $20.00 per square foot during the second year
(the "Monthly Rent") in equal consecutive monthly installments on or before
the first day of each month during the term of this Lease. The Monthly Rent
will be paid in advance at the address specified for Landlord in paragraph
23(f) or such other place as Landlord designates, without prior demand and
without any abatement, deduction or set off. If the commencement date occurs
on a day other than the first day of a calendar month, or if the expiration
date occurs on a day other than the last day of a calendar month, then the
monthly rent for the fractional month will be prorated on a daily basis.
5. TAXES
Obligation for Payment. Landlord will pay all real estate taxes and
assessments assessed, levied, confirmed, or imposed during the term of this
Lease, against the Premises. Tenant shall be obligated to pay all personal
property taxes. Tenant shall be responsible for paying any state sales tax.
6. UTILITIES
Tenant will pay one half of Landlords' expenses for all, electricity,
light, heat, power used by Tenant to the premises during the term, whether or
not the services are billed directly to Tenant. Landlord will furnish to Tenant
a copy of the prior monthly utility bill for payment. Payment shall be made
within ten days (10) of presentment. Tenant will also procure, or cause to be
procured, without cost to Landlord, any and all necessary permits, licenses, or
other authorizations required for the lawful and proper use of the premises by
Tenant. Landlord, upon request of Tenant, and at the sole expense and liability
of Tenant, will join with Tenant in any application required for obtaining or
continuing any of the services. All other services necessary or required by
Tenant, including but not limited to janitorial service to the Premises, office
maintenance, shall be the responsibility of Tenant. Landlord shall incur the
cost of all common area maintenance expenses.
7. INSURANCE
(a) "All-Risk" Coverage. Tenant will, at its sole expense, obtain and
keep in force, during the term of this Lease, "all-risk" coverage insurance
(including wind and flood insurance) naming Landlord and Tenant as their
interests may appear and other parties that Landlord or Tenant may designate
as additional insures in the customary form in the City of Boca Raton for
buildings and improvements of similar character, on all buildings and
improvements now or after this date located on the premises. Landlord and
Tenant agree that the value of the existing building on the premises is Five
Hundred Thousand and No\100 Dollars ($500,000.00).
(b) General Liability. Tenant will, at its sole expense, obtain and
keep in force during the term of this Lease commercial general liability
insurance with a combined single limit of not less than Five Hundred Thousand
Dollars ($500,000.00) for injury to or death of any one person, for injury to
or death of any number of persons in one occurrence, and for damage to
property, insuring
<PAGE>
against any and all liability of Landlord and Tenant, including without
limitation coverage for contractual liability, broad form property damage, and
non-owned automobile liability, with respect to the premises or arising out of
the maintenance, use, or occupancy of the premises. The insurance will insure
the performance by Tenant of the indemnity agreement as to liability for injury
to or death of persons and damage to property set forth in paragraph 18. The
insurance will be noncontributing with any insurance that may be carried by
Landlord and will contain a provision that Landlord, although named as an
insured, will nevertheless be entitled to recover under the policy for any
loss, injury, or damage to Landlord, its agents, and employees, or the property
of such persons.
(c) Other Matters. All insurance required in this paragraph and all
renewals of it will be issued by companies authorized to transact business in
the State of Florida, and rated at least A+ Class X by Best's Insurance Reports
(property liability) or approved by Landlord. All insurance policies will be
subject to approval by Landlord and any lender as to form and substance; will
expressly provide that the policies will not be canceled or altered without
(30) days' prior written notice to Landlord and any Lender, in the case of
"all-risk" coverage insurance, and to Landlord, in the case of general
liability insurance; and will, to the extent obtainable, provide that no act or
omission of Tenant which would otherwise result in forfeiture or reduction or
the insurance will affect or limit the obligation of the insurance company to
pay the amount of any loss sustained. Tenant may satisfy its obligation under
this paragraph by appropriate endorsements of its blanket insurance policies.
(d) Additional Insures. All policies of liability insurance that
Tenant is obligated to maintain according to this Lease (other than any
policy of workmen's compensation insurance) will name Landlord and such other
persons or firms as Landlord specifies from time to time as additional
insures. Original or copies of original policies (together with copies of the
endorsements naming Landlord, and any others specified by Landlord, as
additional insures) and evidence of the payment of all premiums of such
policies will be delivered to Landlord prior to Tenant's occupancy of the
premises and from time to time at least thirty (30) days prior to the
expiration of the term of each policy. All public liability, property damage
liability, and casualty policies maintained by Tenant will be written as
primary policies, not contributing with and not in excess of coverage that
Landlord may carry. No insurance required to be maintained by tenant by this
paragraph will be subject to any deductible without Landlord's prior written
consent.
8. USE
The premises will be used only for GENERAL OFFICE and no other purpose.
Any other use of the premises without Landlord's consent shall be deem a
default under this lease and Landlord shall avail itself to the default
remedies of paragraph 22 herein.
9. COMPLIANCE WITH LAWS
(a) Tenant's Obligations. Tenant will not use or occupy, or permit
any portion of the premises to be used or occupied:
(1) in violation of any law, ordinance, order, rule,
regulation, certificate of
<PAGE>
occupancy, or other governmental requirement;
(2) for any disreputable business or purpose; or
(3) in any manner or for any business or purpose that creates
risk of fire or other hazards, or that would in any way violate, suspend,
void, or increase the rate of fire or liability or any other insurance of any
kind at any time carried by Landlord upon all or any part of the building
in which the premises are located or its contents.
Tenant will comply with all laws, ordinances, orders, rules, regulations, and
other governmental requirements relating to the use, condition, or occupancy
of the premises, and all rules, orders, regulations, and requirements of the
board of fire underwriters or insurance service office, or any other similar
body, having jurisdiction over the building in which the premises are located.
Landlord represents that to the best of Landlord's knowledge no current
environmental problems exist.
(b) Tenant's Obligations with Respect to Environmental Laws.
(1) Tenant and the premises will remain in compliance with all
applicable laws, ordinances, and regulations (including consent decrees and
administrative orders) relating to public health and safety and protection of
the environment, including those statutes, laws, regulations, and ordinances
identified in subparagraph (7), all as amended and modified from time to time
(collectively, "environmental laws"). All governmental permits relating to
the use or operation of the premises required by applicable environmental
laws are and will remain in effect, and tenant will comply with them.
(2) Tenant will not permit to occur any release, generation,
manufacture, storage, treatment, transportation, or disposal of "hazardous
material," as that term is defined in subparagraph (7), on, in, under, or from
the premises. Tenant will promptly notify Landlord, in writing, if Tenant has
or acquires notice or knowledge that any hazardous material has been or is
threatened to be released, discharged, disposed or, transported, or stored on,
in, under, or from the premises; and if any hazardous material is found on the
premises, Tenant, at its own cost and expense, will immediately take such
action as is necessary to detain the spread of and remove the hazardous
material to the complete satisfaction of Landlord and the appropriate
governmental authorities.
(3) Tenant will immediately notify Landlord and provide copies
upon receipt of all written complaints, claims, citations, demands, inquiries,
reports, or notices relating to the condition of the premises or compliance
with environmental laws. Tenant will promptly cure and have dismissed with
prejudice any of those actions and proceedings to the satisfaction of Landlord.
Tenant will keep the premises free of any lien imposed pursuant to any
environmental laws.
(4) Landlord will have the right at all reasonable times and
from time to time to conduct environmental audits of the premises, and Tenant
will cooperate in the conduct of those audits. The audits will be conducted
by a consultant of Landlord's choosing, and if any hazardous
<PAGE>
material is detected or if a violation of any of the warranties,
representations, or covenants contained in this paragraph is discovered, the
fees and expenses of such consultant will be borne by Tenant and will be paid
as additional rent under this Lease on demand by Landlord.
(5) If Tenant fails to comply with any of the foregoing
warranties, representations, and covenants, Landlord may cause the removal
(or other cleanup acceptable to Landlord) of any hazardous material from the
premises. The costs of hazardous material removal and any other cleanup
(including transportation and storage costs) will be additional rent under
this Lease, whether or not a court has ordered the cleanup, and those costs
will become due and payable on demand by Landlord. Tenant will give Landlord,
its agents, and employees access to the premises to remove or otherwise clean
up any hazardous material. Landlord, however, has no affirmative obligation
to remove or otherwise clean up any hazardous material, and this Lease will
not be construed as creating any such obligation.
(6) Tenant agrees to indemnify, defend (with counsel reasonably
acceptable to Landlord and at Tenant's sole cost), and hold Landlord and
Landlord's affiliates, shareholders, directors, officers, employees, and agents
free and harmless from and against all losses, liabilities, obligations,
penalties, claims, litigation, demands, defenses, costs, judgments, suits,
proceedings, damages (including consequential damages), disbursements, or
expenses of any kind (including attorneys' and experts' fees and expenses and
fees and expenses incurred in investigating, defending, or prosecuting any
litigation, claim, or proceeding) that may at any time be imposed upon,
incurred by, or asserted or awarded against Landlord or any of them in
connection with or arising from or out of:
(A) any hazardous material on, in, or affecting all or any
portion of the premises;
(B) any misrepresentation, inaccuracy, or breach or any
warranty, covenant, or agreement contained or referred to in this paragraph;
(C) any violation or claim of violation by Tenant of any
environmental law; or
(D) the imposition of any lien for the recovery of any costs
for environmental cleanup or other response costs relating to the release or
threatened release of hazardous material.
This indemnification is the personal obligation of Tenant and will survive
termination of this Lease. Tenant, its successors, and assigns waive,
release, and agree not to make any claim or bring any cost recovery action
against Landlord under CERCLA, as that term is defined in subparagraph (7), or
any state equivalent or any similar law now existing or enacted after this
date. To the extent that Landlord is strictly liable under any such law,
regulation, ordinance, or requirement, Tenant's obligation to Landlord under
this indemnity will also be without regard to fault on the part of Tenant
with respect to the violation or condition that results in liability to
Landlord.
(7) For purposes of this Lease, "hazardous material" means:
(A) "hazardous substances" or "toxic substances" as those
terms are defined by
<PAGE>
the Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA), 42 U.S.C. # 9601, et seq., or the Hazardous Materials Transportation
Act, 49 U.S.C. # 1802, both as amended to this date and as amended after this
date;
(B) "hazardous wastes," as that term is defined by the
Resource Conservation and Recovery Act (RCRA), 42 U.S.C. # 6902, et seq., as
amended to this date and as amended after this date;
(C) any pollutant, contaminant, or hazardous, dangerous, or
toxic chemical, material, or substance within the meaning of any other
applicable federal, state, or local law, regulation, ordinance, or
requirement (including consent decrees and administrative orders) relating to
or imposing liability or standards of conduct concerning any hazardous,
toxic, or dangerous waste substance or material, all as amended to this date
or as amended after this date;
(D) crude oil or any fraction of it that is liquid at standard
conditions of temperature and pressure (60 degrees Fahrenheit and 14.7 pounds
per square inch absolute);
(E) any radioactive material, including any source, special
nuclear, or by-product material as defined at 42 U.S.C. # 2011, et seq., as
amended to this date or as amended after this date;
(F) asbestos in any form or condition; and
(G) polychlorinated biphenyls (PCB's) or substances or
compounds containing PCB's.
10. ASSIGNMENTS AND SUBLEASES
Without Landlord's prior written consent, which Landlord agrees will not
be unreasonably withheld or delayed, Tenant will neither assign this Lease in
whole or in part nor sublease all or part of the premises.
11. REPAIRS AND MAINTENANCE
Tenant will, at is sole cost and expense, maintain the premises and make
repairs, restorations, replacements and build out to the Lease Space, to suit
Tenant's use under this Lease and to preserve them in good working order and
condition and regardless of whether the repairs, restorations, and
replacements are ordinary or extraordinary, foreseeable or unforeseeable, or
the fault or not the fault of Tenant, its agents, employees, invitees,
visitors, or contractors. All repairs, restorations, and replacements will be
in quality and class equal to the original work or installations. If Tenant
fails to make repairs, restorations, or replacements, Landlord may make them
at the expense of Tenant and the expense will be collectible as additional
rent to be paid by Tenant within fifteen (15) days after delivery of a
statement for the expense. In the event any repair is required pursuant to
this paragraph 11, and said repair inures to the benefit of Landlord as well
as Tenant, Tenant shall only be liable for Tenant's prorata share of said
expense. Landlord shall contribute its
<PAGE>
prorata share as may be necessary.
12. ALTERATIONS
Tenant will not make any alterations, additions, or improvements to the
premises without Landlord's prior written consent; however, Landlord's prior
written consent will not be necessary for any alteration, addition, or
improvement which:
(a) costs less than Five Thousand Dollars ($5,000.00)
including labor and materials;
(b) does not change the general character of the premises, or
reduce the fair market value of the premises below its fair market value
prior to the alteration, addition, or improvement;
(c) is made with due diligence, in a good and workmanlike
manner, and in compliance with the laws, ordinances, orders, rules,
regulations, certificates of occupancy, or other governmental requirements
described in paragraph 9;
(d) is promptly and fully paid for by Tenant; and
(e) is made under the supervision of an architect or engineer
reasonably satisfactory to Landlord and in accordance with plans and
specifications and cost estimates approved by Landlord.
Landlord may designate a supervising architect to assure compliance with
the provisions of this paragraph, and if it does, Tenant will pay the
supervising architect's charges. Subject to Tenant's rights in paragraph 13,
all alterations, additions, fixtures, and improvements, whether temporary or
permanent in character, made in or upon the premises by Tenant, will
immediately become Landlord's property and at the end of the term of this
Lease will remain on the premises without compensation to Tenant. By notice
given to Tenant no less than ninety (90) days prior to the end of this Lease,
Landlord may require that any alterations, additions, fixtures, and
improvements made in or upon the premises be removed by Tenant. In that
event, Tenant will remove the alterations, additions, fixtures, and
improvements at Tenant's sole cost and will restore the premises to the
condition in which they were before the alterations, additions, improvements,
and additions were made, reasonable wear and tear excepted.
13. END OF TERM
At the end of this Lease, Tenant will surrender the premises in good
order and condition, ordinary wear and tear excepted. If Tenant is not then
in default, Tenant may remove from the premises any trade fixtures, equipment,
and movable furniture placed in the premises by Tenant, whether or not the
trade fixtures or equipment are fastened to the building. Tenant will not
remove any trade fixtures or equipment without Landlord's prior written
consent if the trade fixtures or equipment are used in the operation of the
building, provided by Landlord to Tenant under this lease
<PAGE>
or if the removal of the fixtures or equipment will impair the structure of
the building. Whether or not Tenant is then in default, Tenant will remove
alterations, additions, improvements, trade fixtures, equipment, and
furniture that Landlord has requested to be removed in accordance with
paragraph 12. Tenant will fully repair any damage occasioned by the removal
of any trade fixtures, equipment, furniture, alterations, additions, and
improvements. All trade fixtures, equipment, furniture, alterations,
additions, and improvements not so removed will conclusively be deemed to
have been abandoned by Tenant and may be appropriated, sold, stored,
destroyed, or otherwise disposed of by Landlord without notice to Tenant or
to any other person and without obligation to account for them. Tenant will
pay Landlord all expenses incurred in connection with Landlord's disposition
of such property, including without limitation the cost of repairing any
damage to the building or premises caused by removal of the property.
Tenant's obligation to observe and perform this covenant will survive the end
of this Lease.
14. DAMAGE AND DESTRUCTION
(a) General. If the premises are damaged or destroyed by reason of fire
or any other Tenant related cause, Tenant will immediately notify Landlord
and will promptly repair or rebuild the building at Tenant's expense, so as
to make the building at least equal in value to the building existing
immediately prior to the occurrence and as nearly similar to it in character as
is practicable and reasonable. Landlord will apply and make available to pay
to Tenant the net proceeds of any fire or other casualty insurance paid to
Landlord, after deduction of any costs of collection, including attorneys'
fees, for repairing or rebuilding as the same progresses. Payments will be
made against properly certified vouchers of a competent architect in charge
of the work and approved by Landlord. Landlord will contribute, out of the
insurance proceeds, towards each payment to be made by or on behalf of Tenant
for the repairing or rebuilding of the building, under a schedule of payments
to be made by Tenant and not unreasonably objected to by Landlord, an amount
in the proportion to the payment by Tenant as the total net amount received
by Landlord from insurers bears to the total estimated cost of the rebuilding
or repairing. Landlord, however, may withhold from each amount so to be paid by
Landlord fifteen percent (15%) of the amount until the work of repairing or
rebuilding is completed and proof has been furnished to Landlord that no lien
or liability has attached or will attach to the premises or to Landlord in
connection with the repairing or rebuilding. Upon the completion of rebuilding
and the furnishing of that proof, the balance of the net proceeds of the
insurance will be paid to Tenant. If the proceeds of insurance are paid to
the holder of any mortgage on Landlord's interest in the premises, Landlord
will make available net proceeds of the insurance in accordance with the
provisions of this paragraph. Before beginning repairs or rebuilding, or
letting any contracts in connection with repairs or rebuilding, Tenant will
submit for Landlord's approval, which approval Landlord will not unreasonably
withhold or delay, complete and detailed plans and specifications for the
repairs or rebuilding. Promptly after receiving Landlord's approval of those
plans and specifications, Tenant will begin the repairs or rebuilding and will
prosecute the repairs or rebuilding to completion with diligence, subject,
however, to strikes, lockouts, acts of God, embargoes, governmental
restrictions, and other causes beyond Tenant's reasonable control. Tenant
will obtain and deliver to Landlord a temporary or final certificate of
occupancy before the premises are reoccupied for any purpose. The repairs or
rebuilding will be completed free and clear of mechanics' or other liens, and
in accordance with the building codes and all applicable laws, ordinances,
regulations, or orders of any state, municipal, or other public
<PAGE>
authority affecting the repairs or rebuilding, and also in accordance with all
requirements of the insurance rating organization, or similar body, and of
any liability insurance company insuring Landlord against liability for
accidents related to the premises. Any remaining proceeds of insurance after
the restoration will be Tenant's property.
In the event that Tenant's Leases Space is damaged due to the actions of
Landlord, its agent, licenses, invitees or guest, Tenant shall be entitled to
a rent abatement for the period of time in which Tenant is prevented for the
use of the Lease Space. In addition, Landlord shall restore the Lease Space
to the condition in which Tenant occupied prior to the damage, reasonable wear
and tear excepted.
(b) Landlord's Inspection. During the progress of repairs or
rebuilding, Landlord and its architects and engineers may from time to time
inspect the building and will be furnished, if required by them, with copies
of all plans, shop drawings, and specifications relating to the repairs or
rebuilding. Tenant will keep all plans, shop drawings, and specifications at
the building, and Landlord and its architects and engineers may examine them
at all reasonable times. If, during repairs or rebuilding, Landlord and its
architects and engineers may examine them at all reasonable times. If, during
repairs or rebuilding, Landlord and its architects and engineers determine
that the repairs or rebuilding are not being done in accordance with the
approved plans and specifications, Landlord will give prompt notice in
writing to Tenant, specifying in detail the particular deficiency, omission,
or other respect in which Landlord claims the repairs or rebuilding do not
accord with the approved plans and specifications. Upon the receipt of that
notice, Tenant will cause corrections to be made to any deficiencies,
omissions, or such other respect. Tenant's obligations to supply insurance
according to paragraph 7 will be applicable to any repairs or building under
this paragraph.
(c) Landlord's Costs. The charges of any architect or engineer of
Landlord employed to pass upon any plans and specifications and to supervise
and approve any construction, or for any services rendered by the architect
or engineer to Landlord as contemplated by any of the provisions of this
Lease, will be paid by Tenant as a cost of the repair or rebuilding. The fees
of such architect or engineer will be those customarily paid for comparable
services.
(d) No Rent Abatement. Monthly rent and additional rent will not abate
pending the repairs or rebuilding except to the extent to which Landlord
receives a net sum as proceeds of any rent insurance.
15. CONDEMNATION
(a) Total Taking. If, by exercise of the right of eminent domain or by
conveyance made in response to the threat of the exercise of such right (in
either case a "taking"), all of the premises are taken, or if so much of the
premises are taken that the premises (even if the restorations described in
paragraph 15(b) were to be made) cannot be used by Tenant for the purposes
for which they were used immediately before the taking, this Lease will end
on the earlier of the vesting of title to the premises in the condemning
authority or the taking of possession of the premises by the condemning
authority (in either case the "ending date"). If this Lease ends according to
this paragraph 15(a), prepaid rent will be appropriately prorated to the
ending date. The award in a taking subject to this paragraph 15(a) will be
allocated according to paragraph 15(d).
<PAGE>
(b) Partial Taking. If, after a taking, so much of the premises remains
that the premises can be used for substantially the same purposes for which
they were used immediately before the taking:
(1) this Lease will end on the ending date as to the part of the
premises which is taken;
(2) prepaid rent will be appropriately allocated to the part of
the premises which is taken and prorated to the ending date;
(3) beginning on the day after the ending date, rent for so much
of the premises as remains will be reduced in the proportion of the floor
area of the building remaining after the taking to the floor area of the
building before the taking;
(4) at its cost, Tenant will restore so much of the premises as
remains to a sound architectural unit substantially suitable for the purposes
for which it was used immediately before the taking, using good workmanship
and new first class materials, all according to paragraph 12;
(5) upon the completion of restoration according to clause (6),
Landlord will pay Tenant the lesser of the net award made to Landlord on
account of the taking (after deducting from the total award attorneys',
appraisers', and other costs incurred in connection with obtaining the award,
and amounts paid to the holders of mortgages affecting the premises), or
Tenant's actual out-of-pocket cost of restoring the premises; and
(6) Landlord will keep the balance of the net award.
(c) Tenant's Award. In connection with any taking subject to paragraph
15(a) or 15(b), Tenant may prosecute its own claim by separate proceedings
against the condemning authority for damages legally due to it (such as the
loss of fixtures which Tenant was entitled to remove and moving expenses)
only so long as Tenant's award does not diminish or otherwise adversely
affect Landlord's award.
(d) Allocation of an Award for a Total Taking. If this Lease ends
according to paragraph 15(a), the condemnation award will be paid in the
order in this paragraph 15(d) to the extent it is sufficient:
(1) First, Landlord will be reimbursed for its attorneys' fees,
appraisal fees, and other costs incurred in prosecuting the claim for the
award.
(2) Second, any lender whose loan is secured by the premises will
be paid the principal balance of its loan, plus accrued and unpaid interest,
and any other charges due on payment.
(3) Third, Landlord will be paid the value at the time of the award
of lost rent and the reversion to the extent they exceed the amount paid to
Landlord's lender.
<PAGE>
(4) Fourth, Tenant will be paid its adjusted book value as of the
date of the taking of its improvements (excluding trade fixtures) made to the
premises. In computing its adjusted book value, improvements will be
conclusively presumed to have been depreciated or amortized for federal income
tax purposes over their useful lives with a reasonable salvage value.
(5) Fifth, the balance will be divided equally between Landlord and
Tenant.
16. SUBORDINATION
(a) General. This Lease and Tenant's rights under this Lease are
subject and subordinate to any ground Lease or underlying Lease, first
mortgage, first deed of trust, or other first lien encumbrance or indenture,
together with any renewals, extensions, modifications, consolidations, and
replacements of them, which now or at any subsequent time affect the
premises, any interest of Landlord in the premises, or Landlord's interest in
this Lease and the estate created by this Lease (except to the extent that any
such instrument expressly provides that this Lease is superior to it). This
provision will be self-operative and no further instrument of subordination
will be required in order to effect it. Nevertheless, Tenant will execute,
acknowledge and deliver to Landlord, at any time and from time to time, upon
demand by Landlord, any documents as may be requested by Landlord, any ground
Landlord or underlying lessor, or any mortgagee, or any holder of a deed of
trust or other instrument described in this paragraph, to confirm or effect
the subordination. If Tenant fails or refuses to execute, acknowledge, and
deliver any such document within twenty (20) days after written demand,
Landlord, its successors, and assigns will be entitled to execute,
acknowledge, and deliver the document on behalf of Tenant as Tenant's as
attorney-in-fact. Tenant constitutes and irrevocably appoints Landlord, its
successors, and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any documents described in this
paragraph.
(b) Attornment. If any holder of any mortgage, indenture, deed of
trust, or other similar instrument described in subparagraph (a) succeeds to
Landlord's interest in the premises, Tenant will pay to it all rents
subsequently payable under this Lease. Tenant will, upon request of anyone so
succeeding to the interest of Landlord, automatically become the Tenant of,
and attorn to, the successor in interest without change in this Lease. The
successor in interest will not be bound by (1) any payment of rent for more
than one month in advance, (2) any amendment or modification of this Lease
made without its written consent, (3) any claim against Landlord arising
prior to the date on which the successor succeeded to Landlord's interest, or
(4) any claim or offset of rent against the Landlord. Upon request by the
successor in interest and without cost to Landlord or the successor in
interest, Tenant will execute, acknowledge, and deliver an instrument or
instruments confirming the attornment. The instrument to attornment will also
provide that the successor in interest will not disturb Tenant in its use of
the premises in accordance with this Lease. If Tenant fails or refuses to
execute, acknowledge, and deliver the instrument within twenty (20) days
after written demand, the successor in interest will be entitled to execute,
acknowledge, and deliver the document on behalf of Tenant as Tenant's as
attorney-in-fact. Tenant constitutes and irrevocably appoints the successor
in interest as Tenant's attorney-in-fact to execute, acknowledge, and deliver
on behalf of Tenant any document described in this paragraph.
<PAGE>
17. LANDLORD'S ACCESS
Landlord, its agents, employees, and contractors may enter the premises
at any time in response to an emergency, and at reasonable hours with notice,
to (a) inspect the premises, (b) exhibit the premises to prospective
purchasers, lenders, or Tenants within the last 90 days of the Lease, (c)
determine whether Tenant is complying with its obligations in this Lease, (d)
supply any other service which this Lease requires Landlord to provide, (e)
post notices of nonresponsibility or similar notices, or (f) make repairs
which this Lease requires Landlord to make; however, all work will be done as
promptly as reasonably possible and so as to cause as little interference to
Tenant as reasonably possible. Tenant waives any claim on account of any
injury or inconvenience to Tenant's business, interference with Tenant's
business, loss of occupancy or quiet enjoyment of the premises, or any other
loss occasioned by the entry. Landlord will at all times have a key with
which to unlock all of the doors in the premises (excluding Tenant's vaults,
safes, and similar areas designed in writing by Tenant in advance). Landlord
will have the right to use any means Landlord may deem proper to open doors
in the premises and to the premises in an emergency in order to enter the
premises. No entry to the premises by Landlord by any means will be a
forcible or unlawful entry into the premises or a detainer of the premises or
an eviction, actual or constructive, of Tenant from the premises, or any part
of the premises, nor will any entry entitle Tenant to damages or an abatement
of rent or other charges which this Lease requires Tenant to pay. Landlord
agrees to provide to Tenant 24 hour, 7 days a week access to the Premises,
unless prohibited by an emergency, act of God or other such circumstances
beyond Landlord's control.
18. INDEMNIFICATION, WAIVER AND RELEASE
(a) Indemnification. Tenant will indemnify Landlord, its agents, and
employees against, and hold Landlord, its agents, and employees harmless from,
any and all demands, claims, causes of action, fines, penalties, damages
(including consequential damages), losses, liabilities, judgments, and
expenses (including without limitation attorneys' fees and court costs)
incurred in connection with or arising from:
(1) the use or occupancy of the premises by Tenant or any person
claiming under Tenant;
(2) any activity, work, or thing done or permitted or suffered by
Tenant in or about the premises;
(3) any acts, omissions, or negligence of Tenant, any person
claiming under Tenant, or the employees, agents, contractors, invitees, or
visitors of Tenant or any person;
(4) any breach, violation, or nonperformance by Tenant, any person
claiming under Tenant, or the employees, agents, contractors, invitees, or
visitors of Tenant, or any person of any term, covenant, or provision of this
Lease or any law, ordinance, or governmental requirement of any kind; or
(5) except for loss of use of all or any portion of the premises
or Tenant's property
<PAGE>
located within the premises that is proximately caused by or results
proximately from the negligence of Landlord, any injury or damage to the
person, property, or business of Tenant or its employees, agents,
contractors, invitees, visitors, or any other person entering upon the
premises under the express or implied invitation of Tenant.
If any action or proceeding is brought against Landlord, its employees, or
agents by reason of any claim, Tenant, upon notice from Landlord, will
defend the claim at Tenant's expense with counsel reasonably
satisfactory to Landlord.
(b) Waiver and Release. Tenant waives and releases all claims against
Landlord, its employees, and agents with respect to all matters for which
Landlord has disclaimed liability pursuant to the provisions of this Lease.
In addition, Tenant agrees that Landlord, its agents, and employees will not
be liable for any loss, injury, death, or damage (including consequential
damages) to persons, property, or Tenant's business occasioned by theft; act
of God; public enemy; injunction; riot; strike; insurrection; war; court
order; requisition; order of governmental body or authority; fire; explosion;
falling objects; steam, water, rain or snow; leak or flow of water (including
water from the elevator system), rain or snow from the premises or into the
premises or from the roof, street, subsurface, or from any other place, or
by dampness, or from the breakage, leakage, obstruction, or other defects of
the pipes, sprinklers, wires, appliances, plumbing, air conditioning, or
lighting fixtures of the building; or from construction, repair, or
alteration of the premises or from any acts or omissions of any visitor of
the premises; or from any cause beyond Landlord's control.
(c) Indemnification. Landlord will indemnify Tenant against, and hold
Tenant harmless from, any and all demands, claims, causes of action, fines,
penalties, damages, losses, liabilities, judgments, and expenses (including
without limitation attorneys' fees and court costs) incurred in connection
with or arising from:
(1) any acts, omissions, or negligence of Landlord, any person
claiming under Landlord, or the employees, agents, contractors, invitees, or
visitors of Landlord or any person;
(2) any breach, violation, or nonperformance by Landlord, any
person claiming under Landlord, or the employees, agents, contractors,
invitees, or visitors of Landlord, or any person of any term, covenant, or
provision of this Lease or any law, ordinance, or governmental requirement of
any kind; or
(3) except for loss of use of all or any portion of the premises
or Tenant's property located within the premises that is proximately caused
by or results proximately from the negligence of Landlord, any injury or
damage to the person, property, or business of Tenant or its employees,
agents, contractors, invitees, visitors, or any other person entering upon
the premises under the express or implied invitation of Tenant.
19. SECURITY DEPOSIT
Tenant has deposited the sum of Twenty-Four Thousand Five Hundred Thirty
Three Dollars and 33/100, ($24,533.33) with Landlord as advance rent and for
the first four months (4) of this
<PAGE>
Lease, the sum of Seven Thousand Six Hundred Sixty-Six Dollars and 66/100
($7,666.66) as security deposit for Tenant's performance of rent and other
obligations under this Lease, and any renewals or extensions of this Lease.
If Tenant defaults in its payment of rent or performance of its other
obligations under this Lease, Landlord may use all or part of the advance
rent or security deposit for the payment of rent or any other amount in
default, or for the payment of any other amount which Landlord may spend or
become obligated to spend by reason of Tenant's default, or for the payment
to Landlord of any other loss or damage which Landlord may suffer by reason
of Tenant's default. If Landlord so uses any portion of the security deposit,
Tenant will restore the security deposit to its original amount within five
(5) days after written demand from Landlord. Landlord will not be required to
keep the security deposit separate from its general funds, and Tenant will
not be entitled to interest on the security deposit. The security deposit
will not be a limitation on Landlord's damages or other rights under this
Lease, or a payment of liquidated damages, or an advance payment of the rent.
If Tenant pays the rent and performs all of its other obligations under this
Lease, Landlord will return the unused portion of the security deposit to
Tenant within sixty (60) days after the end of the term; however, if Landlord
has evidence that the security deposit has been assigned to an assignee of
the Lease, Landlord will return the security deposit to the assignee.
Landlord may deliver the security deposit to the purchaser of the premises
and be discharged from further liability with respect to it.
20. COVENANT OF QUIET ENJOYMENT
So long as Tenant pays the rent and performs all of its obligations in
this Lease, Tenant's possession of the premises will not be disturbed by
Landlord, or anyone claiming by, through or under Landlord, or by the holders
of the mortgages described in paragraph 16.
21. LIMITATION ON TENANT'S RECOURSE
Tenant's sole recourse against Landlord, and any successor to the
interest of Landlord in the premises, is to the interest of Landlord, and any
successor, in the premises. Tenant will not have any right to satisfy any
judgment which it may have against Landlord, or any successor, from any other
assets of Landlord, or any successor.
In this paragraph the terms "Landlord" and "successor" include the
shareholders, venturers, and partners of Landlord and successor and the
officers, directors, and employees of Landlord and successor. The provisions
of this paragraph are not intended to limit Tenant's right to seek injunctive
relief or specific performance, or Tenant's right to claim the proceeds of
insurance (if any) specifically maintained by Landlord for Tenant's benefit.
22. DEFAULT
(a) Cure. If Tenant fails to pay when due amounts payable under this
Lease or to perform any of its other obligations under this Lease within the
time permitted for its performance, then Landlord, after ten (10) days'
written notice to Tenant (or, in case of any emergency, upon notice or
without notice as may be reasonable under the circumstances) and without
waiving any of its rights under this Lease, may (but will not be required to)
pay the amount or perform the obligation.
<PAGE>
All amounts so paid by Landlord and all costs and expenses incurred by
Landlord in connection with the performance of any obligations (together with
interest at the prime rate from the date of Landlord's payment of the amount
or incurring of each cost or expense until the date of full repayment by
Tenant) will be payable by Tenant to Landlord on demand. In the proof of any
damages that Landlord may claim against Tenant arising out of Tenant's
failure to maintain insurance, Landlord will not be limited to the amount of
the unpaid insurance premium but will also be entitled to recover as damages
for the breach the amount of any uninsured loss (to the extent of any
deficiency in the insurance required by the provisions of this Lease),
damages, costs and expenses of suit, including attorneys' fees, arising out of
damage to, or destruction of, the premises occurring during any period for
which Tenant has failed to provide the insurance.
(b) Events of Default. The following occurrences are "events of default":
(1) Tenant defaults in the due and punctual payment of rent, and
the default continues for five (5) days after written notice from Landlord;
however, Tenant will not be entitled to more than two (2) notices for default
in payment of rent during any twelve-month period, and if, within twelve (12)
months after any notice, any rent is not paid when due, an event of default
will have occurred without further notice;
(2) Tenant vacates or abandons the premises and has failed to pay
rent;
(3) This Lease or the premises or any part of the premises is taken
upon execution or by other process of law directed against Tenant, or is
taken upon or subjected to any attachments by any creditor of Tenant or
claimant against Tenant, and the attachment is not discharged within fifteen
(15) days after its levy;
(4) Tenant files a petition in bankruptcy or insolvency or for
reorganization or arrangement under the bankruptcy laws of the United States
or under any insolvency act of any state, or is dissolved, or makes an
assignment for the benefit of creditors;
(5) Involuntary proceedings under any bankruptcy laws or insolvency
act or for the dissolution of Tenant are instituted against Tenant, or a
receiver or trustee is appointed for all or substantially all of Tenant's
property, and the proceeding is not dismissed or the receivership or
trusteeship is not vacated within sixty (60) days after institution or
appointment;
(6) Tenant fails to take possession of the premises on the
commencement date of the term; or
(7) Tenant breaches any of the other agreements, terms, covenants,
or conditions that this Lease requires Tenant to perform, and the breach
continues for a period of thirty (30) days after written notice by Landlord
to Tenant.
(c) Remedies. If any one or more events of default set forth in
paragraph 22(b) occurs, then Landlord may, at its election, either:
<PAGE>
(1) give Tenant written notice of its intention to terminate this
Lease on the date of the notice or on any later date specified in the notice,
and, on the date specified in the notice, Tenant's right to possession of the
premises will cease and the Lease will be terminated, except as to Tenant's
liability set forth in this paragraph 22(c)(1), as if the date fixed in the
notice were the end of the term of this Lease. If this Lease is terminated
pursuant to the provisions of this subparagraph (1), Tenant will remain liable
to Landlord for damages in an amount equal to the rent and other sums that would
have been owing by Tenant under this Lease for the balance of the term if this
Lease had not been terminated, less the net proceeds, if any, of any reletting
of the premises by Landlord subsequent to the termination, after deducting all
Landlord's expenses in connection with reletting, including without limitation
the expenses set forth in paragraph 22(c)(2). Landlord will be entitled to
collect damages from Tenant monthly on the days on which the rent and other
amounts would have been payable under this Lease if this Lease had not been
terminated, and Landlord will be entitled to receive damages from Tenant on each
day. Alternatively, at the option of Landlord, if this Lease is terminated,
Landlord will be entitled to recover from Tenant: or;
(2) without demand or notice, re-enter and take possession of the
premises or any part of the premises; repossess the premises as of the
Landlord's former estate; expel the Tenant from the premises and those
claiming through or under Tenant; and remove the effects of both or either,
without being deemed guilty of any manner of trespass and without prejudice
to any remedies for arrears of rent or preceding breach of covenants or
conditions. If Landlord elects to re-enter as provided in this paragraph
22(c)(2), or if Landlord takes possession of the premises pursuant to legal
proceedings or pursuant to any notice provided by law, Landlord may, from
time to time, without terminating this Lease, relet the premises or any part
of the premises, either alone or in conjunction with other portions of the
building of which the premises are a part, in Landlord's or Tenant's name but
for the account of Tenant, for the term or terms (which may be greater or
less than the period which would otherwise have constituted the balance of
term of this Lease) and on such terms and conditions (which may include
concessions of free rent, and the alteration and repair of the premises) as
Landlord, in its uncontrolled discretion, may determine. Landlord may collect
and receive the rents for the premises. Landlord will not be responsible or
liable for any failure to relet the premises, or any part of the premises, or
for any failure to collect any rent due upon reletting. No re-entry or taking
possession of the premises by Landlord will be construed as an election on
Landlord's part to terminate this Lease unless a written notice of the
intention is given to Tenant. No notice from Landlord under this Lease or
under a forcible entry and detainer statute or similar law will constitute an
election by Landlord to terminate this Lease unless the notice specifically
says so. Landlord reserves the right following any re-entry or reletting, or
both, to exercise its right to terminate this Lease by giving Tenant written
notice, and in that event the Lease will terminate as specified in the
notice. If Landlord elects to take possession of the premises according to
this paragraph 22(c)(2) without terminating the Lease, Tenant will pay
Landlord the rent and other sums which would be payable under this Lease if
the repossession had not occurred, less the net proceeds, if any, of any
reletting of the premises after deducting all of Landlord's expenses incurred
in connection with the reletting, including without limitation all
repossession costs, brokerage commissions, legal expenses, attorneys' fees,
expenses of employees, alteration, remodeling and repair costs, and expenses
of preparation for the reletting. If, in connection with any reletting, the
new Lease term extends beyond the existing term, or the premises covered by
the reletting include areas that are not part of the premises, a fair
apportionment of the rent received from the reletting and the expenses
incurred in
<PAGE>
connection with the reletting will be made in determining the net proceeds
received from reletting. In addition, in determining the net proceeds from
reletting, any rent concessions will be apportioned over the term of the new
Lease. Tenant will pay the amounts to Landlord monthly on the days on which
the rent and all other amounts owing under this Lease would have been payable
if possession had not retaken, and Landlord will be entitled to receive the
rent and other amounts from Tenant on each day.
(a) The decision of the arbitrators will be final and
non-appealable, and may be enforced according to the laws of the State of
Florida.
23. MISCELLANEOUS
(a) Recordation. Tenant's recordation of this Lease or any
memorandum or short form of it will be void and a default under this Lease.
(b) Holding Over. If Tenant remains in possession of the premises
after the end of this Lease, Tenant will occupy the premises as a Tenant from
month to month, subject to all conditions, provisions, and obligations of
this Lease in effect on the last day of the term.
(c) Estoppel Certificates. Within no more than Thirty (30) days
after written request by Landlord, Tenant will execute, acknowledge, and
deliver to Landlord a certificate stating:
(1) that this Lease is unmodified and in full force and
effect, or, if the Lease is modified, the way in which it is modified
accompanied by a copy of the modification agreement;
(2) the date to which rental and other sums payable under
this Lease have been paid;
(3) that no notice has been received by Tenant of any
default which has not been cured, or, if the default has not been cured, what
Tenant intends to do in order to effect the cure, and when it will do so;
(4) that Tenant has accepted and occupied the premises;
(5) that Tenant has no claim or offset against Landlord, or,
if it does, stating the date of the assignment and assignee (if known to
Tenant); and
(6) other matters as may be reasonably requested by Landlord.
Any certificate may be relied upon by any prospective purchaser of the
premises and any prospective mortgagee or beneficiary under any deed of trust
or mortgage encumbering the premises. If Landlord submits a completed
certificate to Tenant, and if Tenant fails to object to its contents within
ten (10) days after its receipt of the completed certificate, the matters
stated in the certificate will conclusively be deemed to be correct.
Furthermore, Tenant irrevocably appoints Landlord as Tenant's
attorney-in-fact to execute and deliver on Tenant's behalf any completed
certificate to which
<PAGE>
Tenant does not object within ten (10) days after its receipt.
(d) No Waiver. No waiver of any condition or agreement in this
Lease by either Landlord or Tenant will imply or constitute a further waiver
by such party of the same or any other condition or agreement. No act or
thing done by Landlord or Landlord's agents during the term of this Lease
will be deemed an acceptance of a surrender of the premises, and no agreement
to accept the surrender will be valid unless in writing signed by Landlord.
The delivery of Tenant's keys to any employee or agent of Landlord will not
constitute a termination of this Lease unless Landlord has entered into a
written agreement to that effect. No payment by Tenant, or receipt from
Landlord, of a lesser amount than the rent or other charges stipulated in
this Lease will be deemed to be anything other than a payment on account of
the earliest stipulated rent. No endorsement or statement on any check or any
letter accompanying any check or payment as rent will be deemed an accord and
satisfaction. Landlord will accept the check for payment without prejudice to
Landlord's right to recover the balance of the rent or to pursue any other
remedy available to Landlord. If this Lease is assigned, or if the premises
or any part of the premises are sublet or occupied by anyone other than
Tenant, Landlord may collect rent from the assignee, Subtenant, or occupant
and apply the net amount collected to the rent reserved in this Lease. No
collection will be deemed a waiver of the covenant in this Lease against
assignment and subletting; the acceptance of the assignee, Subtenant, or
occupant as Tenant; or a release of Tenant from the complete performance by
Tenant of its covenants in this Lease.
(e) Authority. If Tenant signs this Lease as a corporation, each
of the persons executing this Lease on behalf of Tenant warrants to Landlord
that Tenant is a duly authorized and existing corporation, that Tenant is
qualified to do business in the state in which the premises are located, that
Tenant has full right and authority to enter into this Lease, and that each
and every person signing on behalf of Tenant is authorized to do so. Upon
Landlord's request, Tenant will provide evidence satisfactory to Landlord
confirming these representations.
(f) Notices. Any notice, request, demand, consent, approval, or
other communication required or permitted under this Lease will be written
and will be deemed to have been given (1) when personally mailed, addressed
to:
Landlord: Donald I. Goldstein
G.S. Funding Group, L.C.
7171 North Federal Highway
Boca Raton, Florida 33432
with a copy to:
Mark S. Mucci, Esq.
Benson, Moyle & Mucci, LLP
One Financial Plaza, Suite 1600
Ft. Lauderdale, Florida 33394
Tenant Partsbase.Com
7171 N. Federal Highway
Boca Raton, Florida 33432
<PAGE>
with a copy at the same to: Robert Hammond
Either Landlord or Tenant may change its address or addressee for purposes of
this paragraph by giving ten (10) days' prior notice according to this
paragraph. Any notice from Landlord to Tenant will be deemed to have been given
if delivered to the premises, addressed to Tenant, whether or not Tenant has
vacated or abandoned the premises.
(g) Attorneys' Fees. If Landlord and Tenant litigate any provision of
this Lease or the subject matter of this Lease, the unsuccessful litigant will
pay to the successful litigant all costs and expenses, including reasonable
attorneys' fees and court costs, incurred by the successful litigation at trial
and on any appeal. If, without fault, either Landlord or Tenant is made a party
to any litigation instituted by or against the other, the other will indemnify
the faultless one against all loss, liability, and expense, including
reasonable attorneys' fees and court costs, incurred by it in connection with
the litigation.
(h) Waiver of Jury Trial. Landlord and Tenant waive trial by jury in any
action, proceeding, or counterclaim brought by either of them against the other
on all matters arising out of this Lease or the use and occupancy of the
premises (except claims for personal injury or property damage). If Landlord
commences any summary proceeding for nonpayment of rent, Tenant will not
interpose (and waives the right to interpose) any counterclaim in any
proceeding.
(i) Binding Effect. This Lease will inure to the benefit of, and will be
binding upon, Landlord's successors and assigns. This Lease will inure to the
benefit of, and will be binding upon, the Tenant's successors and assigns so
long as the succession or assignment is permitted by paragraph 10.
(j) Radon Gas Disclosure
Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from the county
public health unit.
(k) Broker's Representation
The parties hereto acknowledge the CB Richard Ellis, Inc. was the
procuring broker in the transaction respectfully representing the Tenant and
Mr. Kevin Kramer represented the Landlord.
Landlord and Tenant have executed this Lease as of the first date in this
Lease.
<PAGE>
Landlord:
G. S. FUNDING GROUP, L.C.
ATTEST
By: /s/ [illegible]
[corporate seal] Its: [illegible]
Date: 7/1/99
Tenant:
ATTEST:
PARTSBASE.COM
By: /s/ Robert A. Hammond
[corporate seal] Its: President
Date: 07/06/99
STATE OF FLORIDA )
)ss.
COUNTY OF PALM BEACH )
The foregoing instrument was acknowledged before me on 07.06, 1999, by
Robert A. Hammond Pres. of Partsbase.com, a Florida Corporation.
Witness my hand and official seal.
- ------------------------------------------
[seal] PATRICIA A. SANTONI
MY COMMISSION # CC 811823 /s/ Patricia A. Santoni
EXPIRES: February 23, 2003 -------------------------------
Banded Thru Notary Public Underwriters NOTARY PUBLIC
- ------------------------------------------ Patricia A. Santoni
My commission expires:
<PAGE>
EMPLOYMENT CONTRACT
By this Agreement, Partsbase.com Inc., referred to in this Agreement
as Employer, located at 7171 N. Federal Highway, Suite 100, Boca Raton,
Florida 33487, employs Robert A. Hammond, referred to in this Agreement as
Employee, of 1154 Cocoanut Rd., Boca Raton, Florida, 33432, who accepts
employment on the following terms and conditions:
WHEREAS, Employee agrees that in rendering services to Employer,
Employee has been, and will continue to be, exposed to and learn valuable
information about Employer's business, including valuable Confidential
Information, which it would be unfair to disclose to others, or use to
compete with Employer, or use to Employer's disadvantage, except as stated
herein; and
WHEREAS, Employer wishes to protect its interests in its Confidential
Information, and Employee agrees that during the term of this Agreement and
upon termination of Employee's employment, Employee will not disclose to
others the Confidential Information or compete with Employer except as stated
herein.
NOW THEREFORE, in consideration of Employer's employment of Employee,
and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Employee and Employer agree as follows:
ARTICLE I
TERM OF EMPLOYMENT
1.01. By this Agreement, the Employer employs the Employee, and the
Employee accepts employment with the Employer for a period of two (2) years.
If one party does not give notice to the other party of intention to
terminate this Agreement within thirty (30) days prior to the date that this
Agreement will terminate, this Agreement shall continue for an additional two
(2) year term and renew for successive two year terms until such notice is
given or this contract terminates otherwise pursuant to its terms. However,
this Agreement may be terminated earlier, as provided in Article XI.
-1-
<PAGE>
ARTICLE II
COMPENSATION
2.01. As compensation for all services rendered under this Agreement,
the Employee shall be paid by the Employer a salary of one hundred fifty
thousand Dollars ($150,000) per year, payable according to the Employer's
normal payroll cycle for salaried employees. The amount paid is to be pro
rated for any partial employment period. The Employer and Employee may
negotiate adjustments to the Employee's salary. If the Employer successfully
completes a public offering of its stock, the Employee shall be paid a salary
of two hundred fifty thousand Dollars ($250,000) per year.
ARTICLE III
DUTIES OF EMPLOYEE
3.01. The Employee is employed as the Chief Executive Officer and
President of the Employer and shall work at the Boca Raton, Florida office of
the Employer and at such other places as the Employer may direct. The
Employee shall be responsible for the overall management of the Company and
supervise the day-to-day operations of the Employer.
3.02. The Employee shall devote his entire productive time, ability,
attention, and energies to the business of the Employer during the term of
this Agreement. During such time, the Employee shall not directly or
indirectly render any material services of a business, commercial or
professional nature to any other person or organization, whether or not for
compensation, without the prior written consent of the Employer.
Notwithstanding the other provisions of this paragraph, the Employer
recognizes that Employee may spend time on the management of his investments
and the investments of his family and the limited partnership established by
the Employee and his family as long as Employee's investment activities do
not impinge on his ability to perform his duties as an Employee under this
Agreement.
ARTICLE IV
EMPLOYEE BENEFITS
4.01. The Employer agrees to include Employee, his spouse and his
dependents as defined under the Internal Revenue Code in the hospital, medical,
and other employee benefit plans adopted by the Employer for its salaried
employees.
-2-
<PAGE>
Without limiting the foregoing, the Employer shall pay the cost of all
medical insurance coverage.
4.02 The Employer agrees to provide the Employee three (3) weeks of paid
vacation per calendar year. This vacation shall be pro-rated for any part year.
The Employee may carry over up to two weeks of paid vacation to the subsequent
calendar year. On a termination of service, the Employee is entitled to pay for
unused vacation days.
ARTICLE V
REIMBURSEMENT OF EXPENSES INCURRED BY EMPLOYEE
5.01. The Employee is authorized to incur reasonable business
expenses for promoting the business of the Employer, including expenditures
for entertainment, gifts, and travel. Employer will reimburse the Employee
for all such expenses upon the Employee's timely presentation of an itemized
account of such expenditures.
5.02 Employer shall pay the Employee an automobile allowance of one
thousand dollars ($1,000) per month, payable on the first day of each month.
ARTICLE VI
CONFIDENTIAL INFORMATION
6.01. Employer and Employee agree that Employer has a legitimate
business interest in protecting its valuable Confidential Information.
Employee agrees that he will not disclose to or allow the use by any third
party, without the prior written consent of an executive officer of Employer,
any information relating to the business of Employer or its customers, if
such information could reasonably be construed as confidential unless and
until such Confidential Information has become public knowledge without fault
by the Employee. By way of illustration, but not limitation, Confidential
Information may include concepts, themes, business processes or ideas,
inventions, products, processes, methods, techniques, formulas, projects,
developments, plans, insurance data, research data, market data, financial
data, personnel data, computer programs, HTML code and Internet-related
information (including related graphics, links, scripts, or audio-visual
files), customer and supplier lists, and contacts at or knowledge of
customers or prospective customers of Employer.
6.02. Employee further agrees that he will not make personal use of,
reproduce in any way, or divulge any information which could reasonably be
construed as constituting Confidential Information.
-3-
<PAGE>
6.03. All files, records, documents, drawings, specifications,
equipment, and similar items relating to the business of the Employer,
whether or not prepared by the Employee, and other Confidential Information
shall remain the exclusive property of the Employer.
ARTICLE VII
RETURN OF PROPERTY
7.01. On the termination of employment or whenever requested by the
Employer, the Employee shall immediately deliver to the Employer all property
in the Employee's possession or under the Employee's control belonging to the
Employer, including but not limited to diskettes and other storage media
containing Confidential Information.
ARTICLE VIII
OBLIGATIONS OF EMPLOYER
8.01. The Employer shall indemnify the Employee for all losses
sustained by the Employee as a direct result of the lawful discharge of his
duties required by this Agreement.
ARTICLE IX
EMPLOYEE'S OBLIGATIONS OTHER THAN TO PERFORM SERVICES
9.01. During the term of this Agreement, the Employee shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director, or any other
individual or representative capacity, engage or participate in any business
if such business is engaged in the Same Business of the Employer. For
purposes of this section, Same Business of the Employer shall mean any
business engaged in the sale of aviation parts or products or the
facilitation thereof. Furthermore, on the termination of employment, the
Employee expressly agrees not to engage or participate, directly or
indirectly, in any business that is engaged in the Same Business of the
Employer for a period of two (2) years (hereinafter "Non-Compete Period").
The parties agree that this restriction is reasonable and the least
restrictive prohibition on the Employee's competition with the Employer that
protects the Employer's interests.
-4-
<PAGE>
9.02. The obligation of the Employee not to compete with the Employer
as set forth in Paragraph 9.01 of this Agreement shall not prohibit the
Employee from owning or purchasing any corporate securities that are
regularly traded on a recognized stock exchange or over-the-counter market so
long as the Employee's holdings do not exceed ten percent (10%) of the
outstanding shares of Employer.
9.03. In the event of a breach of this section by Employee, Employer
and Employee agree that the Employer would suffer irreparable damages for
which monetary compensation would not be adequate. Accordingly, the parties
agree that the Employer shall be entitled, in addition to any other remedies
they may have under this Agreement at law or otherwise, to immediate
injunctive and other equitable relief to prevent or curtail any breach of
this Agreement.
9.04. Employer's business is international in scope, and the
restrictions of this paragraph shall accordingly apply throughout the world.
9.05. In the event of a breach of any post-employment covenant or
restriction contained in this Agreement, the two year period set forth
therein shall be automatically tolled and suspended for the amount of time
that the violation continues.
9.06. The provisions of this Article shall survive the termination of
this Agreement for any reason whatsoever for a period equal to the two years
from termination (including any tolling period).
ARTICLE X
NON-SOLICITATION OF EMPLOYEES AND CANDIDATES
10.01. During the Employment Period, Employee shall not in any way
induce or entice any existing employee to terminate or sever his or her
relationship with Employer or to abandon or discontinue the pursuit of a
relationship with Employer.
10.02. During the Non-Compete Period, Employee shall not hire, offer
to hire, solicit for employment, or otherwise endeavor in any way to entice
or lure away from employment, prospective employment, or any other
affiliation with Employer any person who, within the six months immediately
preceding the Termination Date, is or was an employee, agent, officer,
director, or candidate of Employer.
10.03. Employee agrees that during the Non-Compete Period Employee
shall neither solicit nor accept business from any client of Employer. For
purposes of this section, the term "client" refers to any one or more of the
following:
-5-
<PAGE>
(i) any person or entity for whom Employer performs or has
performed services;
(ii) any person or entity who had an existing account with
Employer during the Employment Period; or
(iii) any person or entity who was an active prospect of Employer
during the Employment Period.
10.04. Employee acknowledges that Employer has substantial
relationships with its clients; that Employer expends significant time and
resources in acquiring and maintaining those client relationships; and that
Employer's relationships with its clients constitutes a significant and
valuable asset of Employer.
ARTICLE XI
TERMINATION
11.01. Either party may terminate the Employee's employment by giving
30 days written notice of termination to the other party. Such termination
shall not prejudice any remedy that the terminating party may have at law or
in equity.
11.02. In the event of the termination of employment, the Employee
shall be entitled to the compensation earned by the Employee prior to the
date of termination as is provided for in this Agreement, computed pro rata
up to and including the date of termination. The Employee shall be entitled
to no further compensation after the date of termination.
ARTICLE XII
GENERAL PROVISIONS
12.01. All notices or other communications required under this
Agreement may be effected either by personal delivery in writing or by
certified mail, return receipts requested. Notice shall be deemed to have
been given when delivered or mailed to the parties at their respective
addresses as set forth at the beginning of this Agreement or when mailed to
the last address provided in writing to the other party by the addressee.
-6-
<PAGE>
12.02. This Agreement supersedes all other agreements, either oral or
in writing, between the parties to this Agreement, with respect to the
employment of the Employee by the Employer. This Agreement contains the
entire understanding of the parties and all of the covenants and agreements
between the parties with respect to such employment.
12.03. If any clause, phrase provision or portion of this Agreement
or the application thereto to any person or circumstance shall be invalid or
unenforceable under any applicable law, such event shall not affect or render
invalid or unenforceable the remainder of this Agreement and shall not affect
the application of any clause, provision or portion hereto to other persons
or circumstances.
12.04. The restrictions contained in Article 9 of this Agreement are
considered reasonable by Employee and Employer, and it is the desire of both
parties that such restrictions and the other provisions of this Agreement be
enforced to the fullest extent permissible under the laws and the public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any such restriction or provision shall be
found to be void or invalid but would be valid if some part thereof were
deleted or the period or area of application reduced, such restriction or
provisions shall apply with such modification as shall be necessary to make
it valid and effective. A deletion resulting from any adjudication shall
occur only with respect to the operation of the provision or a portion
thereof affected in the particular jurisdiction in which such adjudication is
made, and each court or other body having jurisdiction with respect to the
enforcement of the provisions of this Article 9 of this Agreement is hereby
empowered to modify by reduction, rather than deletion, of the time periods
or other restrictions referred to therein.
12.05. This Agreement shall be binding upon and inure to the benefit
of the heirs, successors, assigns, and delegates of the parties hereto.
-7-
<PAGE>
Executed at 7171 N Federal Highway,Boca Raton, Florida, 33487 on
November 22, 1999.
EMPLOYER
Partsbase.com, Inc.
By:
------------------------------------
Name: Steven R. Spencer
Title: Chief Operating Officer
EMPLOYEE
---------------------------------------
Robert A. Hammond
-8-
<PAGE>
EMPLOYMENT CONTRACT
By this Agreement, Partsbase.com Inc., referred to in this Agreement
as Employer, located at 7171 N. Federal Highway, Suite 100, Boca Raton,
Florida 33487, employs Steven R. Spencer, referred to in this Agreement as
Employee, of 820 Lavers Circle, Apt 308, Delray Beach, Florida, 33444, who
accepts employment on the following terms and conditions:
WHEREAS, Employee agrees that in rendering services to Employer,
Employee has been, and will continue to be, exposed to and learn valuable
information about Employer's business, including valuable Confidential
Information, which it would be unfair to disclose to others, or use to
compete with Employer, or use to Employer's disadvantage, except as stated
herein; and
WHEREAS, Employer wishes to protect its interests in its Confidential
Information, and Employee agrees that during the term of this Agreement and
upon termination of Employee's employment, Employee will not disclose to
others the Confidential Information or compete with Employer except as stated
herein.
NOW THEREFORE, in consideration of Employer's employment of Employee,
and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Employee and Employer agree as follows:
ARTICLE I
TERM OF EMPLOYMENT
1.01. By this Agreement, the Employer employs the Employee, and the
Employee accepts employment with the Employer for a period of two (2) years.
If one party does not give notice to the other party of intention to
terminate this Agreement within thirty (30) days prior to the date that this
Agreement will terminate, this Agreement shall continue for an additional two
(2) year term and renew for successive two year terms until such notice is
given or this contract terminates otherwise pursuant to its terms. However,
this Agreement may be terminated earlier, as provided in Article XI.
-1-
<PAGE>
ARTICLE II
COMPENSATION
2.01. As compensation for all services rendered under this Agreement,
the Employee shall be paid by the Employer a salary of eighty four thousand
Dollars ($84,000) per year, payable according to the Employer's normal
payroll cycle for salaried employees. The amount paid is to be pro rated for
any partial employment period. The Employer and Employee may negotiate
adjustments to the Employee's salary. If the Employer successfully completes
a public offering of its stock, the Employee shall be paid a salary of one
hundred twenty five thousand Dollars ($125,000) per year.
ARTICLE III
DUTIES OF EMPLOYEE
3.01. The Employee is employed as the Chief Operating Officer of the
Employer and shall work at the Boca Raton, Florida office of the Employer and
at such other places as the Employer may direct. The Employee shall be
responsible for the overall management of the Company and supervise the
day-to-day operations of the Employer.
3.02. The Employee shall devote his entire productive time, ability,
attention, and energies to the business of the Employer during the term of
this Agreement. During such time, the Employee shall not directly or
indirectly render any material services of a business, commercial or
professional nature to any other person or organization, whether or not for
compensation, without the prior written consent of the Employer.
ARTICLE IV
EMPLOYEE BENEFITS
4.01. The Employer agrees to include Employee, his spouse and his
dependents as defined under the Internal Revenue Code in the hospital,
medical, and other employee benefit plans adopted by the Employer for its
salaried employees. Without limiting the foregoing, the Employer shall pay
the cost of all medical insurance coverage.
-2-
<PAGE>
4.02 The Employer agrees to provide the Employee three (3) weeks of
paid vacation per calendar year. This vacation shall be pro-rated for any
part year. The Employee may carry over up to two weeks of paid vacation to
the subsequent calendar year. On a termination of service, the Employee is
entitled to pay for unused vacation days.
ARTICLE V
REIMBURSEMENT OF EXPENSES INCURRED BY EMPLOYEE
5.01. The Employee is authorized to incur reasonable business
expenses for promoting the business of the Employer, including expenditures
for entertainment, gifts, and travel. Employer will reimburse the Employee
for all such expenses upon the Employee's timely presentation of an itemized
account of such expenditures.
5.02 Employer shall pay the Employee an automobile allowance of seven
hundred fifty dollars ($750) per month, payable on the first day of each
month.
ARTICLE VI
CONFIDENTIAL INFORMATION
6.01. Employer and Employee agree that Employer has a legitimate
business interest in protecting its valuable Confidential Information.
Employee agrees that he will not disclose to or allow the use by any third
party, without the prior written consent of an executive officer of Employer,
any information relating to the business of Employer or its customers, if
such information could reasonably be construed as confidential unless and
until such Confidential Information has become public knowledge without fault
by the Employee. By way of illustration, but not limitation, Confidential
Information may include concepts, themes, business processes or ideas,
inventions, products, processes, methods, techniques, formulas, projects,
developments, plans, insurance data, research data, market data, financial
data, personnel data, computer programs, HTML code and Internet-related
information (including related graphics, links, scripts, or audio-visual
files), customer and supplier lists, and contacts at or knowledge of
customers or prospective customers of Employer.
6.02. Employee further agrees that he will not make personal use of,
reproduce in any way, or divulge any information which could reasonably be
construed as constituting Confidential Information.
6.03. All files, records, documents, drawings, specifications,
equipment, and similar items relating to the business of the Employer,
whether or not prepared by the
-3-
<PAGE>
Employee, and other Confidential Information shall remain the exclusive
property of the Employer.
ARTICLE VII
RETURN OF PROPERTY
7.01. On the termination of employment or whenever requested by the
Employer, the Employee shall immediately deliver to the Employer all property
in the Employee's possession or under the Employee's control belonging to the
Employer, including but not limited to diskettes and other storage media
containing Confidential Information.
ARTICLE VIII
OBLIGATIONS OF EMPLOYER
8.01. The Employer shall indemnify the Employee for all losses
sustained by the Employee as a direct result of the lawful discharge of his
duties required by this Agreement.
ARTICLE IX
EMPLOYEE'S OBLIGATIONS OTHER THAN TO PERFORM SERVICES
9.01. During the term of this Agreement, the Employee shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director, or any other
individual or representative capacity, engage or participate in any business
if such business is engaged in the Same Business of the Employer. For
purposes of this section, Same Business of the Employer shall mean any
business engaged in the sale of aviation parts or products or the
facilitation thereof. Furthermore, on the termination of employment, the
Employee expressly agrees not to engage or participate, directly or
indirectly, in any business that is engaged in the Same Business of the
Employer for a period of two (2) years (hereinafter "Non-Compete Period").
The parties agree that this restriction is reasonable and the least
restrictive prohibition on the Employee's competition with the Employer that
protects the Employer's interests.
9.02. The obligation of the Employee not to compete with the Employer
as set forth in Paragraph 9.01 of this Agreement shall not prohibit the
Employee from owning or purchasing any corporate securities that are
regularly traded on a recognized stock
-4-
<PAGE>
exchange or over-the-counter market so long as the Employee's holdings do not
exceed ten percent (10%) of the outstanding shares of Employer.
9.03. In the event of a breach of this section by Employee, Employer
and Employee agree that the Employer would suffer irreparable damages for
which monetary compensation would not be adequate. Accordingly, the parties
agree that the Employer shall be entitled, in addition to any other remedies
they may have under this Agreement at law or otherwise, to immediate
injunctive and other equitable relief to prevent or curtail any breach of
this Agreement.
9.04. Employer's business is international in scope, and the
restrictions of this paragraph shall accordingly apply throughout the world.
9.05. In the event of a breach of any post-employment covenant or
restriction contained in this Agreement, the two year period set forth
therein shall be automatically tolled and suspended for the amount of time
that the violation continues.
9.06. The provisions of this Article shall survive the termination of
this Agreement for any reason whatsoever for a period equal to the two years
from termination (including any tolling period).
ARTICLE X
NON-SOLICITATION OF EMPLOYEES AND CANDIDATES
10.01. During the Employment Period, Employee shall not in any way
induce or entice any existing employee to terminate or sever his or her
relationship with Employer or to abandon or discontinue the pursuit of a
relationship with Employer.
10.02. During the Non-Compete Period, Employee shall not hire, offer
to hire, solicit for employment, or otherwise endeavor in any way to entice
or lure away from employment, prospective employment, or any other
affiliation with Employer any person who, within the six months immediately
preceding the Termination Date, is or was an employee, agent, officer,
director, or candidate of Employer.
10.03. Employee agrees that during the Non-Compete Period Employee
shall neither solicit nor accept business from any client of Employer. For
purposes of this section, the term "client" refers to any one or more of the
following:
(i) any person or entity for whom Employer performs or has
performed services;
-5-
<PAGE>
(ii) any person or entity who had an existing account with
Employer during the Employment Period; or
(iii) any person or entity who was an active prospect of Employer
during the Employment Period.
10.04. Employee acknowledges that Employer has substantial
relationships with its clients; that Employer expends significant time and
resources in acquiring and maintaining those client relationships; and that
Employer's relationships with its clients constitutes a significant and
valuable asset of Employer.
ARTICLE XI
TERMINATION
11.01. Either party may terminate the Employee's employment by giving
30 days written notice of termination to the other party. Such termination
shall not prejudice any remedy that the terminating party may have at law or
in equity.
11.02. In the event of the termination of employment, the Employee
shall be entitled to the compensation earned by the Employee prior to the
date of termination as is provided for in this Agreement, computed pro rata
up to and including the date of termination. The Employee shall be entitled
to no further compensation after the date of termination.
ARTICLE XII
GENERAL PROVISIONS
12.01. All notices or other communications required under this
Agreement may be effected either by personal delivery in writing or by
certified mail, return receipts requested. Notice shall be deemed to have
been given when delivered or mailed to the parties at their respective
addresses as set forth at the beginning of this Agreement or when mailed to
the last address provided in writing to the other party by the addressee.
12.02. This Agreement supersedes all other agreements, either oral or
in writing, between the parties to this Agreement, with respect to the
employment of the Employee by the Employer. This Agreement contains the
entire understanding of the
-6-
<PAGE>
parties and all of the covenants and agreements between the parties with
respect to such employment.
12.03. If any clause, phrase provision or portion of this Agreement
or the application thereto to any person or circumstance shall be invalid or
unenforceable under any applicable law, such event shall not affect or render
invalid or unenforceable the remainder of this Agreement and shall not affect
the application of any clause, provision or portion hereto to other persons
or circumstances.
12.04. The restrictions contained in Article 9 of this Agreement are
considered reasonable by Employee and Employer, and it is the desire of both
parties that such restrictions and the other provisions of this Agreement be
enforced to the fullest extent permissible under the laws and the public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any such restriction or provision shall be
found to be void or invalid but would be valid if some part thereof were
deleted or the period or area of application reduced, such restriction or
provisions shall apply with such modification as shall be necessary to make
it valid and effective. A deletion resulting from any adjudication shall
occur only with respect to the operation of the provision or a portion
thereof affected in the particular jurisdiction in which such adjudication is
made, and each court or other body having jurisdiction with respect to the
enforcement of the provisions of this Article 9 of this Agreement is hereby
empowered to modify by reduction, rather than deletion, of the time periods
or other restrictions referred to therein.
12.05. This Agreement shall be binding upon and inure to the benefit
of the heirs, successors, assigns, and delegates of the parties hereto.
-7-
<PAGE>
Executed at 7171 N Federal Highway, Boca Raton, FL, on November 21,
1999.
EMPLOYER
PartsBase.com, Inc.
By:
------------------------------------
Name: Robert A. Hammond
Title: President, CEO
EMPLOYEE
---------------------------------------
Steven R. Spencer
-8-
<PAGE>
EMPLOYMENT CONTRACT
By this Agreement, Partsbase.com Inc., referred to in this Agreement
as Employer, located at 7171 N. Federal Highway, Suite 100, Boca Raton,
Florida 33487, employs Kevin J. Steil, referred to in this Agreement as
Employee, of 5649 NW 118th Drive, Coral Springs, Florida, 33076, who accepts
employment on the following terms and conditions:
WHEREAS, Employee agrees that in rendering services to Employer,
Employee has been, and will continue to be, exposed to and learn valuable
information about Employer's business, including valuable Confidential
Information, which it would be unfair to disclose to others, or use to
compete with Employer, or use to Employer's disadvantage, except as stated
herein; and
WHEREAS, Employer wishes to protect its interests in its Confidential
Information, and Employee agrees that during the term of this Agreement and
upon termination of Employee's employment, Employee will not disclose to
others the Confidential Information or compete with Employer except as stated
herein.
NOW THEREFORE, in consideration of Employer's employment of Employee,
and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Employee and Employer agree as follows:
ARTICLE I
TERM OF EMPLOYMENT
1.01. By this Agreement, the Employer employs the Employee, and the
Employee accepts employment with the Employer for a period of two (2) years.
If one party does not give notice to the other party of intention to
terminate this Agreement within thirty (30) days prior to the date that this
Agreement will terminate, this Agreement shall continue for an additional two
(2) year term and renew for successive two year terms until such notice is
given or this contract terminates otherwise pursuant to its terms. However,
this Agreement may be terminated earlier, as provided in Article XI.
-1-
<PAGE>
ARTICLE II
COMPENSATION
2.01. As compensation for all services rendered under this Agreement,
the Employee shall be paid by the Employer a salary of eighty thousand
Dollars ($80,000) per year, payable according to the Employer's normal
payroll cycle for salaried employees. The amount paid is to be pro rated for
any partial employment period. The Employer and Employee may negotiate
adjustments to the Employee's salary.
ARTICLE III
DUTIES OF EMPLOYEE
3.01. The Employee is employed as the Chief Information Officer of
the Employer and shall work at the Boca Raton, Florida office of the Employer
and at such other places as the Employer may direct. The Employee shall be
responsible for the overall management of the Company and supervise the
day-to-day operations of the Employer.
3.02. The Employee shall devote his entire productive time, ability,
attention, and energies to the business of the Employer during the term of
this Agreement. During such time, the Employee shall not directly or
indirectly render any material services of a business, commercial or
professional nature to any other person or organization, whether or not for
compensation, without the prior written consent of the Employer.
ARTICLE IV
EMPLOYEE BENEFITS
4.01. The Employer agrees to include Employee, his spouse and his
dependents as defined under the Internal Revenue Code in the hospital,
medical, and other employee benefit plans adopted by the Employer for its
salaried employees. Without limiting the foregoing, the Employer shall pay
the cost of all medical insurance coverage.
-2-
<PAGE>
4.02 The Employer agrees to provide the Employee three (3) weeks of
paid vacation per calendar year. This vacation shall be pro-rated for any
part year. The Employee may carry over up to two weeks of paid vacation to
the subsequent calendar year. On a termination of service, the Employee is
entitled to pay for unused vacation days.
ARTICLE V
REIMBURSEMENT OF EXPENSES INCURRED BY EMPLOYEE
5.01. The Employee is authorized to incur reasonable business
expenses for promoting the business of the Employer, including expenditures
for entertainment, gifts, and travel. Employer will reimburse the Employee
for all such expenses upon the Employee's timely presentation of an itemized
account of such expenditures.
ARTICLE VI
CONFIDENTIAL INFORMATION
6.01. Employer and Employee agree that Employer has a legitimate
business interest in protecting its valuable Confidential Information.
Employee agrees that he will not disclose to or allow the use by any third
party, without the prior written consent of an executive officer of Employer,
any information relating to the business of Employer or its customers, if
such information could reasonably be construed as confidential unless and
until such Confidential Information has become public knowledge without fault
by the Employee. By way of illustration, but not limitation, Confidential
Information may include concepts, themes, business processes or ideas,
inventions, products, processes, methods, techniques, formulas, projects,
developments, plans, insurance data, research data, market data, financial
data, personnel data, computer programs, HTML code and Internet-related
information (including related graphics, links, scripts, or audio-visual
files), customer and supplier lists, and contacts at or knowledge of
customers or prospective customers of Employer.
6.02. Employee further agrees that he will not make personal use of,
reproduce in any way, or divulge any information which could reasonably be
construed as constituting Confidential Information.
6.03. All files, records, documents, drawings, specifications,
equipment, and similar items relating to the business of the Employer,
whether or not prepared by the
-3-
<PAGE>
Employee, and other Confidential Information shall remain the exclusive
property of the Employer.
ARTICLE VII
RETURN OF PROPERTY
7.01. On the termination of employment or whenever requested by the
Employer, the Employee shall immediately deliver to the Employer all property
in the Employee's possession or under the Employee's control belonging to the
Employer, including but not limited to diskettes and other storage media
containing Confidential Information.
ARTICLE VIII
OBLIGATIONS OF EMPLOYER
8.01. The Employer shall indemnify the Employee for all losses
sustained by the Employee as a direct result of the lawful discharge of his
duties required by this Agreement.
ARTICLE IX
EMPLOYEE'S OBLIGATIONS OTHER THAN TO PERFORM SERVICES
9.01. During the term of this Agreement, the Employee shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director, or any other
individual or representative capacity, engage or participate in any business
if such business is engaged in the Same Business of the Employer. For
purposes of this section, Same Business of the Employer shall mean any
business engaged in the sale of aviation parts or products or the
facilitation thereof. Furthermore, on the termination of employment, the
Employee expressly agrees not to engage or participate, directly or
indirectly, in any business that is engaged in the Same Business of the
Employer for a period of two (2) years (hereinafter "Non-Compete Period").
The parties agree that this restriction is
-4-
<PAGE>
reasonable and the least restrictive prohibition on the Employee's
competition with the Employer that protects the Employer's interests.
9.02. The obligation of the Employee not to compete with the Employer
as set forth in Paragraph 9.01 of this Agreement shall not prohibit the
Employee from owning or purchasing any corporate securities that are
regularly traded on a recognized stock exchange or over-the-counter market so
long as the Employee's holdings do not exceed ten percent (10%) of the
outstanding shares of Employer.
9.03. In the event of a breach of this section by Employee, Employer
and Employee agree that the Employer would suffer irreparable damages for
which monetary compensation would not be adequate. Accordingly, the parties
agree that the Employer shall be entitled, in addition to any other remedies
they may have under this Agreement at law or otherwise, to immediate
injunctive and other equitable relief to prevent or curtail any breach of
this Agreement.
9.04. Employer's business is international in scope, and the
restrictions of this paragraph shall accordingly apply throughout the world.
9.05. In the event of a breach of any post-employment covenant or
restriction contained in this Agreement, the two year period set forth
therein shall be automatically tolled and suspended for the amount of time
that the violation continues.
9.06. The provisions of this Article shall survive the termination of
this Agreement for any reason whatsoever for a period equal to the two years
from termination (including any tolling period).
ARTICLE X
NON-SOLICITATION OF EMPLOYEES AND CANDIDATES
10.01. During the Employment Period, Employee shall not in any way
induce or entice any existing employee to terminate or sever his or her
relationship with Employer or to abandon or discontinue the pursuit of a
relationship with Employer.
10.02. During the Non-Compete Period, Employee shall not hire, offer
to hire, solicit for employment, or otherwise endeavor in any way to entice
or lure away from employment, prospective employment, or any other
affiliation with Employer any person who, within the six months immediately
preceding the Termination Date, is or was an employee, agent, officer,
director, or candidate of Employer.
10.03. Employee agrees that during the Non-Compete Period Employee shall
-5-
<PAGE>
neither solicit nor accept business from any client of Employer. For purposes
of this section, the term "client" refers to any one or more of the following:
(i) any person or entity for whom Employer performs or has
performed services;
(ii) any person or entity who had an existing account with
Employer during the Employment Period; or
(iii) any person or entity who was an active prospect of Employer
during the Employment Period.
10.04. Employee acknowledges that Employer has substantial
relationships with its clients; that Employer expends significant time and
resources in acquiring and maintaining those client relationships; and that
Employer's relationships with its clients constitutes a significant and
valuable asset of Employer.
ARTICLE XI
TERMINATION
11.01. Either party may terminate the Employee's employment by giving
30 days written notice of termination to the other party. Such termination
shall not prejudice any remedy that the terminating party may have at law or
in equity.
11.02. In the event of the termination of employment, the Employee
shall be entitled to the compensation earned by the Employee prior to the
date of termination as is provided for in this Agreement, computed pro rata
up to and including the date of termination. The Employee shall be entitled
to no further compensation after the date of termination.
ARTICLE XII
GENERAL PROVISIONS
12.01. All notices or other communications required under this
Agreement may be effected either by personal delivery in writing or by
certified mail, return receipts requested. Notice shall be deemed to have
been given when delivered or mailed to the
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<PAGE>
parties at their respective addresses as set forth at the beginning of this
Agreement or when mailed to the last address provided in writing to the other
party by the addressee.
12.02. This Agreement supersedes all other agreements, either oral or
in writing, between the parties to this Agreement, with respect to the
employment of the Employee by the Employer. This Agreement contains the
entire understanding of the parties and all of the covenants and agreements
between the parties with respect to such employment.
12.03. If any clause, phrase provision or portion of this Agreement
or the application thereto to any person or circumstance shall be invalid or
unenforceable under any applicable law, such event shall not affect or render
invalid or unenforceable the remainder of this Agreement and shall not affect
the application of any clause, provision or portion hereto to other persons
or circumstances.
12.04. The restrictions contained in Article 9 of this Agreement are
considered reasonable by Employee and Employer, and it is the desire of both
parties that such restrictions and the other provisions of this Agreement be
enforced to the fullest extent permissible under the laws and the public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any such restriction or provision shall be
found to be void or invalid but would be valid if some part thereof were
deleted or the period or area of application reduced, such restriction or
provisions shall apply with such modification as shall be necessary to make
it valid and effective. A deletion resulting from any adjudication shall
occur only with respect to the operation of the provision or a portion
thereof affected in the particular jurisdiction in which such adjudication is
made, and each court or other body having jurisdiction with respect to the
enforcement of the provisions of this Article 9 of this Agreement is hereby
empowered to modify by reduction, rather than deletion, of the time periods
or other restrictions referred to therein.
12.05. This Agreement shall be binding upon and inure to the benefit
of the heirs, successors, assigns, and delegates of the parties hereto.
-7-
<PAGE>
Executed at 7171 N Federal Highway,Boca Raton, Florida, 33487 on
November 22, 1999.
EMPLOYER
Partsbase.com, Inc.
By:
------------------------------------
Name: Robert A. Hammond
Title: Chief Executive Officer
EMPLOYEE
---------------------------------------
Kevin J. Steil
-8-
<PAGE>
[LETTERHEAD]
December 29, 1999
Michael Siegel
3701 N. 47th Avenue
Hollywood, FL 33021
Tel: (954) 963-6751
Re: Offer of Employment
Dear Mike:
As we discussed on the telephone December 28, 1999, we are extending to you
an offer of employment as Chief Financial Officer of PartsBase.com. If you
accept our offer of employment, the following terms and conditions will apply.
Please plan to begin work on January 19, 2000. I will contact you within the
next few days to confirm your starting date. Your beginning rate of
compensation will be an annual salary of $141,000.00. We will also provide
you with a monthly car allowance of $750 to cover the operating and insurance
costs of a vehicle of your choice.
Upon commencement of employment we will provide you with a signing bonus of
$30,000 to compensate you for a bonus that was to be distributed by your
current employer in February 2000. If, on your own accord, you leave the
employ of PartsBase.com during the first six months of your employment, you
agree to repay this bonus on a pro-rata basis. In addition, PartsBase.com
will grant to you an option to purchase 75,000 shares at sixty-five cents per
share of our common stock upon commencement of your employment. These
options will vest monthly pursuant to a two-year vesting schedule. This
vesting schedule will be accelerated to include all unvested options if there
is a change in control of PartsBase.com. Change of control is defined as any
other single entity other than Robert A. Hammond owning 51% of the
outstanding stock. PartsBase.com also agrees that if you are terminated for
any reason other than cause, we will pay you a lump sum equal to six months'
salary. You will also be eligible for an annual bonus which are awarded at
the discretion of the board of directors.
You will be reimbursed for the following out-of-pocket expenses, in
accordance with our policies that may be changed from time to time:
- travel expenses
- meals
- postage
- professional dues
- cost of job-related seminars
- cellular phone costs
<PAGE>
We also have a benefits package. You will be permitted to participate in the
following benefits, in accordance with our policies as may change from time
to time, and after meeting the applicable eligibility requirements, if any:
- pension plan
- health insurance
- life insurance
- disability insurance
We agree to pay 100% of the cost for health insurance to cover yourself, your
wife and children. We will provide you with a laptop, docking station,
monitor and keyboard for your use while in the office, at home and while
travelling.
Additionally, you will be entitled to three weeks of paid vacation for each
year of employment in accordance with our usual policies.
Your employment will not be for a specific duration or term, and it is
understood that your employment is voluntary in nature and is
employment-at-will. Therefore, either party may terminate the employment
relationship at any time.
Upon acceptance of this offer, please sign and return the attached letter.
Please feel free to contact me if you have any questions or need additional
information.
We are looking forward to the opportunity of working closely with you in the
near future.
Sincerely,
/s/ Robert A. Hammond
Robert Hammond
Chief Executive Officer
PartsBase.com
Accepted By:
/s/ Michael W. Siegel 12/31/99
- ---------------------
Michael W. Siegel
<PAGE>
EMPLOYMENT CONTRACT
By this Agreement, Partsbase.com Inc., referred to in this Agreement
as Employer, located at 7171 N. Federal Highway, Suite 100, Boca Raton,
Florida 33487, employs Yves C. Duplan, referred to in this Agreement as
Employee, of 18367 Coral Chase Drive, Boca Raton, Florida, 33498, who accepts
employment on the following terms and conditions:
WHEREAS, Employee agrees that in rendering services to Employer,
Employee has been, and will continue to be, exposed to and learn valuable
information about Employer's business, including valuable Confidential
Information, which it would be unfair to disclose to others, or use to
compete with Employer, or use to Employer's disadvantage, except as stated
herein; and
WHEREAS, Employer wishes to protect its interests in its Confidential
Information, and Employee agrees that during the term of this Agreement and
upon termination of Employee's employment, Employee will not disclose to
others the Confidential Information or compete with Employer except as stated
herein.
NOW THEREFORE, in consideration of Employer's employment of Employee,
and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Employee and Employer agree as follows:
ARTICLE I
TERM OF EMPLOYMENT
1.01. By this Agreement, the Employer employs the Employee, and the
Employee accepts employment with the Employer for a period of two (2) years.
If one party does not give notice to the other party of intention to
terminate this Agreement within thirty (30) days prior to the date that this
Agreement will terminate, this Agreement shall continue for an additional two
(2) year term and renew for successive two year terms until such notice is
given or this contract terminates otherwise pursuant to its terms. However,
this Agreement may be terminated earlier, as provided in Article XI.
-1-
<PAGE>
ARTICLE II
COMPENSATION
2.01. As compensation for all services rendered under this Agreement,
the Employee shall be paid by the Employer a salary of ninety five thousand
Dollars ($95,000) per year, payable according to the Employer's normal
payroll cycle for salaried employees. The amount paid is to be pro rated for
any partial employment period. The Employer and Employee may negotiate
adjustments to the Employee's salary.
ARTICLE III
DUTIES OF EMPLOYEE
3.01. The Employee is employed as the Chief Technology Officer of the
Employer and shall work at the Boca Raton, Florida office of the Employer and
at such other places as the Employer may direct. The Employee shall be
responsible for the overall management of the Company and supervise the
day-to-day operations of the Employer.
3.02. The Employee shall devote his entire productive time, ability,
attention, and energies to the business of the Employer during the term of
this Agreement. During such time, the Employee shall not directly or
indirectly render any material services of a business, commercial or
professional nature to any other person or organization, whether or not for
compensation, without the prior written consent of the Employer.
ARTICLE IV
EMPLOYEE BENEFITS
4.01. The Employer agrees to include Employee, his spouse and his
dependents as defined under the Internal Revenue Code in the hospital,
medical, and other employee benefit plans adopted by the Employer for its
salaried employees. Without limiting the foregoing, the Employer shall pay
the cost of all medical insurance coverage.
-2-
<PAGE>
4.02 The Employer agrees to provide the Employee three (3) weeks of
paid vacation per calendar year. This vacation shall be pro-rated for any
part year. The Employee may carry over up to two weeks of paid vacation to
the subsequent calendar year. On a termination of service, the Employee is
entitled to pay for unused vacation days.
ARTICLE V
REIMBURSEMENT OF EXPENSES INCURRED BY EMPLOYEE
5.01. The Employee is authorized to incur reasonable business
expenses for promoting the business of the Employer, including expenditures
for entertainment, gifts, and travel. Employer will reimburse the Employee
for all such expenses upon the Employee's timely presentation of an itemized
account of such expenditures.
ARTICLE VI
CONFIDENTIAL INFORMATION
6.01. Employer and Employee agree that Employer has a legitimate
business interest in protecting its valuable Confidential Information.
Employee agrees that he will not disclose to or allow the use by any third
party, without the prior written consent of an executive officer of Employer,
any information relating to the business of Employer or its customers, if
such information could reasonably be construed as confidential unless and
until such Confidential Information has become public knowledge without fault
by the Employee. By way of illustration, but not limitation, Confidential
Information may include concepts, themes, business processes or ideas,
inventions, products, processes, methods, techniques, formulas, projects,
developments, plans, insurance data, research data, market data, financial
data, personnel data, computer programs, HTML code and Internet-related
information (including related graphics, links, scripts, or audio-visual
files), customer and supplier lists, and contacts at or knowledge of
customers or prospective customers of Employer.
6.02. Employee further agrees that he will not make personal use of,
reproduce in any way, or divulge any information which could reasonably be
construed as constituting Confidential Information.
6.03. All files, records, documents, drawings, specifications,
equipment, and similar items relating to the business of the Employer,
whether or not prepared by the
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<PAGE>
Employee, and other Confidential Information shall remain the exclusive
property of the Employer.
ARTICLE VII
RETURN OF PROPERTY
7.01. On the termination of employment or whenever requested by the
Employer, the Employee shall immediately deliver to the Employer all property
in the Employee's possession or under the Employee's control belonging to the
Employer, including but not limited to diskettes and other storage media
containing Confidential Information.
ARTICLE VIII
OBLIGATIONS OF EMPLOYER
8.01. The Employer shall indemnify the Employee for all losses
sustained by the Employee as a direct result of the lawful discharge of his
duties required by this Agreement.
ARTICLE IX
EMPLOYEE'S OBLIGATIONS OTHER THAN TO PERFORM SERVICES
9.01. During the term of this Agreement, the Employee shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director, or any other
individual or representative capacity, engage or participate in any business
if such business is engaged in the Same Business of the Employer. For
purposes of this section, Same Business of the Employer shall mean any
business engaged in the sale of aviation parts or products or the
facilitation thereof. Furthermore, on the termination of employment, the
Employee expressly agrees not to engage or participate, directly or
indirectly, in any business that is engaged in the Same Business of the
Employer for a period of two (2) years (hereinafter "Non-Compete Period").
The parties agree that this restriction is reasonable and the least
restrictive prohibition on the Employee's competition with the Employer that
protects the Employer's interests.
-4-
<PAGE>
9.02. The obligation of the Employee not to compete with the Employer
as set forth in Paragraph 9.01 of this Agreement shall not prohibit the
Employee from owning or purchasing any corporate securities that are
regularly traded on a recognized stock exchange or over-the-counter market so
long as the Employee's holdings do not exceed ten percent (10%) of the
outstanding shares of Employer.
9.03. In the event of a breach of this section by Employee, Employer
and Employee agree that the Employer would suffer irreparable damages for
which monetary compensation would not be adequate. Accordingly, the parties
agree that the Employer shall be entitled, in addition to any other remedies
they may have under this Agreement at law or otherwise, to immediate
injunctive and other equitable relief to prevent or curtail any breach of
this Agreement.
9.04. Employer's business is international in scope, and the
restrictions of this paragraph shall accordingly apply throughout the world.
9.05. In the event of a breach of any post-employment covenant or
restriction contained in this Agreement, the two year period set forth
therein shall be automatically tolled and suspended for the amount of time
that the violation continues.
9.06. The provisions of this Article shall survive the termination of
this Agreement for any reason whatsoever for a period equal to the two years
from termination (including any tolling period).
ARTICLE X
NON-SOLICITATION OF EMPLOYEES AND CANDIDATES
10.01. During the Employment Period, Employee shall not in any way
induce or entice any existing employee to terminate or sever his or her
relationship with Employer or to abandon or discontinue the pursuit of a
relationship with Employer.
10.02. During the Non-Compete Period, Employee shall not hire, offer
to hire, solicit for employment, or otherwise endeavor in any way to entice
or lure away from employment, prospective employment, or any other
affiliation with Employer any person who, within the six months immediately
preceding the Termination Date, is or was an employee, agent, officer,
director, or candidate of Employer.
10.03. Employee agrees that during the Non-Compete Period Employee
shall neither solicit nor accept business from any client of Employer. For
purposes of this section, the term "client" refers to any one or more of the
following:
-5-
<PAGE>
(i) any person or entity for whom Employer performs or has
performed services;
(ii) any person or entity who had an existing account with
Employer during the Employment Period; or
(iii) any person or entity who was an active prospect of Employer
during the Employment Period.
10.04. Employee acknowledges that Employer has substantial
relationships with its clients; that Employer expends significant time and
resources in acquiring and maintaining those client relationships; and that
Employer's relationships with its clients constitutes a significant and
valuable asset of Employer.
ARTICLE XI
TERMINATION
11.01. Either party may terminate the Employee's employment by giving
30 days written notice of termination to the other party. Such termination
shall not prejudice any remedy that the terminating party may have at law or
in equity.
11.02. In the event of the termination of employment, the Employee
shall be entitled to the compensation earned by the Employee prior to the
date of termination as is provided for in this Agreement, computed pro rata
up to and including the date of termination. The Employee shall be entitled
to no further compensation after the date of termination.
ARTICLE XII
GENERAL PROVISIONS
12.01. All notices or other communications required under this
Agreement may be effected either by personal delivery in writing or by
certified mail, return receipts requested. Notice shall be deemed to have
been given when delivered or mailed to the parties at their respective
addresses as set forth at the beginning of this Agreement or when mailed to
the last address provided in writing to the other party by the addressee.
-6-
<PAGE>
12.02. This Agreement supersedes all other agreements, either oral or
in writing, between the parties to this Agreement, with respect to the
employment of the Employee by the Employer. This Agreement contains the
entire understanding of the parties and all of the covenants and agreements
between the parties with respect to such employment.
12.03. If any clause, phrase provision or portion of this Agreement
or the application thereto to any person or circumstance shall be invalid or
unenforceable under any applicable law, such event shall not affect or render
invalid or unenforceable the remainder of this Agreement and shall not affect
the application of any clause, provision or portion hereto to other persons
or circumstances.
12.04. The restrictions contained in Article 9 of this Agreement are
considered reasonable by Employee and Employer, and it is the desire of both
parties that such restrictions and the other provisions of this Agreement be
enforced to the fullest extent permissible under the laws and the public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any such restriction or provision shall be
found to be void or invalid but would be valid if some part thereof were
deleted or the period or area of application reduced, such restriction or
provisions shall apply with such modification as shall be necessary to make
it valid and effective. A deletion resulting from any adjudication shall
occur only with respect to the operation of the provision or a portion
thereof affected in the particular jurisdiction in which such adjudication is
made, and each court or other body having jurisdiction with respect to the
enforcement of the provisions of this Article 9 of this Agreement is hereby
empowered to modify by reduction, rather than deletion, of the time periods
or other restrictions referred to therein.
12.05. This Agreement shall be binding upon and inure to the benefit
of the heirs, successors, assigns, and delegates of the parties hereto.
-7-
<PAGE>
Executed at 7171 N Federal Highway,Boca Raton, Florida, 33487 on
November 22, 1999.
EMPLOYER
Partsbase.com, Inc.
By:
------------------------------------
Name: Robert A. Hammond
Title: Chief Executive Officer
EMPLOYEE
---------------------------------------
Yves C. Duplan
-8-
<PAGE>
BUSINESS CONSULTANT CONTRACT
This agreement dated October 13th, 1999, is made By and Between
PartsBase.com, whose address is 7171 North Federal Highway, Boca Raton,
Florida 33487-1612, referred to as "Company", AND PLAN THREE SOLUTIONS,
L.L.C., whose address is 3229 D'Amico, Suite 100, Houston, Texas 77019,
referred to as "Consultant."
1. CONSULTATION SERVICES. The company hereby employs the consultant to
perform the following services in accordance with the terms and conditions
set forth in this agreement: The consultant will consult with the officers
and employees of the company concerning matters relating to the software
development needs of the company.
2. TERMS OF AGREEMENT. This agreement will begin November 1st, 1999 and
will end May 1st, 2000. Either party may cancel this agreement on sixty (60)
days notice to the other party in writing, by certified mail or personal
delivery.
3. TIME DEVOTED BY CONSULTANT. It is anticipated the consultant will spend
approximately 80 hours each week in fulfilling its obligations under this
contract. The particular amount of time may vary from day to day or week to
week.
4. PLACE WHERE SERVICES WILL BE RENDERED. The consultant will perform most
services in accordance with this contract at the consultant's offices. In
addition, the consultant will perform services on the telephone and at such
other places as designated by the company to perform these services in
accordance with this agreement, which will change from time to time.
5. PAYMENT TO CONSULTANT. The consultant will be paid $15,600 on the 15th
and the last day of the month for work performed in accordance with this
agreement. The consultant will submit an itemized statement on the 15th and
the last day of the month, setting forth the time spent and services rendered.
6. INDEPENDENT CONTRACTOR. Both the company and the consultant agree that
the consultant will act as an independent contractor in the performance of
its duties under this contract. Accordingly, the consultant shall be
responsible for payment of all taxes including Federal, State and local taxes
arising out of the consultant's activities in accordance with this contract,
including by way of illustration but not limitation, Federal and State income
tax, Social Security tax, Unemployment Insurance taxes, and any other taxes
or business license fee as required.
7. CONFIDENTIAL INFORMATION. The consultant agrees that any information
received by the consultant during any furtherance of the consultant's
obligations in accordance with this contract, which concerns the personal,
financial or other affairs of the company will be treated by the consultant
in full confidence and will not be revealed to any other persons, firms or
organizations.
8. EMPLOYMENT OF OTHERS. The company may, from time to time, request that
the consultant arrange for the services of others. All costs to the
consultant for those services will be paid by the company, but in no event
shall the consultant employ others without the prior authorization of the
company.
9. SIGNATURES. Both the company and the consultant agree to the above
contract.
PartsBase.com Plan Three Solutions, L.L.C.
Robert Hammond Louis W. Storms, IV
7171 North Federal Highway 3229 D'Amico Street
Boca Raton, FL 33487-1612 Suite 100
Houston, TX 77019
By: Signature /s/ Robert A. Hammond By: Signature /s/ Louis W. Storms
---------------------- ----------------------
Title President Title Sr. Partner
---------------------- ----------------------
Date 10/16/99 Date 10/13/99
---------------------- ----------------------
<PAGE>
[LETTERHEAD]
December 13, 1999
Mr. Robert A. Hammond
CEO
Partsbase.com
7171 N. Federal Highway
Boca Raton, Fl 33487
Dear Mr. Hammond:
Please find enclosed a copy of the License Agreement between Partsbase.com and
Tradex Technologies, Inc. for youR files.
If you have any questions, please feel free to contact Michael Murray at
813-349-7464.
Sincerely,
/s/ Julie M. Johnson
Julie M. Johnson
Executive Assistant
Enclosure
<PAGE>
TRADEX TECHNOLOGIES, INC.
SOFTWARE LICENSE AGREEMENT
- --------------------------------------------------------------------------------
THIS SOFTWARE LICENSE AGREEMENT is made and entered into as of the 3rd day of
December, 1999 ("Effective Date"), by and between TRADEX TECHNOLOGIES, INC., a
Delaware corporation ("TRADEX") and PartsBase.com, a Florida corporation
("Licensee").
In consideration of the covenants and conditions hereinafter set forth, the
parties agree as follows:
1. DEFINITIONS.
(a) "Advertising or Marketing Revenues" shall mean all charges, markups and
fees charged for advertisement and sponsorship in a Marketplace.
(b) "Approved Market" shall have the meaning set forth in Schedule A.
(c) "Documentation" shall mean user manuals and other written materials that
relate to the Software, as updated from time to time, and which are
identified by TRADEX as "Documentation."
(d) "Employee" shall mean employees, subcontractors, and consultants of
Licensee with authorized access as Users to Licensee's copy of the
Software for use of the Software on behalf of Licensee only.
(e) "Fees" shall mean all sums payable by Licensee to TRADEX under this
Agreement.
(f) "Governor" shall mean a User with the particular user functionality and
permissions set forth and defined in the User's Manual including any
limitations described therein.
"Initiation Revenues" shall mean all initial charges, markups and fees
charged for a third party to participate as a Marketplace User in the
Marketplace.
(h) "Licensee Applications" shall mean software (and any documentation
thereof) developed by Licensee, which utilize the Software API's and are
designed to electronically interface and interact with the Software and
which provide functionality separate and apart from the Software
functionality.
(i) "Marketplace" shall mean an on-line trading community established with
the Software where Marketplace Users may conduct Transactions.
(j) "Marketplace Revenues" shall mean all gross revenues generated from the
Marketplace including, without limitation: (i) Transaction Revenues; (ii)
Subscription Revenues; (iii) Initiation Revenues; and (iv) Advertising or
Marketing Revenues.
(k) "Marketplace User" shall mean a User that is either a Buyer, Supplier,
Trader or Observer with the particular user functionality and permissions
set forth and defined in the User's Manual including any limitations
described therein.
(l) "Payment Report" shall have the meaning set forth in Schedule A.
(m) "Software" shall mean the computer programs listed on Schedule A, in
object code form only, on machine readable media.
(n) "Software API" shall mean the application programming interfaces for the
Software, including all accompanying documentation thereof.
(o) "Subscription Revenues" shall mean all on-going periodic charges, markups
and fees charged for a third party to participate as a Marketplace User in
the Marketplace.
(p) "Third Party End User" shall mean a User other than an Employee who is
permitted limited access to the Software as a Marketplace User under this
Agreement and has agreed to and abides by terms and conditions
substantially similar to the Third Party End User Agreement Terms and
Conditions set forth in Schedule B.
(q) "Transaction" shall mean an individual purchase order issued using the
Software as set forth and described in the User's Manual.
(r) "Transaction Revenues" shall mean all charges, markups and fees charged
to a third party for Transactions, or other transaction events, performed
by Marketplace Users in the Marketplace.
(s) "Update" shall mean new program code, object code form only, on machine
readable media, that is designed to be compatible with any upgrade version
or new release of any operating system, and which may include, but is not
limited to, modifications, corrections and enhancements which improve
performance and add additional capabilities or which otherwise improve
the existing functionality of the Software that has an increase in the
version number to the right of the decimal point (for example, from x.2
to x.3), at TRADEX's sole discretion.
(t) "Upgrade" shall mean an Update that has an increase in the version number
to the left of the decimal point (for example, from 3.xx to 4.xx), at
TRADEX's sole discretion.
(u) "User" shall mean an individual user with authorized access to the
Software.
(v) "User Interface" shall mean the Java applet downloaded in the User's
browser which allows access to the Software functionality set forth in
the User's Manual.
(w) "User's Manual" shall mean the user manual for the Software which gives
instructions and describes the functionality of the Software, as updated
from time to time, and which is identified as "TRADEX User's Manual."
2. GRANT OF LICENSE; OWNERSHIP.
2.1. During the term and subject to the terms and conditions set forth in
this Agreement and the limitations in Schedule A, TRADEX grants to Licensee a
non-exclusive, non-transferable license to use the Software and Documentation
("License") to create, maintain and operate a Marketplace solely within the
Approved Market. Upon consenting to the terms of the Third Party End User
License Agreement (attached as Schedule B), Third Party End Users are granted a
license to access the User Interface of the Software only as necessary to
participate as Marketplace Users but not for purposes of hosting, modifying or
otherwise maintaining the Software. Third Party End Users cannot participate
as a Governor in either a direct or indirect Marketplace nor use the Software
in a manner that would constitute control of the Marketplace. Only Employees
shall participate as Governor and use the Software to establish and collect
Marketplace Revenues on behalf of Licensee. Third Party End Users shall not
use the Software to directly or indirectly charge, establish, receive or
collect Marketplace Revenues. Licensee may make one copy of the Software in
machine-readable, object code form, for backup purposes only. The License
granted to Licensee under this Agreement is
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conditioned upon the timely payment by Licensee of all Fees.
2.2. All right, title and interest in and to the Software and all copies
thereof are and shall remain the exclusive property of TRADEX. No implied
license or right of any kind is granted to Licensee regarding the Software.
Except as expressly set forth in this Agreement, Licensee shall not and shall
not allow third parties to reproduce, copy, market, sell, distribute, transfer,
translate, modify, adapt, disassemble, decompile, or reverse engineer the
Software or obtain possession of any source code or other technical material
relating to the Software. Licensee's rights may not be transferred, leased,
assigned or sublicensed. No service bureau work, multiple-user license, or
time-sharing arrangement is permitted, provided, however, Licensee's use of the
Software to host an authorized Marketplace for use by Third Party End Users, in
accordance with the terms of this Agreement, shall not be considered a
prohibited service bureau, multiple-user license or time-sharing arrangement.
2.3. At Licensee's request, TRADEX will disclose certain Software API's
to Licensee (as deemed appropriate in TRADEX's sole discretion) solely for
Licensee's use in developing Licensee Applications. Licensee may use the
Software API's for no other purpose. Licensee's license to develop Licensee
Applications using the Software API's will not include, implicitly or
otherwise, either ownership of, or the right to incorporate or distribute, any
Proprietary Information. In return, Licensee agrees that Licensee will not
sublicense, re-market, lease, license or allow any third party to use any
Licensee Applications, except that the foregoing restrictions shall not apply
to the use of the Licensee Applications by authorized Third Party End Users for
use in Licensee's Marketplace only. All Software API's shall be considered
"Proprietary Information" as defined below.
3. PAYMENT TO TRADEX. Licensee shall pay TRADEX all [ILLEGIBLE] set forth
in Schedule A. Licensee shall pay any shipping costs, taxes, other duties,
tax penalties, or amounts in lieu thereof, however designated, now or
hereafter levied or based on payments due under this Agreement, any license
granted hereunder, the transfer, use or receipt of the Software or the
Software storage media, exclusive of taxes based upon TRADEX's net income.
Unless otherwise specified in Exhibit A, payment for all Fees and charges is
due and payable in full within thirty (30) days of Licensee's receipt of
TRADEX's invoices. Payments received beyond thirty (30) days will result in
a late charge equal to the lesser of one and one-half percent (1.5%) interest
fee per month until paid or the maximum amount allowable under applicable
law. All prices and payments are in U.S. dollars unless otherwise indicated.
4. LICENSEE OBLIGATIONS.
4.1. Licensee, not TRADEX, shall perform and furnish to its Users all
necessary support for the Software. Such support includes, but is not limited
to, installation, training and telephone support. Except pursuant to the terms
of the Maintenance and Support Plan attach hereto as Schedule D or as otherwise
agreed by the parties in writing (collectively "Support Services"), Licensee
shall not receive any support services from TRADEX nor receive Upgrades or
Updates. Licensee shall inform its Users of the prohibitions in this Agreement
against unauthorized access, use and copying of the Software, including screen
displays, and shall use its best efforts to enforce such prohibitions.
4.2. The Software is designed for use with the equipment and accessories
specified in the Documentation. TRADEX assumes no responsibility under this
Agreement for obtaining or providing such equipment. Licensee is also
responsible for ensuring a proper environment and proper utilities for the
computer system on which the Software will operate. TRADEX assumes no
responsibility under this Agreement for converting Licensee data files for use
with the Software.
4.3. Licensee shall indemnify, defend and hold TRADEX harmless from and
against any claims and liability to third parties and against any and all costs
(including reasonable attorneys' fees) arising out of: (i) Licensee's breach of
any of its obligations under this Agreement; (ii) any misrepresentation
relating to the Software by Licensee; (iii) a breach by Licensee of any
third-party agreements relating to the Software; or (iv) any claim related to
Licensee's or any third party's use of the Software.
4.4. Licensee shall, at its expense, comply with all laws and regulations
governing its performance hereunder and use of the Software including, without
limitation, laws relating to import and export of the Software. Except as
otherwise provided herein, Licensee shall bear all of the costs associated with
the performance of its duties under this Agreement.
4.5. Licensee shall obtain the consent of every Third Party End User with
access to the User Interface to the Third Party End User Agreement or other
agreement containing terms no less restrictive than the terms of this Agreement
and terms substantially in conformance with the terms and conditions set forth
in Schedule B. A "click wrap" acceptance of the Third Party End User Agreement
will be acceptable in lieu of a hand-signed Third Party End User Agreement.
4.6. Licensee shall prominently display the "Powered by TRADEX" logo,
attached hereto as Schedule C, in each application screen of the Software
displayed to Marketplace Users. The "Powered by TRADEX" logo will be placed in
the Navigational Bar for the Admin Interface and in the lower left hand corner
for the Self Service Interface as those screens are defined in the User's
Manual.
4.7. Licensee shall limit use of and access to the Software to Employees
that are directly involved in the operation or maintenance of the Software by
Licensee.
4.8. The parties agree to jointly issue a press release to the public
within thirty (30) days from the Effective Date, including pertinent quotes
from the executive management of both parties. Licensee's executive
Management team will make themselves reasonably available for interviews from
potential customers of TRADEX. Interviews with industry analysts relating to
Licensee's use of TRADEX software will be available following the press
release referred to above.
4.9. During the term of this Agreement, Licensee grants TRADEX a
limited, non-exclusive right to place Licensee's trademarks and logos on
TRADEX's web site and marketing materials solely for the purpose of identifying
Licensee as a user of the Software.
4.10. TRADEX and Licensee will cooperate in good faith to author
and publish a case study relating to the Software in html and print formats
including pertinent quotes and photographs from the executive management of
each party.
5. TRADEMARKS AND COPYRIGHT NOTICES. Licensee shall not use any trademark,
trade name, service mark or service name of TRADEX, except in connection with
the promotion and support of the Software, pursuant to the terms and conditions
of this Agreement and, only if TRADEX has previously consented in writing to
the manner of such use and approved the materials in which it will appear.
Without the prior written approval of TRADEX, Licensee shall not, on its own
initiative, take any action to register any trademark, trade name, service mark
or service
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name of TRADEX and, if such registration is undertaken, such registrant shall
immediately assign the registered name or mark to TRADEX. Licensee agrees to
maintain and respect the copyright notices of the Software and the Documentation
in connection with its use thereof. Licensee shall not remove, obscure or deface
any trademark, copyright notice or similar mark or notice in the Software or
Documentation.
6. LIMITED WARRANTY. TRADEX warrants to Licensee that, during the first
thirty (30) days following the initial delivery of the Software to Licensee:
(i) the Software as delivered by TRADEX will perform substantially in
accordance with the Documentation in effect when the Software is delivered to
Licensee, (ii) the Software as delivered by TRADEX is Year 2000 Compliant (as
defined below) and is free from viruses or other damaging or malicious code,
and (iii) the magnetic media on which the Software is furnished to Licensee
free of defects in materials. "Year 2000 Compliant" means that the Software
will: (i) report and display all dates, including dates occurring before and
after the year 2000, with a four-digit date; and (ii) handle all leap years,
including, but not limited to, the Year 2000 leap year, correctly; provided,
however, that TRADEX shall not be responsible or liable for any date errors
caused or contributed to by any third party software, operating systems, or
hardware. EXCEPT AS SPECIFICALLY SET FORTH IN THIS SECTION, THE SOFTWARE AND
ALL RELATED SERVICES ARE PROVIDED BY TRADEX "AS-IS". TRADEX SPECIFICALLY
DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT
LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY, ACCURACY AND FITNESS FOR A
PARTICULAR PURPOSE. Without limiting the foregoing, TRADEX does not warrant
that the Software or Licensee's use thereof will meet Licensee's requirements
or be uninterrupted or error free. TRADEX shall not be liable for claims
under the foregoing warranty if Licensee fails to provide written notice of
such claim prior to expiration of the warranty period. TRADEX's sole
obligation and liability under this warranty shall be to replace or correct
the defective Software or media, or, at the option of TRADEX, to refund the
License Fee for the Software upon return or destruction of all copies of the
Software and its associated documentation by Licensee.
7. LIMITATION OF LIABILITY.
7.1. TRADEX'S LIABILITY FOR ANY CLAIM RELATING IN ANY MANNER TO THE SOFTWARE
OR THIS AGREEMENT, REGARDLESS OF THE TYPE OR NATURE OF THE ACTION, SHALL BE
LIMITED TO LICENSEE'S DIRECT DAMAGES NOT EXCEEDING THE AMOUNT PAID TO TRADEX BY
LICENSEE HEREUNDER FOR USE OF THE SOFTWARE. IN NO EVENT SHALL TRADEX BE LIABLE
FOR ANY LOSS OF USE, DATA OR PROFITS OR INDIRECT, SPECIAL, EXEMPLARY, PUNITIVE
OR CONSEQUENTIAL DAMAGES, WHETHER IN AN ACTION IN CONTRACT, TORT OR OTHERWISE,
EVEN IF TRADEX HAS BEEN SPECIFICALLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
TRADEX shall not be liable to any third party for loss of profits, goodwill,
lost computer time, destruction, damage or loss of data, or any other indirect,
incidental or consequential damages, whether based in contract, tort or
otherwise, even If TRADEX has been advised of the possibility of such damages.
7.2. NO ACTION, REGARDLESS OF FORM, ARISING OUT OF THE TRANSACTIONS UNDER
THIS AGREEMENT MAY BE BROUGHT BY LICENSEE MORE THAN ONE (1) YEAR AFTER THE CAUSE
OF ACTION HAS ACCRUED.
7.3. For the purpose of this Section 7 (Limitation of Liability), "TRADEX"
shall mean TRADEX and its affiliates, officers, shareholders, contractors,
licensors, agents and endorsers.
8. PROPRIETARY INFORMATION; PROTECTION OF SOFTWARE.
8.1. In the performance of this Agreement, either party may disclose to the
other certain Proprietary Information. For the purposes of this Agreement,
(i) "Proprietary Information" means Trade Secrets and Confidential
Information; (ii) "Trade Secrets" means trade secrets as defined under
Article 27 of Chapter 1 of Title 10 of the Official Code of Georgia
Annotated; and (iii) "Confidential Information" means information that is of
value to its owner and is treated as confidential other than Trade Secrets.
Proprietary Information includes, without limitation, the Software and
Documentation, all financial information, Licensee's Payment Reports,
business plans, customer lists, procedures, formulas, discoveries,
inventions, improvements, innovations, concepts and ideas. The receiving
party agrees to hold the Proprietary Information disclosed by the other party
in strictest confidence and not to, directly or indirectly, copy, use,
reproduce, distribute, manufacture, duplicate, reveal, report, publish,
disclose, cause to be disclosed, or otherwise transfer the Proprietary
Information for any purpose whatsoever other than as expressly provided by
this Agreement.
8.1. Both parties acknowledge and agree that the Proprietary Information
shall remain the sole and exclusive property of the disclosing party or a third
party providing such information to the disclosing party. The disclosure of the
Proprietary Information does not confer upon the receiving party any license,
interest, or rights of any kind in or to the Proprietary Information, except as
expressly provided under this Agreement. Subject to the terms set forth herein,
the receiving party shall protect the Proprietary Information of the disclosing
party with the same degree of protection and care the receiving party uses to
protect its own Proprietary Information, but in no event less than reasonable
care. With regard to Trade Secrets, the obligations in this Section shall
continue for so long as such information constitutes a Trade Secret. With regard
to Confidential Information, the obligations in this Section shall continue for
the longer of (i) the duration dictated under governing law, or (ii) the term of
this Agreement and for a period of five (5) years thereafter.
8.2. Nothing in this Section shall prohibit or limit the receiving party's
use of information if (i) at the time of disclosure hereunder such information
is generally available to the public; (ii) after disclosure hereunder such
information becomes generally available to the public, except through breach of
this Agreement by the receiving party; (iii) the receiving party can demonstrate
such information was in its possession prior to the time of disclosure by the
disclosing party; (iv) the information becomes available to the receiving party
from a third party which is not legally prohibited from disclosing such
information; (v) the receiving party can demonstrate the information was
developed by or for it independently without the use of such information; or
(vi) if disclosure is required under applicable law or regulation.
8.3. Neither party shall disclose the terms of this Agreement except (i) as
required by applicable law or regulation, (ii) to its employees and agents with
a need to know such terms, or (iii) in connection with a potential merger or
sale of all or substantially all of its assets; provided that the receiving
party agrees in writing to be bound by the restrictions of this Agreement.
9. INTELLECTUAL PROPERTY INDEMNIFICATION.
9.1. TRADEX agrees to defend and hold Licensee harmless against any
liability or claim that the Software infringes a United States copyright or
trade secret, and will pay resulting costs,
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damages and attorneys' fees finally awarded, provided that: (i) Licensee
promptly notifies TRADEX of any such claim; (b) Licensee provides TRADEX with
all information and assistance necessary to defend or settle such liability or
claim; and (c) TRADEX has sole control of the defense and all related settlement
negotiations. If such liability or claim occurs, or in TRADEX'S opinion is
likely to occur, Licensee agrees to permit TRADEX, at its option and expense but
without obligation to do so, either to procure for Licensee the right to
continue using the Software or to replace or modify the same so that they become
non-infringing and provide similar functionality. If neither of the foregoing
alternatives are reasonably available to TRADEX as determined in its sole
discretion, then TRADEX may terminate this Agreement upon thirty (30) days
written notice to Licensee, and shall refund the Fees received by TRADEX in the
twelve (12) months prior to such termination. This Section states the entire
obligation of TRADEX and the sole remedy of Licensee with respect to
infringement or claims of infringement of patents, copyrights, and trade
secrets.
9.2. TRADEX shall have no obligation to defend Licensee or to pay any costs,
damages or attorney's fees for any claim based upon use of other than an
unmodified release of the Software if such infringement relates to the use of
the Software with hardware, Software or other items where such infringement
would have been avoided by the use of the Software alone.
10. TERM AND TERMINATION.
10.1. This Agreement shall remain in force unless terminated as provided
herein.
10.2. Either party shall have the right to terminate this Agreement: (i)
in the event that the other party breaches any provision of this Agreement
and fails to cure such breach within sixty (60) days after receiving written
notice of termination specifying the alleged breach; (ii) immediately upon
written notice, in the event Licensee shall breach any provision of Sections
2, 4.3, 4.7, 5 or 8. Additionally, TRADEX shall have the right to terminate
this Agreement: (i) immediately if Licensee fails to make any payment
obligation due hereunder and continues to be delinquent for a period of
thirty (30) days after receipt of written notice of non-payment, or (ii)
immediately in the event that the Licensee becomes insolvent, files or is
forced to file any petition in bankruptcy, or makes an assignment for the
benefit of its creditors.
10.3 Licensee shall have the right to terminate this Agreement for any
reason upon sixty (60) days written notice to TRADEX.
11. CONSEQUENCES OF TERMINATION. Upon termination of this Agreement for any
reason:
(a) Licensee's License to use the Software shall immediately terminate and
Licensee shall promptly return and deliver to TRADEX or destroy all Software and
Documentation and all other Proprietary Information of TRADEX. Within ten (10)
days from the date of any such termination, Licensee shall provide TRADEX with a
signed written statement by an officer of Licensee certifying that Licensee has
not retained any copies of (i) the Software, (ii) the Documentation, (iii) any
licensing, delivery or technical information regarding the Software, or (iv) any
other Proprietary Information of TRADEX;
(b) all Fees due to TRADEX from Licensee shall remain due and payable in
accordance with the terms hereof;
(c) Licensee shall cease using any TRADEX trade names, trademarks, service
marks and service names;
(d) Licensee shall immediately cease all use of the Software and shall
advise all of its Users to return or destroy those portions of the Software
distributed by Licensee to such Users;
(e) Any and all provisions or obligations contained in this Agreement which
by their nature or effect are required or intended to be observed, kept or
performed after termination of this Agreement will survive the termination of
this Agreement and remain binding upon and for the benefit of the parties, their
successors and permitted assignees including, without limitation, Sections 2.3,
3, 4.3, 4.7, 7, 8, 11, 12 and 13.
12. REPORTING AND AUDIT.
12.1. Licensee shall use the Software in a manner consistent with its Fee
payment obligations set forth in Schedule A. Licensee agrees to maintain
complete and adequate records relating to the calculation and payment of Fees to
TRADEX and submit Payment Reports to TRADEX as set forth in Schedule A.
12.2. Licensee agrees to maintain complete and appropriate records of the
location of each copy of the Software. Licensee shall provide TRADEX with the
right, upon reasonable notice, to physically inspect Licensee's equipment and
Software as necessary to confirm the Payment Reports and Licensee's compliance
with the terms of this Agreement. Licensee agrees to allow a mutually acceptable
independent certified public accountant to audit and analyze the records of
Licensee upon which the Payment Reports are based. Any such audit shall be
permitted by Licensee within thirty (30) days of TRADEX's written request during
normal business hours and at times mutually agreed upon by Licensee and TRADEX.
Audits shall be made no more frequently than twice every twelve (12) months, and
shall not unreasonably interfere with Licensee's business activities. In the
event an audit performed by TRADEX should establish an underpayment of greater
than five (5) percent of the payment owed TRADEX for any particular period,
Licensee shall be responsible for reimbursement of reasonable, verifiable costs
related to the performance of the subject audit by the independent certified
public accountant.
13. MISCELLANEOUS.
13.1. FORCE MAJEURE. Neither party to this Agreement shall be liable to the
other party for any delays in the performance of its obligations or duties due
to acts of God, strikes, transportation delays, fires, floods, riots, political
uprisings or revolutions, labor disputes, freight embargoes, shortage of labor,
inability to secure fuel or power at reasonable prices or on account of
shortages thereof, laws or acts of any Federal, state or local government
affecting the Software or the conduct of the parties, including export licensing
restrictions or other export restrictions, or any other such causes beyond such
party's reasonable control, except in no event shall this paragraph apply to any
payments due to TRADEX hereunder.
13.2. TRADEX'S LICENSORS. TRADEX may make modifications to the terms of this
Agreement, provided that any such changes do not materially lessen Licensee's
rights and entitlements hereunder, to reflect accurately a material change in
the terms of a license agreement ("Supplier Agreement") between TRADEX and its
licensor of technology to TRADEX which is incorporated into the Licensed
Materials. TRADEX shall inform Licensee of any such modifications by
transmitting a copy of the material changes subject to ninety (90) days prior
written notice.
13.3. ASSIGNMENT. Licensee shall not have the right to assign or otherwise
transfer its rights or obligations under this Agreement including, without
limitation, by operation of law,
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merger, acquisition or otherwise, except that Licensee, in connection with
the sale of all or substantially all of its assets, shall be entitled to
transfer its rights and obligations under this Agreement, in their entirety,
to an acquiring entity so long as such acquiring entity is not a competitor
of TRADEX in its business as a developer and/or distributor of business to
business e-commerce software solutions. In the event of such acquisition,
TRADEX and Licensee shall renegotiate the Annual License Fee, based upon the
size and nature of the acquiring entity, which agreed upon Annual License Fee
shall not exceed $500,000 annually for the Aerospace Vertical Market. Any
such prohibited assignment shall be void and of no effect. Subject to the
above, this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto.
13.4. AMENDMENT OR MODIFICATION. No amendment to or modification of this
Agreement shall be binding upon either party unless such amendment or
modification is reduced to writing, dated and executed by the parties to this
Agreement and it is identified by the parties to be an amendment to this
Agreement.
13.5. NOTICES. Unless otherwise provided herein, all notices given under
this Agreement shall be effected either by personal delivery in writing, by
facsimile or by mailing to the addresses via air mail, postage prepaid (and
sending it certified mail, return receipt requested, if such service is
available) to the addresses and facsimile numbers listed with the parties'
signatures below, or at such other address as shall have been given to the
other party in writing for the purposes of this clause. A copy of any notice
to TRADEX shall also be sent to: TRADEX Technologies, Inc., attn: Director of
Licensing, Tradex Technologies, Inc. 11625 Rainwater Drive, Building 500
Suite 200 Alpharetta, GA 30004. Notices shall be deemed to be received as of
the date of actual receipt; or if mailed, notices shall be deemed to be
received as of the earlier of actual receipt or seven (7) days after mailing;
or if sent by facsimile, notices shall be deemed to be received the day
following the day of sending.
13.6. WAIVER. No failure or delay of any party to exercise any right or
remedy hereunder shall operate as a waiver thereof, nor shall any exercise of
any right or remedy preclude any other or further exercise thereof or the
exercise of any other right or remedy granted hereby or by any related document
or by law. No waiver of any breach of any provision of this Agreement shall be
effective unless made in writing, identified in such writing by the parties as a
waiver pursuant to this paragraph, and signed by the party alleged to have
waived.
13.7. CONSTRUCTION. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity and shall not invalidate the remainder
of such provision or the remaining provisions of this Agreement which shall
continue in full force and effect. This Agreement shall be interpreted using the
English language, which shall control in the event of any conflict of
interpretation. Headings of particular Sections are inserted only for
convenience and are not to be considered a part of this Agreement or be used to
define, limit or construe the scope of any term or provision of this Agreement.
Should any provision of this Agreement require judicial interpretation, the
parties agree that the court or arbitrators construing the same shall not apply
a presumption that the terms of this Agreement shall be more strictly construed
against one party than against another.
13.8. COUNTERPARTS. This Agreement may be executed in more than one
counterpart and each such counterpart shall be deemed to be an original.
13.9. ENTIRE AGREEMENT. This Agreement, including all attached Schedules,
constitute the entire agreement and understanding between the parties in
reference to its subject matter and any and all previous agreements,
discussions, promises, representations, and understandings between the parties
relative thereto are merged herein and superseded hereby. Licensee represents
that it has not relied upon any representation of TRADEX in entering into this
Agreement, which is not expressly set forth in this written Agreement. Licensee
represents to TRADEX that any representation made by TRADEX to Licensee which is
not set forth herein is not material to Licensee.
13.10. RELATIONSHIP OF THE PARTIES. This Agreement does not create and shall
not be construed as creating any relationship of agency, partnership, or
employment between the parties. The parties enter this Agreement as, and shall
remain, independent parties and independent contractors. Except as otherwise
provided in this Agreement, no party shall have the right or authority to
assume, create, or enlarge any obligation or commitment on behalf of any other,
and shall not represent itself as having the authority to bind any other in any
manner.
13.11. RIGHTS ARE CUMULATIVE. Except as otherwise limited herein, the rights
and remedies of the parties set forth in this Agreement are cumulative and are
in addition to all other rights and remedies (whether civil, criminal,
equitable, or otherwise) which they may have in law or in equity.
13.12. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, without regard to its laws
governing conflicts of laws. The parties agree that the United Nations
Convention on Contracts for the International Sale of Goods shall not apply in
any respect to this Agreement or the parties. The parties agree that the
exclusive venue for all actions relating in any manner to this Agreement shall
only be in a federal or state court of competent jurisdiction located in Fulton
County, Georgia. Each party consents and submits to the personal jurisdiction of
such courts and irrevocably waives any and all defenses inconsistent with this
Section. The prevailing party in any dispute between the parties shall recover
its reasonable attorneys' fees and costs from the non-prevailing party.
13.13. EQUITABLE RELIEF. The parties also acknowledge that (i) any use or
threatened use of the Software, or (ii) any other misuse of the Proprietary
Information of either party will cause immediate irreparable harm to the
non-breaching party for which there is no adequate remedy at law. Accordingly,
the parties agree that the non-breaching party shall be entitled to immediate
and permanent injunctive relief from a court of competent jurisdiction in the
event of any such breach or threatened breach. The parties hereby waive the
defense that the non-breaching party has or will have an adequate remedy at law
for any such breach or threatened breach. The parties agree and stipulate that
the non-breaching party shall be entitled to such injunctive relief without
posting a bond or other security; provided however that if the posting of a bond
is a prerequisite to obtaining injunctive relief, then a bond in the amount of
$1,000.00 shall be sufficient. Nothing contained herein shall limit either
party's right to any remedies at law, including the recovery of damages from the
other party for breach of this Agreement.
13.14. THIS AGREEMENT CONTROLS. Notwithstanding the content of any purchase
order, sale order, sale confirmation or any other document relating to the
subject matter of this Agreement, this Agreement shall take precedence over any
such
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document, and any conflicting, inconsistent, or additional terms contained
therein shall be null and void.
13.15. NO THIRD PARTY BENEFICIARY RIGHTS. Except for the parties set forth
in Section 7.3, no provision of this Agreement is amended or shall be construed
to provide or create any third party beneficiary right or any other right of
any kind in any Third Party End User or any client, customer, affiliate,
insurer, lender, shareholder, partner, officer, director, employee or agent of
any party hereto, or in any other person.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement by and through
their respective duly authorized representatives as of the Effective Date.
TRADEX TECHNOLOGIES, INC. LICENSEE:
-------------------------------------
By: /s/ [ILLEGIBLE] By: /s/ Robert A. Hammond
------------------------------------ ---------------------------------
Title: Vice President Title: President
--------------------------------- ------------------------------
Address: 501 E. Kennedy Blvd Ste 600 Address: 7171 N. Federal Hwy.
------------------------------- ----------------------------
Tampa, FL 33602 Boca Raton, Florida
------------------------------- ----------------------------
Telephone: 813-349-7464 Telephone: (561) 443-3302
----------------------------- --------------------------
Facsimile: 813-222-5658 Facsimile:
----------------------------- --------------------------
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SCHEDULE A
APPROVED MARKET AND PAYMENT TERMS
(ANNUAL FIXED FEE MODEL)
A. APPROVED MARKET
1. A "Vertical Market" is defined in the terms of: (i) the segmented
industry areas categorized by the North American Industrial
Classification System (NAICS) code structure
(http://www.census.gov/cpcd/naics/naicscod.txt), and (ii) the NAICS
category of goods and services within a particular industry area. Each
NAICS category of goods and services within a particular industry area
constitute a separate Vertical Market. With the exception of the
Manufacturing Sector (NAICS 31-33), the fist two digits of each six-digit
NAICS code (NAICS Sector) will correspond to a separate Vertical Market.
With respect to goods contained within the Manufacturing Sector, the
first three digits of each six-digit NAICS code (NAICS Subsector) will
correspond with a separate Vertical Market (see table below for
illustration).
<TABLE>
<CAPTION>
NAICS NAICS DESCRIPTION
LEVEL CODE
<S> <C> <C>
Sector 31-33 Manufacturing
Subsector 334 Computer and electronic
product
</TABLE>
In order to account for the possibility of incidental overlap from one
Vertical Market to another Vertical Market, a Vertical Market will
remain as a single Vertical Market so long as: (i) ninety (90) percent
of the overall goods and services contained within the Vertical Market
corresponds to the specified NAICS Sector (or a particular NAICS Subsector
in the case of the Manufacturing Sector), and (ii) the balance of the
products and services rationally relate to the goods and/or services
contained in the NAICS Sector or Subsector making up the particular
Vertical Market.
2. Licensee's Approved Market shall be the Aerospace Industry Vertical
Market which consists of the categories of goods and services contained
within NAICS Code 3364.
B. SOFTWARE, LICENSE FEE, ANNUAL FIXED FEES, MAINTENANCE AND SUPPORT FEES,
FAST TRACK IMPLEMENTATION FEES
1. SOFTWARE DESCRIPTION
Commerce Center 6.01.1
2. LICENSE FEE
US $675,000 non-refundable License Fee due immediately upon execution of
the Agreement;
3. ANNUAL LICENSE FEE
In addition to the License Fees specified above, Licensee shall, on
January 1, 2001, and on January 1st of each thereafter, in which the
Agreement is in effect, make an annual payment to TRADEX in the amount of
$250,000 ("Annual License Fee") for the Approved Market.
8
<PAGE>
4. MAINTENANCE AND SUPPORT PLAN
Gold Support and Maintenance - See Schedule D.
5. MAINTENANCE AND SUPPORT FEE
Annual non-refundable prepayment of $100,000 for each year of Maintenance and
Support (based on the Effective Date) for the Approved Market, subject to the
terms and conditions set forth in Schedule D. Licensee shall make payment for
the initial year Maintenance and Support period in the amount of US $100,000
in accordance with the following schedule:
- - $33,333 on or before February 14, 2000
- - $33,333 on or before March 13, 2000
- - $33,334 on or before April 10, 2000
6. FAST TRACK IMPLEMENTATION SERVICES FEES
Licensee shall make payment of $225,000 as a non-refundable payment for the
Fast Track Implementation Services set forth in Exhibit 1 to Schedule E in
accordance with the following schedule:
- - $75,000 on or before February 14, 2000
- - $75,000 on or before March 13, 2000
- - $75,000 on or before April 10, 2000
9
<PAGE>
SCHEDULE B
THIRD PARTY END USER AGREEMENT
TERMS AND CONDITIONS
TRADEX TECHNOLOGIES, INC.'S SOFTWARE IS COPYRIGHTED AND LICENSED (NOT SOLD),
LICENSEE DOES NOT SELL OR TRANSFER TITLE TO THE SOFTWARE TO YOU. YOUR LICENSE
OF THE USER INTERFACE TO THE SOFTWARE WILL NOT COMMENCE UNTIL YOU HAVE
EXECUTED THIS AGREEMENT AND AN AUTHORIZED REPRESENTATIVE OF LICENSEE HAS
RECEIVED, APPROVED, AND EXECUTED A COPY OF IT AS EXECUTED BY YOU OR CLICK
WRAP ACCEPTANCE, AS THE CASE MAY BE.
1. Licensee grants you a nontransferable, nonexclusive license to download
a Java Applet or dHTML ("User Interface") into your browser and use the
User Interface to the Software for the purpose of purchasing and selling
goods and services only subject to the following terms and conditions.
2. TRADEX Technologies, Inc. shall have sole and exclusive ownership of all
right, title, and interest in and to the Software and all modifications
and enhancements thereof (including ownership of all trade secrets and
copyrights pertaining thereto), subject only to the rights and
privileges expressly granted to you herein by Licensee. This Agreement
does not provide you with title or ownership of the Software, but only a
right of limited use of the User Interface.
3. You may not use, copy, modify, or distribute the User Interface
(electronically or otherwise), or any copy, adaptation, transcription, or
merged portion thereof. You may not reverse assemble, reverse compile,
or otherwise translate the User Interface. No service bureau work,
multiple-user license, or time-sharing arrangement is permitted. You may
not install the User Interface in any other computer system or use it at
any other location without Licensee's express authorization obtained in
advance. If you use, copy, or modify the User Interface or if you
transfer possession of any copy, adaptation, transcription, or merged
portion of the User Interface to any other party in any way not
expressly authorized by Licensee, your license is automatically
terminated. Licensee may terminate your limited license under this
Agreement at any time without further obligation.
4. Warranty: LICENSEE AND TRADEX TECHNOLOGIES, INC. PROVIDE NO WARRANTIES
TO THIRD PARTY END USERS WITH RESPECT TO THE SOFTWARE OR THE
TRANSACTIONS PERFORMED HEREUNDER. LICENSEE AND TRADEX TECHNOLOGIES,
INC. EXPRESSLY DISCLAIM THE IMPLIED WARRANTIES OF MERCHANTABILITY,
NONINFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.
5. Limitation of Liability: LICENSEE AND TRADEX TECHNOLOGIES, INC. SHALL
NOT BE LIABLE FOR ANY LOSS OF BUSINESS, LOSS OF USE OR OF DATA,
INTERRUPTION OF BUSINESS, LOST PROFITS OR GOODWILL, OR OTHER INDIRECT,
SPECIAL, INCIDENTAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES OF ANY KIND
ARISING OUT OF THIS AGREEMENT, EVEN IF LICENSEE OR TRADEX TECHNOLOGIES,
INC. HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS, AND
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
THIS EXCLUSION INCLUDES ANY LIABILITY THAT MAY ARISE OUT OF THIRD-PARTY
CLAIMS AGAINST THIRD PARTY END USERS.
6. Indemnity: Third Party End User shall indemnify, defend, and hold
harmless Licensee, TRADEX Technologies and their employees, agents,
successors, officers, and assigns, from any suits, losses, claims,
demands, liabilities, costs and expenses (including attorney and
accounting fees) that Licensee or TRADEX Technologies, Inc. may sustain
or incur arising from (a) the Third Party End User's use of the
Software, (b) the Third Party End User's failure to comply with any
applicable laws and regulations (including without limitation those
regarding the export of products or technology abroad) or to obtain any
licenses or approvals from the appropriate government agencies necessary
to purchase or sell the subject goods and services, or (c) the Third
Party End User's breach of any of its obligations set forth in the
Agreement; provided, that Licensee and/or TRADEX Technologies, Inc.
provides Third Party End User with: (i) prompt written notice of such
claim; (ii) control over the defense and settlement of such claim; and
(iii) proper and full information and assistance at Third Party End
User's expense to settle and/or defend any such claim. Notwithstanding
the foregoing, Third Party End User shall not settle any such claim,
suit or proceeding without the written consent of Licensee and TRADEX
Technologies, Inc., which shall not be unreasonably withheld.
7. No Third Party Beneficiary Rights: The Software used by Licensee to
facilitate business transactions by Third Party End User is supplied by
TRADEX pursuant to a separate License Agreement. All rights granted
pursuant to such License Agreement shall be for the sole and exclusive
benefit of TRADEX Technologies, Inc. and Licensee. Third Party End User
shall not be treated as a direct, indirect, intended or incidental third
party beneficiary of such License Agreement, nor shall any other person
or entity have any legal or equitable right, remedy or claim under or in
respect of the License Agreement.
10
<PAGE>
SCHEDULE C
The dimensions for the "Powered by TRADEX" logo shall be the following:
Width: 120 pixels
Height: 48 pixels
- - The graphic should support 256 colors.
- - Preferred graphic format: .gif
[GRAPHIC]
<PAGE>
SCHEDULE D
GOLD MAINTENANCE AND SUPPORT PLAN
1. DEFINITIONS. In addition to the other terms defined elsewhere in
the Agreement, the following terms shall have the following meanings:
(a) "Critical" shall mean a verifiable, reproducible condition that causes
the Software to halt, causing substantially reduced performance/throughput, or
substantially inhibits execution of an existing vital process.
(b) "Error" shall mean a failure of the Software to perform in material
conformance with the applicable Documentation.
(c) "Response" shall mean that TRADEX begins working on resolution of the
Error.
(d) "Serious" shall mean a verifiable, reproducible condition that causes
an initial degradation in performance/throughput, and creates a high risk
condition leading to reduced Software performance or loss of a vital process.
2. GOLD SUPPORT: Gold Support shall entitle Licensee to the Support
Services set forth below. TRADEX will use commercially reasonable efforts to
correct any Critical or Serious Errors.
3. 8 X 5 SUPPORT. When requiring Support Services at any time other than
normal working hours 9 a.m. to 5 p.m. EST, Licensee should use the TRADEX
support pager number of 1-888-914-1571 and leave a phone number where they
can be contacted. During normal hours, Licensee should contact the TRADEX
Help Desk to report all support issues. TRADEX Help Desk will be the contact
point of Support Services for Licensee. TRADEX Help Desk associates will
escalate any Support Services issues internally that cannot be resolved upon
the initial call.
4. FIRST PRIORITY SERVER SUPPORT. TRADEX shall undertake commercially
reasonable efforts to provide an Initial Response to Licensee within a
reasonable period of time. Responses may be delivered by e-mail, fax and/or
telephone. TRADEX may also request Licensee to provide additional information
as part of the initial TRADEX Response.
5. ACCESS TO BETA SOFTWARE PRODUCTS. Subject to Licensee's execution of
any beta license agreement that TRADEX may require, TRADEX will offer to
Licensee any generally available beta versions of the Software (including
major Upgrades). TRADEX reserves the right to charge its then-current hourly
rate for professional services preformed at Licensee's request for
installation, integration, data cut-over or other services to accomplish
migration from one version/release to another. Licensee shall have the right
to decline beta testing of new software products.
6. UPGRADES AND UPDATES. Subject to the terms of the Agreement, TRADEX
will make Updates and Upgrades made generally available at no further cost
during the periods in which Licensee is entitled to receive the Support
Services. TRADEX reserves the right to charge additional License Fees for any
Upgrades to existing Software which incorporate significant new features or
functionality of the Software licensed from or contributed by third parties,
as determined by TRADEX in its sole discretion. This provision shall not
constitute a requirement that TRADEX develop or otherwise make available any
Updates or Upgrades.
7. CONDITIONS OF SUPPORT: Licensee's right to obtain Support Services are
conditioned on adherence to the following terms and conditions.
(a) Licensee shall provide a first line of support to its Users. Licensee
shall assign internal support persons to act as Support Service liaisons
("Liaisons") with TRADEX. All Support Service calls from Licensee shall be
directed through the Liaisons. Licensee may change its Liaisons, at no
additional charge, by notifying TRADEX either via e-mail or fax of such change
forty-eight (48) hours in advance.
(b) In the event an Error requiring technical support cannot be resolved by
telephone, e-mail or facsimile in a reasonable time, Licensee and TRADEX will
jointly develop and implement a resolution plan. This plan may require the
payment of fees to TRADEX for off-plan man-hours and reimbursement of
reasonable, documented travel expenses for TRADEX personnel involved.
(c) TRADEX shall not be liable for supporting problems or issues arising
solely from system abnormalities or other software applications used in
conjunction with or resident on the same computer hardware on which the
TRADEX Software resides ("Equipment").
(d) TRADEX requires Licensee to segregate TRADEX software from other
applications which Licensee may be supporting. This segregation should
include but not be limited to establishing different instances of the
database for each application and separating RAID array functionality.
(e) In the event that TRADEX, at the request of Licensee, provides support
for a problem which is ultimately determined to have been a problem for which
TRADEX is not liable for providing Support Services, then Licensee shall
compensate TRADEX for time spent resolving the problem at TRADEX's
then-current hourly rate for professional services.
(f) TRADEX's obligation to provide Support Services shall not apply to
Software that was released more than one year before the then most current
Upgrade of the Software, unless the version number of the installed Software
is within one decimal versions of the then most current Upgrade of the
Software.
(g) Licensee agrees to promptly notify TRADEX of the change of location of
the equipment upon which any of the Software covered by this Agreement
resides. TRADEX reserves the right to adjust the monthly charges if the move
is likely to materially change the cost of providing Support Services
hereunder.
(h) TRADEX will not be under any obligation to provide Support Services:
(i) for any modifications, extensions or customizations to the Software not
performed or provided by TRADEX, (ii) if the Software is used in violation of
the Agreement or most current Documentation, or (ii) if the equipment on
which the Software resides ("Equipment") contains application software not
provided, authorized or recommended by TRADEX.
(i) In no event is TRADEX required to provide Support Services due to: (i)
causes beyond TRADEX's reasonable control, or (ii) the acts or omissions of
Licensee or other third parties.
(j) Licensee will give TRADEX Access (defined below) to a server outside of
Licensee's environment which is running an
<PAGE>
exact copy of the current Software running within Licensee's environment.
"Access" means remote access including but not limited to a browser log-on
with all permissions, database root access via the database port and direct
access to the web server to view any relevant Java code.
(k) TRADEX shall not be obligated to provide Support Services in the event
of a discontinuation by Licensee of Support Services or gaps in the Support
Services resulting from non-payment by Licensee.
(l) Response times shall be measured in U.S. business hours.
8. SUPPORT FEES AND PAYMENT: TRADEX will provide Licensee the Support
Services on fiscal year increments (based on the Effective Date). Licensee
will pay the first year of Support Services as set forth in Schedule A to the
Agreement. TRADEX will invoice Licensee for the next year's Support Services
before the current Support period is scheduled to expire. Support Services
shall terminate unless Licensee pays TRADEX's then-current fees within thirty
(30) days of the invoice date. Support Services Fees are based on the
continuous contracting for support for the Software. Reinstatement of Support
Services will be subject to TRADEX's then-current policies and applicable
Fees regarding reinstatement. TRADEX reserves the right to modify its
Support Service policies and Fees from time to time.
9. TERMINATION: Either party may terminate the Support Services if the
other party commits a material breach of this Agreement and fails to remedy
such breach within thirty (30) days after receipt of written notice of such
breach.
10. LIMITATIONS: TRADEX'S SOLE LIABILITY AND LICENSEE'S SOLE REMEDY FOR
ANY FAILURE OF TRADEX TO PROVIDE THE SUPPORT SERVICES AS REQUIRED HEREIN IS
(I) FOR TRADEX TO USE COMMERCIALLY REASONABLE EFFORTS TO FIX OR RESOLVE THE
ERROR SO AS TO RESTORE THE SOFTWARE TO MATERIAL CONFORMANCE WITH THE
APPLICABLE DOCUMENTATION, OR (II) FOR LICENSEE TO TERMINATE ITS RECEIPT OF
SUPPORT SERVICES. IN ANY EVENT, TRADEX'S CUMULATIVE LIABILITY FOR ANY CLAIM
RELATING IN ANY MANNER TO THE SUPPORT SERVICES, REGARDLESS OF THE TYPE OR
NATURE OF THE ACTION, SHALL BE LIMITED TO LICENSEE'S DIRECT DAMAGES NOT
EXCEEDING THE AMOUNT PAID TO TRADEX BY LICENSEE FOR SUCH DEFECTIVE SUPPORT
SERVICES FOR THE SUBJECT ANNUAL PERIOD. IN NO EVENT SHALL TRADEX BE LIABLE
FOR ANY LOSS OF USE, DATA OR PROFITS OR INDIRECT, SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES, WHETHER IN AN ACTION IN CONTRACT, TORT OR
OTHERWISE, EVEN IF TRADEX HAS BEEN SPECIFICALLY ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES. THERE ARE NO OTHER EXPRESS OR IMPLIED WARRANTIES, INCLUDING
THOSE OF MERCHANTABILITY, ACCURACY OR FITNESS FOR A PARTICULAR PURPOSE,
REGARDING THE SUPPORT SERVICES.
<PAGE>
SCHEDULE E
PROFESSIONAL SERVICES AGREEMENT
THIS PROFESSIONAL SERVICES AGREEMENT is made and entered into as of
the 3rd day of December, 1999, by and between TRADEX TECHNOLOGIES, INC., a
Delaware corporation (hereinafter referred to as "TRADEX") with a place of
business at 501 East Kennedy Blvd., Suite 600, Tampa, Florida 33602, and
PartsBase.com, (hereinafter referred to as "Customer") with its principal
place of business at Boca Raton, Florida.
In consideration of the mutual terms, conditions and covenants hereinafter
set forth, Customer and TRADEX agree as follows:
1. The Customer hereby retains TRADEX as an independent contractor to
perform implementation, integration and customizations services as set forth
in Exhibit A, as may be amended from time to time, and TRADEX hereby accepts
such engagement.
2. The term of this Agreement shall commence when this Agreement is signed
by an authorized representative of TRADEX.
3. Customer shall pay to TRADEX and TRADEX shall accept from the Customer
as compensation for all services to be provided pursuant to this Agreement
("Services") the hourly rates outlined in Exhibit A. In addition, Customer
shall promptly reimburse TRADEX for all reasonable expenses incurred by
TRADEX in providing services to Customer, including but not limited to
reasonable travel time, transportation, lodging, meal expenses and related
costs incurred by TRADEX. Reimbursements shall be paid by Customer to TRADEX
upon Customer's receipt of invoice from TRADEX.
4. TRADEX shall provide to Customer the Services in accordance with the
delivery dates, if any, set forth in Exhibit A.
5. Any software code created by TRADEX under this Agreement shall be owned
by TRADEX. Customer hereby assigns to TRADEX all right, title and interest,
including any copyright that it may have in any products developed by TRADEX
pursuant to this Agreement. Customer's right to use software developed by
TRADEX shall be governed by the Software License Agreement between the
Customer and TRADEX (the "License Agreement"). Any product created by TRADEX
pursuant to this Agreement will remain the property of TRADEX, and TRADEX
retains the right to use and demonstrate such products for prospective
clients of TRADEX. Customer shall not license or otherwise convey any portion
of any product developed by TRADEX in any form unless expressly agreed to in
writing in advance by TRADEX.
6. Customer shall not disclose, copy or transfer any trade secrets,
products, customized software or other confidential information owned by
TRADEX without prior written permission from TRADEX.
7. TRADEX is an independent contractor and nothing contained in this
Agreement shall be deemed or interpreted to constitute TRADEX or Customer as
a partner, agent or employee of each other, nor shall either party have any
authority to bind the other. During the term of this Agreement and for one
year thereafter, neither party shall solicit the other party's employees.
8. The License Agreement and this Agreement state the entire agreement and
understanding between the parties relating to the subject matter of this
Agreement. This Agreement and the License Agreement supersede all other prior
agreements, oral or written, between the parties relating to their subject
matter and are intended as a complete and exclusive statement of the
agreement between the parties. Customer represents that it has not relied
upon any representations which are not contained in this Agreement as an
inducement to enter into this Agreement. No change or modification of this
Agreement shall be valid unless the same be is writing, refers to this
paragraph, and is signed by the parties. In the event of any conflict between
this Agreement and the License Agreement, the terms of this Agreement shall
prevail with regard to the services performed under this Agreement.
9. TRADEX does not warrant that the Services provided pursuant to this
Agreement will meet Customer's requirements or that the Services performed
will be error-free. TRADEX warrants that, during the first thirty (30) days
following delivery of any such software, the Services delivered by TRADEX,
will perform substantially in accordance with any documentation provided
which give instructions regarding the Services, as updated from time to time,
and which are identified by TRADEX on their face as "Documentation." TRADEX
shall not be liable for claims under the foregoing warranty if Customer
fails to provide written notice of such claim prior to expiration of the
warranty. TRADEX's sole obligation and liability under this paragraph 9 shall
be to replace or correct the Services or, at the option of TRADEX, to refund
the license fee for the Services upon return or destruction of the software
portion of the Services and its associated documentation and all copies
thereof.
TRADEX warrants the magnetic media on which software portion of the Services
is furnished to Customer to be free of defects in materials for a period of
thirty (30) days from the date of shipment to Customer. TRADEX's entire
liability under this paragraph 9 shall be the replacement of any media found
to be defective in materials.
THERE ARE NO OTHER WARRANTIES, EXPRESS OR IMPLIED. TRADEX DISCLAIMS THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
ANY MODIFICATION OF SERVICES FURNISHED BY TRADEX BY ANY PERSON OTHER THAN
TRADEX OR ANY USE OF THE SERVICES WITH INFRINGING SOFTWARE OR DATA WILL VOID
TRADEX'S DUTIES UNDER
<PAGE>
the warranty provisions hereof. TRADEX is not liable for any damage caused by
running TRADEX developed software on other than the recommended hardware
configuration as described in Schedule B.
10. TRADEX's liability to Customer for any breach of the warranties in paragraph
9 hereof will be limited to the remedies specified therein. IN ANY EVENT, ANY
CLAIM CONCERNING PERFORMANCE OR NON-PERFORMANCE OF TRADEX PURSUANT TO, OR IN ANY
WAY RELATED TO, THE SUBJECT MATTER OF THIS AGREEMENT SHALL BE LIMITED TO
COMPANY'S DIRECT DAMAGES NOT EXCEEDING THE AMOUNT PAID TO TRADEX BY COMPANY
HEREUNDER FOR THE SERVICES. IN NO EVENT SHALL TRADEX BE LIABLE FOR ANY LOSS OF
USE, DATA OR PROFITS OR INDIRECT, SPECIAL, EXEMPLARY, OR CONSEQUENTIAL DAMAGES,
WHETHER IN AN ACTION IN CONTRACT OR TORT, EVEN IF TRADEX HAS BEEN SPECIFICALLY
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. NO ACTION, REGARDLESS OF FORM,
ARISING OUT OF THE TRANSACTIONS UNDER THIS AGREEMENT MAY BE BROUGHT BY CUSTOMER
MORE THAN ONE (1) YEAR AFTER THE CAUSE OF ACTION HAS ACCRUED.
11. This Agreement shall be governed by and construed in accordance with the
laws of the State of Georgia. The solo and exclusive jurisdiction and venue for
any dispute arising from this Agreement or related to its subject matter shall
be in the State of Georgia. The prevailing party in any dispute between the
parties shall recover its reasonable attorneys' fees and costs from the
non-prevailing party.
12. All notices required or permitted to be given hereunder shall be in writing
and shall be delivered personally or by Certified or Registered Mail - Return
Receipt Requested, postage prepaid, addressed to the party's last know address.
Customer address:
Attention:
Robert A. Hammond, CEO
PartsBase.com
7171 N. Federal Highway
Boca Raton, FL 33487
TRADEX address:
Attention:
Vice President of Consulting Services
TRADEX Technologies, Inc.
501 East Kennedy Blvd., Suite 600
Tampa, Florida 33602
13. Whenever possible, each provision of this Agreement shall be interpreted in
such a manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity and shall not invalidate the remainder of such provision or the
remaining provisions of this Agreement which shall continue in full force and
effect.
14. This Agreement may be executed in more than one counterpart and each such
counterpart shall be deemed to be an original.
15. This Agreement, including all attached Exhibits and Schedules, constitute
the entire agreement and understanding between the parties in reference to its
subject matter and any and all previous agreements, discussions, promises,
representations, and understandings between the parties relative thereto are
merged herein and superseded hereby. Customer represents that it has not relied
upon any representation of TRADEX in entering into this Agreement, which is not
expressly set forth in this written Agreement. Customer represents to TRADEX
that any representation made by TRADEX to Customer which is not set forth herein
is not material to Customer.
16. This Agreement does not create and shall not be construed as creating any
relationship of agency, partnership, or employment between the parties. The
parties enter this Agreement as, and shall remain, independent parties and
independent contractors. Except as otherwise provided in this Agreement, no
party shall have the right or authority to assume, create, or enlarge any
obligation or commitment on behalf of any other, and shall not represent itself
as having the authority to bind any other in any manner.
17. Except as otherwise limited herein, the rights and remedies of the parties
set forth in this Agreement are cumulative and are in addition to all other
rights and remedies (whether civil, criminal, equitable, or otherwise) which
they may have in law or in equity.
18. The parties hereby agree to opt out of the application of the United Nations
Convention for the International Sale of Goods to this transaction.
19. Neither party to this Agreement shall be liable to the other party for any
delays in the performance of its obligations or duties due to acts of God,
strikes, transportation delays, fires, floods, riots, political uprisings or
revolutions, labor disputes, freight embargoes, shortage of labor, inability to
secure fuel or power at reasonable prices or on account of shortages thereof,
laws or acts of any Federal, state or local government affecting the Software or
the conduct of the parties, including export licensing restrictions or other
export restrictions, or any other such causes beyond such party's reasonable
control, except in no event shall this paragraph apply to any payments due to
TRADEX hereunder.
20. Customer shall not have the right to assign or otherwise transfer its rights
or obligations under this Agreement without TRADEX's prior written consent,
<PAGE>
TRADEX TECHNOLOGIES, INC.
By: /s/ [ILLEGIBLE]
-----------------------------------------
Title:
--------------------------------------
Address:
------------------------------------
------------------------------------
Telephone:
----------------------------------
Facsimile:
----------------------------------
LICENSEE:
By: /s/ [ILLEGIBLE]
-----------------------------------------
Title: President
--------------------------------------
Address: 7171 N. Federal Hwy
------------------------------------
Boca Raton, Florida
------------------------------------
Telephone: (561) 443-3302
----------------------------------
Facsimile:
----------------------------------
<PAGE>
EXHIBIT 1
STATEMENT OF WORK FOR FAST TRACK IMPLEMENTATION SERVICES
DESCRIPTION OF SERVICES TO BE PERFORMED:
The following activities and deliverables are referenced from the E-ComSIM
document:
ACTIVITIES
CONDUCT PRODUCT INFORMATION SESSIONS TO USERS
CONDUCT A SCOPING AND JAD SESSION TO GATHER INITIAL SPECIFICATIONS
a) Develop a Customer Profile (PSA-Profile)
b) Create a Project Description (SIM-100)
c) Develop Meeting Agendas (SIM-210)
d) Generate an Initial Requirements Definition (SIM-125)
PERFORM INITIAL GAP ANALYSIS
a) UPDATE Requirements Definition
PRODUCE SPECIFICATION DOCUMENTS AND STATEMENTS OF WORK (SOW) FOR IDENTIFIED
CUSTOMIZATIONS WITH ASSOCIATED COSTS AND TIMELINES
a) Refine the Requirements Definition (SIM-125)
b) Create Use Case Flows (SIM-420)
c) Update the Project Workplan (SIM-225)
d) Generate Statements of Work (SIM-SOW)
PROVIDE CONSULTING IN THE AREA OF TECHNICAL ARCHITECTURE DEVELOPMENT
PRODUCE PRO-INSTALLATION SPECIFICATION DOCUMENTS RELATED TO NETWORK TOPOLOGY,
HARDWARE, ENVIRONMENT AND INFRASTRUCTURE
a) Complete Pre-Installation Questionnaire (PSA-Checklist)
AGGREGATE/IMPORT 2 SUPPLIER CATALOGS
TRAIN KEY USERS ON CONTENT MANAGEMENT PROCESSES
PERFORM THE CORE INSTALLATION OF BASELINE PRODUCT
PERFORM THE INITIAL CONFIGURATION AS PER REQUIREMENTS
CONDUCT FORMAL USER TRAINING
PREPARE CUSTOMER SPECIFIC TRAINING MATERIALS AND CONTENT FOR A 2-3 DAY TRAINING
SESSION
DELIVERABLES
SIM-100 PROJECT DESCRIPTION
Contains all high level information about the project as it
relates to high level timeline expectations, project manager
assigned and basic requirements such as the application being
installed.
SIM-125 REQUIREMENTS DEFINITION
This is the main document containing all project related
information. This includes hardware and software requirements
as well as all development work to be performed based on
functionality and feature requirements. Any and all project
related requirements are contained in this document, including
integration to any customer systems.
SIM-210 MEETING AGENDAS
This document is used as the controlling entity of the project
meeting and all JAD sessions. Attendees and meeting
objectives/items are listed on this document.
<PAGE>
SIM-SOW STATEMENTS OF WORK
This document is used for each customization requested and
approved.
SIM-225 PROJECT WORKPLAN
This is the project workplan that defines the schedule of tasks
being completed.
SIM-420 USE CASE SCENARIO
These documents contain information related to any one
requirement. The requirement is spelled out in detail
containing all screen prints as necessary. The task level
requirement is a result of this document. The SIM 125 contains
links to the Use Case documents. The document naming convention
is "SIM-420_#". Each "#" will be incremented by "1" and linked
to from within the SIM-125.
PSA_CHECK LIST PRE-INSTALLATION CHECKLIST
This is used to ensure the customer location adheres to the
basic requirements of the TRADE'ex application.
PSA_PROFILE CUSTOMER PROFILE
This document contains all customer related information as it
relates to existing hardware systems, platforms, desktop
machines, browsers and all other related information so that
TRADE'ex can be prepared to resolve compatibility issues.
TERMS OF PAYMENT FOR FAST TRACK IMPLEMENTATION SERVICES
In addition to the required prepayment, Customer shall promptly reimburse
TRADEX for all reasonable expenses incurred by TRADEX in providing services to
Customer, including but not limited to reasonable travel time, transportation,
lodging, meal expenses and related costs incurred by TRADEX. Additional
professional services outside of the scope of the Fast Track methodology will be
on a time and materials basis. The rates for any such additional professional
services shall be based on TRADEX's then prevailing hourly rates for
professional services. TRADEX's current professional services rates are set
forth below in the Professional Services Rate Schedule.
PROFESSIONAL SERVICES RATE SCHEDULE
<TABLE>
<S> <C>
Manager Level Resources $275 Hour
Technical Resources $225 Hour
Training $2,950 Day
</TABLE>
<PAGE>
Exhibit 10.12
CUSTOMER ORDER FORM
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------
Customer: PartsBase.com Contact: Yves Duplan
- ---------------------------------------------------------------------------------------------------
Address: 7171 North Federal HWY, Boca Raton, FL 33437 Phone: 561-443-3302
- ---------------------------------------------------------------------------------------------------
Support Manager Contact: Fax: 561-443-7092
- ---------------------------------------------------------------------------------------------------
Operating Brand: PartsBase.com E-Mail: [email protected]
- ---------------------------------------------------------------------------------------------------
Vertical Market Aerospace/Defense
- ---------------------------------------------------------------------------------------------------
The Software for the Services will be hosted on Customer's server.
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
CONFIGURATION SERVICES AND ANNUAL SUBSCRIPTION FEES: $138,000
- ---------------------------------------------------------------------------------------------------
TD-ReverseAuction $40,000 per server if purchased on before 11-17-99 with
TD-Auction and TD-Exchange
(Includes 25,000 traders per year to be utilized by all
applications listed, $25,000 for an additional 25,000 trades)
- ---------------------------------------------------------------------------------------------------
TD-Exchange $50,000 per server if purchased on before 11-17-99 with TD-
Reverse Auction and TD-Auction
- ---------------------------------------------------------------------------------------------------
TD-Auction $40,000 per server if purchased on before 11-17-99 with TD-
Exchange and TD-ReverseAuction
Development System(API) Included if purchased with above configuration.
- ---------------------------------------------------------------------------------------------------
Additional Servers options:
TD-Analyst $10,000 per server
Presentation Server $15,000 per server
Development System (API) $7,500 per server
[ILLEGIBLE] Standby Server 30% of base application configuration
Staging/Testing Server $7,500 per server
- ---------------------------------------------------------------------------------------------------
_X_ 5zK Telephone Hotline Support
(7am - 3pm PST) OR 12% of list price of total annual subscription fees per year
per two named contracts OR
5x12 Telephone Hotline Support
(6am - 6pm PST) 18% of list price of total annual subscription fees per year
per two named contracts
- ---------------------------------------------------------------------------------------------------
Market Design Consulting Services $250 per hour
- ---------------------------------------------------------------------------------------------------
Term: one year Year 2 license fees will increase by no more than 15%
provided that Customer commits to renew the Annual
subscription for Year 2 by June 30, 2000
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
USER AGREEMENT
This agreement ("Agreement") is entered into on this 17th day of _____, 1999,
(the "Effective Date") between TradingDynamics, Inc. with its principal place
of business at 313 West Evelyn Mountain View, CA 94041 ("TradingDynamics"),
and the Customer listed above ("Customer"). THIS AGREEMENT INCLUDES AND
INCORPORATES THE ABOVE CUSTOMER ORDER FORM AS WELL AS THE ACCOMPANYING TERMS
AND CONDITIONS AND CONTAINS, AMONG OTHER THINGS, WARRANTY DISCLAIMERS, LIABILITY
LIMITATIONS AND USE LIMITATIONS. There shall be no force or effect to any
different terms of any related purchase order or similar form even if signed
by the parties after the date hereof. Each party's acceptance of this
Agreement was and is expressly conditional upon the other's acceptance of the
terms contained in the Agreement to the exclusion of all other terms.
TradingDynamics, Inc. Customer:
By: /s/ [ILLEGIBLE] By: /s/ Robert A. Hammond
------------------------------------- -----------------------------------
Name & Title: [ILLEGIBLE] VP of Sales Name & Title: Robert A. Hammond, CEO &
--------------------------- PRESIDENT
-------------------------
<PAGE>
TERMS AND CONDITIONS
--------------------
1. SERVICES. Under the terms and conditions of this Agreement,
TradingDynamics shall provide, and Customer hereby accepts, the trading
[ILLEGIBLE] infrastructure services described in the Customer Order Form
under [ILLEGIBLE] Services" (the "Services"), which Customer may offer only
to authorized users of Customer's electronic commerce service ("Commerce
Service", but only in the Vertical Market and solely under the Operating
Brand identified on the Customer Order Form or a replacement Operating Brand
with written notice to TradingDynamics, never to exceed one Operating Brand
at one time. The Services include Updates (as defined in Section 4.3 below)
made generally available during the term of the Agreement.
2. RESTRICTIONS AND RESPONSIBILITIES
2.1 Any software provided to Customer by TradingDynamics under this Agreement
(the "Software") is licensed to Customer on a non-exclusive,
non-transferable, royalty-free basis, with the right to use such Software
limited solely to use as part of the Commerce Services during the term and
subject to the terms and conditions of this Agreement. Customer may provide
access or distribute only that part of the Software designated on the Order
Form as "Distributed Software" to users of the Commerce Services ("Users");
all other elements of the Software may be used and accessed only by Customer
employees. Customer covenants, represents and warrants that the Operating
Brand shall be the exclusive brand through which Customer offers or markets
the Commerce Services. TradingDynamics will provide another copy of the
Software at minimal or no charge if Customer loses or damages its copy of the
Software.
2.2 Notwithstanding anything else in this Agreement, TradingDynamics and its
licensors retain all title to, and, except as expressly and unambiguously
licensed herein, all rights to the Software. Customer will have no right to
receive or license any source code with respect to the Software. Customer
shall not, directly or indirectly; (i) reverse engineer, demcompile,
disassemble or otherwise attempt to discover the source code, or underlying
structure, ideas or algorithms of the Software; (ii) divide the Software into
components or parts; (iii) modify, translate, or create derivative works
based on any Software or any portion thereof; (iv) copy (including but not
limited to back-up copying), rent, lease, distribute, pledge, assign, or
otherwise transfer or encumber rights to the [ILLEGIBLE]; (v) except as part
of the Customer Services as expressly and unambiguously authorized above, use
any Software for timesharing or service bureau purposes or otherwise for the
benefit of a third party; or (vi) delete, alter, add to or fail to reproduce
the name of TradingDynamics or any notices appearing in or on any Software or
in connection with the Services or which may be required by TradingDynamics
at any time. Notwithstanding anything else herein, Customer may not use any
name, mark or designation used by TradingDynamics except (A) for use in
advertising or marketing the Commerce Services in accordance with written
approval of TradingDynamics and (B) reproduction of trademarks as part of
making Commerce Services available to Users; provided that any such
reproductions are subject to reasonable quality control inspections and
approval of TradingDynamics. Customer will not contest anywhere in the world
the use by or authorization by TradingDynamics of any trademark, name or
other designation relevant to the subject matter of this Agreement
("Trademark List") set forth in Attachment D hereto (which Trademark List may
be changed by TradingDynamics from time to time) or application or
registration therefor, whether during or after the term of this Agreement.
2.3 Customer shall comply with all applicable laws and regulations of the
United States and foreign authorities (including, but not limited to export
laws relating to encryption or other security measures that Customer elects
to implement in connection with the Services). Customer shall not directly or
indirectly export or re-export the Software in violation of any such laws or
regulations. Customer shall indemnify and hold harmless TradingDynamics
against any liability, damages and expenses (including without limitation
costs and attorneys' fees) arising from or related to an actual or alleged
violation of the foregoing or from Customer's acts or omissions, including
but not limited to use of Software by Customer or Customer's Users.
2.4 Customer shall reproduce and clearly and prominently display within the
website through which the Commerce Services are provided, TradingDynamics'
"powered by TradingDynamics" icon in the manner mutually agreed upon by both
parties.
2.5 Customer shall make Services available to Users only pursuant to an
enforceable written agreement (which may be in the form of a click-wrap
agreement) for TradingDynamics' benefit that is at least as protective of
TradingDynamics and its rights as TradingDynamics' then current Terms of Use
(a copy of the current terms are set forth in Attachment A). TradingDynamics
reserves the right to modify such Terms of Use upon thirty (30) days prior
written notice to Customer.
2.6 If Customer communicates to TradingDynamics any suggested modifications,
design changes or improvements of the Services or Software, TradingDynamics
shall have and is hereby assigned any and all right, title, and interest in
and to any such suggested modifications, design changes, or improvements of
the Services, without the payment of any additional consideration therefor.
Customer shall not disseminate performance information or analysis
(including, without limitation, benchmarks) from any source relating to the
Software or Services.
2.7 TradingDynamics shall have the right from time to time upon fifteen (15)
days prior written notice to inspect Customer's equipment and operations to
confirm Customer's compliance with the terms and restrictions set forth in
this Agreement, and Customer shall promptly provide all assistance and access
reasonably requested by TradingDynamics in connection therewith.
3. PAYMENT OF FEES
3.1 Customer will pay in full the fees set forth in the Customer Order Form
(under Subscription Fees) in accordance with the schedule set forth therein,
for use of the Services during the Term. Customer will pay within thirty (30)
days of receipt of TradingDynamics' invoice, any fees as set forth in the
Customer Order Form for use of the Services. For any renewal term,
TradingDynamics shall invoice Customer no earlier than thirty (30) days
before the beginning of such renewal term. All payments shall be made in U.S.
dollars in the United States. If any termination occurs prior to the end of a
term then in effect, Customer shall not receive any refund of the amounts
owed or paid.
3.2 In addition, Customer will pay all charges, including without limitation
transportation charges, and shall be responsible for all taxes (except
TradingDynamics' U.S. income taxes) in connection with the subject matter of
this Agreement, duties and other governmental assessments. Unpaid fees are
subject to a finance charge of 1.5% per month on any outstanding balance, or
the maximum permitted by law, whichever is lower, plus all expenses of
collection.
4. EDUCATION AND SUPPORT
4.1 TradingDynamics agrees to provide the education services set forth in
Attachment B for Customer personnel upon payment of the applicable education
fees set forth in such Attachment.
4.2 Upon payment of the applicable support fees set forth in the Customer
Order Form (under Subscription Fees), TradingDynamics will use diligent
efforts to provide telephone support during the term of the agreement for the
Services directly to the support managers of Customer designated in the
Customer Order Form (each a "Support Manager Contact") during
TradingDynamics' normal business hours (Pacific Standard Time) concerning the
installation and use of the then-current release of Software and the
immediately Previous Sequential Release. "Previous Sequential Release" means
at any time the release of Software that has been replaced by the
then-current release of the same Software. Notwithstanding anything else, a
Previous Sequential Release will be supported by TradingDynamics only for a
period of six (6) months after release of the then-current release.
TradingDynamics shall provide such support during the time period designated
upon the Customer Order Form. TradingDynamics' sole obligation with respect
to errors in the Services or Software (i.e., failure of the Services or
Software to comply with TradingDynamics' published specifications) will be to
use diligent efforts to correct at its expense, any such reproducible and
fully documented error about which it receives written notice ("Error").
TradingDynamics shall exercise diligent efforts to correct any Error reported
by Customer in the current unmodified release of Software in accordance with
the priority level reasonably assigned to such Error by TradingDynamics as
set forth below: (1) Priority A Error: TradingDynamics shall promptly
[ILLEGIBLE] the following procedures: (a) assign TradingDynamics engineers to
correct the Error; (b) notify TradingDynamics management that such Error has
been reported and of steps being taken to correct such Error; (c) provide
Customer with periodic reports on the status of the corrections; and (d)
initiate work to provide Customer
2
<PAGE>
a Workaround or Fix; (2) Priority B Error: (a) assign TradingDynamics
engineers to correct the Error; and (b) initiate work to provide Customer
with a Workaround or Fix; (3) Priority C Error: TradingDynamics may include
the Fix for the Error in a later major release of the Software. "Priority A
Error" means an Error that renders the Software inoperative or causes
Software to fail catastrophically. "Priority B Error" means an Error that
substantially degrades the performance of Software or materially restricts
Customer's use of the Software. "Priority C Error" means an Error that causes
only a minor impact on the performance of Software or Customer's use of
Software. "Fix" means the repair or replacement of object or executable code
versions of Software to remedy an Error, "Workaround" means a change in the
procedures followed or data supplied by Customer to avoid an Error without
substantially impairing Customer's use of Software. Each "Fix" or
"Workaround" shall be included in the term Update. Customer shall pay
TradingDynamics at its then current time and materials rates (at the
Effective Date, $250.00 per man hour) for any additional support, similar
service or professional services provided to Customer by TradingDynamics
within thirty (30) days of receipt of "TradingDynamics" invoice therefor.
Customer shall be responsible, and Customer shall be solely responsible for
instructing and supporting the use of the Services by Users.
4.3 "TradingDynamics" support obligations described in Section 4.2 are
contingent upon proper use of the Software consistent with documentation
provided by TradingDynamics and shall not apply if the Software is (i)
modified by any party other than TradingDynamics and to the extent that such
modification caused the error or (ii) used on or with a version of a platform
or configuration other than the configuration identified in the Customer
Order Form. TradingDynamics shall have no obligation to support; (i) altered,
damaged or modified Software or any portion of the Software incorporated with
or into other software (except software authorized by TradingDynamics as set
forth in documentation), (ii) Software that is not the then-current release
or immediately Previous Sequential Release as designated by TradingDynamics;
(iii) Software problems or other problems caused by Customer's negligence,
abuse or misapplication, or by other factors beyond the control of
TradingDynamics. "Update" shall mean any update, enhancement, patch, bug
fix, new release or new version of Software which is made generally available
by TradingDynamics, [ILLEGIBLE] is marketed under the same product number and
nomenclature as the [ILLEGIBLE] are, and for which TradingDynamics does not
charge a separate fee. Each Update shall be included within the term
"Software".
4.4 TradingDynamics shall deposit into escrow with a reputable third party
escrow agent (e.g. DSI, Brambics, Fort Knox) the Software and each Update, and
TradingDynamics shall for the term of this Agreement include Customer as a
third party beneficiary entitled to receive such deposits in the event of
release. Customer shall reimburse TradingDynamics for the cost of including
Customer as a beneficiary of such escrow.
5. TERM AND TERMINATION
5.1 Subject to earlier termination as provided below, this Agreement shall
commence on the Effective Date and continue for the Term specified in the
Customer Order Form. Either party may terminate this Agreement upon thirty
(30) days notice (or ten (10) days in the case of nonpayment) if the other
party materially breaches the Agreement and fails to cure such breach within
such notice period. If Customer terminates the support services under Section
4.2 of the Agreement in the manner expressly authorized under this Agreement,
Customer shall receive a refund of the unused portion of the applicable
Telephone Hotline Support Fees (as set forth on the Order Form) paid by
Customer.
5.2 Upon termination of this Agreement by either party or naturally at the
end of the term (i) all rights of Customer (including but not limited to use
of Services and Software) and restrictions on TradingDynamics hereunder shall
terminate, and (ii) Customer will immediately return to TradingDynamics all
Software, catalogues and literature in its possession, custody or control in
whichever form held (including all copies or embodiments thereof) and will
cease using any trade marks, service marks and other designations of
TradingDynamics. Sections 2,3, 5.3, 5.4, 6 - 10 of this Agreement shall
survive termination. Upon any termination, TradingDynamics may, but is not
obligated to, delete archived data.
5.3 Termination is not the sole remedy under this Agreement and, whether or
not termination is affected, all other remedies will remain available.
Neither [ILLEGIBLE] shall incur any liability or compensation obligation
whatsoever for any damage (including, without limitation, damage to or loss
of goodwill or investment), loss or expenses of any kind suffered or incurred
by the other (or for any compensation to the other) arising from or incident
to any termination of this Agreement by such party that complies with the
terms of the Agreement whether or not such party is aware of any such damage,
loss or expenses.
6. WARRANTY AND DISCLAIMER
EXCEPT FOR THE WARRANTIES UNAMBIGUOUSLY AND EXPRESSLY SET FORTH IN SECTION 6
OF THIS AGREEMENT, THE SERVICES AND SOFTWARE ARE PROVIDED "AS IS" AND
TRADINGDYNAMICS AND ITS SUPPLIERS DISCLAIM ALL WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT, WITHOUT LIMITING
THE FOREGOING, NEITHER TRADINGDYNAMICS NOR ITS SUPPLIER WARRANTS THAT THE
SERVICES OR SOFTWARE WILL BE UNINTERRUPTED OR ERROR FREE; NOR DOES
TRADINGDYNAMICS OR ITS SUPPLIERS MAKE ANY WARRANTY AS TO THE RESULTS THAT
MAY BE OBTAINED FROM USE OF THE SERVICES OR SOFTWARE.
(a) TradingDynamics warrants to Customer that for a period of 30 days
after delivery of the Software to Customer, the Service and Software will
operate substantially in accordance with any written specifications provided
for the Service and Software by TradingDynamics.
(b) TRADINGDYNAMICS YEAR 2000 READINESS DISCLOSURE AND WARRANTY.
TradingDynamics warrants to Customer that the Software is Year 2000
Compliant. "Year 2000 Compliant" shall mean that the occurrence of the year
2000 will not, by itself cause the Software to materially fail to comply with
the installation documentation provided by TradingDynamics; provided that (a)
all date data received for use by the Software is accurate and is delivered
to the Software in formats specified in the documentation, (b) all date data
generated by the Software is generated in formats defined by the documentation,
and (c) the Software shall not be obligated to provide date data for interface
functions such as screens, reports or data transmission files in any format
other than that specified in the documentation. For the avoidance of doubt,
TradingDynamics in no event makes any representation or warranty as to the
ability of Software in circumstances where data received for use by the
Software is in formats other than those defined by the documentation. The
foregoing warranty does not apply to anything, including hardware, software,
technology, database management systems and operating systems, provided by
any party other than TradingDynamics.
(c) TradingDynamics' warranties in this Section 6 shall not extend to
problems in the Software that result from: (i) Customer's failure to
implement all Updates issued by TradingDynamics during the warranty period;
(ii) modifications made by Customer to its operating environment that
adversely affects the Software; (iii) any alterations or additions to the
Software not performed by TradingDynamics; (iv) failures in operation of the
Software that are not reproducible in standalone form; (v) Software that is
otherwise operated in violation of this Agreement or other than in accordance
with the applicable documentation therefor; or (vi) failures which are caused
by Customer or Customer's software or other software, hardware or products
not licensed hereunder.
(d) FOR ANY SOFTWARE THAT DOES NOT OPERATE AS WARRANTED IN SECTIONS
6(a) or 6(b), TRADINGDYNAMICS WILL, AT ITS DISCRETION, EITHER REPAIR THE
SOFTWARE, REPLACE THE SOFTWARE OR TERMINATE THE LICENSE AND REFUND THE
RELEVANT LICENSE FEES PAID LESS A REASONABLE SUM FOR USE. THIS IS CUSTOMER'S
EXCLUSIVE REMEDY, AND TRADINGDYNAMICS' SOLE LIABILITY ARISING IN CONNECTION
WITH THE LIMITED WARRANTIES IN SECTIONS 6(a) AND 6(b).
7. LIMITATION OF LIABILITY
NOTWITHSTANDING ANYTHING TO THE CONTRARY, EXCEPT WITH RESPECT TO
SECTIONS 2, 9, OR 10 OR PAYMENTS OWED TO TRADINGDYNAMICS BY CUSTOMER OR
BODILY INJURY OF A PERSON, EACH PARTY ("FIRST PARTY") AND THEIR RESPECTIVE
SUPPLIERS (INCLUDING BUT NOT LIMITED TO ALL EQUIPMENT AND PROPERTY
SUPPLIERS), OFFICERS, AGENTS, AFFILIATES,
3
<PAGE>
REPRESENTATIVES, CONTRACTORS AND EMPLOYEES SHALL NOT BE RESPONSIBLE OR
LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT OR TERMS AND
CONDITIONS RELATED THERETO UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY
OR OTHER THEORY: (A) FOR ERROR OR INTERRUPTION OF USE OR FOR LOSS OR
INACCURACY OR CORRUPTION OF DATA OR COST OF PROCUREMENT OF SUBSTITUTE GOODS,
SERVICES OR TECHNOLOGY OR LOSS OF BUSINESS; (B) FOR ANY INDIRECT, EXEMPLARY,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES; (C) FOR ANY MATTER BEYOND THE
FIRST PARTY'S REASONABLE CONTROL, EVEN IF TRADINGDYNAMICS HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH LOSS OR DAMAGE; OR (D) FOR ANY AMOUNTS THAT, TOGETHER
WITH AMOUNTS ASSOCIATED WITH ALL OTHER CLAIMS, EXCEED THE FEES PAID OR OWED
BY CUSTOMER TO TRADINGDYNAMICS FOR THE SERVICES UNDER THIS AGREEMENT IN THE
12 MONTHS PRIOR TO THE ACT THAT GAVE RISE TO THE LIABILITY. EXCEPT FOR BODILY
INJURY OF A PERSON, WITHOUT LIMITING THE FOREGOING, TRADINGDYNAMICS'
LIABILITY FOR DAMAGES FROM ANY CAUSE OF ACTION WHATSOEVER RELATING TO
TRADINGDYNAMICS' AGREEMENT TO PROVIDE SUPPORT SERVICES SHALL BE LIMITED TO
THE AMOUNT PAID BY CUSTOMER FOR THE SUPPORT SERVICES FOR THE APPLICABLE YEAR.
8. MISCELLANEOUS
The parties agree that they shall issue a mutually agreed upon
press release with respect to this Agreement. Notwithstanding any provision
hereof, for all purposes of this Agreement each party shall be and act as an
independent contractor and not as partner, joint venturer, or agent of the
other and shall not bind nor attempt to bind the other to any contract. If
any provision of this Agreement is found to be unenforceable or invalid, that
provision will be limited or eliminated to the minimum extent necessary so
that this Agreement will otherwise remain in full force and effect and
enforceable. Neither this Agreement nor any rights, licenses or obligations
hereunder, may be assigned or transferred [ILLEGIBLE] Customer (by operation
of law or otherwise) without the prior written approval of TradingDynamics;
provided, however, Customer may assign this Agreement to any acquiror of all
or of substantially all of Customer's assets or business or equity
securities. TradingDynamics may transfer and assign any of its rights and
obligations under this Agreement without consent of Customer. 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,
communications and other understandings relating to the subject matter of
this Agreement, and that all waivers and modifications must be in a writing
signed by both parties. No waiver of any breach of any provision of this
Agreement shall constitute a waiver of any prior, concurrent or subsequent
breach of the same or any other provisions hereof. All notices under this
Agreement will be in writing shall be directed to the CEO and will be deemed
to have been duly given when received in person, by confirmed telecopy or
confirmed e-mail. A party may change its address or designee for notices
upon written notice to the other party. This Agreement shall be governed by
and construed under 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 Contracts for the International Sale of
Goods. Headings and captions are for convenience only and are not to be used
in the interpretation of this Agreement.
9. INFRINGEMENT
TradingDynamics shall hold Customer harmless from damages awarded
to a third party on account of infringement by the Software of any United
States patent or copyright or trade secret, provided TradingDynamics is
promptly notified of any and all threats, claims and proceedings related
thereto and Customer furnishes to TradingDynamics, on TradingDynamics'
request, information available to Customer for such defense and sole control
over the defense and all negotiations for a settlement or compromise;
TradingDynamics will not be responsible for any settlement it does not
approve in writing. Customer shall not admit any such claim without prior
consent of TradingDynamics. In the event that the use of the Software is
enjoined on account of a suit referred to above, TradingDynamics, at its
option, shall use reasonable efforts to procure for Customer the right to
continue using the Software, or to replace or modify the Software so that it
is outside the scope of the injunction but substantially equivalent in
functionality and performance. If TradingDynamics determines that neither of
those actions is reasonably feasible, TradingDynamics shall refund to
Customer the unamortized portion of the license fee actually paid by Customer
for such Software (as amortized on a straight-line basis over one year from
the Effective Date or the beginning of the then-current term, as applicable).
The foregoing obligations of TradingDynamics do not apply with respect to
Software or portions or components thereof (i) that are not supplied by
TradingDynamics, (ii) that are made in whole or in part in accordance with
Customer specifications or as a result of Customer configurations or
implementation, (iii) that are modified by any person or entity other than by
TradingDynamics, (iv) that are combined with other products, processes or
materials where the alleged infringement relates to such combination, (v) to
the extent Customer continues allegedly infringing activity after being
provided with notified modifications that would have avoided the alleged
infringement, or (vi) where Customer's use of the Software is incident to an
infringement not resulting primarily from the Software or is not strictly in
accordance with the Agreement; Customer will indemnify TradingDynamics and
its officers, directors, shareholders, agents and employees from all damages,
settlements, attorneys' fees and expenses related to a claim of infringement
or misapropriation or defamation or violation of rights of publicity or
privacy excluded from TradingDynamics' indemnity obligation by this sentence.
The foregoing states the sole obligation and exclusive liability of
TradingDynamics, and Customer's sole remedy for any claims of intellectual
property infringement.
10. CONFIDENTIALITY
"Confidential Information" means the Software and all communications
concerning Customer's or TradingDynamics' business and marketing strategies,
including but not limited to, employee and customer lists, project plans,
design documents, product strategies and pricing data, research, advertising
plans, leads and sources of supply, web-based development activities, website
design and coding, web interfaces with the Software, anything (including but
not limited to testing scripts) provided by TradingDynamics, and other
information of the parties which by its nature can be reasonably expected to
be proprietary and confidential, whether it is presented in oral,
printed, written, graphic, or photographic or other tangible form (including
information received, stored or transmitted electronically) even though
specific designation as Confidential Information has not been made. Each
party shall not use or disclose the Confidential Information of the other
party, except as expressly and unambiguously provided in the Agreement. This
Section 10 shall survive any termination of the Agreement. TradingDynamics
shall have no obligation to insure or be responsible for any loss or damage to
property of any kind provided by Customer. Notwithstanding anything else to
the contrary, except as required by law or in connection with a financing,
neither partly disclose to any third party any of the terms or conditions of
this Agreement.
4
<PAGE>
ATTACHMENT A
USER TERMS OF USE
- - User represents, covenants, and warrants that it will use the Services
and Software (as defined in the Agreement) only in compliance with all
applicable laws. With respect to TradingDynamics hosted Services,
although TradingDynamics has no obligation to monitor the content
provided by you or your use of the Services, TradingDynamics may do so
and may remove any such content or prohibit any use of the Services it
believes may be (or alleged to be) in violation of the foregoing.
- - ALL SERVICES AND SOFTWARE ARE PROVIDED "AS IS" AND TRADINGDYNAMICS AND
ITS SUPPLIERS DISCLAIM ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING,
BUT NOT LIMITED TO, IMPLIED WARRANTIES OR MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT.
- - NOTWITHSTANDING ANYTHING TO THE CONTRARY, EXCEPT FOR BODILY INJURY OF A
PERSON, NEITHER TRADINGDYNAMICS NOR ITS SUPPLIERS NOR AGENTS SHALL BE
LIABLE UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY
FOR ANY INDIRECT, EXEMPLARY, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES
WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT.
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of PartsBase.com on Form
S-1 of our report dated January 28, 2000, appearing in this prospectus, which is
part of this Registration Statement and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami,Florida
February 18, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANYS BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999 DEC-31-1999
<PERIOD-START> JAN-01-1997 JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<CASH> 0 0 735,276
<SECURITIES> 0 0 0
<RECEIVABLES> 0 0 297,884
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 0 0 1,537,707
<PP&E> 11,972 12,660 1,034,123
<DEPRECIATION> (4,124) (6,576) (24,646)
<TOTAL-ASSETS> 7,848 6,084 4,729,295
<CURRENT-LIABILITIES> 1,709 25,128 2,224,880
<BONDS> 0 0 962,500
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 6,139 (19,044) 1,541,915
<TOTAL-LIABILITY-AND-EQUITY> 7,848 6,084 4,729,295
<SALES> 2,861 3,504 362,224
<TOTAL-REVENUES> 2,861 3,504 362,224
<CGS> 104,041 43,462 1,412,532
<TOTAL-COSTS> 104,041 43,462 1,799,139
<OTHER-EXPENSES> 90,452 108,163 2,192,912
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 0 0 870,675
<INCOME-PRETAX> (191,632) (148,121) (5,913,034)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (191,632) (148,121) (5,913,034)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (191,632) (148,121) (5,913,034)
<EPS-BASIC> 0.02 0.01 (0.64)
<EPS-DILUTED> 0.02 0.01 (0.64)
</TABLE>
