<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 11, 1999
REGISTRATION NO. 333-74659
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------------
STARMEDIA NETWORK, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7375 06-1461770
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
29 WEST 36(TH) STREET
FIFTH FLOOR
NEW YORK, NEW YORK 10018
(212) 548-9600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
FERNANDO J. ESPUELAS
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
STARMEDIA NETWORK, INC.
29 WEST 36(TH) STREET
FIFTH FLOOR
NEW YORK, NEW YORK 10018
(212) 548-9600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
ALEXANDER D. LYNCH, ESQ. KEITH F. HIGGINS, ESQ.
BABAK YAGHMAIE, ESQ. CHRISTOPHER J. AUSTIN, ESQ.
BROBECK, PHLEGER & HARRISON LLP ROPES & GRAY
1633 BROADWAY, 47TH FLOOR ONE INTERNATIONAL PLACE
NEW YORK, NEW YORK 10019 BOSTON, MASSACHUSETTS 02110
(212) 581-1600 (617) 951-7000
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
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. / /
------------------------------
CALCULATION OF REGISTRATION FEE CHART
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C>
Common Stock, par value $.001 per share (including the
associated Rights to purchase Series A Junior Participating
Preferred Stock)(2).......................................... $96,600,000 $26,855(3)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Securities Act of 1933.
(2) The Rights to purchase shares of our Series A Junior Participating Preferred
Stock initially are attached to and trade with the shares of our common
stock being registered hereby. Value attributed to such Rights, if any, is
reflected in the market price of our common stock.
(3) $26,855 of the registration fees has previously been paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION. DATED MAY 11, 1999.
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
<TABLE>
<S> <C> <C>
7,000,000 Shares
STARMEDIA NETWORK, INC.
</TABLE>
Common Stock
------------------
This is an initial public offering of shares of common stock of StarMedia
Network, Inc. All of the 7,000,000 shares of common stock are being sold by
StarMedia.
Before this offering, there has been no public market for the common stock.
StarMedia currently anticipates that the initial public offering price will be
between $10.00 and $12.00 per share. Application has been made for quotation of
the common stock on the Nasdaq National Market under the symbol "STRM".
SEE "RISK FACTORS" BEGINNING ON PAGE 6 TO READ ABOUT FACTORS YOU SHOULD
CONSIDER BEFORE BUYING SHARES OF THE COMMON STOCK.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
<TABLE>
<CAPTION>
Per Share Total
-------------- ----------------
<S> <C> <C>
Initial public offering price..................... $ $
Underwriting discount............................. $ $
Proceeds, before expenses, to StarMedia........... $ $
</TABLE>
The underwriters may, subject to the terms of the underwriting agreement,
purchase up to an additional 1,050,000 shares from StarMedia at the initial
public offering price less the underwriting discount.
------------------------
The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.
GOLDMAN, SACHS & CO.
BANCBOSTON ROBERTSON STEPHENS
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
------------------------
WIT CAPITAL CORPORATION
FACILITATOR OF INTERNET DISTRIBUTION
------------------------------
Prospectus dated , 1999.
<PAGE>
[A FOLD-OUT WITH COLOR PICTURES OF THE STARMEDIA WEB SITE HOME PAGE
AND VARIOUS OTHER PAGES WITHIN THE STARMEDIA WEB SITE;
THE STARMEDIA LOGO AND WEB SITE ADDRESS; AND THE FOLLOWING TEXT:
"TARGETING 500 MILLION PEOPLE . . . 23 COUNTRIES . . . 1 COMMUNITY";
"PAN-REGIONAL COMMUNITY AND EXTENSIVE LOCAL CONTENT";
"HIGHLY ATTRACTIVE ADVERTISING PLATFORM";
"MARKET LEADERSHIP THROUGH BRAND"; AND
"THE LEADING ONLINE NETWORK TARGETING LATIN AMERICA WITH 17 TOPICAL AREAS AND
EXTENSIVE WEB-BASED COMMUNITY FEATURES IN SPANISH AND PORTUGUESE".]
<PAGE>
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES TO THOSE
STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
STARMEDIA NETWORK, INC.
OUR BUSINESS
StarMedia is the leading online network targeting Latin America. Our network
consists of 17 interest-specific areas or channels, extensive Web-based
community features, sophisticated search capabilities and access to online
shopping in Spanish and Portuguese. These channels cover topics of interest to
Latin Americans online, including local and regional news, business and sports.
We promote user affinity to the StarMedia community by providing Spanish and
Portuguese language e-mail, chat rooms, instant messaging and personal
homepages.
At a time when content on the Internet is overwhelmingly in English, we
offer Latin Americans a pan-regional community experience, combined with a broad
array of Spanish and Portuguese content tailored for regional dialects and local
cultural norms. We develop our product offerings both internally and through
strategic relationships with third parties, including Netscape, Disney, Reuters
and Ziff-Davis. We also provide advertisers and merchants targeted access to
Latin American Internet users, an audience with a highly desirable demographic
profile.
The total number of Web pages our users access on our network in a month,
referred to as our monthly page views, have grown from approximately 7 million
in December 1997 to approximately 60 million in March 1999. In addition, as of
March 31, 1999, we had approximately 425,000 registered e-mail users.
Our growing user base provides advertisers and merchants with a highly
attractive platform to reach their target audience and provides us with
additional revenue opportunities. In addition, we believe that StarMedia appeals
to advertisers and merchants because of our:
- focus on Latin America;
- powerful brand image in Latin America;
- highly-targeted and attractive demographic user base; and
- dedicated client services team that assists advertisers in developing,
targeting and analyzing their campaigns.
Consequently, we have been able to attract leading advertisers and sponsors
such as Bradesco, Ford, Fox Television, IBM, Motorola, Nokia and Sony.
OUR MARKET OPPORTUNITY
We believe that growth of Internet usage in Latin America will significantly
outpace growth of worldwide Internet usage over the next several years.
According to Nazca Saatchi & Saatchi, the number of Internet users in Latin
America is expected to increase from 7 million users at the end of 1997 to 34
million users by the end of 2000. In Latin America, 20% of the population
controls an estimated 65% of the overall buying power. Nazca Saatchi & Saatchi
also reports that 90% of Latin American Internet users are from upper and middle
socio-economic classes. This group represents an attractive demographic audience
for advertisers and businesses.
OUR STRATEGY
Our objective is to strengthen our position as the leading online network
across Latin America by:
- aggressively extending our brand recognition;
- enhancing and expanding our network of Spanish and Portuguese content and
pan-regional community;
- pursuing strategic acquisitions and alliances;
- offering Internet access service to our community of users; and
- expanding into additional Spanish- and Portuguese-speaking markets.
3
<PAGE>
RECENT DEVELOPMENTS
In April and May 1999, we completed the private placement of 3,727,272
shares of our common stock to a number of strategic investors for $41 million.
These investors include:
- Critical Path, Inc.
- eBay Inc.;
- Europortal Holding S.A., which is owned by MediaSet;
- Hearst Communications, Inc.;
- National Broadcasting Company, Inc.; and
- Reuters Holdings Switzerland SA.
We intend to work closely with our strategic investors in order to develop
new content and to add new features to our network.
OUR HISTORY
We were incorporated in Delaware in March 1996. We commenced operations in
September 1996 and launched the StarMedia network in December 1996. As of March
31, 1999, we had an accumulated deficit of approximately $72.2 million.
Our principal executive offices are located at 29 West 36(th) Street, Fifth
Floor, New York, New York 10018 and our telephone number is (212) 548-9600. In
addition, we maintain offices in Sao Paulo, Mexico City, Buenos Aires, Bogota,
Santiago, Montevideo, Caracas and Miami. Our Internet address is
www.starmedia.com. The information on our Web site is not a part of this
prospectus.
OUR TRADEMARKS
STARMEDIA and the STARMEDIA logo are registered trademarks and service marks
of StarMedia. STARMEDIA.COM, TALKPLANET, BUSCAWEB, ORBITA, PIZARRAS and (V)PULSE
are trademarks and service marks of StarMedia. All other trademarks and service
marks used in this prospectus are the property of their respective owners.
THE OFFERING
The following information assumes that the underwriters do not exercise the
option we have granted to them to purchase additional shares in this offering.
Please see "Underwriting".
<TABLE>
<S> <C>
Shares offered by StarMedia... 7,000,000 shares
Shares to be outstanding after
this offering...............
53,150,939 shares
Proposed Nasdaq National
Market symbol...............
STRM
Use of proceeds...............
To fund our marketing activities, expand our sales force,
enhance our products and services, make strategic
investments and acquisitions, offer Internet access
services, improve our network infrastructure and for general
corporate purposes. Please see "Use of Proceeds".
</TABLE>
This information is based on our shares of common stock outstanding as of
March 31, 1999 and gives effect to the conversion of all outstanding shares of
redeemable convertible preferred stock into 31,996,667 shares of common stock
automatically on the closing of this offering and 3,727,272 additional shares of
common stock issued to strategic investors at $11.00 per share subsequent to
March 31, 1999. This information excludes:
- 8,229,100 shares subject to options outstanding as of March 31, 1999 at a
weighted average exercise price of $1.92 per share; and
- 8,770,900 additional shares that could be issued under our stock option
plans.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following tables summarize the financial data for our business. You
should read this information with the discussion in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements and notes to those statements included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
PERIOD FROM MARCH 5, DECEMBER 31, MARCH 31,
1996 (INCEPTION) TO ----------------------- -------------------------
DECEMBER 31, 1996 1997 1998 1998 1999
--------------------- --------- ------------ --------- --------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues............................... $ -- $ 460 $ 5,329 $ 256 $ 1,541
Operating expenses:
Product and technology development... 36 1,229 6,816 794 3,562
Sales and marketing.................. 12 2,108 29,274 1,816 9,657
General and administrative........... 78 648 4,600 450 2,410
Depreciation and amortization........ 2 38 774 79 467
Stock-based compensation expense..... -- -- 10,421 2 1,247
-------- --------- ------------ --------- --------------
Total operating expenses............. 128 4,023 51,885 3,141 17,343
-------- --------- ------------ --------- --------------
Operating loss......................... (128) (3,563) (46,556) (2,885) (15,802)
Interest income, net................. -- 35 670 28 421
-------- --------- ------------ --------- --------------
Net loss............................... (128) (3,528) (45,886) (2,857) (15,381)
-------- --------- ------------ --------- --------------
Preferred stock dividends and
accretion............................ -- (185) (4,536) (295) (2,541)
Net loss available to common
shareholders......................... $ (128) $ (3,713) $(50,422) $ (3,152) $ (17,922)
-------- --------- ------------ --------- --------------
-------- --------- ------------ --------- --------------
Basic and diluted net loss per share... $ (0.01) $ (.37) $ (4.94) $ (.31) $ (1.72)
-------- --------- ------------ --------- --------------
Shares used in computing basic and
diluted net loss per share........... 9,147 10,012 10,202 10,012 10,410
-------- --------- ------------ --------- --------------
Pro forma basic and diluted net loss
per share............................ $ (1.09) $ (.36)
------------ --------------
------------ --------------
Shares used in computing pro forma
basic and diluted net loss per
share................................ 42,199 42,406
------------ --------------
------------ --------------
</TABLE>
The following table is a summary of our balance sheet at March 31, 1999. The
pro forma data give effect to the conversion of our redeemable convertible
preferred stock and the sale of 3,727,272 shares of common stock at $11.00 per
share subsequent to March 31, 1999 and the application of the net proceeds
therefrom. The pro forma as adjusted data reflect the sale of 7,000,000 shares
of common stock at an assumed initial public offering price of $11.00 per share,
after deducting underwriting discounts and estimated offering expenses.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- ------------
<S> <C> <C> <C>
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................................. $ 40,588 $ 79,948 $ 150,294
Working capital........................................................... 31,383 70,743 141,664
Total assets.............................................................. 53,889 93,249 162,784
Redeemable convertible preferred stock.................................... 99,035 -- --
Total stockholders' (deficit) equity...................................... (60,232) 78,163 148,273
</TABLE>
5
<PAGE>
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER
THE RISKS DESCRIBED BELOW BEFORE YOU DECIDE TO BUY OUR COMMON STOCK. IF ANY OF
THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR RESULTS
OF OPERATIONS WOULD LIKELY SUFFER. IN THIS CASE, THE TRADING PRICE OF OUR COMMON
STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATED TO OUR FINANCIAL CONDITION AND BUSINESS MODEL
OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT
We were incorporated in March 1996. We commenced operations in September
1996 and launched the StarMedia network in December 1996. Accordingly, we have
only a limited operating history for you to evaluate our business. You must
consider the risks, expenses and uncertainties that an early stage company like
ours faces. These risks include our ability to:
- increase awareness of the StarMedia brand and continue to build user
loyalty;
- expand the content and services on our network;
- attract a larger audience to our network;
- attract a large number of advertisers from a variety of industries;
- maintain our current, and develop new, strategic relationships;
- respond effectively to competitive pressures; and
- continue to develop and upgrade our technology.
If we are unsuccessful in addressing these risks, our business, financial
condition and results of operations will be materially and adversely affected.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for detailed information on our limited operating
history.
WE HAVE NEVER MADE MONEY AND EXPECT OUR LOSSES TO CONTINUE
We have never been profitable. As of March 31, 1999, we had an accumulated
deficit of approximately $72.2 million. We expect to continue to incur
significant losses for the foreseeable future. Although our revenues have grown
in recent quarters, our expenses have grown even faster and we expect to
increase our spending significantly. Accordingly, we will need to generate
significant revenues to achieve profitability. We may not be able to do so.
OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATION AND YOU
SHOULD NOT RELY ON THEM AS AN INDICATION OF OUR FUTURE RESULTS
Our future revenues and results of operations may significantly fluctuate
due to a combination of factors. Accordingly, you should not rely on
quarter-to-quarter comparisons of our results of operations as an indication of
our future performance. It is possible that in future periods our results of
operations may be below the expectations of public market analysts and
investors. This could cause the trading price of our common stock to decline.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" for factors which may impact our quarterly results.
OUR OPERATING RESULTS MAY FLUCTUATE DUE TO SEASONAL FACTORS
The level of use on our network is highly seasonal. This may cause
fluctuations in our revenues and operating results. Visitor traffic on our
network has historically been significantly lower during the first calendar
quarter of the year because:
- it includes the summer months in much of Latin America;
- our target audience tends to take extended vacations during these months;
and
6
<PAGE>
- schools and universities are generally closed.
As a result, advertisers have historically spent less in the first and second
calendar quarters. We believe that these seasonal trends will continue to affect
our results of operations. If our expenses increase during these periods, we may
not generate sufficient revenue to offset these expenses.
WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT FUNDS TO GROW OUR BUSINESS
We intend to continue to grow our business. Because we expect to generate
losses for the foreseeable future, we do not expect that income from our
operations will be sufficient to meet these needs. Therefore, we will likely
have substantial future capital requirements after this offering. Obtaining
additional financing will be subject to a number of factors, including:
- market conditions;
- our operating performance; and
- investor sentiment.
These factors may make the timing, amount, terms and conditions of
additional financing unattractive for us. If we are unable to raise additional
capital, our growth could be impeded.
RISKS RELATED TO OUR MARKETS AND STRATEGY
OUR BUSINESS WILL SUFFER IF THE INTERNET IS NOT ACCEPTED AS A MEDIUM FOR
ADVERTISING AND COMMERCE
We expect to derive most of our revenue for the foreseeable future from
Internet advertising, and to a lesser extent, from electronic commerce. If the
Internet is not accepted as a medium for advertising and commerce, our business
will suffer. The Internet advertising market is new and rapidly evolving,
particularly in Latin America. As a result, we cannot gauge its effectiveness or
long term market acceptance as compared with traditional media.
Advertisers and advertising agencies must direct a portion of their budgets
to the Internet and, specifically, to our network. Many of our current or
potential advertising and electronic commerce partners have limited experience
using the Internet for advertising purposes and historically have not devoted a
significant portion of their advertising budgets to Internet-based advertising.
Advertisers that have invested substantial resources in other methods of
conducting business may be reluctant to adopt a new strategy that may limit or
compete with their existing efforts.
In addition, companies may choose not to advertise on the StarMedia network
if they do not perceive our audience demographic to be desirable or advertising
on our network to be effective. No standards have been widely accepted for the
measurement of the effectiveness of Internet advertising. Standards may not
develop sufficiently to support the Internet as an effective advertising medium.
If these standards do not develop, advertisers may choose not to advertise on
the Internet in general or, specifically, on our network. This would have a
material adverse effect on our business, financial condition and results of
operations.
SOCIAL AND POLITICAL CONDITIONS IN LATIN AMERICA ARE VOLATILE AND MAY MAKE IT
DIFFICULT TO CONTINUE GROWING AS EXPECTED
We have and expect to continue to derive substantially all of our revenues
from the Latin American markets. Social and political conditions in Latin
America are volatile and may cause our operations to fluctuate. This volatility
could make it difficult for us to sustain our expected growth in revenues and
earnings, which could have an adverse effect on our stock price. Historically,
volatility has been caused by:
- significant governmental influence over many aspects of local economies;
- political instability;
- unexpected changes in regulatory requirements;
7
<PAGE>
- social unrest;
- slow or negative growth;
- imposition of trade barriers; and
- wage and price controls.
We have no control over these matters. Volatility resulting from these matters
may decrease Internet availability, create uncertainty regarding our operating
climate and adversely affect our customers' advertising budgets, all of which
may adversely impact our business.
CURRENCY FLUCTUATIONS AND GENERAL ECONOMIC CONDITIONS IN LATIN AMERICAN
COUNTRIES MAY IMPACT OUR CUSTOMERS' SPENDING AND THE VALUE OF MONEY OWED TO US
The currencies of many countries in Latin America, including Brazil and
Argentina, have experienced substantial depreciation and volatility. The
currency fluctuations, as well as high interest rates, inflation and high
unemployment, have materially and adversely affected the economies of these
countries. Poor general economic conditions in Latin American countries may
cause our customers to reduce their advertising spending, which could adversely
impact our business and could cause our revenue to decline unexpectedly.
Our reporting currency is the U.S. dollar. In a number of cases, however,
customers in Latin America may be billed in local currencies. Our accounts
receivable from these customers will decline in value if the local currencies
depreciate relative to the U.S. dollar. To date, we have not tried to reduce our
exposure to exchange rate fluctuations by using hedging transactions. Although
we may enter into hedging transactions in the future, we may not be able to do
so successfully. In addition, our currency exchange losses may be magnified if
we become subject to exchange control regulations restricting our ability to
convert local currencies into U.S. dollars.
IF THE INTERNET IN LATIN AMERICA DOES NOT GROW, OUR BUSINESS WILL SUFFER
The Latin American Internet market is in an early stage of development. Our
future success depends on the continued growth of the Internet in Latin America.
Our business, financial condition and results of operations will be materially
and adversely affected if Internet usage in Latin America does not continue to
grow or grows more slowly than we anticipate. Internet usage in Latin America
may be inhibited for a number of reasons, including:
- the cost of Internet access;
- concerns about security, reliability, and privacy;
- ease of use; and
- quality of service.
UNDERDEVELOPED LATIN AMERICAN TELECOMMUNICATIONS INFRASTRUCTURES MAY LIMIT
ACCESS TO THE INTERNET
Access to the Internet requires a relatively advanced telecommunications
infrastructure. The telecommunications infrastructure in many parts of Latin
America is not as well-developed as in the United States or Europe. The quality
and continued development of the telecommunications infrastructure in Latin
America will have a substantial impact on our ability to deliver our services
and on the market acceptance of the Internet in Latin America in general. If
further improvements to the Latin American telecommunications infrastructure are
not made, the Internet will not gain broad market acceptance in Latin America.
If access to the Internet in Latin America does not continue to grow or grows
more slowly than we anticipate, our business, financial condition and results of
operations will be materially and adversely affected.
HIGH COST OF INTERNET ACCESS MAY LIMIT THE GROWTH OF THE INTERNET IN LATIN
AMERICA
Each country in Latin America has its own telephone rate structure which, if
too expensive, may cause consumers to be less likely to access and transact
business over the Internet. Although rates charged by Internet service providers
and local telephone companies have been reduced recently in some countries, we
do not know whether this trend will continue. Unfavorable rate developments
could decrease our visitor traffic and our ability to derive revenues from
8
<PAGE>
transactions over the Internet. This could have a material adverse effect on our
business, financial condition and results of operations.
OUR BUSINESS WILL SUFFER IF OUR PAN-REGIONAL APPROACH TO CONTENT DELIVERY DOES
NOT ATTRACT USERS
Latin America is made up of a number of diverse markets that differ
historically, culturally, economically and politically. We use a pan-regional
approach of customizing our content and advertisements to a particular user
based on the user's location. Users, however, may prefer content which is
specifically created for a local audience within Latin America using a strictly
localized approach over our pan-regional approach. If users do not find the
pan-regional content on our network appealing, they will decrease in number and
advertisers will find our network an unattractive medium on which to advertise.
WE HAVE RECENTLY ANNOUNCED THAT WE WILL BE OFFERING INTERNET ACCESS SERVICES IN
LATIN AMERICA, AND IT IS UNCERTAIN WHETHER THESE SERVICES WILL ACHIEVE
WIDESPREAD CUSTOMER ACCEPTANCE
We intend to offer Internet access services beginning in the second half of
1999. We have contracted with IBM to provide these services. We may also acquire
or develop additional Internet access services in the future. We have no
experience in marketing or operating an Internet access service, and we may not
be able to do so successfully. If we are not able to successfully develop,
market or operate our Internet access services, our expenses could increase
substantially without generating significant additional revenue, our
management's time may be wasted and our business may otherwise be materially and
adversely affected.
IF WE FAIL TO DEVELOP OUR BRAND, WE WILL NOT ATTRACT VISITORS TO OUR NETWORK AND
OUR BUSINESS WILL SUFFER
Maintaining the StarMedia brand is critical to our ability to expand our
user base and our revenues. We believe that the importance of brand recognition
will increase as the number of Internet sites in Latin America grows. In order
to attract and retain Internet users, advertisers and electronic commerce
partners, we intend to increase substantially our expenditures for creating and
maintaining brand loyalty.
Our success in promoting and enhancing the StarMedia brand will also depend
on our success in providing high quality content, features and functionality. If
we fail to promote our brand successfully or if visitors to our network or
advertisers do not perceive our services to be of high quality, the value of the
StarMedia brand could be diminished. This could have a material and adverse
effect on the business, financial condition and results of operations.
ADVERTISING PRICING MODELS WE ADOPT MAY NOT BE THE MOST PROFITABLE
Different pricing models are used to sell advertising on the Internet, and
the models we adopt may prove to not be the most profitable. Advertising based
on impressions, or the number of times an advertisement is delivered to users,
currently comprises substantially all of our revenues. To the extent that
minimum guaranteed impression levels are not met, we defer recognition of the
corresponding revenues until guaranteed impression levels are achieved. To the
extent that minimum impression levels are not achieved, we may be required to
provide additional impressions after the contract term, which would reduce our
advertising inventory. This could have a material adverse effect on our
business, financial condition and results of operations. It is difficult to
predict which pricing model, if any, will emerge as the industry standard. This
makes it difficult to project our future advertising rates and revenues. Our
advertising revenues could be adversely affected if we are unable to adapt to
new forms of Internet advertising or we do not adopt the most profitable form.
9
<PAGE>
IF WE ARE UNABLE TO ADEQUATELY TRACK AND MEASURE THE DELIVERY OF ADVERTISEMENTS,
COMPANIES MAY NOT FIND OUR NETWORK AN ATTRACTIVE MEDIUM ON WHICH TO ADVERTISE
It is important to our advertisers that we accurately measure the
demographics of our user base and the delivery of advertisements on our network.
Companies may choose to not advertise on our network or may pay less for
advertising if they do not perceive our ability to track and measure the
delivery of advertisements to be reliable. We depend on third parties to provide
us with some of these measurement services. If they are unable to provide these
services in the future, we would need to perform them ourselves or obtain them
from another provider. This could cause us to incur additional costs or cause
interruptions in our business during the time we are replacing these services.
We are currently implementing additional systems designed to record information
on our users. If we do not implement these systems successfully, we may not be
able to accurately evaluate the demographic characteristics of our users.
THE LOSS OF ONE OF OUR TOP ADVERTISERS COULD SIGNIFICANTLY REDUCE OUR
ADVERTISING REVENUE
In 1998, our top advertiser, Fox Latin America, accounted for approximately
23% of our total advertising revenues. In 1998, our top five advertisers
accounted for approximately 62% of our total revenues. In the first quarter of
1999, our top advertiser, Netscape, accounted for approximately 19% of our total
revenues. In the first quarter of 1999, our top 5 advertisers accounted for
approximately 60% of our total revenues. Our business, results of operations and
financial condition could be materially and adversely affected by the loss of
one or more of our top advertisers. If we do not attract additional advertisers,
our business, financial condition and results of operations could be materially
adversely affected.
IF OUR ADVERTISING SALES DEPARTMENT DOES NOT MAINTAIN AND INCREASE OUR
ADVERTISING SALES, OUR REVENUES WILL NOT GROW AS EXPECTED
We depend on our advertising sales department to maintain and increase our
advertising sales. Our business, financial condition and results of operations
could be materially and adversely affected if our advertising sales department
is not effective. As of March 31, 1999, our advertising sales department
consisted of over 75 employees. Although we expect our advertising sales
department to grow, it can take a relatively long period of time before new
sales personnel become productive.
WE MAY HAVE DIFFICULTY MANAGING OUR EXPANDING OPERATIONS
We have recently experienced a period of rapid growth. This has placed a
significant strain on our managerial, operational and financial resources. To
accommodate this growth, we must implement new or upgraded operating and
financial systems, procedures and controls throughout many different locations.
We may not succeed with these efforts. Our failure to expand and integrate these
areas in an efficient manner could cause our expenses to grow, our revenues to
decline or grow more slowly than expected and could otherwise have a material
adverse effect on our business, financial condition and results of operations.
IF WE ARE UNABLE TO HIRE AND RETAIN KEY PERSONNEL, OUR BUSINESS AND GROWTH WILL
SUFFER
We depend on the services of our senior management and key technical
personnel. In particular, our success depends on the continued efforts of our
Chairman and Chief Executive Officer, Fernando J. Espuelas, and our President,
Jack C. Chen. The loss of the services of either executive officer or any of our
key management, sales or technical personnel could have a material adverse
effect on our business, financial condition and results of operations. In
addition, our success is largely
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<PAGE>
dependent on our ability to hire highly qualified managerial, sales and
technical personnel. These individuals are in high demand and we may not be able
to attract the staff we need. The difficulties and costs in connection with our
personnel growth are compounded by the fact that many of our operations are
internationally based.
IF WE ARE UNABLE TO INTEGRATE OUR JOINT VENTURES, ACQUISITIONS AND ALLIANCES,
OUR BUSINESS MAY BE DISRUPTED
In the past, we have acquired or developed alliances or joint ventures with
complementary businesses, technologies, services or products. In particular, in
the first and second quarter of 1999, we acquired two Internet companies in
Brazil and have entered into an agreement to acquire an Internet company in
Spain. The closing of our acquisition in Spain is subject to a number of
conditions. Therefore, we may not be able to complete the acquisition as
planned. Moreover, we may be unable to integrate or implement these joint
ventures, acquisitions or alliances effectively. Any difficulties in this
process could disrupt our ongoing business, distract our management and
employees, increase our expenses and otherwise adversely affect our business.
FINANCING FOR FUTURE JOINT VENTURES, ACQUISITIONS OR ALLIANCES MAY NOT BE
AVAILABLE OR MAY DILUTE EXISTING STOCKHOLDERS
We do not know if we will be able to identify any future joint ventures,
acquisitions or alliances or that we will be able to successfully finance these
transactions. A failure to identify or finance future transactions may impair
our growth. In addition, to finance these transactions, it may be necessary for
us to raise additional funds through public or private financings. Any equity or
debt financings, if available at all, may impact our operations and, in the case
of equity financings, may result in dilution to existing stockholders.
COMPETITION COULD REDUCE OUR MARKET SHARE AND HARM OUR BUSINESS
There are many companies that provide Web sites and online destinations
targeted to Latin Americans and Spanish- and Portuguese-speaking people in
general. Competition for visitors, advertisers and electronic commerce partners
is intense and is expected to increase significantly in the future because there
are no substantial barriers to entry in our market.
Increased competition could result in:
- lower advertising rates;
- price reductions and lower profit margins;
- loss of visitors;
- reduced page views; or
- loss of market share.
Any one of these could materially and adversely affect our business,
financial condition and results of operations.
In addition, our competitors may develop content that is better than ours or
that achieves greater market acceptance. It is also possible that new
competitors may emerge and acquire significant market share. A loss of users to
our competitors may have a material and adverse effect on our business,
financial condition and results of operations.
IF WE DO NOT CONTINUALLY ENHANCE AND DEVELOP THE CONTENT AND FEATURES OF OUR
NETWORK, WE WILL NOT ATTRACT VISITORS OR ADVERTISERS
To remain competitive, we must continue to enhance and improve our content.
In addition, we must:
- continually improve the responsiveness, functionality and features of our
network; and
- develop other products and services that are attractive to users and
advertisers.
We may not succeed in developing or introducing features, functions,
products and services that visitors and advertisers find attractive in a timely
manner. This would likely
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<PAGE>
reduce our visitor traffic and materially and adversely affect our business,
financial condition and results of operations.
We constantly attempt to determine what content, features and functionality
our target audience wants. We rely to a large extent on third parties for our
content, much of which is easily available from other sources. If other networks
present the same or similar content in a superior manner, it would adversely
affect our visitor traffic.
A FAILURE TO ESTABLISH AND MAINTAIN STRATEGIC THIRD-PARTY RELATIONSHIPS COULD
LIMIT OUR ABILITY TO ATTRACT AND RETAIN USERS
We have focused on establishing relationships with leading content
providers, electronic commerce merchants, technology providers and
infrastructure providers. Our business depends extensively on these
relationships. Because most of our agreements with these third parties are not
exclusive, our competitors may seek to use the same partners as we do and
attempt to adversely impact our relationships with our partners. We might not be
able to maintain these relationships or replace them on financially attractive
terms. If the parties with which we have these relationships do not adequately
perform their obligations, reduce their activities with us, choose to compete
with us or provide their services to a competitor, we may have more difficulty
attracting and maintaining visitors to our network and our business, financial
condition and results of operations could be materially and adversely affected.
Also, we intend to actively seek additional relationships in the future. Our
efforts in this regard may not be successful.
RISKS RELATED TO THE INTERNET AND OUR TECHNOLOGY INFRASTRUCTURE
UNEXPECTED NETWORK INTERRUPTIONS CAUSED BY SYSTEM FAILURES MAY RESULT IN REDUCED
VISITOR TRAFFIC, REDUCED REVENUE AND HARM TO OUR REPUTATION
In the past, we have experienced:
- system disruptions;
- inaccessibility of our network;
- long response times;
- impaired quality; and
- loss of important reporting data.
Although we are in the process of improving our network, we may not be
successful in implementing these measures. If we experience delays and
interruptions, visitor traffic may decrease and our brand could be adversely
affected. Because our revenues depend on the number of individuals who use our
network, our business may suffer if our improvement efforts are unsuccessful.
We maintain our central production servers at the New Jersey data center of
Exodus Communications. We also have a second co-location facility at Digital
Island in New York. A failure by Exodus or Digital Island to protect their
systems against damage from fire, hurricanes, power loss, telecommunications
failure, break-ins or other events, could have a material adverse effect on our
business, financial condition and results of operations.
CONCERNS ABOUT SECURITY OF THE INTERNET MAY REDUCE THE USE OF OUR NETWORK AND
IMPEDE OUR GROWTH
A significant barrier to electronic commerce and confidential communications
over the Internet has been the need for security. Internet usage could decline
if any well-publicized compromise of security occurred. We may incur significant
costs to protect against the threat of security breaches or to alleviate
problems caused by these breaches. Unauthorized persons could attempt to
penetrate our network security. If successful, they could misappropriate
proprietary information or cause interruptions in our services. As a result, we
may be required to expend capital and resources to protect against or to
alleviate these problems. Security breaches could have a material adverse effect
on our business, financial condition and results of operations.
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<PAGE>
COMPUTER VIRUSES MAY ADVERSELY AFFECT OUR BUSINESS
Computer viruses may cause our systems to incur delays or other service
interruptions. In addition, the inadvertent transmission of computer viruses
could expose us to a material risk of loss or litigation and possible liability.
Moreover, if a computer virus affecting our system is highly publicized, our
reputation could be materially damaged and our visitor traffic may decrease.
YEAR 2000 PROBLEMS MAY DISRUPT OUR BUSINESS
Many currently installed computer systems and software products only accept
two digits to identify the year in any date. Therefore, the year 2000 will
appear as "00", which the system might consider to be the year 1900 rather than
the year 2000. This could result in system failures, delays or miscalculations
causing disruptions to our operations. Our failure to correct a material Year
2000 problem could have a material adverse effect on our business, financial
condition and results of operations.
We are currently conducting an inventory, and developing testing procedures,
for all software and other systems that we believe might be affected by Year
2000 issues. Since third parties developed and currently support many of the
systems that we use, a significant part of this effort will be to ensure that
these third-party systems are Year 2000 compliant. We plan to confirm this
compliance through a combination of the representation by these third parties of
their products' Year 2000 compliance, as well as specific testing of these
systems. Please see "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
RISKS RELATED TO LEGAL UNCERTAINTY
GOVERNMENTAL REGULATIONS REGARDING THE INTERNET MAY BE ENACTED WHICH COULD
IMPEDE OUR BUSINESS
To date, governmental regulations have not materially restricted use of the
Internet in our markets. However, the legal and regulatory environment that
pertains to the Internet is uncertain and may change. Uncertainty and new
regulations could increase our costs of doing business and prevent us from
delivering our products and services over the Internet. The growth of the
Internet may also be significantly slowed. This could delay growth in demand for
our network and limit the growth of our revenues.
In addition to new laws and regulations being adopted, existing laws may be
applied to the Internet. New and existing laws may cover issues which include:
- sales and other taxes;
- user privacy;
- pricing controls;
- characteristics and quality of products and services;
- consumer protection;
- cross-border commerce;
- libel and defamation;
- copyright, trademark and patent infringement;
- pornography; and
- other claims based on the nature and content of Internet materials.
WE MAY BECOME SUBJECT TO CLAIMS REGARDING FOREIGN LAWS AND REGULATIONS
Because we have employees, property and business operations in the United
States and throughout Latin America, we are subject to the laws and the court
systems of many jurisdictions. We may become subject to claims based on foreign
jurisdictions for violations of their laws. In addition, these laws may be
changed or new laws may be enacted in the future. International litigation is
often expensive, time consuming and distracting. Accordingly, any of the
foregoing could have a material adverse effect on our business, financial
condition and results of operations.
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<PAGE>
UNAUTHORIZED USE OF OUR INTELLECTUAL PROPERTY BY THIRD PARTIES MAY DAMAGE OUR
BRAND
We regard our copyrights, service marks, trademarks, trade secrets and other
intellectual property as critical to our success. Unauthorized use of our
intellectual property by third parties may damage our brand and our reputation.
We rely on trademark and copyright law, trade secret protection and
confidentiality and/or license agreements with our employees, customers,
partners and others to protect our intellectual property rights. Despite our
precautions, it may be possible for third parties to obtain and use our
intellectual property without authorization. Furthermore, the validity,
enforceability and scope of protection of intellectual property in Internet-
related industries is uncertain and still evolving. The laws of some foreign
countries are uncertain or do not protect intellectual property rights to the
same extent as do the laws of the United States.
DEFENDING AGAINST INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS COULD BE EXPENSIVE,
AND IF WE ARE NOT SUCCESSFUL, COULD DISRUPT OUR BUSINESS
We cannot be certain that our products do not or will not infringe valid
patents, copyrights or other intellectual property rights held by third parties.
We may be subject to legal proceedings and claims from time to time relating to
the intellectual property of others in the ordinary course of our business. We
may incur substantial expenses in defending against these third-party
infringement claims, regardless of their merit. Successful infringement claims
against us may result in substantial monetary liability or may materially
disrupt the conduct of our business.
WE MAY BE SUBJECT TO CLAIMS BASED ON THE CONTENT WE PROVIDE OVER OUR NETWORK
The laws in the United States and in Latin American countries relating to
the liability of companies which provide online services, like ours, for
activities of their visitors are currently unsettled. Claims have been made
against online service providers and networks in the past for defamation,
negligence, copyright or trademark infringement, obscenity, personal injury or
other theories based on the nature and content of information that was posted
online by their visitors. We could be subject to similar claims and incur
significant costs in their defense. In addition, we could be exposed to
liability for the selection of listings that may be accessible through our
network or through content and materials that our visitors may post in
classifieds, message boards, chat rooms or other interactive services. It is
also possible that if any information provided through our services contains
errors, third parties could make claims against us for losses incurred in
reliance on the information. We offer Web-based e-mail services, which expose us
to potential liabilities or claims resulting from:
- unsolicited e-mail;
- lost or misdirected messages;
- illegal or fraudulent use of e-mail; or
- interruptions or delays in e-mail service.
Investigating and defending these claims is expensive, even if they do not
result in liability.
WE MAY BE SUBJECT TO CLAIMS BASED ON PRODUCTS SOLD ON OUR NETWORK
We have entered into arrangements to offer third-party products and services
on our network under which we may be entitled to receive a share of revenues
generated from these transactions. These arrangements may subject us to
additional claims including product liability or personal injury from the
products and services, even if we do not ourselves provide the products or
services. These claims may require us to incur significant expenses in their
defense or satisfaction. While our agreements with these parties often provide
that we will be indemnified against such liabilities, such indemnification may
not be adequate.
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<PAGE>
Although we carry general liability insurance, our insurance may not cover
all potential claims to which we are exposed or may not be adequate to indemnify
us for all liability that may be imposed. Any imposition of liability that is
not covered by insurance or is in excess of insurance coverage could have a
material adverse effect on our business, financial condition and results of
operations or could result in the imposition of criminal penalties. In addition,
the increased attention focused on liability issues as a result of these
lawsuits and legislative proposals could impact the overall growth of Internet
use.
RISKS RELATED TO THIS OFFERING
WE WILL HAVE DISCRETION AS TO THE USE OF THE PROCEEDS OF THIS OFFERING, WHICH WE
MAY NOT USE EFFECTIVELY
We have not committed the net proceeds of this offering to any particular
purpose. Our management will therefore have significant flexibility in applying
the net proceeds of this offering, including ways in which stockholders may
disagree. If we do not apply the funds we receive effectively, our accumulated
deficit will increase and we may lose significant business opportunities. See
"Use of Proceeds".
OUR STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE AND COULD DROP UNEXPECTEDLY
Following this offering, the price at which our common stock will trade is
likely to be highly volatile and may fluctuate substantially.
In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have affected the market prices for the
securities of technology companies, particularly Internet companies. As a
result, investors in our common stock may experience a decrease in the value of
their common stock regardless of our operating performance or prospects. 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. Many companies in our industry have been subject to this
type of litigation in the past. We may also become involved in this type of
litigation. Litigation is often expensive and diverts management's attention and
resources, which could have a material adverse effect upon our business,
financial condition and results of operations.
SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD ADVERSELY AFFECT OUR
STOCK PRICE
The market price of our common stock could decline as a result of sales by
our existing stockholders of shares of common stock in the market after this
offering, or the perception that these sales could occur. These sales also might
make it difficult for us to sell equity securities in the future at a time and
at a price that we deem appropriate. Please see "Shares Eligible for Future
Sale".
OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER THAT STOCKHOLDERS
MAY CONSIDER FAVORABLE
Provisions in our charter and bylaws may have the effect of delaying or
preventing a change of control or changes in our management that stockholders
consider favorable or beneficial. See "Description of Capital Stock". If a
change of control or change in management is delayed or prevented, the market
price of our common stock could suffer.
WE ARE CONTROLLED BY A SMALL GROUP OF OUR EXISTING STOCKHOLDERS, WHOSE INTERESTS
MAY DIFFER FROM OTHER STOCKHOLDERS
Our directors, executive officers and affiliates currently beneficially own
approximately 62.3% of the outstanding shares of our common stock, and after the
offering will beneficially own approximately 54.6% of the outstanding shares of
our common stock. Accordingly, they will have significant influence in
determining the outcome of any corporate transaction or other matter submitted
to the stockholders for approval, including mergers,
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<PAGE>
consolidations and the sale of all or substantially all of our assets, and also
the power to prevent or cause a change in control. The interests of these
stockholders may differ from the interests of the other stockholders.
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price per share will significantly exceed the
net tangible book value per share. Accordingly, investors purchasing shares in
this offering will suffer immediate and substantial dilution of their
investment. Please see "Dilution".
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<PAGE>
FORWARD-LOOKING STATEMENTS; MARKET DATA
Many statements made in this prospectus under the captions "Prospectus
Summary", "Risk Factors", "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere are
forward-looking statements that are not based on historical facts. Because these
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual results to differ materially from those
expressed or implied by these forward-looking statements, including those
discussed under "Risk Factors".
This prospectus contains market data related to our business and the
Internet. This market data includes projections that are based on a number of
assumptions. The assumptions include that:
- no catastrophic failure of the Internet will occur;
- the number of people online and the total number of hours spent online
will increase significantly over the next five years;
- the value of online advertising dollars spent per online user hour will
increase;
- the download speed of content will increase dramatically; and
- Internet security and privacy concerns will be adequately addressed.
If any one or more of the foregoing assumptions turns out to be incorrect,
actual results may differ from the projections based on these assumptions. The
Internet-related markets may not grow over the next three to four years at the
rates projected by these market data, or at all. The failure of these markets to
grow at these projected rates may have a material adverse effect on our
business, results of operations and financial condition, and the market price of
our common stock.
The forward-looking statements made in this prospectus relate only to events
as of the date on which the statements are made. We undertake no obligation to
update any forward-looking statement to reflect events or circumstances after
the date on which the statement is made or to reflect the occurrence of
unanticipated events.
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<PAGE>
USE OF PROCEEDS
The net proceeds we will receive from the sale of the shares of common stock
offered by us are estimated to be $70.1 million, assuming an initial public
offering price of $11.00 per share and after deducting the estimated
underwriting discount and offering expenses. If the underwriters' over-allotment
option is exercised in full, we estimate that the net proceeds we will receive
will be $80.9 million.
We intend to use the proceeds of this offering as follows:
- to fund our marketing activities;
- to expand our sales force;
- to enhance our products and services;
- to make strategic investments and acquisitions;
- to offer Internet access service to Latin American Internet users;
- to improve our network infrastructure; and
- for general corporate purposes.
We have not determined the amount of net proceeds to be used for each of the
specific purposes indicated. Accordingly, our management will have significant
flexibility in applying the net proceeds of the offering. Pending any use, the
net proceeds of this offering will be invested in short-term, interest-bearing
securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain future earnings, if any, to finance the expansion of
our business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999:
- on an actual basis;
- on a pro forma basis after giving effect to (1) the automatic conversion
of all outstanding shares of our convertible preferred stock into common
stock, (2) the sale of 3,727,272 additional shares of our common stock at
$11.00 per share subsequent to March 31, 1999 and the application of the
net proceeds therefrom, and (3) an increase in our authorized common stock
to 200,000,000 shares and a decrease in our authorized preferred stock to
10,000,000 shares; and
- on a pro forma as adjusted basis to reflect our sale of shares of common
stock at an assumed initial public offering price of $11.00 per share,
after deducting underwriting discounts and commissions and estimated
offering expenses payable by us. Please see "Use of Proceeds".
You should read this information together with our consolidated financial
statements and the notes to those statements appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
--------------------------------------
<S> <C> <C> <C>
PRO FORMA AS
ACTUAL PRO FORMA ADJUSTED
---------- ----------- -------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Capital lease obligations--current portion................................ $ 166 $ 166 $ 166
Long-term debt............................................................ 3,626 3,626 3,626
Preferred stock, 60,000,000 shares authorized (actual); 10,000,000 shares
authorized (pro forma and pro forma as adjusted):
Series A redeemable convertible preferred stock, $.001 par value;
7,330,000 shares authorized, issued and outstanding (actual); no
shares authorized, issued or outstanding (pro forma and pro forma as
adjusted)........................................................... 4,311 -- --
Series B redeemable convertible preferred stock, $.001 par value;
8,000,000 shares authorized, issued and outstanding (actual); no
shares authorized, issued or outstanding (pro forma and pro forma as
adjusted)........................................................... 13,246 -- --
Series C redeemable convertible preferred stock, $.001 par value;
16,666,667 shares authorized, issued and outstanding (actual); no
shares authorized, issued or outstanding (pro forma and pro forma as
adjusted)........................................................... 81,478 -- --
Stockholders' (deficit) equity:
Common stock, $.001 par value; 100,000,000 shares authorized (actual);
200,000,000 shares authorized (pro forma and pro forma as adjusted);
10,427,000 shares issued and outstanding (actual); 46,150,939 shares
issued and outstanding (pro forma); 53,150,939 shares issued and
outstanding (pro forma as adjusted)................................. 10 46 53
Additional paid in capital................................................ 21,057 159,416 229,519
Deferred compensation..................................................... (8,896) (8,896) (8,896)
Other comprehensive income................................................ (218) (218) (218)
Accumulated deficit....................................................... (72,185) (72,185) (72,185)
---------- ----------- -------------
Total stockholders' (deficit) equity...................................... (60,232) 78,163 148,273
---------- ----------- -------------
Total capitalization...................................................... $ 42,595 $ 81,955 $ 152,065
---------- ----------- -------------
---------- ----------- -------------
</TABLE>
The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of March 31, 1999. It does not
include:
- 8,229,100 shares subject to options outstanding as of March 31, 1999 at a
weighted average exercise price of $1.92 per share; and
- 8,770,900 additional shares that could be issued under our stock option
plans.
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DILUTION
Our pro forma net tangible book value as of March 31, 1999 was approximately
$75.9 million, or $1.65 per share of common stock. Pro forma net tangible book
value per share is determined by dividing the amount of our total tangible
assets less total liabilities by the pro forma number of shares of common stock
outstanding at that date, assuming conversion of all outstanding shares of our
convertible preferred stock into common stock and the sale of 3,727,272
additional shares of our common stock at $11.00 per share after deducting
related commissions. Dilution in net tangible book value per share represents
the difference between the amount per share paid by purchasers of shares of
common stock in this offering made and the net tangible book value per share of
common stock immediately after the completion of this offering.
After giving effect to the issuance and sale of the shares of common stock
offered by us and after deducting the estimated underwriting discount and
offering expenses payable by us, our pro forma net tangible book value as of
March 31, 1999 would have been $146.9 million, or $2.76 per share. This
represents an immediate increase in pro forma net tangible book value of $1.11
per share to existing stockholders and an immediate dilution of $8.24 per share
to new investors purchasing shares in this offering. If the initial public
offering price is higher or lower, the dilution to the new investors will be
greater or less, respectively. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................ $ 11.00
Pro forma net tangible book value per share at March 31, 1999.............. $ 1.65
Increase in pro forma net tangible book value per share attributable to
this offering 1.11
---------
Pro forma net tangible book value per share after this offering 2.76
---------
Dilution per share to new investors........................................ $ 8.24
---------
</TABLE>
------------------------
The following table summarizes, on a pro forma basis, as of March 31, 1999,
the differences between the number of shares of common stock purchased from us,
the aggregate cash consideration paid to us and the average price per share paid
by existing stockholders and new investors purchasing shares of common stock in
this offering. The calculation below is based on an assumed initial public
offering price of $11.00 per share, before deducting the estimated underwriting
discount and offering expenses payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------------- ----------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------------- ----------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...................... 46,150,939 86.8% $ 137,168,000 64.0% $ 2.97
New investors.............................. 7,000,000 13.2 77,000,000 36.0 11.00
-------------- ----- ---------------- -----
Total.................................. 53,150,939 100.0% $ 214,168,000 100.0%
-------------- ----- ---------------- -----
-------------- ----- ---------------- -----
</TABLE>
This discussion and table assume no exercise of any stock options
outstanding as of March 31, 1999. As of March 31, 1999, there were options
outstanding to purchase a total of 8,229,100 shares of common stock with a
weighted average exercise price of $1.92 per share. To the extent that any of
these options are exercised, there will be further dilution to new investors.
Please see "Capitalization".
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SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated balance sheet data as of December 31, 1997 and
1998 and the selected consolidated statement of operations data for the period
from March 5, 1996 (inception) to December 31, 1996 and the years ended December
31, 1997 and 1998 have been derived from our audited consolidated financial
statements included elsewhere in this prospectus. The selected consolidated
balance sheet data as of March 31, 1999 and the consolidated statement of
operations for the three months ended March 31, 1998 and 1999 have been derived
from unaudited consolidated financial statements included elsewhere in this
prospectus. The selected consolidated balance sheet data as of December 31, 1996
are derived from our consolidated audited financial statements not included in
this prospectus. The unaudited consolidated financial statements include all
adjustments, consisting only of normal recurring adjustments, which, in the
opinion of management, are necessary for the fair presentation of our
consolidated financial position and the consolidated results of operations for
those periods. Results of operations for the three months ended March 31, 1999
are not necessarily indicative of the results that may be expected for the
entire year or for any future period. The selected consolidated financial data
set forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and the notes to those statements included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 5, 1996
(INCEPTION) TO YEAR ENDED DECEMBER THREE MONTHS
DECEMBER 31, 31, ENDED MARCH 31,
--------------- --------------------- ---------------------
1996 1997 1998 1998 1999
--------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues............................................... $ -- $ 460 $ 5,329 $ 256 $ 1,541
------- --------- ---------- --------- ----------
Operating expenses:
Product and technology development................... 36 1,229 6,816 794 3,562
Sales and marketing.................................. 12 2,108 29,274 1,816 9,657
General and administrative........................... 78 648 4,600 450 2,410
Depreciation and amortization........................ 2 38 774 79 467
Stock-based compensation expense..................... -- -- 10,421 2 1,247
------- --------- ---------- --------- ----------
Total operating expenses........................... 128 4,023 51,885 3,141 17,343
Operating loss......................................... (128) (3,563) (46,556) (2,885) (15,802)
Interest income, net................................. -- 35 670 28 421
------- --------- ---------- --------- ----------
Net loss............................................... (128) (3,528) (45,886) (2,857) (15,381)
------- --------- ---------- --------- ----------
Preferred stock dividends and accretion................ -- (185) (4,536) (295) (2,541)
Net loss available to common shareholders.............. $ (128) $ (3,713) $ (50,422) $ (3,152) $ (17,922)
------- --------- ---------- --------- ----------
------- --------- ---------- --------- ----------
Basic and diluted net loss per share................... $ (0.01) $ (0.37) $ (4.94) $ (.31) $ (1.72)
------- --------- ---------- --------- ----------
Shares used in computing basic and diluted net loss per
share................................................ 9,147 10,012 10,202 10,012 10,410
------- --------- ---------- --------- ----------
------- --------- ---------- --------- ----------
Pro forma basic and diluted net loss per share(1)...... $ (1.09) $ (.36)
---------- ----------
---------- ----------
Shares used in computing pro forma basic and diluted
net loss per share(1)................................ 42,199 42,406
---------- ----------
---------- ----------
</TABLE>
- ------------------------
(1) Assumes conversion of all outstanding shares of redeemable convertible
preferred stock into 31,996,667 shares of common stock. See note 4 to our
consolidated financial statements included elsewhere in this prospectus for
an explanation of the method used to determine the number of shares used to
compute pro forma net loss per share.
21
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, MARCH 31,
-------------------------------- ----------
<S> <C> <C> <C> <C>
1996 1997 1998 1999
--------- --------- ---------- ----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................................ $ 230 $ 436 $ 53,141 $ 40,588
Working capital...................................................... 284 146 47,512 31,383
Total assets......................................................... 313 786 60,986 53,889
Capital lease obligations............................................ 18 220 166
Total current liabilities............................................ 324 7,763 12,419
Long-term debt....................................................... 2,541
Redeemable convertible preferred stock............................... 3,833 96,494 99,035
Total stockholders' (deficit) equity................................. 313 (3,400) (43,393) (60,232)
</TABLE>
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND NOTES TO THOSE STATEMENTS AND OTHER FINANCIAL INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
StarMedia is the leading online network targeting Latin America. We were
incorporated in March 1996 and commenced operations in September 1996. For the
period from our inception through December 1996, we did not generate any
revenues, incurred minimal operating expenses and focused our operating
activities on the development of the StarMedia network.
We launched our network in December 1996. During 1997, we continued the
development of the StarMedia network and related technology infrastructure and
also focused on recruiting personnel, raising capital and developing content to
attract and retain users. In 1998, we:
- improved and upgraded our services;
- expanded our production staff;
- built a direct sales force; and
- increased our marketing activities in order to build the StarMedia brand.
In 1999, we expanded our operations in Latin America by acquiring two
leading Brazilian Internet guides, Achei Internet Promotion Ltda. and KD
Sistemas de Informacao Ltda., which primarily categorize and review
Portuguese-language Web sites. The aggregate purchase price paid by us for these
acquisitions was approximately $6.1 million. We are obligated to make additional
payments, estimated to be $7 million, to the former stockholders of KD Sistemas
if various performance targets are achieved. These acquisitions were accounted
for as purchases.
In May 1999, we entered into an agreement to purchase Wass Net S.L., a
Spanish-language online service with extensive community applications. The
aggregate purchase price for this acquisition is $17 million. The purchase price
is payable in our common stock at the initial public offering price. The closing
of the acquisition is contingent on the satisfaction of a number of conditions,
including the completion of our initial public offering. As a result, we may not
be able to successfully complete this acquisition.
In addition, we recently completed the sale of 3,727,272 shares of our
common stock to a number of strategic investors for $41 million.
To date, we have derived substantially all of our revenues from the sale of
advertisements and sponsorships on our network.
Advertising revenues are derived principally from:
- advertising arrangements under which we receive revenues based on a
cost-per-thousand-impressions basis, commonly referred to as CPMs;
- sponsorship arrangements which allow advertisers to sponsor an area on our
network in exchange for a fixed payment; and
- design, coordination and integration of advertising campaigns and
sponsorships to be placed on our network.
Advertising and sponsorship rates depend on:
- whether the impressions are for general audiences or targeted audiences;
- which of the specific channels within the StarMedia network display the
impressions; and
- the number of guaranteed impressions, if any.
Advertising revenues are recognized ratably in the period in which the
advertisement is displayed, provided that no significant obligations remain and
collection of the resulting receivable is probable. To the extent minimum
guaranteed impression levels are not met, we defer recognition of the
corresponding revenues until guaranteed levels are achieved. Payments received
from advertisers prior to displaying their advertisements on our network are
recorded as deferred revenues. Revenues from sponsorship arrangements are
recognized ratably over the contract term, provided that we have no
23
<PAGE>
significant obligations remaining. Revenue related to the design, coordination
and integration of content under sponsorship arrangements are recognized ratably
over the contract term or using the percentage of completion method if the
revenue for the services is fixed. Under some of our content arrangements, we
have agreed to pay a portion of the advertising revenue derived from the related
content to the content provider.
We have entered into co-marketing arrangements with various media companies,
including Fox Latin America and USA Networks. Under these arrangements, we
exchange advertising space on our network predominantly for advertising on
television and radio stations. We entered into these agreements to enhance our
marketing efforts and to extend our marketing presence beyond the ten major
markets in which our paid advertising is concentrated. Revenues and expenses
from these arrangements are recorded at the lower of estimated fair value of the
goods or services received or the estimated fair value of the advertisements
given. Expenses are recorded at the value of the television advertising received
when our advertisements are broadcast, which is typically in the same period as
the advertisements are run on our network. These expenses are included in our
sales and marketing expenses. To date, we have engaged in no barter transactions
under which we have received online advertising.
In addition to advertising revenues, we derive revenues from online commerce
transactions conducted through our network. Revenues from our share of the
proceeds from sales are recognized on notification of sales attributable to our
network. To date, commerce revenues have not been significant. We anticipate
that, although commerce revenues will increase in future periods, the
substantial majority of our revenues will continue to be derived from the sale
of advertising on our network.
We have a limited operating history for you to use as a basis for evaluating
our business. You must consider the risks and difficulties frequently
encountered by early stage companies like us in new and rapidly evolving
markets, including the Internet advertising market. Please see "Risk
Factors--Our limited operating history makes evaluating our business difficult".
We have incurred significant net losses and negative cash flows from
operations since our inception. At March 31, 1999, we had an accumulated deficit
of $72.2 million. These losses have been funded primarily through the issuance
of preferred stock. We intend to continue to invest heavily in marketing and
brand development, content enhancements, and technology and infrastructure
development. As a result, we believe that we will continue to incur net losses
and negative cash flows from operations for the foreseeable future. Moreover,
the rate at which these losses will be incurred may increase from current
levels.
We recorded cumulative deferred compensation of approximately $20.6 million
through March 31, 1999, which represents the difference between the exercise
price of some stock options granted in 1998 and 1999, and the fair market value
of the underlying common stock at the date of grant. The difference is recorded
as a reduction of stockholders' equity and amortized over the vesting period of
the applicable options, either immediately or generally over three years. Of the
total deferred compensation amount, approximately $10.4 million and $1.2 million
was amortized during the year ended December 31, 1998 and the three months ended
March 31, 1999, respectively. In the second quarter of 1999, we expect to record
additional deferred compensation of approximately $2.5 million due to options
granted in this period. The amortization of deferred compensation is recorded as
an operating expense. As a result, we currently expect to amortize the following
amounts of deferred compensation annually:
- 1999--$5.5 million;
- 2000--$4.5 million;
- 2001--$2.4 million; and
- 2002--$260,000.
24
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,
1999 AND 1998
REVENUE
Revenues increased to $1.5 million for the three months ended March 31, 1999
from $256,000 for the three months ended March 31, 1998. The increase in
revenues was primarily due to an increase in the volume of advertising
impressions and sponsorships. During 1999, we continued to:
- expand our sales force; and
- increase the number of impressions available on our network by adding
channels and by increasing our marketing efforts.
In the three months ended March 31, 1998, two advertisers each accounted for
greater than 10% of total revenues and four advertisers during the same period
accounted for 100% of total revenues. In the three months ended March 31, 1999,
three advertisers, Netscape, Teleglobe and Outpost.com, each accounted for
greater than 10% of total revenues. Our five largest advertisers during the same
period accounted for 60% of total revenues. In the three months ended March 31,
1999, 28% of our total revenues were derived from reciprocal advertising
arrangements with our media partners, which consist primarily of television
network operators. We do not receive any cash payments from these arrangements.
We have not engaged in any barter transactions under which we received online
advertising. Electronic commerce revenues were not material during these
periods.
OPERATING EXPENSES
PRODUCT AND TECHNOLOGY. Product and technology expenses include:
- personnel costs;
- hosting and telecommunications costs; and
- content acquisition fees and revenue sharing arrangements related to
agreements with third-party content providers under which we pay
guaranteed fees and/or a portion of our revenues.
Product and technology expenses increased to $3.6 million, or 231% of total
revenues, for the three months ended March 31, 1999, from $794,000, or 310% of
total revenues, for the three months ended March 31, 1998. The increase in
product and technology expenses was primarily attributable to increased staffing
levels required to support the StarMedia network and related systems and to
enhance the content and features on the StarMedia network. We have, to date,
expensed all product and technology costs as incurred. We believe that increased
investment in new and enhanced features and technology is critical to attaining
our strategic objectives and remaining competitive. Accordingly, we intend to
continue recruiting and hiring experienced product and technology personnel and
to make additional investments in product development. We expect that product
expenditures will continue to increase in absolute dollars in future periods.
SALES AND MARKETING. Sales and marketing expenses consist primarily of:
- advertising costs, including the costs of advertisements placed on various
television networks under our reciprocal advertising arrangements;
- salaries and commissions of sales and marketing personnel;
- public relations costs; and
- other marketing-related expenses.
Sales and marketing expenses increased to $9.7 million, or 627% of total
revenues, for the three months ended March 31, 1999, from $1.8 million, or 709%
of total revenues, for the three months ended March 31, 1998. The increases in
sales and marketing expenses were primarily attributable to:
- expansion of our advertising, public relations and other promotional
25
<PAGE>
expenditures related to our aggressive branding campaign;
- increased sales commissions as our advertising sales increased; and
- higher personnel expenses as we built our sales force.
We expect sales and marketing expenses will continue to increase in absolute
dollars for the foreseeable future as we:
- continue our branding strategy;
- expand our direct sales force;
- hire additional marketing personnel; and
- increase expenditures for marketing and promotion.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of:
- salaries and benefits;
- costs for general corporate functions, including finance, accounting and
facilities; and
- fees for professional services.
General and administrative expenses increased to $2.4 million, or 156% of
total revenues, for the three months ended March 31, 1999, from $450,000, or
176% of total revenues, for the three months ended March 31, 1998. The increase
in general and administrative expenses was primarily due to increased salaries
and related expenses associated with the hiring of additional personnel and
increases in professional fees to support the growth of our business. We expect
that we will incur additional general and administrative expenses as we hire
additional personnel and incur additional costs related to the growth of our
business and our operation as a public company. Accordingly, we anticipate that
general and administrative expenses will continue to increase in absolute
dollars in future periods.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expenses increased to $467,000, or 30% of
revenues, for the three months ended March 31, 1999, from $79,000, or 31% of
revenues, for the three months ended March 31, 1998. The dollar increases were
primarily attributable to the increase in fixed assets of approximately $2.4
million during 1999 and $5.8 million during 1998.
STOCK-BASED COMPENSATION EXPENSE
We recorded additional deferred compensation of $1.5 million during the
three months ended March 31, 1999. Of the cumulative deferred compensation
amount, $1.2 million was recorded as an expense during the three months ended
March 31, 1999. The unamortized balance is being amortized over the vesting
period for the individual options, which is typically three years.
INTEREST INCOME, NET
Interest income, net includes income from our cash and investments. Interest
income, net increased to $421,000 for the three months ended March 31, 1999 from
$28,000 for the three months ended March 31, 1998. The increase in interest
income was primarily due to higher average cash, cash equivalent and investment
balances as a result of capital received from the sale of preferred stock in the
first and third quarters of 1998.
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND THE PERIOD FROM MARCH 5, 1996
(INCEPTION) TO DECEMBER 31, 1996
REVENUES
Revenues increased to $5.3 million for the year ended December 31, 1998 from
$460,000 for the year ended December 31, 1997. We did not have any revenue for
the period from March 5, 1996 (inception) to December 31, 1996. The increase in
revenues was primarily due to an increase in the volume of advertising
impressions and sponsorships. During 1998, we:
- expanded our sales force; and
- increased the number of impressions available on our network by adding
26
<PAGE>
channels and by increasing our marketing efforts.
In 1997, three advertisers each accounted for greater than 10% of total
revenues and the five largest advertisers accounted for 98% of total revenues.
In 1998, two advertisers, Netscape and Fox Latin America, each accounted for
greater than 10% of total revenues and the five largest advertisers accounted
for 62% of total revenues. In 1998, 45% of our total revenues were derived from
reciprocal advertising arrangements with our media partners, which consist
primarily of television network operators. We do not receive any cash payments
from these arrangements. We have not engaged in any barter transactions under
which we received online advertising. Electronic commerce revenues were not
material during these periods.
OPERATING EXPENSES
PRODUCT AND TECHNOLOGY. Product and technology expenses increased to $6.8
million, or 128% of total revenues, for the year ended December 31, 1998, from
$1.2 million, or 267% of total revenues, for the year ended December 31, 1997.
We incurred $36,000 of product and technology expenses during 1996. The increase
in product and technology expenses was primarily attributable to increased
staffing levels required to support the StarMedia network and related systems
and to enhance the content and features on the StarMedia network. We have, to
date, expensed all product and technology costs as incurred.
SALES AND MARKETING. Sales and marketing expenses increased to $29.3
million, or 549% of total revenues, for the year ended December 31, 1998, from
$2.1 million, or 458% of total revenues, for the year ended December 31, 1997,
and $12,000 during 1996. The increases in sales and marketing expenses were
primarily attributable to:
- expansion of our advertising, public relations and other promotional
expenditures related to our aggressive branding campaign;
- increased sales commissions as our advertising sales increased; and
- higher personnel expenses as we built our sales force.
Sales and marketing expenses as a percentage of total revenues have
increased as a result of the continued development and implementation of
StarMedia's branding and marketing campaign.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
to $4.6 million, or 86% of total revenues, for the year ended December 31, 1998,
from $648,000, or 141% of total revenues, for the year ended December 31, 1997,
and $78,000 during 1996. The increase in general and administrative expenses was
primarily due to increased salaries and related expenses associated with the
hiring of additional personnel and increases in professional fees to support the
growth of our business. General and administrative expenses decreased on a
percentage basis because of the growth in revenues.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expenses increased to $774,000, or 15% of
revenues, for the year ended December 31, 1998, from $38,000, or 8% of revenues,
for the year ended December 31, 1997 and from $2,000 during 1996. The dollar
increases were primarily attributable to the increase in fixed assets of
approximately $5.8 million during 1998 and $270,000 during 1997.
STOCK-BASED COMPENSATION EXPENSE
We recorded deferred compensation of $19.1 million during the year ended
December 31, 1998. Of this amount, $10.4 million was recorded as an expense in
1998. The unamortized balance is being amortized over the vesting period for the
individual options, which is typically three years.
INTEREST INCOME, NET
Interest income, net includes income from our cash and investments. Interest
income, net increased to $670,000 for the year-ended
27
<PAGE>
December 31, 1998 from $35,000 for the year ended December 31, 1997. We did not
record any interest income, net during 1996. The increase in interest income was
primarily due to higher average cash, cash equivalent and investment balances as
a result of capital received from the sale of preferred stock in the first and
third quarters of 1998.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth unaudited quarterly statement of operations
data for each of the five quarters ended March 31, 1999. In the opinion of
management, this information has been prepared substantially on the same basis
as the audited financial statements appearing elsewhere in this prospectus, and
all necessary adjustments, consisting only of normal recurring adjustments, have
been included in the amounts stated below to present fairly the unaudited
quarterly results of operations data. The quarterly data should be read with our
consolidated financial statements and the notes to those statements appearing
elsewhere in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1998 1998 1998 1998 1999
--------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Revenues...................... $ 256 $ 589 $ 1,308 $ 3,176 $ 1,541
Operating expenses:
Product and technology
development............... 794 2,384 1,552 2,086 3,562
Sales and marketing......... 1,816 4,199 7,725 15,534 9,657
General and
administrative............ 450 574 857 2,719 2,410
Depreciation and
amortization.............. 79 169 204 322 467
Stock-based compensation
expense................... 2 3,248 666 6,505 1,247
--------- -------- ------------- ------------ ---------
Total operating
expenses................ 3,141 10,574 11,004 27,166 17,343
--------- -------- ------------- ------------ ---------
Loss from operations.......... (2,885) (9,985) (9,696) (23,990) 15,802
--------- -------- ------------- ------------ ---------
Net loss...................... $(2,857) $(9,922) $(9,624) $(23,483) $(15,381)
--------- -------- ------------- ------------ ---------
</TABLE>
The operating results for any quarter are not necessarily indicative of the
operating results for any future period. In particular, because of our limited
operating history, we have limited meaningful financial data to estimate
revenues and operating expenses. In addition, we believe that we will continue
to experience seasonality in our business, with use of our network being lower
during the Latin American summer vacation period in the first calendar quarter
of the year. This may adversely affect our advertising revenue during the first
calendar quarter.
Our future revenues and results of operations may significantly fluctuate
due to a combination of factors, including:
- growth and acceptance of the Internet, particularly in Latin America;
- our ability to attract and retain users;
- demand for advertising on the Internet in general and on our network in
particular;
- our ability to upgrade and develop our systems and infrastructure;
- technical difficulties that users may experience on our network;
- technical difficulties or system downtime resulting from the developing
telecommunications infrastructure in Latin America;
- competition in our markets;
- foreign currency exchange rates that affect our international operations;
and
- general economic conditions in Latin America.
28
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
To date, we have primarily financed our operations through the sale of our
preferred stock. As of March 31, 1999, we had approximately $40.6 million in
cash and cash equivalents.
Net cash used in operating activities was $12.3 million for the three months
ended March 31, 1999, $30.6 million for the year ended December 31, 1998, $3.3
million for the year ended December 31, 1997 and $127,000 for 1996. To date, we
have experienced significant negative cash flows from operating activities. Net
cash used in operating activities resulted primarily from our net operating
losses, offset by:
- the amortization of deferred compensation;
- depreciation and amortization;
- increases in accounts payable and accrued expenses; and
- deferred revenues.
Net cash used in investing activities was $3.7 million for the three months
ended March 31, 1999, $4.6 million for the year ended December 31, 1998,
$280,000 for the year ended December 31, 1997 and $30,000 during 1996. Net cash
used in investing activities during 1996, 1997 and 1998 resulted primarily from
the purchase of fixed assets.
Net cash provided by financing activities was $3.6 million for the three
months ended March 31, 1999, $88 million for the year ended December 31, 1998,
$3.8 million for the year ended December 31, 1997 and $387,000 during 1996. Net
cash provided by financing activities during 1997 and 1998 consisted primarily
of proceeds from the sale of preferred stock. In April and May 1999, we
completed the sale of 3,727,272 shares of our common stock for $41 million.
Our principal commitments consist of obligations outstanding under capital
and operating leases. As of March 31, 1999, we have spent approximately $8.1
million on capital expenditures, excluding capital lease arrangements. We expect
our capital expenditures will increase significantly in the future as we make
technological improvements to our system and technical infrastructure.
In March 1999, we entered into a $12 million credit line for the acquisition
of computer equipment and furniture and fixtures. At March 31, 1999,
approximately $3.6 million was outstanding under the equipment line. Amounts
outstanding are payable in monthly installments of principal and interest of
approximately $126,000, bear interest at approximately 13.7% per annum and are
secured by certain computer equipment and furniture and fixtures of the Company.
The credit line requires us to maintain of at least $10 million in cash and cash
equivalents.
Our capital requirements depend on numerous factors, including:
- market acceptance of our services;
- the amount of resources we devote to investments in the StarMedia network;
- marketing and selling our services; and
- promoting our brand.
We have experienced a substantial increase in our capital expenditures and
operating lease arrangements since our inception consistent with the growth in
our operations and staffing. We anticipate that this will continue for the
foreseeable future. Additionally, we will continue to evaluate possible
investments in businesses, products and technologies, and plan to expand our
sales and marketing programs and conduct more aggressive brand promotions.
We believe that the net proceeds from this offering, together with our
current cash and cash equivalents, will be sufficient to meet our anticipated
cash needs for working capital and capital expenditures for at least the next 12
months. If cash generated from operations is insufficient to satisfy our
liquidity requirements, we may seek to sell additional equity or debt securities
or to obtain a credit facility. The sale of additional equity or convertible
debt securities could result in additional dilution to our stockholders. The
incurrence of indebtedness would result in increased fixed obligations and could
result in
29
<PAGE>
operating covenants that would restrict our operations. We cannot assure you
that financing will be available in amounts or on terms acceptable to us, if at
all. Please see "Risk Factors--We may not be able to obtain sufficient funds to
grow our business".
YEAR 2000 COMPLIANCE
The Year 2000 issue refers to the potential for system and processing
failures of date-related calculations, and is the result of computer-controlled
systems using two digits rather than four to define the applicable year. For
example, computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
STATE OF READINESS
We have made a preliminary assessment of the Year 2000 readiness of our
operating, financial and administrative systems, including the hardware and
software that support our systems. As part of our assessment plan, we are
evaluating our date-dependent code, internally-developed software, software
developed by third parties and hardware. We plan to complete this evaluation by
October 1999. All internally-developed code will be checked, and any problematic
code identified, fixed and tested by November 1999. All material
externally-developed software that is not Year 2000 compliant will be upgraded
or replaced by November 1999. More specifically:
- We are quality assurance testing our internally-developed proprietary
software and systems related to the delivery of our service to our users.
We plan to complete this testing by November 1999.
- We have contacted our principal third-party vendors and licensors of
material hardware, software, and services that are related to the delivery
of our services to our users, and requested their confirmation of our Year
2000 compliance of the software, hardware and services they provide to us.
All of these contacted vendors and licensors have notified us that the
hardware, software and services that they have provided to us are Year
2000 compliant.
- We have contacted our principal vendors of material non-information
technology systems and services used by us, and requested their
confirmation of the Year 2000 compliance of their systems and services. We
have received notification from the majority of these vendors that the
systems and services that they have provided to us are Year 2000
compliant. By the end of the third quarter of 1999, we will either have
received this confirmation from the remaining vendors or have replaced the
systems and services they provide with compliant systems and services.
- We are formulating repair or replacement requirements and implementing
corrective measures. These requirements will be completed by October 1999,
and, if necessary, corrective measures and repair procedures will be
implemented by the end of November 1999.
- We are currently evaluating the need for, and preparing and implementing a
contingency plan, if required. The results of our assessment and
simulation testing will be taken into account when we determine the need
for and the extent of any contingency plans. We plan to finalize our
contingency plans, if any, by November 1999.
COSTS
To date, we have spent an immaterial amount on Year 2000 compliance issues
but expect to incur an additional $200,000 to $350,000 in connection with
identifying, evaluating and addressing Year 2000 compliance issues. Most of our
expenses have related to, and are expected to continue to
30
<PAGE>
relate to, the operating costs associated with time spent by employees and
consultants in the evaluation process and Year 2000 compliance matters
generally. Such expenses, if higher than anticipated, could have a material
adverse effect on our business, results of operations, and financial condition.
RISKS
To the extent that our assessment is finalized without identifying any
additional material non-compliant IT systems operated by us or by third parties,
the most reasonably likely worst case Year 2000 scenario is a systemic failure
beyond our control, such as a prolonged telecommunications or electrical
failure. Such a failure could prevent us from operating our business, prevent
users from accessing our network, or change the behavior of advertising
customers or persons accessing our network. We believe that the primary business
risks, in the event of such failure, would include but not be limited to, lost
advertising revenues, increased operating costs, loss of customers or persons
accessing our network, or other business interruptions of a material nature, as
well as claims of mismanagement, misrepresentation, or breach of contract.
CONTINGENCY PLAN
As discussed above, we are engaged in an ongoing Year 2000 assessment and
have developed no contingency plans to address the worst-case scenario that
might occur if technologies we are dependent on actually are not Year 2000
compliant. The results of our Year 2000 simulation testing and the responses
received from all third-party vendors and service providers will be taken into
account in determining the need for and nature and extent of any contingency
plans. We intend to develop any required contingency plans by November 1999.
FORWARD-LOOKING STATEMENTS
The Year 2000 discussion above is provided as a "Year 2000 Readiness
Disclosure" as defined in the Year 2000 Information and Readiness Disclosure Act
of 1998 (Public Law 105-271, 112 Stat. 2386) enacted on October 19, 1998 and
contains forward-looking statements. These statements are based on management's
best current estimates, which were derived from a number of assumptions about
future events, including the continued availability of resources,
representations received from third parties and other factors. However, we
cannot assure you that these estimates will be achieved, and our actual results
could differ materially from those anticipated. Specific factors that might
cause material differences include:
- the ability to identify and remediate all relevant systems;
- results of Year 2000 testing;
- adequate resolution of Year 2000 issues by governmental agencies,
businesses and other third parties who are our outsourcing service
providers, suppliers, and vendors;
- unanticipated system costs; and
- our ability to implement adequate contingency plans.
INFLATION AND FOREIGN CURRENCY
EXCHANGE RATE LOSSES
To date, our results of operations have not been impacted materially by
inflation in the U.S. or in the countries that comprise Latin America.
Although a substantial portion of our revenues are denominated in U.S.
dollars, an increasing percentage of our revenues are denominated in foreign
currencies. As a result, our revenues may be impacted by fluctuations in these
currencies and the value of these currencies relative to the U.S. dollar. In
addition, a portion of our monetary assets and liabilities and our accounts
payable and operating expenses are denominated in foreign currencies. Therefore,
we are exposed to foreign currency exchange risks. However, revenues derived
from foreign currencies historically have not comprised a material portion of
our revenues. As a result, we have not tried to reduce our exposure to exchange
rate fluctuations by using hedging transactions.
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However, we may choose to do so in the future. We may not be able to do this
successfully. Accordingly, we may experience economic loss and a negative impact
on earnings and equity as a result of foreign currency exchange rate
fluctuations.
RECENT ACCOUNTING PRONOUNCEMENTS
We adopted the provisions of Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income" as of January 1, 1998. SFAS
No. 130 requires us to report in our financial statements, in addition to our
net income (loss), comprehensive income (loss), which includes all changes in
equity during a period from non-owner sources including, as applicable, foreign
currency items, minimum pension liability adjustments and unrealized gains and
losses on investments in debt and equity securities.
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosure About Segments of an Enterprise and Related Information".
SFAS No. 131 establishes standards for the way that public business enterprises
report information about operating segments. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. SFAS No. 131 is effective for fiscal years beginning after December
15, 1997. We have determined that we do not have any separately reportable
business segments.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standard for derivative instruments, including derivative instruments
embedded in other contracts, and for hedging activities. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
The statement is not expected to affect us as we currently do not have any
derivative instruments or hedging activities.
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BUSINESS
OVERVIEW
StarMedia is the leading online network targeting Latin America. Our network
consists of 17 interest-specific channels, extensive Web-based community
features, sophisticated search capabilities and access to online shopping in
Spanish and Portuguese. These channels cover topics of interest to Latin
Americans online, including local and regional news, business and sports. We
promote user affinity to the StarMedia community by providing Spanish and
Portuguese language e-mail, chat rooms, instant messaging and personal
homepages.
At a time when content on the Internet is overwhelmingly in English, we
offer Latin Americans a large, pan-regional community experience, combined with
a broad array of Spanish and Portuguese content tailored for regional dialects
and local cultural norms. We also provide advertisers and merchants targeted
access to Latin American Internet users, an audience with a highly desirable
demographic profile.
INDUSTRY BACKGROUND
THE GROWTH OF THE INTERNET AND ONLINE ADVERTISING AND COMMERCE
The Internet has developed into a significant global mass medium that allows
millions of people worldwide to find information, interact with others and
conduct business electronically. International Data Corporation, or IDC,
estimates that the number of Internet users worldwide will grow from
approximately 97 million at the end of 1998 to approximately 320 million by the
end of 2002. The Internet has also emerged as an attractive new medium for
advertisers. The Internet allows advertisers to target desired demographic
groups or consumers in specific geographic locations. It also allows them to
interact more effectively with consumers and capture valuable data about buying
patterns, preferences and demands. According to Jupiter Communications, the
dollar value of Internet advertising in the U.S. is expected to increase from
$1.9 billion in 1998 to approximately $7.7 billion in 2002, representing a
compound annual growth rate of 42%. The growth in the use of the Internet is
also providing businesses with a platform to conduct electronic commerce.
According to IDC, consumer transactions on the Internet are expected to increase
from $11.3 billion in 1998 to approximately $93.7 billion in 2002, representing
a compound annual growth rate of 70%.
INTERNET USE IN LATIN AMERICA
Latin America is comprised of 23 countries with a total population of
approximately 500 million people. Although divided by geographical and political
boundaries, Latin Americans share many cultural affinities, including common
languages and religions, as well as a similar heritage. A majority of Latin
Americans speak Spanish or Portuguese, with only a small portion of the
population being proficient in English. The Latin American population is also
relatively young. For example, about 65% of the population in Mexico is under
the age of 30 and over 40% of the population in Brazil is under the age of 20.
A substantial portion of the buying power in Latin America is concentrated
within 20% of the population, according to Strategy Research Corporation. This
group of approximately 100 million people controls an estimated 65% of the
overall buying power in Latin America and enjoys a standard of living comparable
to the populations of Germany and Great Britain. As a result of these factors,
the Latin American market represents a highly desirable demographic profile for
advertisers and businesses. According to a study conducted in December 1998 by
Zenith Media, overall advertising spending across all media in Latin America was
$27 billion in 1998 and is estimated to grow to $34 billion in 2001.
While Internet use in Latin America is in a relatively early stage of
development, it has grown rapidly in recent years and, according to Nazca
Saatchi & Saatchi, is expected to significantly outpace growth in worldwide
Internet usage over the next several years. According to Nazca Saatchi &
Saatchi, the number of Internet users in Latin America is expected to increase
from 7 million users in 1997 to 34 million users by the end of 2000.
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According to Nazca Saatchi & Saatchi, approximately 90% of these users are from
upper and middle socio-economic classes.
The following factors have contributed to the growth in Internet use in
Latin America:
- increased use of personal computers, particularly among affluent Latin
Americans;
- network infrastructure improvements accelerated by privatization of
telecommunications providers and increased spending;
- the relative youth of the Latin American population and their tendency to
use new technologies, like the Internet;
- reduced Internet access costs; and
- increased awareness of the Internet.
NEED FOR A LATIN AMERICAN ONLINE NETWORK
Despite the rapid growth of non-English speaking Internet users worldwide,
more than 80% of the content on the Internet remains in English. We believe that
an increasing number of Latin American Internet users are seeking a full-service
Internet destination in their local language that provides them with:
- a social interactive experience across the entire Spanish and Portuguese
speaking world;
- a variety of in-depth and focused local content;
- a broad array of compelling content at the regional and international
level; and
- sophisticated Internet applications and tools like e-mail, chat, instant
messaging, bulletin boards, personal homepages and search capabilities.
To date, few Internet sites have been tailored specifically to the interests
and needs of Latin Americans. In an attempt to address this need, some of the
English language general destination sites have translated a small portion of
their content into Spanish or Portuguese. To date, however, these sites have
been generally focused on expanding into the European and Asian markets. As a
result, they typically do not extend their Spanish and Portuguese translations
beyond selected topical content and do not provide in-depth local content or
in-language applications for Latin Americans. Furthermore, they do not tailor
their translations and content to take into account regional dialects, language
differences or local cultural norms.
Some regional sites attempt to provide content for the populations of
specific cities or countries in the local dialect. These sites, while providing
Spanish or Portuguese content, have a limited community of users and do not
provide extensive regional or global content. There are also Spanish or
Portuguese language interest-specific sites, like sports sites. These sites
offer in-depth content, but are limited to only one topic.
We believe that few of these Spanish and Portuguese language sites attract a
broad user audience. Therefore, they cannot provide advertisers with an
attractive platform to effectively reach the highly desirable Latin American
Internet user demographics.
THE STARMEDIA SOLUTION
We are the leading online network targeting Latin America. We provide
original and third-party branded content through 17 interest-specific channels,
extensive Web-based community features and sophisticated search capabilities in
Spanish and Portuguese. We believe that we have created an online network that
uniquely addresses the needs of Latin American Internet users and provides
advertisers and merchants with a highly desirable platform for targeting
affluent Latin American consumers. Our monthly page views have grown from
approximately 7 million in December 1997 to approximately 60 million in March
1999. In addition, as of March 31, 1999, we had approximately 425,000 registered
e-mail users.
We believe that our success to date is attributable to the following key
factors:
FOCUS ON LATIN AMERICA. We serve the interests and needs of Latin American
Internet users and have developed both a product and a business infrastructure
to support our focus on this market. We designed our network around the needs of
our users, providing them with:
- customized global, regional and local content covering a variety of topics
in the appropriate Spanish and Portuguese
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dialects based on the self-reported geographic location of our users;
- a broad range of in-language community features, like chat, bulletin
boards, free e-mail, personal homepages, and personal and classified ads,
that allow users to interact with other Latin Americans with similar
interests;
- an easy-to-use interface and a consistent navigation experience that
facilitates usage by the growing number of Latin Americans coming online
for the first time; and
- search capabilities that can be customized by country, region and/or
language.
In addition, we have developed a business infrastructure designed to address
the needs of our Latin American users by maintaining a strong local presence
throughout Latin America and employing a high percentage of Latin Americans both
in the U.S. and abroad. These are critical to maintaining our network's Latin
American focus and flavor.
Our Latin American employees provide us with important cultural and
linguistic insights. Our local presence allows us to better understand the needs
of local advertisers and businesses, and to maintain strong relationships with
them. We have offices throughout Latin America in Sao Paulo, Mexico City, Buenos
Aires, Bogota, Santiago, Caracas and Montevideo. Each office is staffed
predominantly with sales people from the country in which the office is located.
MARKET LEADERSHIP THROUGH BRAND DEVELOPMENT. We believe that StarMedia is
the most recognized Internet brand in Latin America. As a result, visiting the
StarMedia network is one of the first Internet experiences for many Latin
Americans. We began our marketing efforts in February 1997 and were the first
online network to make a significant investment in brand development in Latin
America. We believe that many of our regular users first visited our network in
response to our marketing efforts. We have continued to invest heavily in
building the StarMedia brand through our extensive marketing, advertising and
public relations programs. Our brand recognition has enabled us to attract a
growing user audience and leading companies as advertisers and electronic
commerce partners.
EXTENSIVE LOCAL CONTENT AND BROAD PAN-REGIONAL COMMUNITY STRUCTURE. We
believe that our extensive local content, combined with our community of
Internet users throughout Latin America, gives us a competitive advantage and is
key to our continued leadership as the Internet destination of choice in the
region. We provide our users with a broad array of relevant and in-depth local
content. In addition, our users throughout Latin America can use our network as
a virtual central plaza to meet other Latin Americans, access region-specific
information and conduct electronic commerce across boundaries. Our pan-regional
community enables us to attract a larger population of users and consequently,
provide them with greater outlets for online interaction.
DEDICATION TO USER CARE. We believe that high quality user care and
technical support are essential to our continued success and brand development
efforts. To further enhance our users' experience and to foster user loyalty, we
have local user care support teams that rapidly respond to e-mail inquiries and
provide technical advice, 24 hours a day, seven days a week in Spanish or
Portuguese. We also proactively solicit feedback from our users in order to
understand their preferences and to enhance their experience on our network. For
example, in order to better understand the demands of our users, we have
developed a special EU QUERO/LO QUIERO, or "I Want It", area which is accessible
from every page on our network. This feature enables our users to make requests
for additions or modifications to the network.
HIGHLY ATTRACTIVE PLATFORM FOR ADVERTISING AND COMMERCE. We believe that
the StarMedia network is a highly attractive platform for advertisers and
businesses because it gives them access to:
- the leading Internet brand in Latin America;
- a highly desirable user demographic profile; and
- users with a high degree of affinity and involvement through e-mail, chat,
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bulletin boards and personal homepages.
Internet advertising is new to Latin America, and we believe that buying
advertising on the StarMedia network is often one of the first Internet
advertising purchases made by businesses and advertising agencies in Latin
America. Accordingly, we have created an advertising environment that fosters
advertiser use of this new medium and solidifies our relationship with
advertisers. We have developed a client services team that is dedicated to
enhancing our relationship with these advertisers and maximizing the
effectiveness of their advertising campaigns. We use our knowledge about the
needs and sensitivities of our user base to help advertisers create more
effective advertising campaigns. In addition, we use leading advertising
techniques and tracking technologies to:
- target advertising to users with specific demographic profiles;
- gather extensive data to create an intelligence profile for each campaign;
and
- use daily tracking data to analyze the campaign's effectiveness.
We provide advertisers with detailed and timely feedback on the
effectiveness of campaigns, as well as recommendations on how to improve their
campaigns. We believe that our client services group is a key differentiator
from other Latin American Web sites and provides us with a significant
competitive advantage.
As a result, we have been able to:
- attract high-profile advertisers, including Bradesco, Ford, Fox Latin
America, IBM, Microsoft, Motorola, Nokia and Sony;
- enter into relationships with leading electronic commerce companies,
including barnesandnoble.com, Outpost.com, Disney, and N2K; and
- charge premium advertising rates.
STRATEGY
Our objective is to strengthen our position as the leading online network
across Latin America. In order to accomplish this, we will:
AGGRESSIVELY EXTEND OUR BRAND RECOGNITION. Our goal is to make the
StarMedia brand synonymous with the Internet in Latin America. We believe that
continuing to enhance our brand recognition will enable us to capitalize on our
leading position in Latin America and will make us more attractive to
advertisers and businesses conducting electronic commerce. This will increase in
importance as more Latin American consumers move online and as additional
Internet sites compete for these users.
We intend to continue to build our brand through:
- extensive television, print, Internet and outdoor advertising;
- public relations programs;
- conference sponsorships;
- new strategic alliances; and
- additional distribution relationships.
ENHANCE AND EXPAND OUR NETWORK. We intend to continue to add new content
and features to the StarMedia network. We believe that this will:
- further differentiate our network from competing sites;
- provide users with a more comprehensive and satisfying Internet
experience; and
- result in users visiting the StarMedia network more often and remaining
there longer.
Since January 1998, we have added 10 new channels to our network and expect
to add a number of other new channels in the remainder of 1999. We currently
have relationships with leading content providers, including Fox Latin America,
Internet Securities, Quote.com, Reuters, WeatherLabs, and Ziff-Davis. We are
aggressively seeking new content relationships in order to further increase the
breadth and depth of our content and community features without incurring
significant additional costs. We currently have more than 70 employees in our
content development group who are responsible for
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gathering, developing and designing our content. We intend to further enlarge
this group.
We are also expanding our country-specific content to further penetrate
local markets. We are aggressively seeking to enter into partnerships with
leading local interest-specific content providers and to further enhance the
features and functions of our network.
We are also seeking to aggressively expand our electronic commerce business
by facilitating the processes that are necessary in the purchase of goods and
services over the Internet by our users. We are developing relationships with
credit card, fulfillment and transaction software companies, as well as
merchants in order to capture a significant portion of Latin American electronic
commerce transactions.
PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES. We plan to expand our user
base, revenues and competitive position through strategic acquisitions and
alliances. Since January 1999, we have broadened our operations by acquiring KD
Sistemas de Informacao Ltda. and Achei Internet Promotion Ltda. Through these
acquisitions, we acquired two leading Brazilian Internet guides, Cade? and
Zeek!, which primarily categorize and review Portuguese-language Web sites. In
May 1999, we entered into an agreement to acquire Wass Net S.L., a
Spanish-language online service based in Spain with extensive community
applications. We anticipate closing this acquisition after the completion of our
initial public offering. We intend to aggresively seek other opportunities to
acquire or form alliances with other companies that will complement our network.
OFFER INTERNET ACCESS TO USERS IN THE LOCAL LATIN AMERICAN
MARKETS. Beginning in the second half of 1999, we plan to offer Internet access
to users in a number of Latin American markets. We believe this service will
enable us to develop an additional source of revenue and to create closer ties
with Internet users in Latin America. We have entered into an agreement with IBM
under which IBM will provide the technical infrastructure, billing, operations
and customer care capabilities related to our Internet access service. We will
market the service under the StarMedia brand and StarMedia will be the
pre-programmed home page for the service. We will charge users monthly access
fees with pricing based on rates that are competitive in each local market.
EXPAND INTO ADDITIONAL SPANISH- AND PORTUGUESE-SPEAKING MARKETS. We seek to
make StarMedia the first and most frequent destination on the Internet for the
Spanish- and Portuguese-speaking population worldwide. We believe there is a
significant opportunity for a Spanish and Portuguese language online network
that extends beyond Latin America to include Spain, the United States and
Portugal. There are approximately 7.7 million Spanish-and Portuguese-speaking
Internet users dispersed through the United States, Spain and Portugal. The
Hispanic population is growing more rapidly than any other minority group within
the U.S. population. According to the Tomas Rivera Policy Institute at Claremont
University, from 1994 to 1998, Internet usage by U.S. Hispanics grew 800%.
Forrester Research Inc. estimates that by the end of 1999, 43% of U.S. Hispanics
will be online. We believe that Hispanic Americans are increasingly using our
network to maintain their cultural identities and to communicate with friends
and family in Latin America and elsewhere.
As the number of Spanish- and Portuguese-speaking Internet users outside
Latin America increases, advertisers and electronic commerce marketers will
increasingly seek an effective means to reach these audiences. To take advantage
of these opportunities, we are expanding our advertising and marketing campaigns
in the United States and Spain. In addition, we intend to expand our presence in
Spain by opening a local office.
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THE STARMEDIA NETWORK
The StarMedia network is currently organized around 17 channels. These
channels are grouped into:
- community services; and
- content and commerce services.
Our Welcome Screen--www.starmedia.com-- is the gateway to our network. It
provides a guide to the network channels, features special content and
promotions, offers direct access to the search, e-mail and chat services and
displays real-time news headlines. When users first visit the StarMedia network
they are prompted to indicate what country they are from and whether they prefer
to receive content in Spanish or Portuguese. This information allows us to
target both content and advertising by subject matter, dialect and country. Our
unique design and layout provides a consistent navigation experience allowing
users to access any channel on our network from any other channel on the
service. Additionally, this design allows for persistent branding throughout the
network. The following is a description of the StarMedia network.
COMMUNITY SERVICES
<TABLE>
<CAPTION>
CHANNEL DESCRIPTION
- -------------------------------- --------------------------------------------------------------------------------
<S> <C>
STARMEDIA TALKPLANET (CHAT) StarMedia TalkPlanet is our chat community and the foundation of our network.
TalkPlanet creates "virtual communities" where participants can interact in
group or one-on-one discussions in both Spanish and Portuguese. These
communities include broad interest areas like sports, romance and current
events. Our users can host their own scheduled chats, create their own
interest-specific rooms or participate in moderated celebrity events.
STARMEDIA MAIL StarMedia Mail is our free Web-based e-mail service and is offered in both
(E-MAIL) Spanish and Portuguese. We currently have over 500,000 registered e-mail users.
StarMedia Mail allows users to access electronic mail from any computer with a
standard Web browser. We believe that providing this service increases user
loyalty and therefore, increases traffic on our network. We have also developed
a series of "I-mails", which are interactive greeting cards that users can send
to friends and family members.
STARMEDIA ORBITA/ORBITA StarMedia Orbita/Orbita enables users to create personalized Web pages on the
(PERSONAL HOMEPAGES) StarMedia network. Using a variety of proprietary publishing tools in Spanish
and Portuguese, users are able to quickly and easily create fully personalized
homepages. Individual homepages reside in designated communities of interest
like family, business and technology. We believe that users will be more
attracted to our network when they can publish content and share experiences
with others through their personalized homepages.
QUADRO DE AVISOS/ PIZARRAS Our bulletin board area--Quadro de Avisos/Pizarras--further enhances user
(BULLETIN BOARDS) interaction. From politics and religion to music and travel, this user-generated
content augments each channel and maintains a record of ongoing communication
about a particular topic on our network.
</TABLE>
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<TABLE>
<CAPTION>
CHANNEL DESCRIPTION
- -------------------------------- --------------------------------------------------------------------------------
<S> <C>
STARMEDIA EXPRESS (INSTANT This instant messaging service enables users to know whether their friends and
MESSENGER) other users with similar interests are online and to send messages directly to
them. Our partnership with PeopleLink enables users to subscribe to specific
interest groups and communicate with people from around the world who share
similar interests.
STARMEDIA CLASSIFICADOS/ StarMedia Classificados/Clasificados is our classifieds marketplace, spanning
STARMEDIA CLASIFICADOS numerous product and service areas from electronics to real estate. Buyers and
(CLASSIFIEDS) sellers from across Latin America can trade timely information on goods and
services.
NAMORO PERSONET/ ROMANCE Namoro Personet/Romance Personet is an interactive meeting place for visitors in
PERSONET (PERSONALS) search of new friends and relationships. Personet connects people from a wide
range of interests, backgrounds and origins. On Personet, people meet in a
variety of ways, including through personal ad postings and in discussion
forums.
STARMEDIA JOGOS/JUEGOS The newest StarMedia channel, StarMedia Jogos/Juegos, offers a compilation of
(ONLINE GAMES) interactive games in which our users can participate and compete for prizes.
These games include fantasy sport games such as Beisbol Virtual and Ole, as well
as a variety of trivia games. In addition, StarMedia Jogos/Juegos offers a host
of free, downloadable games, which are updated several times per week. This
channel also includes a guide to our editors' picks of the best in Spanish and
Portuguese online game sites.
</TABLE>
CONTENT AND COMMERCE SERVICES
We have built our content and commerce services around our successful
community environment. We enhance the effectiveness of our community services by
wrapping them around engaging content like information, news, entertainment and
shopping.
<TABLE>
<CAPTION>
CHANNEL DESCRIPTION
- -------------------------------- --------------------------------------------------------------------------------
<S> <C>
STARMEDIA NOTICIAS/ NOTICIAS StarMedia Noticias/Noticias delivers a comprehensive selection of international,
(NEWS) regional and local news. Content for news and all information services is
provided by top syndicated wire services, local partnerships and by our team of
editors, producers and writers throughout Latin America. Users can react to the
latest headlines through chats, debates and polls. Our partners include Reuters,
Agencia EFE and Agence France Presse.
STARMEDIA ESPORTES/ DEPORTES Through the StarMedia Esportes/Deportes channel, we provide comprehensive local,
(SPORTS) regional and global sports news and information. Users can access headlines,
results, commentary, analysis and daily polls. They can also purchase
merchandise and win prizes through our interactive games. In addition, we are
the exclusive webcaster of FUTBOL DE PRIMERA, one the world's most popular
syndicated radio talk shows about soccer, hosted by Andres Cantor.
</TABLE>
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<TABLE>
<CAPTION>
CHANNEL DESCRIPTION
- -------------------------------- --------------------------------------------------------------------------------
<S> <C>
STARMEDIA MONEY (FINANCE) StarMedia Money provides online financial news and information. In addition,
users can obtain research about top Latin American companies, access information
on personal banking products and services, and track their individual investment
portfolios in Spanish and Portuguese. Information is provided by a host of
leading financial information publishers, including Avance Economico, Enfoque,
El Economista, El Universal and Quote.com.
STARMEDIA DIGITAL (TECHNOLOGY) StarMedia Digital offers the latest in technology news, product reviews and free
downloads from ZDNet. The information provided by ZDNet helps users make
informed buying decisions about technology products, which they can purchase
through StarMedia's relationship with vendors like Outpost.com.
STARMEDIA ENTRETENIMENTO/ Entertainment and music are united in the StarMedia Entretenimento/
ENTRETENIMIENTOS (ENTERTAINMENT) Entretenimientos channel. Our partnerships with USA Networks, Fox Latin America,
Billboard, eDrive, Retila, Successo CD and N2K provide content that creates a
bridge between online and traditional programming. (V)Pulse offers a popular
selection of easily playable music videos. StarMedia TV and StarMedia Radios
provide Internet broadcasts of popular television and radio stations from Latin
America and around the world.
STARMEDIA SHOPPING (ELECTRONIC StarMedia Shopping acts as a virtual central plaza for online Latin American
COMMERCE) consumers. Users are able to purchase a variety of merchandise, including
computers, books and CDs, from a host of global and local retailers like
barnesandnoble.com, N2K, CIM and Outpost.com. Products from the StarMedia
Shopping channel are also merchandised within appropriate channels. For example,
there are direct links that allow a literary chat group to easily purchase books
of interest from barnesandnoble.com.
STARMEDIA BUSCAWEB (SEARCH AND StarMedia BuscaWeb is our Internet search engine. It utilizes Inktomi's
GUIDE) sophisticated search capabilities, which have been customized to support
country-specific, regional and worldwide searches in both Spanish and
Portuguese.
STARMEDIA VIAGENS/VIAJES The travel channel offers travel guides and news through an exclusive
(TRAVEL) relationship with Lonely Planet, as well as advice about preparing for a trip,
links to travel resources on the Web and a forum for exchanging travel stories
and tips.
STARMEDIA TEMPO/TIEMPO (WEATHER) StarMedia Tempo/Tiempo provides up-to-the-minute weather conditions and extended
forecasts for 3,000 cities around the globe.
</TABLE>
STRATEGIC ALLIANCES
We have developed strategic relationships with leading content, electronic
commerce, syndication and application partners. Many of these relationships give
us various exclusive rights. For example, some of these partners have agreed
that StarMedia will be the only Internet company to display their content in
Spanish or Portuguese. Others have agreed that they will not enter into
agreements with other companies targeting the Spanish or Portuguese Internet
markets. These relationships are typically for a period of one to five years.
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These relationships are designed to:
- enhance our network;
- expand our community of users;
- increase traffic; and
- provide us with additional revenues.
Our partners allow us to display their content or technology on our network,
within one or many of our channels, in exchange for a share of revenue or a
licensing fee. We receive some of this content in a format that is ready to
publish on our network. We also receive content that we must modify in order to
publish. For example, some of our partners provide us with English-language
content. In these cases, we translate the content into Spanish and Portuguese
prior to publishing it on our network.
Our commerce partners typically pay us a flat fee for placement on our
network. This fee is based on location of links that allow for entry into their
online store and the number of links present throughout our network. These
content partners also share with us a percentage of transaction revenues
generated when our users purchase their products or services.
CONTENT AND APPLICATION PROVIDERS
We have a number of relationships with leading content and application
providers, including:
- Agence France Press--news and sports information
- Billboard--entertainment news and featured content
- Bottle Rocket--interactive sports games
- BusinessWire--business news
- Critical Path--email services
- eDrive--entertainment news and featured content
- eShare--chat software
- Agencia EFE--news and information
- Futbol de Primera--soccer Webcasts
- Inktomi--in-language search services
- Internet Securities--local business news for major Latin American cities
provided by leading publishers, including Avance Economico, El Economista,
El Universal and Enfoque
- Lonely Planet--travel information
- PeopleLink--instant messaging
- Quote.com--stock and mutual fund quotes
- Reuters--news and sports information
- WeatherLabs--weather information
- Ziff-Davis--technology news and information
COMMERCE PARTNERS
Our electronic commerce relationships include:
- barnesandnoble.com--book purchases
- CIM--Brazilian music
- Disney--branded merchandise
- Music Boulevard (N2K)--music products, CDs, clothing, posters and books
- Outpost.com--computer and technology merchandise
- SportsSuperstore--sports merchandise
- Tickets.com--event information and ticketing
NETSCAPE
In May 1998, we entered into a marketing and distribution agreement with
Netscape. Together, we developed and launched NETSCAPE GUIDE BY STARMEDIA in
both Spanish and Portuguese. NETSCAPE GUIDE BY STARMEDIA is one of the core
services available as part of Netscape's Latin American Spanish and Portuguese
browsers. We also appear as a premium bookmark located on Netscape's Spanish and
Portuguese browser toolbars. These bookmarks link users directly to our network.
StarMedia Noticias/Noticias appears as a ticker on the Netscape Latin America
and Brazil homepages and directs users to our network's general news areas. In
addition, Netscape promotes StarMedia throughout its Spanish and Portuguese
offerings.
REALNETWORKS
In February 1999, we entered into a relationship with RealNetworks, the
leading provider of streaming audio/video over the
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Internet. We are the only in-language Internet company featured as a default
channel on both the Spanish and Portuguese versions of RealNetworks' RealPlayer
G2. This relationship uniquely positions us to enhance our user base by enabling
Spanish and Portuguese-speaking Internet users to access our in-language
streaming content, including music videos, television and radio programming, and
sporting events directly from RealPlayer.
RECENT STRATEGIC INVESTORS
In April and May 1999, we completed the private placement of 3,727,272
shares of our common stock to a number of strategic investors for $41 million.
These investors include:
- Critical Path, Inc.;
- eBay Inc.;
- Europortal Holding S.A., which is owned by MediaSet;
- Hearst Communications, Inc.;
- National Broadcasting Company, Inc.; and
- Reuters Holdings Switzerland SA.
We intend to work closely with our strategic investors in order to develop
new content and to add new features to our network.
ADVERTISING SALES
We have built a direct sales organization of over 60 professionals located
in eight offices: Sao Paulo, Mexico City, Buenos Aires, Bogota, Santiago,
Caracas, Miami and New York.
SALES ORGANIZATION
Our sales organization is dedicated to maintaining close relationships with
top advertisers and leading advertising agencies throughout Latin America. It is
structured on a regional basis and is focused solely on selling advertising on
our network. Our sales organization consults regularly with advertisers and
agencies on design and placement of their Web-based advertising, provides
customers with advertising measurement analysis and focuses on providing a high
level of customer service satisfaction.
ADVERTISING PROGRAMS
Currently, advertisers and advertising agencies enter into agreements under
which they pay for a guaranteed number of impressions for a fixed fee. These
agreements range from one month to multiple years. Advertising on our network
currently consists primarily of banner-style advertisements, buttons and
sponsorships from which viewers can hyperlink directly to the advertiser's own
Web site. Our standard cost per thousand impressions, commonly referred to as
CPMs, for banner advertisements varies depending on location of the
advertisements on the network, the targeted country and the extent to which it
is targeted for a particular audience. Discounts from standard CPM rates may be
provided for higher volume, longer-term advertising contracts.
We also offer promotional advertising programs, such as contests, sampling
and couponing opportunities, in order to build brand awareness, generate leads
and drive traffic to an advertiser's site.
ADVERTISING CUSTOMERS
During 1998, 72 companies advertised on the StarMedia network, up from 6
advertisers in 1997. The following is a selected list of our current advertising
customers:
<TABLE>
<S> <C>
Bradesco Fox Television
Ford Motorola
Nokia Sony
IBM
</TABLE>
We have derived substantially all of our revenues to date from the sale of
advertisements and sponsorships. In the first quarter of 1999, we had 45
advertisers, up from four advertisers in the first quarter of 1998. In the first
quarter of 1999, three advertisers, Netscape, Teleglobe and Outpost.com, each
accounted for greater than 10% of total revenues. During the same period, our
five largest advertisers accounted for 60% of total revenues. In 1998, two
advertisers, Fox Latin
42
<PAGE>
America and Netscape, each accounted for greater than 10% of total revenues.
During the same period, our five largest advertisers accounted for 62% of total
revenues.
MARKETING AND BRAND AWARENESS
We use multiple advertising media, like television, print and Web-based
advertising in order to:
- build our brand;
- increase traffic; and
- raise our profile among potential advertisers.
Our television advertisements have appeared on broadcast television in
Brazil, Mexico, Colombia, Argentina, Chile, the United States, Uruguay,
Venezuela, Spain, Peru and on cable networks throughout Latin America. Our first
television commercial, "Birth of a Star", began airing in 18 Latin American
markets in Spanish and Portuguese in February 1997. In addition to advertising
on television, we advertise in print, use outdoor advertising and have a
significant presence in highly-targeted online media. We also have an extensive
public relations campaign. We are currently in the midst of our fourth
advertising campaign across Latin America. Our strategic and content partners
also typically provide us with advertising support.
We form marketing alliances with companies that have broad reach and whose
customers are similar to our target customers. We currently have co-marketing
relationships with Fox Latin America, USA Networks and other regional television
stations.
TECHNOLOGY INFRASTRUCTURE
Our technology infrastructure is built and maintained for reliability,
security, and flexibility and is administered by our technical staff.
We maintain our central production servers at the New Jersey data center of
Exodus Communications. We also have a second co-location facility at Digital
Island in New York. We maintain regional network operating centers in Brazil and
Argentina. Our operations depend on the ability of Exodus or Digital Island to
protect their systems against damage from fire, hurricanes, power loss,
telecommunications failure, break-ins, or other events.
Exodus and Digital Island provide comprehensive facilities management
services, including human and technical monitoring of all production servers 24
hours per day, 7 days per week. Exodus and Digital Island also provide
connectivity for our U.S. servers through multiple high-speed connections. In
Brazil and Argentina, our servers are connected to the largest Internet service
providers in each country. All facilities are protected by multiple
uninterruptible power supplies.
For reliability, availability, and serviceability, we have implemented an
environment in which each server can function separately. Key components of our
server architecture are served by multiple redundant machines.
We employ in-house and third-party monitoring software. Reporting and
tracking systems generate daily traffic, demographic, and advertising reports.
Our production data is copied to backup tapes each night.
We employ in-house and third-party software to monitor access to our
production and development servers.
Our network must accommodate a high volume of traffic and deliver frequently
updated information. Components or features of our network have in the past
suffered outages or experienced slower response times because of equipment or
software downtime.
LATIN AMERICAN TELECOMMUNICATION INFRASTRUCTURE
According to a recent study by Audits & Surveys Worldwide of
telecommunications systems in Latin America, many of the largest markets in
Latin America have begun to privatize and deregulate their telephone industries.
This has had a direct impact on the cost and quality of Internet access as
competition has driven down both monthly access fees and per minute usage
charges. A few years ago, Internet service providers, or ISPs, in Latin America
charged an average of
43
<PAGE>
more than $80 per month for basic Internet access. In addition to access
charges, local calls to connect to the ISP range in cost from $.01 - $.03 per
minute in some countries, including Peru, Chile and Colombia, and up to
$.12-$.15 per minute in Mexico and Argentina. These per minute charges may make
total cost of Internet access substantially greater in Latin America than in the
United States. Recently, monthly ISP access fees have decreased to an average of
$20-25 per month. While per minute charges have not declined as rapidly, they
are expected to trend downward as the effects of deregulation spread. Because
our target market consists of a relatively affluent part of the population
across Latin America, we do not believe that Internet access costs are a
significant deterrent for many of our users. However, if rates were to increase
substantially, it could cause a decline in the number of visitors to our
network.
COMPETITION
There are many companies that provide Web sites and online destinations
targeted to Latin Americans and Spanish- and Portuguese-speaking people in
general. All of these companies compete with us for visitor traffic, advertising
dollars and electronic commerce partners. The market for Internet content
companies in Latin America is new and rapidly evolving. Competition for
visitors, advertisers and electronic commerce partners is intense and is
expected to increase significantly in the future because there are no
substantial barriers to entry in our market. Increased competition could result
in:
- lower advertising rates;
- price reductions and lower profit margins;
- loss of visitors;
- reduced page views; or
- loss of market share.
Any one of these could materially and adversely affect our business, financial
condition and results of operations.
Our ability to compete successfully depends on many factors. These factors
include:
- the quality of the content provided by us and our competitors;
- how easy our respective services are to use;
- sales and marketing efforts; and
- the performance of our technology.
We compete with providers of content and services over the Internet,
including Web directories, search engines, content sites, Internet service
providers and sites maintained by government and educational institutions. Our
current and anticipated competitors include:
- Spanish- and Portuguese-language versions of U.S. services like Yahoo!,
America Online and Prodigy Communications; and
- services like Zaz (Brazil), Telefonos de Mexico (Mexico) and Universo
Online (Brazil), that target particular Latin American countries.
Many of our competitors and potential new competitors, have:
- longer operating histories;
- greater name recognition in some markets;
- larger customer bases; and
- significantly greater financial, technical and marketing resources.
These competitors may also be able to:
- undertake more extensive marketing campaigns for their brands and
services;
- adopt more aggressive advertising pricing policies;
- use superior technology platforms to deliver their products and services;
and
- make more attractive offers to potential employees, distribution partners,
commerce companies, advertisers and third-party content providers.
44
<PAGE>
Our competitors may develop content that is better than ours or that
achieves greater market acceptance. It is also possible that new competitors may
emerge and acquire significant market share. This could have a material and
adverse effect on our business, financial condition and results of operations.
We also compete with traditional forms of media, like newspapers, magazines,
radio and television for advertisers and advertising revenue. If advertisers
perceive the Internet or our network to be a limited or an ineffective
advertising medium, they may be reluctant to devote a portion of their
advertising budget to Internet advertising or to advertising on our network.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
To date, regulations have not materially restricted use of the Internet in
our markets. However, the legal and regulatory environment that pertains to the
Internet is uncertain and may change. New laws and regulations may be adopted.
Existing laws may be applied to the Internet and new forms of electronic
commerce. Uncertainty and new regulations could increase our costs and prevent
us from delivering our products and services over the Internet. It could also
slow the growth of the Internet significantly. This could delay growth in demand
for our network and limit the growth of our revenues. New and existing laws may
cover issues like:
- sales and other taxes;
- user privacy;
- pricing controls;
- characteristics and quality of products and services;
- consumer protection;
- cross-border commerce;
- libel and defamation;
- copyright, trademark and patent infringement;
- pornography; and
- other claims based on the nature and content of Internet materials.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We regard our copyrights, service marks, trademarks, trade secrets and other
intellectual property as critical to our success. We rely on trademark and
copyright law, trade secret protection and confidentiality and/or license
agreements with our employees, customers, partners and others to protect our
intellectual property rights. Despite our precautions, it may be possible for
third parties to obtain and use our intellectual property without authorization.
Furthermore, the validity, enforceability and scope of protection of
intellectual property in Internet-related industries is uncertain and still
evolving. The laws of some foreign countries do not protect intellectual
property to the same extent as do the laws of the United States.
We pursue the registration of our trademarks in the United States and
internationally in Latin America, Spain and Portugal. We may not be able to
secure adequate protection for our trademarks in the United States and other
countries. An action has been filed in Spain against our application for
registration of the StarMedia trademark, which we are currently contesting. In
addition, there have been oppositions filed against our applications in other
countries for some of our other marks.
We currently hold trademark registrations in the United States, Peru,
Uruguay, Colombia and Paraguay for the StarMedia trademark and registrations for
other marks in some of these and other countries. Effective trademark protection
may not be available in all the countries in which we conduct business. Policing
unauthorized use of our marks is also difficult and expensive. In addition, it
is possible that our competitors will adopt product or service names similar to
ours, thereby impeding our ability to build brand identity and possibly leading
to customer confusion.
45
<PAGE>
We actively seek to protect our marks against similar and confusing marks of
third parties by:
- using a watch service which identifies applications to register
trademarks;
- filing oppositions to third parties' applications for trademarks; and
- bringing lawsuits against infringers.
For example, we were aware of an unauthorized use of our PIZARRAS trademark
and successfully pursued enforcement of our rights against that party. Similar
actions like this may be time consuming and expensive. Our inability to
effectively protect our trademarks and service marks would have a material
adverse effect on our business, financial conditions and results of operations.
Many parties are actively developing chat, homepage, search and related Web
technologies. We expect these developers to continue to take steps to protect
these technologies, including seeking patent protection. There may be patents
issued or pending that are held by others and that cover significant parts of
our technology, business methods or services. For example, we are aware that a
number of patents have been issued in the areas of electronic commerce,
Web-based information indexing and retrieval and online direct marketing.
Disputes over rights to these technologies are likely to arise in the future. We
cannot be certain that our products do not or will not infringe valid patents,
copyrights or other intellectual property rights held by third parties. We may
be subject to legal proceedings and claims from time to time relating to the
intellectual property of others in the ordinary course of our business. In the
event that we determine that licensing this intellectual property is
appropriate, we may not be able to obtain a license on reasonable terms or at
all. We may also incur substantial expenses in defending against third-party
infringement claims, regardless of the merit of these claims. Successful
infringement claims against us may result in substantial monetary liability or
may prevent us from conducting all or a part of our business.
We also intend to continue to license technology from third parties,
including our Web-server and encryption technology. The market is evolving and
we may need to license additional technologies to remain competitive. We may not
be able to license these technologies on commercially reasonable terms or at
all. In addition, we may fail to successfully integrate any licensed technology
into our services. Our inability to obtain any of these licenses could delay
product and service development until alternative technologies can be
identified, licensed and integrated.
EMPLOYEES
As of March 31, 1999, we had 270 full-time employees, of whom 76 worked in
sales, 10 in editorial, 20 in marketing, 116 in product and technology and 48 in
finance and administration. From time to time, we employ independent contractors
to support our research and development, marketing, sales and editorial
departments. None of our personnel are represented under collective bargaining
agreements. We consider our relations with our employees to be good.
FACILITIES
Our principal executive offices are located in approximately 19,500 square
feet of office space in New York, New York, under a lease that expires in August
2003. We also lease sales and business development office space in:
- Sao Paulo, Brazil;
- Mexico City, Mexico;
- Buenos Aires, Argentina;
- Bogota, Colombia;
- Santiago, Chile;
- Montevideo, Uruguay;
- Caracas, Venezuela; and
- Miami, Florida.
LEGAL PROCEEDINGS
There are no material legal proceedings pending or, to our knowledge,
threatened against us.
46
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the executive officers, directors and key
employees of StarMedia, their ages and the positions held by them:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Fernando J. Espuelas......................... 32 Chairman of the Board of Directors
and Chief Executive Officer
Jack C. Chen................................. 32 President and Director
Tracy J. Leeds............................... 34 Chief Operating Officer
Steven J. Heller............................. 33 Chief Financial Officer
Adriana J. Kampfner.......................... 26 President, StarMedia de Mexico and Senior Vice President,
Global Sales
James D. Granlund............................ 35 Chief Technology Officer
Justin K. Macedonia.......................... 40 Senior Vice President, General Counsel
Douglas M. Karp.............................. 43 Director
Christopher T. Linen(1)...................... 49 Director
Gerardo M. Rosenkranz(2)..................... 48 Director
Susan L. Segal............................... 46 Director
Frederick R. Wilson(1)(2).................... 36 Director
</TABLE>
- ------------------------
(1) Member of the compensation committee
(2) Member of the audit committee
FERNANDO J. ESPUELAS is a founder of StarMedia and has been Chairman of the
Board and Chief Executive Officer since September 1996. Prior to founding
StarMedia, Mr. Espuelas was employed in various positions at AT&T from 1994 to
1996, most recently as Managing Director of Marketing Communications for the
Americas. From 1991 to 1994, Mr. Espuelas was employed in various positions at
Ogilvy & Mather, an international advertising firm, most recently as Regional
Account Director for Latin America. Prior to his employment at Ogilvy & Mather,
Mr. Espuelas worked at other major advertising agencies, including Lowe &
Partners and Wunderman Worldwide. He received a B.A. with Distinction from
Connecticut College. Mr. Espuelas is a native of Uruguay.
JACK C. CHEN is a founder of StarMedia and has been President and a Director
since March 1996. Prior to founding StarMedia, Mr. Chen was a Vice President at
S.L. Chen & Associates, Inc., an international consulting firm, from 1995
through 1996. Mr. Chen was a securities analyst at CS First Boston Investment
Management from 1994 to 1995. Prior to his employment at CS First Boston, Mr.
Chen was an investment banker at Goldman, Sachs & Co. Mr. Chen received an
M.B.A. from Harvard Business School and a B.A. with High Honors in Computer
Science from Harvard University.
TRACY J. LEEDS has been the Chief Operating Officer of StarMedia since
September 1998, and prior to that served as StarMedia's Vice President, Business
Operations since July 1997. From 1996 to 1997, Ms. Leeds was General Manager of
the Healthsite Web service for AT&T Personal Online Services. From 1994 to 1996,
she was Director of the PC DreamShop the electronic commerce project of Time
Warner Cable Programming. Prior to that, Ms. Leeds was Director, Client
Services, for Catalog 1, a joint venture between Time Warner and Spiegel. Ms.
Leeds has also held various marketing positions at Johnson & Johnson and
Playtex. Ms. Leeds received an M.B.A. from Harvard Business School and a B.A.
from Yale University.
STEVEN J. HELLER has been the Chief Financial Officer of StarMedia since May
1999,
47
<PAGE>
and prior to that served as StarMedia's Vice President, Finance and
Administration since October 1997. From 1995 to 1997, Mr. Heller was Director,
Finance and Administration, and Treasurer at Evolve Software, Inc., a software
firm based in San Francisco. Prior to that, Mr. Heller was Managing Director of
Entrepreneurial Accounting Resources, a firm he founded in 1991 that provided
finance and accounting consulting services to high technology and media
companies. Mr. Heller served in the San Francisco office of Coopers & Lybrand in
the Emerging Business Services division of the Business Assurance Group from
1987 to 1991. He received a B.S. from The American University.
ADRIANA J. KAMPFNER is President of StarMedia de Mexico and Senior Vice
President of Global Sales. Ms. Kampfner has worked at StarMedia since August
1997. Prior to her current position, Ms. Kampfner was StarMedia's Vice
President, General Manager, Mexico and StarMedia's Director of Sales, North
America, responsible for initiating relationships with key domestic and
international clients. Before joining StarMedia, Ms. Kampfner was a Senior
Financial Analyst at Chase Securities Inc. from 1996 to 1997. Ms. Kampfner
received a B.A. in Business Administration from the University of Michigan.
JAMES D. GRANLUND joined StarMedia as its Chief Technology Officer in
January 1999. Prior to joining StarMedia, Mr. Granlund was Vice President,
Operations and Technology for Turner Broadcast Systems/CNNfn from 1995 until
1999. During his tenure with CNNfn, he designed, developed and implemented
technological strategies and maintained operational integrity for both the CNNfn
television network and CNNfn.com Web site. Prior to joining Turner Broadcast
Systems, Mr. Granlund was manager of Work Group Computing for Bristol-Myers
Squibb Company from 1988 to 1995. He received a B.S. in Industrial and Labor
Relations from Cornell University.
JUSTIN K. MACEDONIA joined StarMedia as its Senior Vice President, General
Counsel in April 1999. Prior to joining StarMedia, Mr. Macedonia was employed by
the law firm of Winthrop, Stimson, Putnam & Roberts from 1994 until 1999, most
recently in the position of Counsel. Prior to joining Winthrop, Stimson, Mr.
Macedonia was a corporate associate with the law firm of Kramer, Levin,
Naftalis, Nessen, Kamin & Frankel from 1988 to 1994. He is a member of the Bar
of the State of New York. Mr. Macedonia received a J.D. from Harvard Law School
and a B.A. from Fordham College.
DOUGLAS M. KARP has been a Director of StarMedia since September 1998. Mr.
Karp is currently a Managing Director and a member of the Operating Committee of
E.M. Warburg, Pincus & Co., LLC, where he is responsible for limited partner
relationships and fund raising as well as the firm's Communications and Latin
American investments. Prior to joining Warburg, Pincus, he was a Managing
Director of Mergers and Acquisitions at Salomon Brothers Inc. from 1989 to 1991
and a manager with the Boston Consulting Group and founder of its New York
office. Mr. Karp is a member of the boards of directors of Qwest Communications,
Journal Register Company, TV Filme, Inc., Primus Telecommunications Group,
Golden Books Family Entertainment and PageNet do Brasil. Mr. Karp received a
B.A. from Yale University and a J.D. from Harvard Law School.
CHRISTOPHER T. LINEN has been a Director of StarMedia since November 1996.
Currently, Mr. Linen is Principal of Christopher Linen & Company, a venture
capital firm. Mr. Linen was President and Chief Executive Officer of Warner
Music Enterprises, a Time Warner Inc. unit charged with developing new music-
related opportunities including Internet properties and direct marketing
businesses worldwide from 1992 to 1996. From 1988 to 1992, Mr. Linen was
President and Chief Executive Officer of Time Warner Direct, a unit of Time
Warner Inc. composed of Time Life, one of the world's largest direct marketers
of books, music and videocassettes; Book-of-the-Month Club Inc., the nation's
largest book club operator; and related ventures. Prior to his employment with
Time Warner Direct, Mr. Linen held various top-level executive positions at Time
Life, including
48
<PAGE>
President and Chief Executive Officer and Managing Director for Latin America,
and currently serves on the board of directors of Allied Devices Corporation.
Mr. Linen received a B.S. from Williams College and attended the Graduate School
of Business Administration at New York University.
GERARDO M. ROSENKRANZ has been a Director of StarMedia since November 1996.
Mr. Rosenkranz is a private investor and founder and Chief Executive Officer of
Ventech International, Inc. Ventech provides consulting services to
telecommunications and information technology companies. Prior to establishing
Ventech in 1987, Mr. Rosenkranz served for 10 years at Sprint International
(formerly GTE Telenet), where he held senior executive positions in management,
business development and sales. Mr. Rosenkranz received B.S., M.S. and Engineer
Degrees in Electrical Engineering from Stanford University. He was born and
raised in Mexico City, Mexico.
SUSAN L. SEGAL has been a Director of StarMedia since July 1997. Ms. Segal
has served as General Partner and Latin American Group Head at Chase Capital
Partners since December 1996. From 1992 to 1996, Ms. Segal was a Senior Managing
Director at Chase Securities Inc. responsible for Emerging Markets Investment
Banking. She has more than 20 years of experience in emerging markets,
particularly Latin America, where her responsibilities have included trading,
capital markets and sovereign debt rescheduling. Ms. Segal is a member of the
Council on Foreign Relations, the advisory board of the Council of the Americas
and the boards of directors of the Tinker Foundation, the Americas Society and
the Corp Group. Ms. Segal received an M.B.A. from Columbia University and a B.A.
from Sarah Lawrence College.
FREDERICK R. WILSON has been a Director of StarMedia since July 1997. Mr.
Wilson is currently Managing Partner of Flatiron Partners, a venture capital
firm focused on early-stage, Internet-focused investments. Prior to founding
Flatiron Partners, Mr. Wilson was associated with Euclid Partners from 1986 to
1996. He received an M.B.A. from The Wharton School of Business at The
University of Pennsylvania and a B.S. in Mechanical Engineering and Computer
Science from MIT.
CLASSIFIED BOARD OF DIRECTORS
Our board of directors is divided into three classes of directors serving
staggered three-year terms. Upon expiration of the term of a class of directors,
the directors in that class will be elected for three-year terms at the annual
meeting of stockholders in the year in which their term expires. Our board of
directors has resolved that Messrs. Chen and Karp will be Class I directors
whose terms expire at the 2000 annual meeting of stockholders, Messrs. Linen and
Wilson will be Class II directors whose terms expire at the 2001 annual meeting
of stockholders, Messrs. Espuelas and Rosenkranz and Ms. Segal will be Class III
directors whose terms expire at the 2002 annual meeting of stockholders. With
respect to each class, a director's term will be subject to the election and
qualification of their successors, or their earlier death, resignation or
removal. These provisions, when coupled with the provision of our amended and
restated certificate of incorporation authorizing the board of directors to fill
vacant directorships or increase the size of the board of directors, may delay a
stockholder from removing incumbent directors and simultaneously gaining control
of the board of directors by filling the vacancies with its own nominees.
BOARD COMMITTEES
The audit committee reports to the board regarding the appointment of our
independent public accountants, the scope and results of our annual audits,
compliance with our accounting and financial policies and management's
procedures and policies relative to the adequacy of our internal accounting
controls. The audit committee consists of Gerardo M. Rosenkranz and Frederick R.
Wilson.
49
<PAGE>
The compensation committee of the board of directors reviews and makes
recommendations to the board regarding our compensation policies and all forms
of compensation to be provided to our executive officers and directors. In
addition, the compensation committee reviews bonus and stock compensation
arrangements for all of our other employees. The current members of the
compensation committee are Christopher T. Linen and Frederick R. Wilson. No
interlocking relationships exist between our board of directors or compensation
committee and the board of directors or compensation committee of any other
company, nor has any interlocking relationship existed in the past.
DIRECTOR COMPENSATION
Directors currently do not receive a stated salary from StarMedia for their
service as members of the board of directors, although by resolution of the
board, they may receive a fixed sum and reimbursement for expenses in connection
with the attendance at board and committee meetings. We currently do not provide
additional compensation for committee participation or special assignments of
the board of directors. From time to time, some of our directors have received
grants of options to purchase shares of common stock. Please see "Certain
Transactions".
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued for
the year ended December 31, 1998 to our Chief Executive Officer and to each of
our most highly compensated executive officers, other than the Chief Executive
Officer, whose salary and bonus for such fiscal year exceeded $100,000.
Securities Underlying Options/SARs does not include options cancelled under our
1997 Plan, but does include the immediate reissuance of options equal to the
cancelled options under our 1998 Plan.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-----------------
ANNUAL COMPENSATION SECURITIES
------------------------ UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS ($) OPTIONS/SARS(#)
- --------------------------------------------------------------------- ----------- ----------- -----------------
<S> <C> <C> <C>
Fernando J. Espuelas................................................. $ 152,084 $ 200,000 1,750,000
Chairman of the Board and Chief Executive Officer
Jack C. Chen......................................................... 152,104 200,000 1,750,000
President
Tracy J. Leeds....................................................... 117,917 -- 550,000
Chief Operating Officer
Steven J. Heller..................................................... 106,667 -- 190,000
Chief Financial Officer
Adriana J. Kampfner.................................................. 138,750 -- 230,000
President, StarMedia de Mexico, Senior Vice President, Global Sales
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth grants of stock options for the year ended
December 31, 1998 to our Chief Executive Officer and our most highly compensated
executive officers, other than our Chief Executive Officer, whose salary and
bonus exceeded $100,000. The options shown for each executive officer do not
include options cancelled under our 1997 Plan, but do include the immediate
reissuance of options equal to the cancelled options under our 1998 Plan. We
have never granted any stock appreciation rights. The potential realizable value
is calculated based on the term of the option at its time of grant. It is
calculated assuming that the fair market value
50
<PAGE>
of common stock on the date of grant appreciates at the indicated annual rate
compounded annually for the entire term of the option and that the option is
exercised and sold on the last day of its term for the appreciated stock price.
These numbers are calculated based on the requirements of the Securities and
Exchange Commission and do not reflect our estimate of future stock price
growth. The percentage of total options granted to employees in the last fiscal
year is based on options to purchase an aggregate of 5,782,000 shares of common
stock granted under our 1998 Plan to our employees, consultants and directors
and under our 1997 Plan to Messrs. Espuelas and Chen in the year ended December
31, 1998. All options granted under our 1997 Plan, other than those granted to
Messrs. Espuelas and Chen, have been cancelled and reissued under our 1998 Plan.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED
OPTION GRANTS IN LAST FISCAL YEAR ANNUAL RATES
INDIVIDUAL GRANTS OF
--------------------------------------------------------------------------- STOCK PRICE
NUMBER OF APPRECIATION
SECURITIES PERCENT OF TOTAL EXERCISE FOR OPTION
UNDERLYING OPTIONS GRANTED TO PRICE PER FMV ON THE TERM
OPTIONS EMPLOYEES IN SHARE DATE OF GRANT EXPIRATION -------------
NAME GRANTED(#) FISCAL YEAR (%) ($/SHARE) ($/SHARE) DATE 0%($)
- -------------------------------- ------------ ------------------- ----------- --------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Fernando J. Espuelas............ 1,000,000 17% $ 0.50 $ 2.08 4/1/08 $ 1,580,000
750,000 13 1.60 5.20 12/17/08 2,700,000
Jack C. Chen.................... 1,000,000 17 0.50 2.08 4/1/08 1,580,000
750,000 13 1.60 5.20 12/17/08 2,700,000
Tracy J. Leeds.................. 375,000 6 0.50 3.83 7/16/07 1,248,750
175,000 3 0.50 4.54 9/17/08 707,000
Steven J. Heller................ 100,000 2 0.50 3.83 7/10/08 333,000
90,000 2 0.50 4.54 9/17/08 363,600
Adriana J. Kampfner............. 130,000 3 0.50 3.83 7/10/08 432,900
100,000 2 0.50 4.54 9/17/08 404,000
<CAPTION>
NAME 5%($) 10%($)
- -------------------------------- ------------- -------------
<S> <C> <C>
Fernando J. Espuelas............ $ 2,890,400 $ 4,887,200
5,157,000 8,901,000
Jack C. Chen.................... 2,890,400 4,887,200
5,157,000 8,901,000
Tracy J. Leeds.................. 2,153,588 3,532,388
1,207,535 1,970,255
Steven J. Heller................ 574,290 941,970
621,018 1,013,274
Adriana J. Kampfner............. 746,577 1,224,561
690,020 1,125,860
</TABLE>
FISCAL YEAR-END OPTION VALUES
The following table provides some information about stock options held as of
December 31, 1998 by our Chief Executive Officer and our most highly compensated
executive officers other than our Chief Executive Officer. No options were
exercised during fiscal 1998 by any of these executive officers. There was no
public trading market for the common stock as of December 31, 1998. Accordingly,
the value of unexercised in-the-money options at fiscal year-end is based on the
assumed initial public offering price of $11.00 per share, less the exercise
price per share, multiplied by the number of shares underlying the options.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END (#) AT FISCAL YEAR END
----------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Fernando J. Espuelas............................. 1,750,000 -- $ 17,550,000 $ --
Jack C. Chen..................................... 1,750,000 -- 17,550,000 --
Tracy J. Leeds................................... 82,639 467,361 867,710 4,907,291
Steven J. Heller................................. 36,111 153,889 379,166 1,615,835
Adriana J. Kampfner.............................. 13,333 216,667 139,997 2,275,004
</TABLE>
51
<PAGE>
EMPLOYMENT CONTRACTS
We have entered into executive employment agreements with Fernando J.
Espuelas, our Chairman and Chief Executive Officer, and Jack C. Chen, our
President. Each employment agreement provides for an initial annual base salary
of $150,000 that will be automatically increased effective each January 1 by not
less than 10% of the previous year's base salary. Each employment agreement also
provides for an initial annual bonus of not less than $100,000, that will also
be increased annually by not less than 10% of the previous year's bonus amount.
Each executive is also entitled to participate in our stock option plans as well
as all health, welfare and other benefit plans provided by us to key executive
employees.
Each employment agreement expires on July 31, 2000, subject to earlier
termination or extension. Each employment agreement provides that, if Messrs.
Espuelas or Chen is terminated by us without cause, or if they choose to
terminate their employment with us for good reason, they will be entitled to
receive from us:
- their base salary through the termination date;
- any accrued but unpaid vacation pay;
- the amount of all compensation previously deferred, if any, together with
any accrued interest or earnings on any deferred compensation;
- a termination payment of 200% of the annual base salary and guaranteed
minimum bonus amount applicable to the year in which the termination
occurs; and
- health and disability benefits for twenty-four months following the
termination date.
Under the agreements, good reason includes:
- a material breach of the compensation provisions of the employment
agreements;
- assignment of Messrs. Espuelas or Chen to duties that are inconsistent
with their roles as executive officers;
- relocation of Messrs. Espuelas or Chen outside of the New York
metropolitan area;
- a change of the reporting relationship of Messrs. Espuelas or Chen; or
- a change of control.
In addition, in the event Messrs. Espuelas or Chen is terminated by us
without cause, or if they choose to terminate their employment with us for good
reason, all stock options previously granted to them that have not been
exercised and are outstanding will remain outstanding and continue to become
exercisable pursuant to their respective terms.
Each employment agreement prohibits Messrs. Espuelas and Chen from competing
with us for a period of two years from the date of their termination of
employment, if they are terminated either by us for cause or if they choose to
terminate their employment with us without good reason. If we terminate their
employment without cause, the non-compete period lasts for one year from the
date of termination.
We have agreed to indemnify Messrs. Espuelas and Chen for all liabilities
relating to their status as officers or directors, and any actions committed or
omitted by them in this capacity, to the maximum extent permitted by the laws of
the State of Delaware.
STOCK OPTION PLANS
1997 STOCK OPTION PLAN
Our 1997 Stock Option Plan was adopted by the board of directors in June
1997. A total of 5,000,000 shares of common stock were authorized for issuance
under the 1997 Plan. When the 1998 Plan was adopted, all options outstanding
under the 1997 Plan were cancelled and reissued under the 1998 Plan, other than
those granted to Messrs. Espuelas and Chen in the aggregate amount of 2,000,000.
We will not issue additional options under the 1997 Plan.
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<PAGE>
The exercise price for the shares of common stock subject to option grants
made under the 1997 Plan may, at the discretion of the plan administrator, be
paid in cash or in shares of common stock valued at fair market value on the
exercise date.
In the event of a merger pursuant to which StarMedia is acquired, each
outstanding option may, at the discretion of the plan administrator, be assumed
by the successor corporation or terminated in exchange for a cash payment equal
to the difference between the fair market value of the shares for which the
option is at the time exercisable and the exercise price payable for such
shares.
The board may amend or modify the 1997 Plan at any time. The 1997 Plan will
terminate in all events on December 31, 1999. Options under the 1997 Plan,
however, will remain outstanding in accordance with their terms.
1998 STOCK PLAN
Our 1998 Stock Plan was adopted by the board of directors and approved by
the stockholders in July 1998. A total of 17,000,000 shares of common stock have
been authorized for issuance under the 1998 Plan. The number of shares of common
stock available for issuance under the 1998 Plan will increase on July 1 of each
year beginning in 2000 by the lesser of:
- 4 million shares;
- 4% of the outstanding shares on such date; or
- an amount determined by the board.
Under the 1998 Plan, eligible individuals in StarMedia's employ or service
may, at the discretion of the plan administrator, be granted options to purchase
shares of common stock at an exercise price determined by the plan administrator
or may be issued shares of common stock directly through the purchase of such
shares at a price determined by the plan administrator. Eligible individuals
include officers, non-employee board members and consultants.
The 1998 Plan is administered by the compensation committee of the board.
The compensation committee as plan administrator has complete discretion to
determine which eligible individuals are to receive option grants or stock
issuances, the time or times when option grants or stock issuances are to be
made, the number of shares subject to each grant or issuance, the status of any
granted option as either an incentive stock option or a non-statutory stock
option under the Federal tax laws, the vesting schedule to be in effect for the
option grant or stock issuance and the maximum term for which any granted option
is to remain outstanding.
The exercise price for the shares of common stock subject to option grants
made under the 1998 Plan may, at the discretion of the plan administrator, be
paid in cash, in shares of common stock valued at fair market value on the
exercise date, through a same-day sale program without any cash outlay by the
optionee or by delivering a full-recourse, interest-bearing promissory note.
In the event of an acquisition of StarMedia, whether by merger or asset
sale, each option which is not to be assumed by the successor corporation will
automatically accelerate in full and all unvested shares will immediately vest,
except to the extent that StarMedia's repurchase rights with respect to those
shares are to be assigned to the successor corporation.
The plan administrator has the authority to effect the cancellation of
outstanding options in return for the grant of new options for the same or
different number of option shares with an exercise price per share based upon
the fair market value of the common stock on the new grant date.
The board may amend or modify the 1998 Plan at any time, subject to any
required stockholder approval. The 1998 Plan will terminate on the earliest of:
- the date determined by the board;
- the date on which all shares available for issuance under the 1998 Plan
have been issued as fully-vested shares; or
53
<PAGE>
- the termination of all outstanding options in connection with an
acquisition of StarMedia.
1999 EMPLOYEE STOCK PURCHASE PLAN
Our 1999 Employee Stock Purchase Plan was adopted by the Board of Directors
in May 1999. A total of 1,000,000 shares of common stock has been reserved for
issuance under the purchase plan, plus annual increases, on July 1 of each year
beginning in 2000, equal to the lesser of:
- 500,000 shares;
- 1% of the outstanding shares on such date; or
- a lesser amount determined by the Board.
The purchase plan is intended to qualify under Section 423 of the Internal
Revenue Code of 1986, as amended. It contains successive, overlapping 24-month
offering periods, each consisting of four six-month purchase periods. The
offering periods generally start on the first trading day on or after May 15 and
November 15 of each year, except for the first offering period which commences
on the first trading day on or after the effective date of this offering and
ends on the last trading day on or before May 14, 2001.
Our employees are eligible to participate in the stock plan if they work
with StarMedia for at least 20 hours per week and more than five months in any
calendar year. However, any employee who:
- immediately after grant owns stock representing 5% or more of the total
combined voting power or value of all classes of our capital stock, or
- whose rights to purchase stock under all of our employee stock purchase
plans exceed $25,000 worth of stock for any calendar year
may not be granted any rights to purchase stock under the purchase plan. The
purchase plan permits participants to purchase common stock through payroll
deductions of not less than 2% and up to 10% of their "compensation".
Compensation is defined as the participant's base straight time gross earnings
and commissions but exclusive of payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses or other cash compensation. The
maximum number of shares a participant may purchase during a single offering
period is 2,500 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each offering period. The price of stock
purchased under the purchase plan is 85% of the lower of the fair market value
of the common stock at the beginning or end of the offering period. Participants
may end their participation at any time during an offering period, and they will
be paid their payroll deductions to date.
Participation ends automatically upon termination of a participant's employment.
Rights granted under the purchase plan are not transferable by a participant
other than by will, the laws of descent and distribution, or as otherwise
provided under the purchase plan. The purchase plan provides that, in the event
that we merge with or into another corporation or sell substantially all of our
assets, each outstanding right to purchase stock may be assumed or substituted
for by the successor corporation. If the successor corporation refuses to assume
or substitute for the outstanding rights to purchase stock, the offering period
then in progress will be shortened and a new exercise date will be set. The
purchase plan will terminate in 2009. The Board has the authority to amend or
terminate the purchase plan, except that, subject to certain exceptions, no such
action may adversely affect any outstanding rights to purchase stock under the
purchase plan.
54
<PAGE>
CERTAIN TRANSACTIONS
In 1996, our directors, officers and 5% stockholders, and their affiliates,
purchased common stock as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF PURCHASE
COMMON PRICE PER
NAME OF INVESTOR STOCK SHARE
- ------------------------------ ----------- -----------
<S> <C> <C>
Fernando J. Espuelas.......... 4,500,000 $ .0056
Jack C. Chen.................. 4,500,000 .0056
Gerardo M. Rosenkranz......... 220,000 .09
Christopher T. Linen.......... 100,000 .25
A trust, of which Mr. Chen is
trustee..................... 20,000 .50
</TABLE>
Messrs. Espuelas, Chen, Rosenkranz and Linen currently serve as our officers
and/or directors.
In May 1997, we issued options to purchase 280,000 shares of common stock at
an exercise price of $0.09 per share to Mr. Rosenkranz. At that time, we also
issued options to purchase 100,000 shares of common stock at an exercise price
of $0.25 per share to Mr. Linen. These options were granted to Messrs.
Rosenkranz and Linen in connection with services provided to us.
In July 1997, we sold 7,330,000 shares of our series A redeemable
convertible preferred stock to a number of investors at a purchase price of
$0.50 per share. Of these, our directors, officers and 5% stockholders, and
their affiliates, purchased shares as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF SERIES A
REDEEMABLE
CONVERTIBLE
NAME OF INVESTOR PREFERRED STOCK
- --------------------------------------- ----------------
<S> <C>
Chase Venture Capital Associates....... 5,535,000
fl@tiron Fund.......................... 465,000
Tracy Leeds and family................. 200,000
Christopher T. Linen................... 100,000
Gerardo Rosenkranz, family and
affiliates........................... 100,000
A trust, of which Mr. Chen is
trustee.............................. 20,000
</TABLE>
Chase Venture Capital Associates owns more than 5% of our stock. In
addition, Susan Segal, one of our directors, is affiliated with Chase Venture
Capital Associates. The fl@tiron Fund is controlled by Frederick Wilson, one of
our directors. Tracy Leeds currently serves as one of our executive officers.
After this offering, all of the series A redeemable convertible preferred stock
will automatically convert into an aggregate of 7,330,000 shares of common
stock.
In January 1998, we issued 8% convertible subordinated notes that were due
on the earlier of July 21, 1998 or the closing of our series B redeemable
convertible preferred stock financing to the fl@tiron Fund in the aggregate
principal amount of $410,000 and to Chase Venture Capital Associates in the
aggregate principal amount of $3,590,000. The notes were repaid in full.
In February 1998, we sold 8,000,000 shares of series B redeemable
convertible preferred stock to a number of investors at a purchase price of
$1.50 per share. Of these, our directors, officers and 5% stockholders, and
their affiliates, purchased shares as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF SERIES B
REDEEMABLE
CONVERTIBLE
NAME OF INVESTOR PREFERRED STOCK
- --------------------------------------- ----------------
<S> <C>
Chase Venture Capital Associates....... 2,393,333
fl@tiron Fund.......................... 273,333
Gerardo Rosenkranz, family and
affiliates........................... 66,666
Tracy Leeds and family................. 66,668
Family of Steven Heller................ 30,000
</TABLE>
Steven Heller is one of our executive officers. After this offering, the
series B redeemable convertible preferred stock will automatically convert into
an aggregate of 8,000,000 shares of common stock.
In August 1998, we issued 8% convertible subordinated notes that were due on
the earlier of December 31, 1998 or the closing of our series C redeemable
convertible preferred stock financing to the Flatiron Fund 1998/99 in the
aggregate principal amount of $200,000, and to Chase Venture Capital Associates
in the aggregate amount of $1,800,000. The Flatiron Fund 1998/99 is controlled
by Mr. Wilson. The notes were repaid in full.
55
<PAGE>
In August 1998, we sold 16,666,667 shares of series C redeemable convertible
preferred stock to a number of investors at a purchase price of $4.80 per share.
Of these, our directors, officers and 5% stockholders, and their affiliates,
purchased shares as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF SERIES C
REDEEMABLE
CONVERTIBLE
NAME OF INVESTOR PREFERRED STOCK
- --------------------------------------- ----------------
<S> <C>
Chase Venture Capital Associates ...... 3,750,000
Warburg, Pincus Equity Partners ....... 2,380,209
Warburg, Pincus Ventures
International ....................... 2,380,208
Flatiron Fund 1998/99.................. 416,667
Gerardo Rosenkranz, family and
affiliates........................... 104,165
Tracy Leeds............................ 28,918
</TABLE>
The Warburg, Pincus entities, collectively, own more than 5% of our stock.
In addition, Douglas M. Karp, one of our directors, is affiliated with the
Warburg, Pincus entities. After this offering, the series C redeemable
convertible preferred stock will automatically convert into an aggregate of
16,666,667 shares of common stock.
We have entered into employment agreements with Fernando J. Espuelas, our
chairman and chief executive officer, and Jack C. Chen, our president.
From time to time we have retained an affiliate of Chase Venture Capital
Associates to perform various investment banking and advisory services on our
behalf. The amount paid to this affiliate of Chase in 1998 for these services
was $1.2 million.
It is our current policy that all transactions with officers, directors, 5%
stockholders and their affiliates be entered into only if they are approved by a
majority of the disinterested independent directors, are on terms no less
favorable to us than could be obtained from unaffiliated parties and are
reasonably expected to benefit us.
56
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of our common stock, as of May 7, 1999 and as adjusted to reflect the
sale of common stock offered by us in this offering for:
- each person known by us to beneficially own more than 5% of our common
stock;
- each executive officer named in the Summary Compensation Table;
- each of our directors and
- all of our executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. Shares beneficially owned includes ownership of
shares of redeemable convertible preferred stock. Unless otherwise indicated,
the address for those listed below is c/o StarMedia Network, Inc., 29 West
36(th) Street, Fifth Floor, New York, New York 10018. Except as indicated by
footnote, and subject to applicable community property laws, the persons named
in the table have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them. The number of shares of common
stock outstanding used in calculating the percentage for each listed person
includes the shares of common stock underlying options held by such persons that
are exercisable within 60 days of May 7, 1999, but excludes shares of common
stock underlying options held by any other person. Percentage of beneficial
ownership is based on 46,346,328 shares of common stock outstanding as of May 7,
1999, assuming the conversion of the redeemable convertible preferred stock, and
53,346,328 shares of common stock outstanding after completion of this offering.
<TABLE>
<CAPTION>
PERCENTAGE OF COMMON STOCK
SHARES BENEFICIALLY OWNED
BENEFICIALLY --------------------------------------
NAME OF BENEFICIAL OWNER OWNED PRIOR TO OFFERING AFTER OFFERING
- ----------------------------------------------------------------- ------------- ------------------- -----------------
<S> <C> <C> <C>
Fernando J. Espuelas(1).......................................... 6,250,000 13.0% 11.3%
Jack C. Chen(2).................................................. 6,290,000 13.1 11.4
Tracy J. Leeds(3)................................................ 357,391 * *
Steven J. Heller(4).............................................. 52,778 * *
Adriana J. Kampfner(5)........................................... 62,777 * *
Douglas M. Karp(6)............................................... 4,760,417 10.3 8.9
Christopher T. Linen(7).......................................... 300,000 * *
Gerardo M. Rosenkranz(8)......................................... 588,055 1.3 1.1
Susan L. Segal(9)................................................ 11,378,333 24.6 21.3
Frederick R. Wilson(10).......................................... 1,155,000 2.5 2.2
Chase Venture Capital Associates, L.P.(11)....................... 11,378,333 24.6 21.3
Warburg, Pincus Equity Partners, L.P.(12)........................ 2,380,209 5.1 4.5
Warburg, Pincus Ventures International, L.P.(12)................. 2,380,208 5.1 4.5
All directors and executive officers as a group (12 persons)..... 31,194,751 62.3 54.6
</TABLE>
- ------------------------
* Indicates less than one percent of the common stock.
(1) Includes (a) 1,750,000 shares issuable upon the exercise of currently
exercisable stock options and (b) 1,000,000 shares held by a trust, of which
Mr. Espuelas is trustee.
57
<PAGE>
(2) Includes (a) 1,750,000 shares issuable upon the exercise of currently
exercisable stock options, (b) 2,150,000 shares owned by Mr. Chen's spouse
and (c) an aggregate of 2,246,600 shares held by three trusts, of which Mr.
Chen is trustee.
(3) Includes (a) 31,250 shares issuable upon the exercise of currently
exercisable stock options and stock options which vest within 60 days and
(b) an aggregate of 250,000 shares held by a trust, of which Ms. Leeds is
trustee.
(4) Consists of 52,778 shares issuable upon the exercise of currently
exercisable stock options and stock options which vest within 60 days.
(5) Consists of 62,777 shares issuable upon the exercise of currently
exercisable stock options and stock options which vest within 60 days.
(6) All shares indicated as owned by Mr. Karp are included because of Mr. Karp's
affiliation with the Warburg, Pincus entities. Mr. Karp disclaims beneficial
ownership of all shares owned by the Warburg, Pincus entities. Mr. Karp's
address is c/o E.M. Warburg, Pincus & Co., LLC, 466 Lexington Avenue, New
York, NY 10017. See note 12 below.
(7) Includes 100,000 shares owned by members of Mr. Linen's immediate family.
Mr. Linen's address is c/o Christopher Linen & Co., 113 East 19(th) Street,
New York, NY 10003.
(8) Consists of (a) 520,833 shares owned by Mr. Rosenkranz, (b) 43,055 shares
owned by a trust, of which Mr. Rosenkranz is managing trustee, and (c)
24,167 shares owned by a company controlled by Mr. Rosenkranz. Mr.
Rosenkranz's address is c/o Ventech International, Inc., 60 Arch Street,
Greenwich, CT 06830.
(9) All shares indicated as owned by Ms. Segal are included because of Ms.
Segal's affiliation with Chase Venture Capital Associates, L.P., of which
Chase Capital Partners is the general partner. Ms. Segal disclaims
beneficial ownership of all shares owned by Chase. Ms. Segal's address is
c/o Chase Venture Capital Associates, L.P., 380 Madison Avenue, 9(th) Floor,
New York, NY 10017.
(10) Consists of shares owned by the fI@tiron Fund, LLC and the FIatiron Fund
1998/99, LLC which are controlled by Mr. Wilson. Mr. Wilson's address is c/o
Flatiron Partners, 257 Park Avenue South, 12(th) Floor, New York, NY 10010.
(11) The address of Chase Venture Capital Partners is 380 Madison Avenue, 12(th)
Floor, New York, NY 10017.
(12) THE WARBURG, PINCUS STOCKHOLDERS. The Warburg, Pincus stockholders are
comprised of Warburg, Pincus Equity Partners, L.P., including three related
limited partnerships, and Warburg Pincus Ventures International,
L.P. Warburg, Pincus & Co. is the sole general partner of each of these
entities and has a 20% interest in each of their profits. The Warburg Pincus
stockholders are each managed by E.M. Warburg Pincus & Co., LLC. Lionel I.
Pincus is the managing partner of Warburg, Pincus & Co. and the managing
member of E.M. Warburg, Pincus & Co., LLC, and may be deemed to control both
entities.
MR. KARP. Mr. Karp, a director of StarMedia, is a managing director and
member of E.M. Warburg, Pincus & Co., LLC and a general partner of Warburg,
Pincus & Co. Mr. Karp may be deemed to have an indirect pecuniary interest
(within the meaning of Rule 16a-1 under the Securities Exchange of 1934, as
amended) in an indeterminate portion of the shares beneficially owned by the
Warburg, Pincus stockholders.
ADDRESS. The address of the Warburg, Pincus entities is 466 Lexington
Avenue, New York, NY 10017.
58
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
StarMedia's amended and restated certificate of incorporation, which will
become effective upon the closing of this offering, authorizes the issuance of
up to 200,000,000 shares of common stock, par value $.001 per share, and
10,000,000 shares of preferred stock, par value $.001 per share, the rights and
preferences of which may be established from time to time by StarMedia's board
of directors. As of May 7, 1999, 14,349,661 shares of common stock were
outstanding and 31,996,667 shares of convertible preferred stock convertible
into the same amount of shares of common stock were issued and outstanding. As
of May 7, 1999, StarMedia had 97 stockholders.
COMMON STOCK
Under our amended and restated certificate of incorporation, holders of our
common stock are entitled to one vote for each share held of record on all
matters submitted to a vote of the stockholders, including the election of
directors. They do not have cumulative voting rights. Subject to preferences
that may be applicable to any then-outstanding preferred stock, holders of our
common stock are entitled to receive ratably dividends, if any, as may be
declared by the board of directors out of legally available funds. In case of a
liquidation, dissolution or winding up of StarMedia, the holders of common stock
will be entitled to share ratably in the net assets legally available for
distribution to shareholders after payment of all of our liabilities and any
preferred stock then outstanding. Holders of common stock have no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the common stock. The rights, preferences
and privileges of holders of common stock are subject to the rights of the
holders of shares of any series of preferred stock that we may designate and
issue in the future. After the closing of this offering, there will be no shares
of preferred stock outstanding.
PREFERRED STOCK
Under our amended and restated certificate of incorporation, our board of
directors has the authority, without further action by the stockholders, to
issue from time to time, shares of preferred stock in one or more series. The
board of directors may fix the number of shares, designations, preferences,
powers and other special rights of the preferred stock. The preferences, powers,
rights and restrictions of different series of preferred stock may differ. The
issuance of preferred stock could decrease the amount of earnings and assets
available for distribution to holders of common stock or affect adversely the
rights and powers, including voting rights, of the holders of common stock. The
issuance may also have the effect of delaying, deferring or preventing a change
in control of StarMedia. All outstanding shares of preferred stock will be
automatically converted into common stock upon the closing of this offering. We
have no current plans to issue any additional shares of preferred stock.
REGISTRATION RIGHTS
Under the terms of our amended and restated registration rights agreement,
at any time on or after the first anniversary of the effective date of this
offering, each of Chase Venture Capital Associates, Warburg, Pincus Equity
Partners and the holders of a majority of the outstanding shares of common stock
issuable after conversion of the shares of our preferred stock held by parties
to that agreement may, on one occasion only, require us to register for sale all
or any portion of the shares of common stock issuable upon conversion of the
preferred shares held by them. We are also obligated to register any of the
shares of common stock issuable upon conversion of the preferred shares held by
parties to the registration rights agreement if they request to be included in
the registration. These parties, in the aggregate, have three
59
<PAGE>
demand registration rights. Further, if we become eligible to file registration
statements on Form S-3, a holder of our preferred stock which is a party to the
registration rights agreement may require us to file a registration statement on
Form S-3 under the Securities Act with respect to the shares of common stock
issuable upon conversion of its preferred stock. We are also obligated to
register the shares of common stock issuable upon conversion of the preferred
shares held by parties to the registration rights agreement if they request to
be included in the registration, provided that we will not be required to effect
any Form S-3 registration more than once in any 180-day period. In addition,
holders of preferred stock which are parties to the registration rights
agreement will be entitled to require us to register the common stock issuable
upon conversion of their preferred stock when we register stock for our own
account or the account of other stockholders. This type of registration right is
known as a "piggyback" registration right. Mr. Espuelas and Mr. Chen may also
participate in any demand, S-3 or piggyback registration.
The foregoing registration rights are subject to certain conditions and
limitations, including:
- the right of the underwriters in any underwritten offering to limit the
number of shares of common stock held by stockholders with registration
rights to be included in any demand, S-3 or piggyback registration; and
- our right to delay for up to 90 days the filing or effectiveness of a
registration statement pursuant to a demand for registration if the board
of directors of determines that the registration would not be in our best
interest at that time.
We are generally required to bear all of the expenses of all registrations,
except underwriting discounts and commissions. Registration of any of the shares
of common stock held by stockholders with registration rights would result in
those shares becoming freely tradable without restriction under the Securities
Act immediately after effectiveness of the registration. We have agreed to
indemnify the holders of registration rights in connection with demand, S-3 and
piggyback registration under the terms of our amended and restated registration
rights agreement.
In connection with our private placement of an aggregate of 3,727,272 shares
of common stock in May 1999, we granted the investors registration rights. As a
result, each of the investors may require us to register the shares of common
stock they purchased. If at any time between the first and third anniversary of
the private placement we propose to register any of our common stock, we have
agreed, upon their written request, to include the investors' shares of common
stock in the registration. The number of shares of common stock which we will be
required to register for the investors may be reduced in an underwritten
offering by the managing underwriter.
We are generally required to bear all of the expenses of registering the
investors' shares of common stock, other than underwriting discounts and
commissions. Registration of any of the shares of common stock held by the
investors would result in those shares becoming freely tradable without
restriction under the Securities Act immediately after effectiveness of the
registration. We have agreed to indemnify the investors in connection with the
registration of their shares of common stock under the terms of the registration
rights agreements.
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND OUR AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION AND BYLAWS
Provisions of our amended and restated certificate of incorporation and
amended and restated bylaws, which are summarized in the following paragraphs,
may be deemed to have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt that a stockholder might consider it its best
interest, including those attempts that might result in a premium over the
market price for the shares held by stockholders.
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<PAGE>
CLASSIFIED BOARD OF DIRECTORS
Our board of directors is divided into three classes of directors serving
staggered three-year terms. Upon expiration of the term of a class of directors,
the directors in that class will be elected for three-year terms at the annual
meeting of stockholders in the year in which their term expires. Our board of
directors has resolved that Messrs. Chen and Karp will be Class I directors
whose terms expire at the 2000 annual meeting of stockholders. Messrs. Linen and
Wilson will be Class II directors whose terms expire at the 2001 annual meeting
of stockholders. Messrs. Espuelas and Rosenkranz and Ms. Segal will be Class III
directors whose terms expire at the 2002 annual meeting of stockholders. With
respect to each class, a director's term will be subject to the election and
qualification of their successors, or their earlier death, resignation or
removal. These provisions, when coupled with the provision of our amended and
restated certificate of incorporation authorizing the board of directors to fill
vacant directorships or increase the size of the board of directors, may delay a
stockholder from removing incumbent directors and simultaneously gaining control
of the board of directors by filling the vacancies created by such removal with
its own nominees.
CUMULATIVE VOTING
Our amended and restated certificate of incorporation expressly denies
stockholders the right to cumulate votes in the election of directors.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS
Our amended and restated certificate of incorporation eliminates the ability
of stockholders to act by written consent. It further provides that special
meetings of our stockholders may be called only by the chairman of the board of
directors or a majority of the board of directors.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTORS NOMINATIONS
Our amended and restated bylaws provide that stockholders seeking to bring
business before an annual meeting of stockholders, or to nominate candidates for
election as directors at an annual meeting of stockholders, must provide timely
notice thereof in writing. To be timely, a stockholder's notice must be received
at our principal executive offices not less than 60 days nor more than 90 days
prior to the anniversary date of the immediately preceding annual meeting of
stockholders. In the event that the annual meeting is called for a date that is
not within thirty (30) days before or after the anniversary date, in order to be
timely, notice from the stockholder must be received no later than the tenth day
following the date on which notice of the annual meeting was mailed to
stockholders or made public, whichever occurred earlier. In the case of a
special meeting of stockholders called for the purpose of electing directors,
notice by the stockholder in order to be timely must be received not later than
the close of business on the tenth day following the day on which notice was
mailed or public disclosure of the date of the special meeting was made,
whichever first occurs. Our amended and restated bylaws also specify certain
requirements as to the form and content of a stockholder's notice. These
provisions may preclude stockholders from bringing matters before an annual
meeting of stockholders or from making nominations for directors at an annual
meeting of stockholders.
AUTHORIZED BUT UNISSUED SHARES
The authorized but unissued shares of common stock and preferred stock are
available for future issuance without stockholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued shares of
common stock and preferred stock could render more difficult or discourage an
attempt to obtain
61
<PAGE>
control of us by means of a proxy contest, tender offer, merger or otherwise.
The Delaware General Corporate Law provides generally that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation or bylaws, unless a
corporation's certificate of incorporation or bylaws, as the case may be,
requires a greater percentage. Our amended and restated certificate of
incorporation imposes supermajority vote requirements in connection with various
business combination transactions and the amendment of various provisions of our
amended and restated certificate of incorporation and amended and restated
bylaws, including those provisions relating to the classified board of
directors, action by written consent and special meetings by stockholders.
AMENDMENTS; SUPERMAJORITY VOTE REQUIREMENTS
The Delaware General Corporation Law provides generally that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation or bylaws, unless a
corporation's certificate of incorporation or bylaws, as the case may be,
requires a greater percentage. Our amended and restated certificate of
incorporation imposes supermajority vote requirements in connection with the
amendment of provisions of our amended and restated certificate of incorporation
and amended and restated bylaws, including those provisions relating to the
classified board of directors and the ability of stockholders to call special
meetings.
RIGHTS AGREEMENT
Under Delaware law, every corporation may create and issue rights entitling
the holders of such rights to purchase from the corporation shares of its
capital stock of any class or classes, subject to any provisions in its
certificate of incorporation. The price and terms of such shares must be stated
in the certificate of incorporation or in a resolution adopted by the board of
directors for the creation or issuance of such rights.
We have entered into a stockholder rights agreement. As with most
stockholder rights agreements, the terms of our rights agreement are complex and
not easily summarized, particularly as they relate to the acquisition of our
common stock and to exercisability. This summary may not contain all of the
information that is important to you.
Our rights agreement provides that each share of our prospective common
stock outstanding will have one right to purchase one one-thousandth of a
preferred share attached to it. The purchase price per one one-thousandth of a
preferred share under the stockholder rights agreement is four times the average
closing price of our common stock for the first five days of trading after the
consummation of this offering.
Initially, the rights under our rights agreement are attached to outstanding
certificates representing our common stock and no separate certificates
representing the rights will be distributed. The rights will separate from our
common stock and be represented by separate certificates approximately 10 days
after someone acquires or commences a tender offer for 15% of our outstanding
common stock.
After the rights separate from our common stock, certificates representing
the rights will be mailed to record holders of the common stock. Once
distributed, the rights certificates alone will represent the rights.
All shares of our common stock issued prior to the date the rights separate
from the common stock will be issued with the rights attached. The rights are
not exercisable until the date the rights separate from the common stock. The
rights will expire on the tenth anniversary of the date of the completion of
this offering unless earlier redeemed or exchanged by us.
If an acquiror obtains or has the rights to obtain 15% or more of our common
stock, then each right will entitle the holder to purchase a number of shares of
our common
62
<PAGE>
stock equal to two times the purchase price of each right.
Each right will entitle the holder to purchase a number of shares of common
stock of the acquiror having a then current market value of twice the purchase
price if an acquiror obtains 15% or more of our common stock and any of the
following occurs:
- we merge into another entity;
- an acquiring entity merges into us; or
- we sell more than 50% of our assets or earning power.
Under our rights agreement, any rights that are or were owned by an acquiror
of more than 15% of our outstanding common stock will be null and void.
Our rights agreement contains exchange provisions which provide that after
an acquiror obtains 15% or more, but less than 50% of our respective outstanding
common stock, our board of directors may, at its option, exchange all or part of
the then outstanding and exercisable rights for common shares. In such an event,
the exchange ratio is one common share per right, adjusted to reflect any stock
split, stock dividend or similar transaction.
Our board of directors may, at its option, redeem all of the outstanding
rights under our rights agreement prior to the earlier of (1) the time that an
acquiror obtains 15% or more of our outstanding common stock or (2) the final
expiration date of the rights agreement. The redemption price under our rights
agreement is $0.001 per right, subject to adjustment. The right to exercise the
rights will terminate upon the action of our board ordering the redemption of
the rights and the only right of the holders of the rights will be to receive
the redemption price.
Holders of rights will have no rights as our stockholders including the
right to vote or receive dividends, simply by virtue of holding the rights.
Our rights agreement provides that the provisions of the rights agreement
may be amended by the board of directors prior to 10 days after someone acquires
or commences a tender offer for 15% of our outstanding common stock without the
approval of the holders of the rights. However, after that date, the rights
agreement may not be amended in any manner which would adversely effect the
interests of the holders of the rights, excluding the interests of any acquiror.
In addition, our rights agreement provides that no amendment may be made to
adjust the time period governing redemption at a time when the rights are not
redeemable.
Our rights agreement contains rights that have anti-takeover effects. The
rights may cause substantial dilution to a person or group that attempts to
acquire us without conditioning the offer on a substantial number of rights
being acquired. Accordingly, the existence of the rights may deter acquirors
from making takeover proposals or tender offers. However, the rights are not
intended to prevent a takeover, but rather are designed to enhance the ability
of our board to negotiate with an acquiror on behalf of all the stockholders. In
addition, the rights should not interfere with a proxy contest.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for StarMedia's common stock is American
Stock Transfer & Trust Company, New York, New York.
LISTING
We have applied to list our common stock on the Nasdaq National Market under
the trading symbol "STRM".
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices of our common stock. Furthermore,
since no shares will be available for sale shortly after this offering because
of the contractual and legal restrictions on resale described below, sales of
substantial amounts of common stock in the public market after these
restrictions lapse could adversely affect the prevailing market price and our
ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
53,346,328 shares of our common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options. Of these shares,
all of the shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, unless the shares
are purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act. The remaining 46,346,328 shares of common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. Restricted securities may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Rule 144 or 701 under the Securities Act, which rules are summarized below.
LOCK-UP AGREEMENTS
All of our officers, directors and substantially all of our stockholders
have signed lock-up agreements under which they agreed not to transfer or
dispose of, directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for shares of common stock, for
a period of 180 days after the date of this prospectus. Transfers or
dispositions can be made sooner:
- with the prior written consent of Goldman, Sachs & Co.;
- in the case of some transfers to affiliates;
- as a bona fide gift; or
- to any trust.
Subject to the provisions of Rule 144, 144(k) and 701, restricted shares
totaling 42,619,056 will be available for sale in the public market, subject in
the case of shares held by affiliates to the volume restrictions contained in
those rules, 180 days after the date of this prospectus.
In addition, the holders of 3,727,272 shares of our common stock have agreed
not to transfer or dispose of any of their shares of common stock for a period
of one year after the date on which they purchased the shares in April and May
1999.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately 533,463 shares immediately after this offering; or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us.
RULE 144(K)
Under Rule 144(k), a person who is not one of our affiliates at any time
during the three months preceding a sale, and who has
64
<PAGE>
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an affiliate, is
entitled to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, "144(k) shares" may be sold immediately upon the
completion of this offering.
RULE 701
In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchases shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell such shares 90 days after the effective date of this offering in
reliance on Rule 144, but without compliance with some of the restrictions,
including the holding period, contained in Rule 144.
REGISTRATION RIGHTS
Upon completion of this offering, the holders of 42,017,272 shares of our
common stock, or their transferees will be entitled to request that we register
their shares under the Securities Act. Please see "Description of Capital
Stock-Registration Rights".
STOCK PLANS
Immediately after this offering, we intend to file a registration statement
under the Securities Act covering 17,000,000 shares of common stock reserved for
issuance under our 1997 and 1998 Plans and 349,933 shares reserved for issuance
under our other non-qualified options. This registration statement is expected
to be filed as soon as practicable after the effective date of this offering.
At March 31, 1999, options to purchase 8,229,100 shares were issued and
outstanding under our Plans and otherwise. All of these shares will be eligible
for sale in the public market from time to time, subject to vesting provisions,
Rule 144 volume limitations applicable to our affiliates and, in the case of
some of the options, the expiration of lock-up agreements.
VALIDITY OF COMMON STOCK
The validity of the common stock offered hereby will be passed upon for
StarMedia by Brobeck, Phleger & Harrison LLP, New York, New York and for the
underwriters by Ropes & Gray, Boston, Massachusetts.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule at December 31, 1997 and 1998, and for the
period from March 5, 1996 (date of inception) to December 31, 1996 and the years
ended December 31, 1997 and 1998 as set forth in their reports. We have included
our financial statements and schedule in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 (including exhibits and schedules thereto) under the
Securities Act with respect to the common stock to be sold in this offering.
This prospectus, which constitutes a
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<PAGE>
part of the registration statement, does not contain all of the information set
forth in the registration statement or the exhibits and schedules which are part
of the registration statement. For further information with respect to StarMedia
and the common stock, reference is made to the registration statement and the
exhibits and schedules thereto.
You may read and copy all or any portion of the registration statement or
any reports, statements or other information in StarMedia's files in the
Commission's public reference room at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C., 20549 and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can
request copies of these documents upon payment of a duplicating fee, by writing
to the Commission. Please call the Commission at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. StarMedia's
Commission filings, including the registration statement, will also be available
to you on the Commission's Internet site (http://www.sec.gov).
We intend to furnish our stockholders with annual reports containing
financial statements audited by our independent auditors and to make available
to our stockholders quarterly reports containing unaudited financial data for
the first three quarters of each fiscal year.
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<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
STARMEDIA NETWORK, INC.
<TABLE>
<S> <C>
Report of Independent Auditors.................................................. F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998 and March 31, 1999
(Unaudited)................................................................... F-3
Consolidated Statements of Operations for the period from March 5, 1996 (date of
inception) to December 31, 1996 and the years ended December 31, 1997 and 1998
and the three months ended March 31, 1998 and 1999 (Unaudited)................ F-4
Consolidated Statements of Changes in Stockholders' Deficit for the period from
March 5, 1996 (date of inception) to December 31, 1996 and the years ended
December 31, 1997 and 1998 and the three months ended March 31, 1998 and 1999
(Unaudited)................................................................... F-5
Consolidated Statements of Cash Flows for the period from March 5, 1996 (date of
inception) to December 31, 1996 and the years ended December 31, 1997 and 1998
and the three months ended March 31, 1998 and 1999 (Unaudited)................ F-6
F-7 -
Notes to Consolidated Financial Statements...................................... F-18
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
StarMedia Network, Inc.
We have audited the accompanying consolidated balance sheets of StarMedia
Network, Inc. (the "Company") as of December 31, 1997 and 1998, and the related
consolidated statements of operations, changes in stockholders' deficit and cash
flows for the period from March 5, 1996 (date of inception) to December 31, 1996
and the years ended December 31, 1997 and 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
StarMedia Network, Inc. at December 31, 1997 and 1998 and the results of their
operations and their cash flows for the period from March 5, 1996 (date of
inception) to December 31, 1996 and the years ended December 31, 1997 and 1998
in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
New York, New York
March 5, 1999,
except for Note 12, as to which
the date is March 14, 1999
F-2
<PAGE>
STARMEDIA NETWORK, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 PRO FORMA
------------------------- MARCH 31, MARCH 31,
1997 1998 1999 1999
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 436,000 $ 53,141,000 $ 40,588,000 $ 40,588,000
Accounts receivable net of allowance for bad debts of
$0, $60,000 and $141,000 as of December 31, 1997 and
1998 and March 31, 1999, respectively................ 27,000 460,000 973,000 973,000
Other current assets................................... 7,000 1,674,000 2,241,000 2,241,000
----------- ------------ ------------ -------------
Total current assets..................................... 470,000 55,275,000 43,802,000 43,802,000
Fixed assets, net........................................ 263,000 5,403,000 7,308,000 7,308,000
Intangible assets, net of accumulated amortization of
$1,000, $93,000 and $124,000 as of December 31, 1997
and 1998 and March 31, 1999, respectively.............. 30,000 179,000 492,000 492,000
Goodwill, net............................................ 920,000 920,000
Other assets............................................. 23,000 129,000 1,367,000 1,367,000
----------- ------------ ------------ -------------
$ 786,000 $ 60,986,000 $ 53,889,000 $ 53,889,000
----------- ------------ ------------ -------------
----------- ------------ ------------ -------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable....................................... $ $ 286,000 $ 3,732,000 $ 3,732,000
Accrued expenses....................................... 227,000 6,442,000 6,845,000 6,845,000
Due to principal stockholders.......................... 67,000
Loan payable, current portion.......................... 1,085,000 1,085,000
Capital lease obligations, current portion............. 10,000 220,000 166,000 166,000
Deferred revenues...................................... 20,000 815,000 591,000 591,000
----------- ------------ ------------ -------------
Total current liabilities................................ 324,000 7,763,000 12,419,000 12,419,000
Capital lease obligations................................ 8,000
Loan payable, long term.................................. 2,541,000 2,541,000
Deferred rent............................................ 21,000 122,000 126,000 126,000
Preferred stock, authorized 60,000,000 shares:
Series A Redeemable Convertible Preferred Stock, $.001
par value, 7,330,000 shares authorized, 7,330,000
shares issued and outstanding at December 31, 1997
and 1998 and March 31, 1999, respectively, stated at
liquidation value, net of related expenses........... 3,833,000 4,218,000 4,311,000
Series B Redeemable Convertible Preferred Stock, $.001
par value, 8,000,000 shares authorized, 8,000,000
shares issued and outstanding at December 31, 1998
and March 31, 1999, respectively, stated at
liquidation value, net of related expenses........... 12,944,000 13,246,000
Series C Redeemable Convertible Preferred Stock, $.001
par value, 16,666,667 shares authorized, 16,666,667
shares issued and outstanding at December 31, 1998
and March 31, 1999, respectively, stated at
liquidation value, net of related expenses........... 79,332,000 81,478,000
Stockholders' deficit:
Common stock, $.001 par value, 100,000,000 shares
authorized, 10,012,000 shares, 10,392,000 shares and
10,427,000 shares issued and outstanding at December
31, 1997 and 1998 and March 31, 1999, respectively,
and 42,423,667 shares outstanding on a pro forma
basis................................................ 10,000 10,000 10,000 42,000
Additional paid-in capital............................. 431,000 19,563,000 21,057,000 120,060,000
Deferred compensation.................................. (8,666,000) (8,896,000) (8,896,000)
Other comprehensive loss............................... (37,000) (218,000) (218,000)
Accumulated deficit.................................... (3,841,000) (54,263,000) (72,185,000) (72,185,000)
----------- ------------ ------------ -------------
Total stockholders' (deficit)............................ (3,400,000) (43,393,000) (60,232,000) 38,803,000
----------- ------------ ------------ -------------
Total liabilities and stockholders' deficit.............. $ 786,000 $ 60,986,000 $ 53,889,000 $ 53,889,000
----------- ------------ ------------ -------------
----------- ------------ ------------ -------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
STARMEDIA NETWORK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 5,1996
(DATE OF THREE MONTHS ENDED
INCEPTION) TO YEAR ENDED DECEMBER 31 MARCH 31,
DECEMBER ----------------------------- -----------------------------
31, 1996 1997 1998 1998 1999
-------------- ------------- -------------- ------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................. $ $ 460,000 $ 5,329,000 $ 256,000 $ 1,541,000
Operating expenses:
Product and technology development..... 36,000 1,229,000 6,816,000 794,000 3,562,000
Sales and marketing.................... 12,000 2,108,000 29,274,000 1,816,000 9,657,000
General and administrative............. 78,000 648,000 4,600,000 450,000 2,410,000
Depreciation and amortization.......... 2,000 38,000 774,000 79,000 467,000
Stock-based compensation expense....... 10,421,000 2,000 1,247,000
-------------- ------------- -------------- ------------- --------------
Total operating expenses................. 128,000 4,023,000 51,885,000 3,141,000 17,343,000
-------------- ------------- -------------- ------------- --------------
Loss from operations..................... (128,000) (3,563,000) (46,556,000) (2,885,000) (15,802,000)
Other income (expense):
Interest income........................ 35,000 715,000 56,000 459,000
Interest expense....................... (45,000) (28,000) (38,000)
-------------- ------------- -------------- ------------- --------------
Net loss................................. (128,000) (3,528,000) (45,886,000) (2,857,000 (15,381,000)
Preferred stock dividends and
accretion.............................. -- (185,000) (4,536,000) (295,000) (2,541,000)
-------------- ------------- -------------- ------------- --------------
Net loss available to common
shareholders........................... $ (128,000) $ (3,713,000) $ (50,422,000) $ (3,152,000) $ (17,922,000)
-------------- ------------- -------------- ------------- --------------
-------------- ------------- -------------- ------------- --------------
Historical basic and diluted net loss per
common share........................... $ (0.01) $ (0.37) $ (4.94) $ (0.31) $ (1.72)
-------------- ------------- -------------- ------------- --------------
-------------- ------------- -------------- ------------- --------------
Historical number of shares used in
computing basic and diluted net loss
per share.............................. 9,147,223 10,012,000 10,202,000 10,012,000 10,409,500
-------------- ------------- -------------- ------------- --------------
-------------- ------------- -------------- ------------- --------------
Pro forma basic and diluted net loss per
share.................................. $ (1.09) $ (0.36)
-------------- --------------
-------------- --------------
Number of shares used in computing pro
forma basic and diluted net loss per
share.................................. 42,198,667 42,406,167
-------------- --------------
-------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
STARMEDIA NETWORK, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
PERIOD FROM MARCH 5, 1996 (DATE OF INCEPTION) TO
DECEMBER 31, 1996, AND THE YEARS ENDED DECEMBER 31, 1997 AND 1998
AND THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL OTHER
----------------------- PAID-IN ACCUMULATED DEFERRED COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT COMPENSATION INCOME TOTAL
---------- ----------- ----------- ------------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 5,
1996 (date of
inception)........... $ $ $ $ $ $
Sale of common stock... 10,012,000 10,000 431,000 441,000
Net loss for the
period............... (128,000) (128,000)
---------- ----------- ----------- ------------- -------------- --------------- ------------
Balance at December 31,
1996................. 10,012,000 10,000 431,000 (128,000) 313,000
Accretion of preferred
stock................ (185,000) (185,000)
Net loss for the
year................. (3,528,000) (3,528,000)
---------- ----------- ----------- ------------- -------------- --------------- ------------
Balance at December 31,
1997................. 10,012,000 10,000 431,000 (3,841,000) (3,400,000)
Deferred compensation
related to stock
options, net of
cancellations........ 19,087,000 (19,087,000)
Amortization of
deferred
compensation......... 10,421,000 10,421,000
Exercise of common
stock options........ 380,000 45,000 45,000
Preferred stock
dividends and
accretion............ (4,536,000) (4,536,000)
Net loss for the
year................. (45,886,000) (45,886,000)
Translation
adjustment........... (37,000) (37,000)
------------
Comprehensive loss..... (45,923,000)
---------- ----------- ----------- ------------- -------------- --------------- ------------
Balance at December 31,
1998................. 10,392,000 10,000 19,563,000 (54,263,000) (8,666,000) (37,000) (43,393,000)
Deferred Compensation
related to stock
options, net of
cancellations........ 1,477,000 (1,477,000)
Amortization of
deferred
compensation......... 1,247,000 1,247,000
Exercise of common
stock options........ 35,000 17,000 17,000
Preferred Stock
dividends and
accretion............ (2,541,000) (2,541,000)
Net loss for the
period............... (15,381,000) (15,381,000)
Translation
adjustment........... (181,000) (181,000)
Comprehensive loss..... (15,562,000)
---------- ----------- ----------- ------------- -------------- --------------- ------------
Balance at March 31,
1999 (unaudited)..... 10,427,000 $ 10,000 $21,057,000 $(72,185,000) $ (8,896,000) $(218,000) $(60,232,000)
---------- ----------- ----------- ------------- -------------- --------------- ------------
---------- ----------- ----------- ------------- -------------- --------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
STARMEDIA NETWORK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 5, 1996
(DATE OF THREE MONTHS ENDED
INCEPTION) TO YEAR ENDED DECEMBER 31 MARCH 31,
DECEMBER --------------------------- ----------------------------
31, 1996 1997 1998 1998 1999
-------------- ------------ ------------- ------------- -------------
UNAUDITED
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................... $ (128,000) $ (3,528,000) $ (45,886,000) $ (2,857,000) $ (15,381,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization........... 1,000 38,000 774,000 79,000 467,000
Provision for bad debts................. 60,000 81,000
Amortization of deferred compensation... 10,421,000 2,000 1,247,000
Deferred rent........................... 21,000 101,000 20,000 4,000
Changes in operating assets and
liabilities:
Accounts receivable................... (27,000) (493,000) (12,000) (542,000)
Other assets.......................... (30,000) (1,773,000) (708,000) (1,805,000)
Accounts payable and accrued
expenses............................ 227,000 5,356,000 907,000 3,828,000
Deferred revenues..................... 20,000 795,000 (224,000)
-------------- ------------ ------------- ------------- -------------
Net cash used in operating activities....... (127,000) (3,279,000) (30,645,000) (2,569,000) (12,325,000)
INVESTING ACTIVITIES
Purchase of fixed assets.................... (30,000) (249,000) (4,395,000) (253,000) (2,420,000)
Intangible assets........................... (31,000) (241,000) (98,000) (344,000)
Cash paid for acquisition................... (921,000)
-------------- ------------ ------------- ------------- -------------
Net cash used in investing activities....... (30,000) (280,000) (4,636,000) (351,000) (3,685,000)
FINANCING ACTIVITIES
Issuance of common stock.................... 441,000 45,000 17,000
Issuance of redeemable convertible preferred
stock, net of related expenses............ 3,647,000 88,125,000 11,936,000
Issuance of convertible subordinated notes.. 6,000,000 4,000,000
Proceeds from long-term debt................ 3,752,000
Repayment of long-term debt................. (126,000)
Repayment of convertible subordinated
notes..................................... (6,000,000) (4,000,000)
Loans (to) from stockholders................ (54,000) 67,000
Repayments (to) from stockholders........... 54,000 (67,000) (67,000)
Payments under capital leases............... (3,000) (112,000) (1,000) (54,000)
-------------- ------------ ------------- ------------- -------------
Net cash provided by financing activities... 387,000 3,765,000 87,991,000 11,868,000 3,589,000
Effect of exchange rate changes on cash and
cash equivalents.......................... (5,000) (132,000)
-------------- ------------ ------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents............................... 230,000 206,000 52,705,000 8,948,000 (12,553,000)
Cash and cash equivalents, beginning of
period.................................... 230,000 436,000 436,000 53,141,000
-------------- ------------ ------------- ------------- -------------
Cash and cash equivalents, end of period.... $ 230,000 $ 436,000 $ 53,141,000 9,384,000 40,588,000
-------------- ------------ ------------- ------------- -------------
-------------- ------------ ------------- ------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid............................... $ $ $ 45,000 $ 28,000 $
-------------- ------------ ------------- ------------- -------------
-------------- ------------ ------------- ------------- -------------
NON-CASH FINANCING ACTIVITIES
Acquisition of fixed assets through capital
leases.................................... $ $ 21,000 $ 314,000 $ $
-------------- ------------ ------------- ------------- -------------
-------------- ------------ ------------- ------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
STARMEDIA NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIOD FROM MARCH 5, 1996 (DATE OF INCEPTION)
TO DECEMBER 31, 1996, THE YEARS ENDED
DECEMBER 31, 1997 AND 1998 AND THE THREE MONTHS
ENDED MARCH 31, 1999
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION AND DESCRIPTION OF BUSINESS
The accompanying consolidated financial statements include the accounts of
StarMedia Network, Inc. and its wholly-owned subsidiaries (collectively, the
"Company"). All intercompany account balances and transactions have been
eliminated in consolidation. StarMedia Network, Inc. was incorporated under
Delaware law in March 1996.
The Company develops and maintains www.starmedia.com, a branded Internet online
network (the "Network") located on the World Wide Web (the "Web"). The Network
is organized around interest specific channels, community features, search
capabilities and online shopping in Spanish and Portuguese, targeted to Latin
America.
INITIAL PUBLIC OFFERING AND UNAUDITED PRO FORMA BALANCE SHEET (UNAUDITED)
In February 1999, the Board of Directors authorized the filing of a registration
statement with the Securities and Exchange Commission ("SEC") that would permit
the Company to sell shares of the Company's common stock in connection with a
proposed initial public offering ("IPO"). In conjunction with a qualified IPO,
all outstanding shares of Series A, B and C Redeemable Convertible Preferred
Stock, automatically convert into shares of Common Stock on a one for one basis.
Accordingly, the effect of the conversions has been reflected in the
accompanying unaudited pro forma balance sheet as if they had occurred as of
March 31, 1999.
INTERIM FINANCIAL STATEMENTS
The financial statements as of March 31, 1999, and for the three months ended
March 31, 1998 and 1999 have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position as of March 31,
1999 and the results of operations and cash flows for the three months ended
March 31, 1998 and 1999 have been made. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or eliminated.
The results of operations for the three months ended March 31, 1999 are not
necessarily indicative of the results to be expected for any future interim
period or for the year ending December 31, 1999.
REVENUE RECOGNITION
The Company's revenues are derived principally from the sale of banner
advertisements and sponsorships, some of which also involve more integration,
design and coordination of the
F-7
<PAGE>
STARMEDIA NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION (CONTINUED)
customer's content with the Company's services, such as the placement of sponsor
buttons in specific areas of the Network. The sponsor buttons generally provide
users with direct links to sponsor homepages that exist within the Network which
are usually focused on selling sponsor merchandise and services to users of the
Network. Advertising revenues on both banner and sponsorship contracts, which
range from one month to two years, are recognized ratably in the period in which
the advertisement is displayed, provided that no significant Company obligations
remain and collection of the resulting receivable is probable. Company
obligations typically include guarantees of minimum number of "impressions," or
times that an advertisement appears in pages viewed by users of the Company's
Network. To the extent minimum guaranteed impressions are not met, the Company
defers recognition of the corresponding revenues until the remaining guaranteed
impression levels are achieved. The Company also earns revenues on sponsorship
contracts for fees relating to the design, coordination, and integration of the
customer's content. Revenue related to the design, coordination and integration
of the customers' content are recognized ratably over the term of the contract
or using the percentage of completion method if the fee for such services is
fixed. A number of the Company's agreements provide for the Company to receive a
percentage of revenues from electronic commerce transactions conducted by
advertisers who are selling goods or services to users of the Network. These
revenues are recognized by the Company upon
notification from the advertiser of its share of revenues earned by the Company
and, to date, have not been significant.
Revenues from barter transactions are recognized during the period in which the
advertisements are displayed on the Company's Network. Barter transactions are
recorded at the estimated fair market value of the goods or services received or
the estimated fair market value of the advertisements given, whichever is more
readily determinable. For the year ended December 31, 1997, substantially all of
the Company's revenues were derived from barter transactions. For the year ended
December 31, 1998 and the three months ended March 31, 1998 and 1999, revenues
derived from barter transactions, were approximately $2.4 million, $224,000 and
$424,000, respectively.
Deferred revenues are primarily comprised of billings in excess of recognized
revenues relating to advertising contracts and sponsorship and banner
advertising contracts.
PRODUCT DEVELOPMENT
Costs incurred in the classification and organization of listings within the
Network and the development of new products and enhancements to existing
products are charged to expense as incurred. Statement of Financial Accounting
Standards ("SFAS") No. 86, "Accounting for the Costs of Computer Software to be
Sold, Leased or Otherwise Marketed," requires capitalization of certain software
development costs subsequent to the establishment of technological feasibility.
Based upon the Company's product development process, technological feasibility
is established upon completion of a working model. Costs incurred by the Company
between completion of the working model and the point at which the product is
ready for general release have been insignificant.
F-8
<PAGE>
STARMEDIA NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
The Company considers all financial instruments with a maturity of three months
or less when purchased to be cash equivalents. Such amounts are stated at cost
which approximates market value.
FIXED ASSETS
Fixed assets, including those acquired under capital leases, are stated at cost
and depreciated by the straight-line method over the estimated useful lives of
the assets, which range from three to five years. Leasehold improvements are
amortized over the lesser of the useful life of the asset or the remaining
period of the lease.
INTANGIBLE ASSETS
Intangible assets consist of trademarks and trade names and are being amortized
on a straight-line basis over a period of five years.
Goodwill consists of the excess of the purchase price paid over the tangible net
assets of acquired companies. Goodwill is amortized using the straight-line
method over three years. Amortization expense and accumulated amortization as of
March 31, 1999 and for the three months ended March 31, 1999 was approximately
$1,000.
The Company assesses the recoverability of its goodwill and intangible assets by
determining whether the amortization of the unamortized balance over its
remaining life can be recovered through forecasted cash flows. If undiscounted
forecasted cash flows indicate that the unamortized amounts will not be
recovered, an adjustment will be made to reduce the net amounts to an amount
consistent with forecasted future cash flows discounted at the Company's
incremental borrowing rate. Cash flow forecasts are based on trends of
historical performance and management's estimate of future performance, giving
consideration to existing and anticipated competitive and economic conditions.
INCOME TAXES
The Company uses the liability method of accounting for income taxes, whereby
deferred income taxes are provided on items recognized for financial reporting
purposes over different periods than for income tax purposes. Valuation
allowances are provided when the expected realization of tax assets does not
meet a more likely than not criteria.
ADVERTISING COSTS
Advertising costs are expensed as incurred. For the period from March 5, 1996
(date of inception) to December 31, 1996, the years ended December 31, 1997 and
1998 and the three months ended March 31, 1998 and 1999, advertising expense
amounted to approximately $0, $1,610,000, $21,246,000, $1,068,000 and
$5,380,000, respectively. For the years ended December 31, 1997 and 1998 and the
three months ended March 31, 1998 and 1999, advertising expense includes
F-9
<PAGE>
STARMEDIA NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
approximately $460,000, $2.4 million, $224,000 and $424,000 of charges related
to barter advertising transactions.
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 footnotes thereto.
Actual results could differ from those estimates.
STOCK-BASED COMPENSATION
The Company grants stock options generally for a fixed number of shares to
certain employees with an exercise price equal to or below the fair value of the
shares at the date of grant. The Company accounts for stock option grants in
accordance with Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees", and, accordingly, recognizes compensation
expense only if the fair value of the underlying Common Stock exceeds the
exercise price of the stock option on the date of grant. In October 1995, the
FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS No.
123"), which provides an alternative to APB Opinion No. 25 in accounting for
stock-based compensation. As permitted by SFAS No. 123, the Company continues to
account for stock-based compensation in accordance with APB Opinion No. 25 and
has elected the pro forma disclosure alternative of SFAS No. 123 (see Note 5).
COMPUTATION OF HISTORICAL NET LOSS PER SHARE
The Company calculates earnings per share in accordance with SFAS No. 128,
"Computation of Earnings Per Share" and SEC Staff Accounting Bulletin No. 98.
Accordingly, basic earnings per share is computed using the weighted average
number of common and dilutive common equivalent shares outstanding during the
period. Common equivalent shares consist of the incremental common shares
issuable upon the conversion of the Preferred Stock (using the if-converted
method) and shares issuable upon the exercise of stock options (using the
treasury stock method); common equivalent shares are excluded from the
calculation if their effect is anti-dilutive.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents
and accounts receivable. The Company maintains the majority of its cash and cash
equivalents with one financial institution. The Company's sales are primarily to
companies located in the United States and Latin American region. The Company
performs periodic credit evaluations of its customers' financial condition and
does not require collateral. Accounts receivable are due principally from large
U.S. companies under stated contract terms and the Company provides for
estimated credit losses at the time of sale. Such losses have not been
significant to date.
F-10
<PAGE>
STARMEDIA NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the consolidated balance sheets for cash and
cash equivalents, accounts receivable, accounts payable and loan payable
approximate their fair values.
FOREIGN CURRENCY AND INTERNATIONAL OPERATIONS
The functional currency of the Company's active subsidiaries in Argentina,
Brazil, Chile and Colombia is the local currency. The financial statements of
these subsidiaries are translated to U.S. dollars using year-end rates of
exchange for assets and liabilities, and average rates for the year for
revenues, costs, and expenses. Translation gains and losses are deferred and
accumulated as a component of stockholders' deficit. The functional currency of
the Company's subsidiaries in highly inflationary economies, Mexico, Uruguay,
and Venezuela, is the U.S. dollar. Accordingly, for those subsidiaries that use
U.S. dollars as the functional currency, monetary assets and liabilities are
translated using the current exchange rate in effect at the year-end date, while
nonmonetary assets and liabilities are translated at historical rates.
Operations are generally translated at the weighted average exchange rate in
effect during the period. The resulting foreign exchange gains and losses are
recorded in the consolidated statement of operations. Revenues earned by the
Company's foreign subsidiaries and assets of such foreign subsidiaries were not
significant for all periods presented or at December 31, 1997 and 1998.
Commencing January 1, 1999, the functional currency of the Company's Mexican
subsidiary changed from the U.S. dollar to the local currency as Mexico was no
longer considered a hyper-inflationary economy.
COMPREHENSIVE INCOME
The Company reports comprehensive income in accordance with SFAS No. 130,
"Reporting Comprehensive Income". SFAS No. 130 establishes rules for the
reporting and display of comprehensive income and its components. SFAS No. 130
requires foreign currency translation adjustments to be included in other
comprehensive loss.
SEGMENT INFORMATION
The Company discloses information regarding segments in accordance with SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information". SFAS
No. 131 establishes standards for reporting of financial information about
operating segments in annual financial statements and requires reporting
selected information about operating segments in interim financial reports. The
disclosure of segment information was not required as the Company operates in
only one business segment.
As of and for the period and years ended December 31, 1996, 1997 and 1998
and March 31, 1999, substantially all of the Company's assets were located in
the U.S. and the Company derived substantially all of its revenue from
businesses located in the U.S.
F-11
<PAGE>
STARMEDIA NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
2. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------- MARCH 31,
1997 1998 1999
----------- ------------- -------------
<S> <C> <C> <C>
Computer equipment................................. $ 172,000 $ 4,738,000 6,782,000
Furniture and fixtures............................. 7,000 446,000 759,000
Leasehold improvements............................. 121,000 938,000 921,000
----------- ------------- -------------
300,000 6,122,000 8,462,000
Less accumulated depreciation and amortization..... (37,000) (719,000) (1,154,000)
----------- ------------- -------------
$ 263,000 $ 5,403,000 $ 7,308,000
----------- ------------- -------------
----------- ------------- -------------
</TABLE>
3. STOCKHOLDERS' DEFICIT
REDEEMABLE CONVERTIBLE PREFERRED STOCK
In July 1997, the Company sold 7,330,000 shares of Series A Redeemable
Convertible Preferred Stock (the "Series A Preferred") for $3,665,000, or $.50
per share. In February 1998, the Company sold 8,000,000 shares of Series B
Redeemable Convertible Stock (the "Series B Preferred") for $12,000,000, or
$1.50 per share. In August and September 1998, the Company sold an aggregate
16,666,667 shares of Series C Redeemable Convertible Preferred Stock (the
"Series C Preferred") for $80,000,000, or $4.80 per share. The Series A
Preferred, Series B Preferred and the Series C Preferred (collectively, the
"Preferred Stock") are convertible into common stock on a one for one basis,
subject to certain anti-dilution provisions, as defined, at any time at the
option of the holder or automatically in the event of a qualified IPO. The
holders of the Preferred Stock are entitled to the number of votes equal to the
number of common shares that could be obtained upon conversion on the date of
the vote and are entitled to a discretionary noncumulative dividend.
Upon a liquidation, including any merger or acquisition where the existing
stockholders of the Company own less than 50% of the successor entity, the
holders of the Preferred Stock are entitled to have the Company redeem their
shares at the original price paid per share (the "Original Investment"), plus a
10% cumulative return less any dividends paid.
In the event that the Preferred Stock has not been converted as of December 31,
2004, the holders of the Preferred Stock can elect to have the Company redeem
their Preferred Stock for an amount equal to their original investment plus any
dividends declared but unpaid.
No Preferred Stock dividends have been declared or paid as of March 31, 1999. At
December 31, 1997 and 1998, and March 31, 1999, total cumulative dividends in
arrears, that would be payable upon a liquidation, were approximately $183,000,
$4,233,000 and $6,625,000, respectively.
The Company has recorded issuance costs incurred in connection with the
Preferred Stock as discounts at issuance and is accreting the discounts from the
date of issuance through the date of mandatory redemption on December 31, 2004.
F-12
<PAGE>
STARMEDIA NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
3. STOCKHOLDERS' DEFICIT (CONTINUED)
CONVERTIBLE SUBORDINATED NOTES
In January 1998 the Company issued $4,000,000 8% convertible subordinated
notes due at the earlier of the closing of the Series B Preferred financing, or
on July 21, 1998. In August 1998 the Company issued $2,000,000 8% convertible
subordinated notes due at the earlier of the closing of the Series C Preferred
financing or on December 31, 1998. All amounts outstanding were repaid during
1998 in accordance with their terms.
4. LOSS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 5, 1996
(DATE OF THREE MONTHS ENDED
INCEPTION) TO YEAR ENDED DECEMBER 31 MARCH 31,
DECEMBER ----------------------------- --------------------------------
31, 1996 1997 1998 1998 1999
-------------- ------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Numerator:
Net loss..................... $ (128,000) $ (3,528,000) $ (45,886,000) $ (2,857,000) $ (15,381,000)
Preferred stock dividends and
accretion.................. -- (185,000) (4,536,000) (295,000) (2,541,000)
-------------- ------------- -------------- --------------- ---------------
Numerator for basic and diluted
loss per share-- net loss
available for common
stockholders................. $ (128,000) $ (3,713,000) $ (50,422,000) $ (3,152,000) $ (17,922,000)
-------------- ------------- -------------- --------------- ---------------
-------------- ------------- -------------- --------------- ---------------
Denominator:
Denominator for basic and
dilutive loss per
share--weighted average
shares..................... 9,147,223 10,012,000 10,202,000 10,012,000 10,409,500
-------------- ------------- -------------- --------------- ---------------
-------------- ------------- -------------- --------------- ---------------
Basic and diluted net loss per
share........................ $ (0.01) $ (0.37) $ (4.94) $ (0.31) $ (1.72)
-------------- ------------- -------------- --------------- ---------------
-------------- ------------- -------------- --------------- ---------------
</TABLE>
Diluted net loss per share for the period from March 5, 1996 (date of
inception) to December 31, 1996, the years ended December 31, 1997 and 1998, and
the three month period ended March 31, 1998 and 1999, does not include the
effect of options to purchase 0, 1,804,933, 6,131,933, 1,889,933 and 8,229,100
shares of common stock, respectively, or 0, 7,330,000, 31,996,667, 15,330,000
and 31,996,667 shares of common stock issuable upon the conversion of Preferred
Stock on an "as if converted" basis, respectively, as the effect of their
inclusion is antidilutive during each period.
F-13
<PAGE>
STARMEDIA NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
4. LOSS PER SHARE (CONTINUED)
The following table sets forth the computation of the unaudited pro forma
basic and diluted loss per share, assuming conversion of the Preferred Stock:
<TABLE>
<CAPTION>
THREE MONTH
YEAR ENDED ENDED
DECEMBER MARCH
31, 1998 31, 1999
--------------- ---------------
<S> <C> <C>
Numerator:
Net loss available to common stockholders................ $ (50,422,000) $ (17,922,000)
Preferred Stock dividends and accretion.................. 4,536,000 2,541,000
--------------- ---------------
Numerator for pro forma loss available to common
stockholders............................................. $ (45,886,000) $ (15,381,000)
--------------- ---------------
--------------- ---------------
Denominator:
Weighted average number of common shares................. 10,202,000 10,409,500
Assumed conversion of Preferred Stock to common shares
(if converted method).................................. 31,996,667 31,996,667
--------------- ---------------
Denominator for pro forma basic and diluted loss per
share.................................................... 42,198,667 42,406,167
--------------- ---------------
--------------- ---------------
Pro forma basic and diluted net loss per share............. $ (1.09) $ (0.36)
--------------- ---------------
--------------- ---------------
</TABLE>
5. STOCK OPTIONS
In January 1997, the Company adopted the 1997 Stock Option Plan and, in July
1998, the Company adopted the 1998 Stock Option Plan (collectively, the "Option
Plans"). The 1997 Stock Option Plan and the 1998 Stock Plan provide for the
authorization of 10,000,000 shares. In February 1999, an additional 7,000,000
shares were reserved for issuance pursuant to the 1998 Stock Option Plan. The
Option Plans provide for the granting of incentive stock options or
non-qualified stock options to purchase common stock to eligible participants.
Options granted under the Option Plan are for periods not to exceed ten years.
In July 1998, approximately 1,400,000 non-qualified options outstanding were
exchanged for incentive stock options having generally equivalent terms as the
non-qualified options.
Other than options to purchase 2,000,000 and 1,500,000 shares granted in
April and December 1998, respectively, which were immediately vested, options
outstanding under the Option Plans generally vest one-third after the first year
of service and ratably each month over the next two years.
In connection with the granting of stock options in 1998 and the exchange of
non-qualified options to incentive stock options, the Company recorded deferred
compensation of approximately $19,087,000. In connection with the granting of
stock options in 1999, the Company recorded additional deferred compensation of
approximately $1,477,000. Deferred compensation is being amortized for financial
reporting purposes over the vesting period of the options. The amount recognized
as expense during the year ended December 31, 1998 and the three months ended
March 31, 1998 and 1999 amounted to approximately $10,421,000, $2,000 and
$1,247,000, respectively.
F-14
<PAGE>
STARMEDIA NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
5. STOCK OPTIONS (CONTINUED)
The following transactions occurred with respect to the Option Plans:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
------------ ---------------
<S> <C> <C>
Granted........................................................ 1,814,933 $ 0.42
Canceled....................................................... (10,000) .50
------------
Outstanding, December 31, 1997................................. 1,804,933 .42
Granted........................................................ 6,792,000 .78
Canceled....................................................... (2,085,000) .50
Exercised...................................................... (380,000) .12
------------
Outstanding, December 31, 1998................................. 6,131,933 .81
Granted........................................................ 2,232,500 4.88
Canceled....................................................... (100,333) .66
Exercised...................................................... (35,000) .50
------------
Outstanding, March 31,1999 8,229,100 $ 1.92
------------
------------
</TABLE>
The following table summarizes information concerning outstanding options at
December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------- OPTIONS EXERCISABLE
WEIGHTED- -------------------------
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE OUTSTANDING LIFE PRICE OUTSTANDING PRICE
- ---------------------------------------------- ------------ --------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
$0.50......................................... 4,415,433 6.75 $ 0.50 3,062,987 $ 0.50
$1.60......................................... 1,716,500 7.00 $ 1.60 1,500,000 $ 1.60
------------ ------------
6,131,933 4,562,987
------------
------------
</TABLE>
The following table summarizes information concerning outstanding options at
March 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------- OPTIONS EXERCISABLE
WEIGHTED- -------------------------
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE OUTSTANDING LIFE PRICE OUTSTANDING PRICE
- ---------------------------------------------- ------------ --------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
$0.50......................................... 4,295,100 6.75 $ 0.50 3,127,157 $ 0.50
$1.60......................................... 2,120,000 7.00 $ 1.60 1,507,500 $ 1.60
$5.64......................................... 1,814,000 9.9 $ 5.64
------------ ------------
8,229,100 4,634,657
------------
------------
</TABLE>
Pro forma information regarding net loss is required by SFAS No. 123 which
also requires that the information be determined as if the Company has accounted
for its stock option under the fair
F-15
<PAGE>
STARMEDIA NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
5. STOCK OPTIONS (CONTINUED)
value method of the statement. The fair value for these options was estimated
using the minimum value method with the following assumptions:
<TABLE>
<CAPTION>
ASSUMPTIONS 1997 1998
- ------------------------------------------------------------------------------ --------------- ----------------
<S> <C> <C>
Average risk-free interest rate............................................... 6.00%-6.40% 4.440%-5.70%
Dividend yield................................................................ 0.0% 0.0%
Average life.................................................................. 5 years 5 years
</TABLE>
Because the determination of fair value of all options granted after such
time as the Company becomes a public entity will include an expected volatility
factor in addition to the factors described in the preceding paragraph, the
above results may not be representative of future periods.
The Company's pro forma information is as follows:
<TABLE>
<CAPTION>
1997 1998
-------------- ---------------
<S> <C> <C>
Pro forma net loss available to common stockholders.............................. $ (3,749,000) $ (51,276,000)
Pro forma basic and diluted loss per share....................................... $ (0.37) $ (5.03)
</TABLE>
6. INCOME TAXES
For Federal income tax purposes at December 31, 1998, the Company had net
operating loss carryfowards of approximately $36,500,000 which expire from 2011
through 2018. The net operating loss carryforwards may be subject to Section 382
of the Internal Revenue Code, which imposes annual limitations on their
utilization. A valuation allowance has been recognized to fully offset the
deferred tax assets, after considering deferred tax liabilities.
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------
<S> <C> <C>
1997 1998
-------------- ---------------
Federal net operating loss carryforwards..................... $ 1,200,000 $ 12,422,000
Depreciation and amortization................................ (6,000) (227,000)
Deferred rent................................................ 9,000 55,000
Other........................................................ 27,000
-------------- ---------------
1,203,000 12,277,000
Valuation allowance.......................................... (1,203,000) (12,277,000)
-------------- ---------------
$ -- $ --
-------------- ---------------
-------------- ---------------
</TABLE>
F-16
<PAGE>
STARMEDIA NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
6. INCOME TAXES (CONTINUED)
The effective income tax rate differs from the statutory rate as follows:
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 5, 1996
(DATE OF YEAR ENDED DECEMBER
INCEPTION) TO 31
DECEMBER 31, --------------------
1996 1997 1998
--------------- --------- ---------
<S> <C> <C> <C>
Statutory rate................................................................. (34%) (34%) (34%)
Non deductible losses from foreign operations.................................. 2
Permanent differences.......................................................... 8
Valuation allowance............................................................ 33 33 23
Other.......................................................................... 1 1 1
----- --------- ---------
Effective tax rate............................................................. --% --% --%
----- --------- ---------
----- --------- ---------
</TABLE>
7. LONG-TERM DEBT
The Company has entered into a $12 million credit line for the acquisition
of computer equipment and furniture and fixtures. At March 31, 1999,
approximately $3.6 million was outstanding under the credit line. Amounts
outstanding are payable in monthly installments of principal and interest of
approximately $126,000, bear interest at approximately 13.7% per annum and are
secured by some of our computer equipment and furniture and fixtures. The credit
line requires the Company to maintain at least $10,000,000 in cash and cash
equivalents.
8. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Product and technology development........................ $ 14,000 $ 490,000 $ 618,000
Sales and marketing....................................... 64,000 3,639,000 4,215,000
General and administrative................................ 132,000 1,108,000 728,000
Accrued fixed asset and intangible purchases.............. 17,000 1,059,000 1,080,000
Other..................................................... -- 146,000 204,000
------------- ------------- -------------
$ 227,000 $ 6,442,000 $ 6,845,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
9. COMMITMENTS
CAPITAL LEASE
Included in computer equipment are assets acquired under a capital lease.
The cost of such equipment as of December 31, 1997 and 1998 is approximately
$21,000 and $335,000 and the related accumulated depreciation is approximately
$1,000 and $51,000, respectively.
Future minimum lease payments under the noncancelable capital lease as of
December 31, 1998 are $231,000, including interest of $11,000, which is all due
in 1999.
F-17
<PAGE>
STARMEDIA NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
9. COMMITMENTS (CONTINUED)
In connection with the capital lease the Company has a letter of credit
outstanding of approximately $144,000 at December 31, 1998.
OPERATING LEASES
The Company rents office space under noncancelable lease agreements. The
minimum annual rental commitments under noncancelable operating leases that have
initial or remaining terms in excess of one year as of December 31, 1998 are as
follows:
<TABLE>
<S> <C>
Year ended December 31:
1999........................................................... $ 330,000
2000........................................................... 330,000
2001........................................................... 330,000
2002........................................................... 286,000
2003........................................................... 182,000
----------
$1,458,000
----------
----------
</TABLE>
Rent expense amounted to approximately $0, $66,000, $392,000 for the period
from March 5, 1996 (date of inception) to December 31, 1996 and for the years
ended December 31, 1997 and 1998, respectively.
10. RETIREMENT PLAN
The Company has a 401(k) plan that covers its eligible domestic employees.
The plan does not require a matching contribution by the Company.
11. SIGNIFICANT CUSTOMERS AND GEOGRAPHICAL CONCENTRATION
For the three months ended March 31, 1999, three customers accounted for
approximately 19%, 12% and 12% of the Company's total revenue, respectively.
For the three months ended March 31, 1998, two customers accounted for
approximately 45% and 42% of the Company's total revenue, respectively.
For the year ended December 31, 1997, three customers accounted for
approximately 38%, 23%, and 18% of the Company's total revenue, respectively.
For the year ended December 31, 1998, two customers accounted for
approximately 23% and 16% of the Company's total revenue, respectively.
12. ACQUISITION
On March 10, 1999, the Company acquired all of the outstanding stock of
Achei Internet Promotion Ltda. in exchange for cash of $810,000. The Company
accounted for the acquisition under the purchase method of accounting and the
results of the operations have been included in the financial statements of the
Company from the date of acquisition. The excess purchase price over the fair
value of the net assets acquired, including expenses incurred by the Company,
has been recorded as goodwill.
F-18
<PAGE>
STARMEDIA NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
12. ACQUISITION (CONTINUED)
On a pro forma basis, if the acquisition had taken place at the beginning of
1998, the effect on the Company's net sales, net loss, and loss per share would
have been immaterial.
13. SUBSEQUENT EVENTS (UNAUDITED)
On April 13, 1999, the Company acquired all of the outstanding stock of KD
Sistemas de Informacao Ltda. in exchange for a cash payment of $5,320,000 at
closing, $570,000 due in March 2000 and additional estimated cash payments of up
to $6,400,000, in the aggregate, due in March 2000, 2001 and 2002 upon the
achievement of certain performance targets (the "Earn-out"). As a portion of the
Earn-out is contingent upon the continued employment of certain key individuals,
the Company will record a portion of such payments as compensation expense when
and if such performance targets are met.
Between April 30 and May 5, 1999, the Company sold an aggregate of 3,727,272
shares of common stock at $11 per share, or approximately $39,400,000, net of
related commissions, to a group of third party investors. The new investors are
subject to a one year restriction on the sale or transfer of such shares after
which such investors have been granted certain registration rights.
On May 4, 1999, the Company entered into an agreement to acquire all of the
outstanding stock of Wass Net, S.L. The agreement is subject to, among other
matters, the successful consummation of the Company's IPO. The aggregate
purchase price of $17,000,000 is to be paid in common stock of the Company
valued at the IPO price.
F-19
<PAGE>
UNDERWRITING
StarMedia and the underwriters for the offering named below have entered
into an underwriting agreement with respect to the shares being offered. Subject
to the terms of the underwriting agreement, each underwriter has severally
agreed to purchase the number of shares indicated in the following table.
Goldman, Sachs & Co., BancBoston Robertson Stephens Inc., J.P. Morgan Securities
Inc. and Salomon Smith Barney Inc. are the representatives of the underwriters.
<TABLE>
<CAPTION>
Number of
Underwriters Shares
- ----------------------------------------------------------------------------------------------------- -----------
<S> <C>
Goldman, Sachs & Co..................................................................................
BancBoston Robertson Stephens Inc....................................................................
J.P. Morgan Securities Inc...........................................................................
Salomon Smith Barney Inc.............................................................................
-----------
Total..........................................................................................
-----------
-----------
</TABLE>
------------------------
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
shares from StarMedia to cover such sales. They may exercise that option for 30
days. If any shares are purchased pursuant to this option, the underwriters will
severally purchase shares in approximately the same proportion as set forth in
the table above.
The following tables show the per share and total underwriting discounts and
commissions to be paid to the underwriters by StarMedia. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
<TABLE>
<CAPTION>
Paid by StarMedia
------------------
No Exercise Full Exercise
------------------ -------------
<S> <C> <C>
Per Share.......... $ $
Total.............. $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any of those
securities dealers may resell any shares purchased from the underwriters to
other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
offering price, the representatives may change the offering price and the other
selling terms.
StarMedia and its directors, officers and stockholders have agreed with the
underwriters not to dispose of or hedge any of their common stock or securities
convertible into or exchangeable for shares of common stock during the period
from the date of this prospectus continuing through the date 180 days after the
date of this prospectus, except with the prior written consent of the
representatives. This agreement does not apply to any existing employee benefit
plans. Please see "Shares Eligible for Future Sale" for a discussion of transfer
restrictions.
At the request of StarMedia, the underwriters have reserved for sale, at the
initial public offering price, up to 700,000 shares of common stock for certain
directors, employees and associates of StarMedia. There can be no assurance that
any of the reserved shares will be so purchased. The number of shares available
for sale to the general public in the offering will be reduced by the number of
reserved shares sold. Any reserved shares not so purchased will be offered to
the general
U-1
<PAGE>
public on the same basis as the other shares offered hereby.
Prior to this offering, there has been no public market for the shares. The
initial public offering price will be negotiated among StarMedia and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be StarMedia's historical performance, estimates of the
business potential and earnings prospects of StarMedia, an assessment of
StarMedia's management and the consideration of the above factors in relation to
market valuation of companies in related businesses.
StarMedia has applied to list the common stock on the Nasdaq National Market
under the symbol "STRM".
In connection with this offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in this offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while this offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
StarMedia estimates that its share of the total expenses of this offering,
excluding underwriting discounts and commissions, will be approximately
$1,500,000.
J.P. Morgan Securities Inc., an affiliate of J.P. Morgan & Co., acted as a
placement agent for StarMedia in connection with the private placement of
StarMedia's series C redeemable convertible preferred stock in August 1998.
StarMedia incurred customary placement fees to J.P. Morgan Securities Inc. for
such services.
Goldman, Sachs & Co. acted as a placement agent for StarMedia in connection
with the private placement of shares of StarMedia's common stock in April and
May 1999. StarMedia incurred customary placement fees to Goldman, Sachs & Co.
for such services.
Bayview Investors, an affiliate of BancBoston Robertson Stephens Inc.,
purchased 200,000 shares of StarMedia's series B redeemable convertible
preferred stock in connection with StarMedia's private placement in February
1998 and 20,834 shares of StarMedia's series C redeemable convertible preferred
stock in connection with StarMedia's private placement in August 1998.
StarMedia has agreed to indemnify the several underwriters against various
liabilities, including liabilities under the Securities Act of 1933.
U-2
<PAGE>
[EXAMPLE OF STARMEDIA PRINT MEDIA ADVERTISEMENT
PREPARED BY OGILVY & MATHER. TEXT OF AD STATES:
(1) WITH A TARGET MARKET OF MORE THAN 10 MILLION
LATIN AMERICANS USING THE INTERNET, ACCORDING TO A 1997
NAZCA SAATCHI & SAATCHI STUDY, THE CHOICES ARE CLEAR:
YOU EITHER INCLUDE INTERNET IN YOUR MIX AND ENJOY THE
OPPORTUNITIES, OR YOU IGNORE IT, AND FACE THE CONSEQUENCES - SEE LEFT.
(2) STARMEDIA IS THE LEADING ONLINE NETWORK TARGETING
LATIN AMERICA WITH 17 TOPICAL AREAS AND EXTENSIVE WEB-BASED
COMMUNITY FEATURES IN SPANISH AND PORTUGUESE. WE OFFER
OUR USERS A WIDE RANGE OF FREE CHOICES - FROM CHAT TO
NEWS, FROM EMAIL TO SHOPPING, PERSONAL HOMEPAGES AND MORE.
OUR CONTENT IS TAILORED TO REGIONAL AND COUNTRY-SPECIFIC
INTERESTS AND IS ENTIRELY IN SPANISH AND PORTUGUESE; (3) A SURVEY
OF STARMEDIA VISITORS CONDUCTED BY THE LAREDO GROUP IN
DECEMBER 1998 REVEALED THAT OUR USERS SPEND
APPROXIMATELY 37% OF THEIR ONLINE TIME ON STARMEDIA, 87%
ARE EMPLOYED OR UNIVERSITY ATTENDEES AND 61% HOLD CREDIT
CARDS. ADDITIONALLY, IN LATIN AMERICA, 20% OF THE POPULATION
CONTROLS AN ESTIMATED 65% OF THE BUYING POWER; (4) AND
WE BELIEVE THE MARKET HOLDS SIGNIFICANT OPPORTUNITY. BY
THE END OF YEAR 2000, NAZCA SAATCHI & SAATCHI ESTIMATES
THAT 34 MILLION LATIN AMERICANS WILL BE ONLINE, SIGNIFICANTLY
OUTPACING THE GROWTH OF INTERNET USAGE WORLDWIDE; AND
(5) WITH A DEDICATED SALES TEAM IN EIGHT COUNTRIES AND A
FOCUS ON THE NEEDS OF THE LATIN AMERICAN POPULATION,
STARMEDIA IS WELL POSITIONED TO TAKE ADVANTAGE OF THE
GROWING LATIN AMERICAN INTERNET MARKET.]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Prospectus Summary................... 3
Risk Factors......................... 6
Forward-Looking Statements; Market
Data............................... 17
Use of Proceeds...................... 18
Dividend Policy...................... 18
Capitalization....................... 19
Dilution............................. 20
Selected Consolidated Financial
Data............................... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 23
Business............................. 33
Management........................... 47
Certain Transactions................. 54
Principal Stockholders............... 56
Description of Capital Stock......... 58
Shares Eligible for Future Sale...... 63
Validity of Common Stock............. 64
Experts.............................. 64
Where You Can Find More Information.. 64
Index to Financial Statements........ F-1
Underwriting......................... U-1
</TABLE>
------------------------
Through and including , 1999 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as underwriter and with respect to an unsold allotment or
subscription.
7,000,000 Shares
STARMEDIA NETWORK, INC.
Common Stock
---------------
[LOGO]
------------
GOLDMAN, SACHS & CO.
BANCBOSTON
ROBERTSON STEPHENS
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
Representatives of the Underwriters
------------------------
WIT CAPITAL CORPORATION
FACILITATOR OF INTERNET DISTRIBUTION
------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an estimate of the costs and expenses, other
than the underwriting discounts and commissions, payable by the registrant in
connection with the issuance and distribution of the common stock being
registered.
<TABLE>
<S> <C>
SEC registration fee........................................... $ 26,885
NASD filing fee................................................ 10,160
NASDAQ listing fee............................................. 95,500
Legal fees and expenses........................................ 500,000
Accountants' fees and expenses................................. 400,000
Printing expenses.............................................. 250,000
Blue sky fees and expenses..................................... 5,000
Transfer Agent and Registrar fees and expenses................. 15,000
Miscellaneous.................................................. 197,455
----------
Total.................................................... $1,500,000
----------
----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL makes provision for the indemnification of officers
and directors in terms sufficiently broad to indemnify officers and directors
under certain circumstances from liabilities (including reimbursement for
expenses incurred) arising under the Securities Act. Section 145 of the DGCL
empowers a corporation to indemnify its directors and officers and to purchase
insurance with respect to liability arising out of their capacity or status as
directors and officers, provided that this provision shall not eliminate or
limit the liability of a director: (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) arising under Section 174 of the DGCL, or (iv) for any transaction
from which the director derived an improper personal benefit. The DGCL provides
further that the indemnification permitted thereunder shall not be deemed
exclusive of any other rights to which the directors and officers may be
entitled under the corporation's bylaws, any agreement, a vote of stockholders
or otherwise.
The certificate of incorporation of StarMedia provides for indemnification
of our directors against, and absolution of, liability to StarMedia and its
stockholders to the fullest extent permitted by the DGCL. StarMedia intends to
purchase directors' and officers' liability insurance covering liabilities that
may be incurred by our directors and officers in connection with the performance
of their duties.
The employment agreements we have with Fernando J. Espuelas and Jack C. Chen
provide that such executives will be indemnified by us for all liabilities
relating to their status as officers or directors of StarMedia, and any actions
committed or omitted by the executives, to the maximum extent permitted by law
of the State of Delaware.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The registrant has sold and issued the following securities since March 5,
1996 (inception):
1. From March 5, 1996 to December 31, 1998, the registrant issued and
sold 10,392,000 shares of common stock to twenty-two purchasers at prices
ranging from $0.0056 to $0.50 per share.
2. In 1997, the registrant issued and sold 7,330,000 shares of series A
redeemable convertible preferred stock to twenty-nine purchasers for an
aggregate purchase price of $3,665,000.
II-1
<PAGE>
3. On January 21, 1998, the registrant issued 8% convertible subordinated
notes due July 21, 1998 to the fl@tiron Fund, LLC in the aggregate
principal amount of $410,000 and to Chase Venture Capital Associates,
L.P. in the aggregate amount of $3,590,000.
4. In February 1998, the registrant issued and sold 8,000,000 shares of
series B redeemable convertible preferred stock to thirty-two purchasers
for an aggregate purchase price of $12,000,000.
5. On August 14, 1998, the registrant issued 8% convertible subordinated
notes due December 31, 1998 to the Flatiron Fund 1998/99, LLC in the
aggregate principal amount of $200,000 and to Chase Venture Capital
Associates, L.P. in the aggregate amount of $1,800,000.
6. In August 1998, the registrant issued and sold 16,666,667 shares of
series C redeemable convertible preferred stock to thirty-seven
purchasers for an aggregate purchase price of $80,000,000.
7. Since December 31, 1998, the registrant issued 35,000 shares of common
stock to two purchasers upon the exercise of options at exercise prices
ranging from $0.50 to $1.50 per share.
8. In May 1999, the registrant completed the sale of 3,727,272 shares of
its common stock at $11.00 per share to six purchasers for the aggregate
purchase price of $41,000,000.
The sales of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act. The
recipients of securities in each of these transactions represented their
intention to acquire the securities for investment only and not with view to or
for sale in connection with any distribution thereof and appropriate legends
were affixed to the share certificates and instruments issued in such
transactions. All recipients had adequate access, through their relationship
with the registrant, to information about the registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1+ Form of underwriting agreement.
3.1+ Certificate of incorporation, as amended.
3.2* Form of amended and restated certificate of incorporation to be in effect upon the closing of this
offering.
3.3+ Bylaws.
3.4* Form of amended and restated bylaws to be in effect upon the closing of this offering.
4.1* Specimen common stock certificate.
4.2+ Please see Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions of the certificate of incorporation and
bylaws defining the rights of holders of common stock.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1+ 1997 stock option plan.
10.2 1998 stock plan.
10.3+ Lease dated September 15, 1997 between Clemons Management Corp. and StarMedia, as amended.
10.4+ Amended and restated registration rights agreement.
10.5+ Amendment no. 1 to amended and restated registration rights agreement.
10.6+ Series A convertible stock purchase agreement, dated as of July 25, 1997, between StarMedia and
several purchasers named in attached schedule.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.7+ Series B convertible stock purchase agreement, dated as of February 20, 1998, between StarMedia and
several purchasers named in attached schedule.
10.8+ Series C convertible stock purchase agreement, dated as of August 24, 1998, between StarMedia and
several purchasers named in attached schedule.
10.9u IBM Business Partner Agreement, dated as of April 1, 1999, by and between StarMedia and International
Business Machines Corporation.
10.10 Quota Purchase Agreement, dated as of April 13, 1999, by and between StarMedia, StarMedia do Brasil
Ltda., Quotaholders of KD Sistemas de Informacao Ltda. and KD Sistemas de Informacao Ltda.
10.11 Master Loan and Security Agreement No. 4231, dated as of March 31, 1999, by and between StarMedia and
Charter Financial, Inc.
10.12* StarMedia 1999 Employee Stock Purchase Plan.
10.13 Stock Purchase Agreement between StarMedia and Hearst Communications, Inc. dated as of April 30,
1999.
10.14 Stock Purchase Agreement between StarMedia and Reuters Holding Switzerland SA dated as of April 30,
1999.
10.15 Stock Purchase Agreement between StarMedia and eBay Inc. dated as of April 30, 1999.
10.16 Stock Purchase Agreement between StarMedia and Europortal Holding S.A. dated as of April 30, 1999.
10.17 Stock Purchase Agreement between StarMedia and Critical Path, Inc. dated as of May 3, 1999.
10.18 Stock Purchase Agreement between StarMedia and Europortal Holding S.A. dated as of May 5, 1999.
10.19 Share Purchase Agreement dated as of May 4, 1999 between StarMedia and Wass Net S.L., Geradons, S.L.,
Salvador Porte and Eduardo Kawas.
10.20 Stock Purchase Agreement between StarMedia and National Broadcasting Company, Inc. dated as of May 4,
1999.
10.21 Registration Rights Agreement dated as of April 30, 1999 between StarMedia and Hearst Communications,
Inc.
10.22 Registration Rights Agreement dated as of April 30, 1999 between StarMedia and Reuters Holdings
Switzerland SA.
10.23 Registration Rights Agreement dated as of April 30, 1999 between StarMedia and eBay Inc.
10.24 Registration Rights Agreement dated as of May 3, 1999 between StarMedia and Europortal Holding S.A.
10.25 Registration Rights Agreement dated as of May 3, 1999 between StarMedia and Critical Path, Inc.
10.26 Registration Rights Agreement dated as of May 5, 1999 between StarMedia and Europortal Holding S.A.
10.27 Registration Rights Agreement dated as of May 4, 1999 between StarMedia and Geradons, S.L.
10.28 Registration Rights Agreement dated as of May 4, 1999 between StarMedia and National Broadcasting
Company, Inc.
10.29 Employment Agreement dated as of April 29, 1999 by and between StarMedia and Fernando J. Espuelas.
10.30 Employment Agreement dated as of April 29, 1999 by and between StarMedia and Jack C. Chen.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
24.1+ Power of attorney (please see Signature Page).
27.1+ Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
+ Previously filed.
u Application has been made to the Commission to seek confidential treatment of
certain provisions.
(b) Financial Statement Schedules
II-3
<PAGE>
Schedule II--Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, 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 of 1933 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
of 1933, 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 2 to the registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on this 11th day of May, 1999.
STARMEDIA NETWORK, INC.
BY: /S/ FERNANDO J. ESPUELAS
-----------------------------------------
Fernando J. Espuelas
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the registration statement has been signed by the following persons in
the capacities indicated below:
<TABLE>
<S> <C>
Dated: May 11, 1999 /s/ FERNANDO J. ESPUELAS
--------------------------------------------
Fernando J. Espuelas
Chief Executive Officer and
Chairman of the Board of Directors
(Principal Executive Officer)
Dated: May 11, 1999 *
--------------------------------------------
Jack C. Chen
President and Director
Dated: May 11, 1999 *
--------------------------------------------
Steven J. Heller
Chief Financial Officer(Principal Financial
and Accounting Officer)
Dated: May 11, 1999 *
--------------------------------------------
Douglas M. Karp
Director
Dated: May 11, 1999 *
--------------------------------------------
Christopher T. Linen
Director
Dated: May 11, 1999 *
--------------------------------------------
Gerardo M. Rosenkranz
Director
Dated: May 11, 1999 *
--------------------------------------------
Susan L. Segal
Director
Dated: May 11, 1999 *
--------------------------------------------
Frederick R. Wilson
Director
</TABLE>
<TABLE>
<S> <C>
/s/ FERNANDO J. ESPUELAS
------------------------------------------
Fernando J. Espuelas
*By: ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
StarMedia Network, Inc.
We have audited the consolidated financial statements of StarMedia Network, Inc.
as of December 31, 1997 and 1998, and the period from March 5, 1996 (date of
inception) to December 31, 1996 and the years ended December 31, 1997 and 1998,
and have issued our report thereon dated March 5, 1999 (included elsewhere in
this Registration Statement). Our audits also included the financial statement
schedule listed in Item 16(b) of this Registration Statement. This schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
New York, New York
March 5, 1999
S-1
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
STARMEDIA NETWORK INC.
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
ADDITIONS
BALANCE AT
BEGINNING OF CHARGED TO COSTS CHARGED TO OTHER
DESCRIPTION PERIOD AND EXPENSES ACCOUNTS DEDUCTIONS
<S> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts...... $ 60,000 $ 81,000 -- --
YEAR ENDED DECEMBER 31, 1998
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts...... -- 60,000 -- --
YEAR ENDED DECEMBER 31, 1997
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts...... -- -- -- --
PERIOD ENDED MARCH 5, 1996 (DATE OF
INCEPTION) TO DECEMBER 31, 1996
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts...... -- -- -- --
<CAPTION>
COLUMN A COLUMN E
BALANCE AT END
DESCRIPTION OF PERIOD
<S> <C>
THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts...... $ 141,000
YEAR ENDED DECEMBER 31, 1998
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts...... 60,000
YEAR ENDED DECEMBER 31, 1997
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts...... --
PERIOD ENDED MARCH 5, 1996 (DATE OF
INCEPTION) TO DECEMBER 31, 1996
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts...... --
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1+ Form of underwriting agreement.
3.1+ Certificate of incorporation, as amended.
3.2* Form of amended and restated certificate of incorporation to be in effect upon the closing of this
offering.
3.3+ By-laws.
3.4* Form of amended and restated bylaws to be in effect upon the closing of this offering.
4.1* Specimen common stock certificate.
4.2+ Please see Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions of the certificate of incorporation and
bylaws defining the rights of holders of common stock.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1+ 1997 stock option plan.
10.2 1998 stock plan.
10.3+ Lease dated September 15, 1997 between Clemons Management Corp. and StarMedia, as amended.
10.4+ Amended and restated registration rights agreement.
10.5+ Amendment no. 1 to amended and restated registration rights agreement.
10.6+ Series A convertible stock purchase agreement, dated as of July 25, 1997, between StarMedia and
several purchasers named in attached schedule.
10.7+ Series B convertible stock purchase agreement, dated as of February 20, 1998, between StarMedia and
several purchasers named in attached schedule.
10.8+ Series C convertible stock purchase agreement, dated as of August 24, 1998, between StarMedia and
several purchasers named in attached schedule.
10.9u IBM business partner agreement, dated as of April 1, 1999 by and between StarMedia and International
Business Machines Corporation.
10.10 Quota purchase agreement, dated as of April 13, 1999, by and between StarMedia, StarMedia do Brasil
Ltda., Quotaholders of KD Sistemas de Informacao Ltda. and KD Sistemas de Informacao Ltda.
10.11 Master Loan and Security Agreement No. 4231, dated as of March 31, 1999, by and between StarMedia and
Charter Financial, Inc.
10.12* StarMedia 1999 Employee Stock Purchase Plan.
10.13 Stock Purchase Agreement between StarMedia and Hearst Communications, Inc. dated as of April 30,
1999.
10.14 Stock Purchase Agreement between StarMedia and Reuters Holdings Switzerland SA dated as of April 30,
1999.
10.15 Stock Purchase Agreement between StarMedia and eBay Inc. dated as of April 30, 1999.
10.16 Stock Purchase Agreement between StarMedia and Europortal Holding S.A. dated as of April 30, 1999.
10.17 Stock Purchase Agreement between StarMedia and Critical Path, Inc. dated as of May 3, 1999.
10.18 Stock Purchase Agreement between StarMedia and Europortal Holding S.A. dated as of May 5, 1999.
10.19 Share Purchase Agreement dated as of May 4, 1999 between StarMedia and Wass Net S.L., Geradons, S.L.,
Salvador Porte and Eduardo Kawas.
10.20 Stock Purchase Agreement between StarMedia and National Broadcasting Company, Inc. dated as of May 4,
1999.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.21 Registration Rights Agreement dated as of April 30, 1999 between StarMedia and Hearst Communications,
Inc.
10.22 Registration Rights Agreement dated as of April 30, 1999 between StarMedia and Reuters Holdings
Switzerland S.A.
10.23 Registration Rights Agreement dated as of April 30, 1999 between StarMedia and eBay Inc.
10.24 Registration Rights Agreement dated as of May 3, 1999 between StarMedia and Europortal Holding S.A.
10.25 Registration Rights Agreement dated as of May 3, 1999 between StarMedia and Critical Path, Inc.
10.26 Registration Rights Agreement dated as of May 5, 1999 between StarMedia and Europortal Holding S.A.
10.27 Registration Rights Agreement dated as of May 4, 1999 between StarMedia and Geradons, S.L.
10.28 Registration Rights Agreement dated as of May 4, 1999 between StarMedia and National Broadcasting
Company, Inc.
10.29 Employment Agreement dated as of April 29, 1999 by and between StarMedia and Fernando J. Espueles.
10.30 Employment Agreement dated as of April 29, 1999 by and between StarMedia and Jack. C. Chen.
21.1 List of subsidiaries.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
24.1+ Power of attorney (please see Signature Page).
27.1+ Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
+ Previously filed.
u Application has been made to the Commission to seek confidential treatment of
certain provisions.
<PAGE>
EXHIBIT-10.2
STARMEDIA NETWORK, INC.
1998 STOCK PLAN
1. Purposes of the Plan. The purposes of this 1998 Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant. Stock Purchase
Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan in accordance with Section 4 hereof
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any other country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 hereof
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means StarMedia Network, Inc., a Delaware corporation.
(h) "Consultant" means any person who is engaged by the Company or
any Parent or Subsidiary to render consulting or advisory services to such
entity.
(i) "Director" means a member of the Board of Directors of the
Company.
(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers
<PAGE>
between locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. For purposes of Incentive Stock Options, no such
leave may exceed ninety days, unless reemployment upon expiration of such leave
is guaranteed by statute or contract. If reemployment upon expiration of a leave
of absence approved by the Company is not so guaranteed, on the 181st day of
such leave any Incentive Stock Option held by the Optionee shall cease to be
treated as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment" by
the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Option Agreement" means a written or electronic agreement
between the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.
-2-
<PAGE>
(s) "Option Exchange Program" means a program whereby outstanding
Options are exchanged for Options with a lower exercise price.
(t) "Optioned Stock" means the Common Stock subject to an Option or
a Stock Purchase Right.
(u) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(v) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(w) "Plan" means this 1998 Stock Plan.
(x) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(y) "Service Provider" means an Employee, Director or Consultant.
(z) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(aa) "Stock Purchase Right" means a right to purchase Common Stock
pursuant to Section 11 below.
(bb) "Subsidiarv" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 17,000,000 Shares, plus an annual increase to be
added on July 1 of each year, beginning on July 1, 2000, equal to the lesser of
(i) 4,000,000 shares, (ii) 4% of the outstanding shares on such date, or (iii) a
lesser amount determined by the Board. The Shares may be authorized but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated). However, Shares that have actually been issued under the Plan,
upon exercise of either an Option or Stock Purchase Right, shall not be returned
to the Plan and shall not become available for future distribution under the
Plan, except that if Shares of Restricted Stock are repurchased by the Company
at their original purchase price, such Shares shall become available for future
grant under the Plan.
-3-
<PAGE>
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different Service
Providers.
(ii) Other Administration. Other than as provided above, the
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by each
such award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, of any Option or
Stock Purchase Right granted hereunder. Such terms and conditions include, but
are not limited to, the exercise price, the time or times when Options or Stock
Purchase Rights may be exercised (which may be based on performance criteria),
any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Option or Stock Purchase Right or the
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vi) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(e) instead of Common Stock;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted;
(viii) to initiate an Option Exchange Program;
-4-
<PAGE>
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by Optionees to
have Shares withheld for this purpose shall be made in such form and under such
conditions as the Administrator may deem necessary or advisable; and
(xi) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees.
5. Eligibility.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
(b) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall it interfere in
any way with his or her right or the Company's right to terminate such
relationship at any time, with or without cause.
(d) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year
of the Company, Options to purchase more than [500,000] Shares.
-5-
<PAGE>
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional [500,000] Shares
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 12), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon its adoption by the
Board. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant or such shorter term as
may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
exercise price shall be no less than 110% of the Fair Market Value per Share on
the date of grant.
(B) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator.
-6-
<PAGE>
(iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price other than as required above pursuant to a
merger or other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (6) any combination of the foregoing methods of payment. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of absence. An
Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares thereafter available, both for purposes of the Plan and
for sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, such Optionee may exercise his or her
Option within such period of time as is
-7-
<PAGE>
specified in the Option Agreement to the extent that the Option is vested on the
date of termination (but in no event later than the expiration of the term of
the Option as set forth in the Option Agreement). In the absence of a specified
time in the Option Agreement, the Option shall remain exercisable for thirty
(30) days following the Optionee's termination. If, on the date of termination,
the Optionee is not vested as to his or her entire Option, the Shares covered by
the unvested portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in the
Option Agreement to the extent that the Option is vested on the date of death
(but in no event later than the expiration of the term of such Option as set
forth in the Option Agreement) by the Optionee's estate or by a person who
acquires the right to exercise the Option by bequest or inheritance. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to the entire Option, the
Shares covered by the unvested portion of the Option shall immediately revert to
the Plan. If the Option is not so exercised within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, Options and Stock Purchase Rights may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
-8-
<PAGE>
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically of the terms, conditions and restrictions
related to the offer, including the number of Shares that such person shall be
entitled to purchase, the price to be paid, and the time within which such
person must accept such offer. The offer shall be accepted by execution of a
Restricted Stock purchase agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchasers service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company.
(c) Other Provisions. The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser shall have rights equivalent to those of a stockholder
and shall be a stockholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of
the Plan.
12. Adjustments Upon Changes in Capitalization. Merger or Asset Sale.
-9-
<PAGE>
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option or Stock Purchase Right until
fifteen (15) days prior to such transaction as to all of the Optioned Stock
covered thereby, including Shares as to which the Option or Stock Purchase Right
would not otherwise be exercisable. In addition, the Administrator may provide
that any Company repurchase option applicable to any Shares purchased upon
exercise of an Option or Stock Purchase Right shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option or Stock Purchase Right will terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock Purchase
Right shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option or Stock Purchase Right shall be considered assumed
if, following the merger
-10-
<PAGE>
or sale of assets, the option or right confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option or Stock Purchase Right
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
13. Time of Granting Options and Stock Purchase Rights. The date of grant
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Service Provider to whom an Option
or Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Board shall obtain stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise of an
Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of
-11-
<PAGE>
any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
16. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
17. Reservation of Shares. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Stockholder Approval. The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the degree and manner
required under Applicable Laws.
-12-
<PAGE>
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN PORTIONS OF THIS
EXHIBIT PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
IBM Business Partner Agreement
International Solution Provider Profile
- --------------------------------------------------------------------------------
We welcome you as an IBM Business Partner-Solution Provider.
This Agreement covers the details of your approval to actively market Eligible
Services. As our Solution Provider, you enhance Eligible Services with your
solution to provide Services capable of satisfying the Customer's requirements.
By signing below, each of us agrees to the terms of the following (collectively
called the "Agreement"):
(a) this Profile;
(a) General Terms (BXGT-02-00 11/98);
(a) the applicable Attachments referred to in this Profile; and
(a) the Exhibit and applicable Transaction Documents.
This Agreement and its applicable transaction documents are the complete
agreement regarding this relationship, and replace any prior oral or written
communications between us. Once this Agreement is signed, 1) any reproduction of
this Agreement or a transaction document made by reliable means (for example,
photocopy or facsimile) is considered an original, to the extent permissible
under applicable law, and 2) all Products and Services you market and Services
you perform under this Agreement are subject to it. If you have not already
signed an Agreement for Exchange of Confidential Information (AECI), your
signature on this Agreement includes your acceptance of the AECI provided to
you.
After signing this Agreement, please return a copy to the IBM address shown
below.
Agreed to: Agreed to:
StarMedia Network Inc. International Business Machines
Corporation
By: /s/ Betsy Scolnik By: /s/ Roger L. Dudley
------------------------------- ---------------------------------
Authorized Signature Authorized Signature
Name (type or print): Betsy Scolnik Name (type or print): Roger L. Dudley
Date: 3/31/99 Date: 4/1/99
Agreement number:
IBM Business Partner number:
Business Partner Address: IBM Address:
29 W. 36th Street IBM Global Services
New York City, NY 10018 3405 W. Dr. M. L. King, Jr. Blvd.
Tampa, FL 33607
Attention: Order Fulfillment Services
Page 1 of 4
<PAGE>
1. DETAILS OF OUR AGREEMENT
1.
1. Contract Start Date: March xx, 1999 Duration: 5 years
1.
This Agreement shall commence on March xx, 1999, and terminate on March xx,
December 2004.
The effective date of this Agreement and all modifications to this Agreement are
effective on the first day of the month after signature by you and acceptance by
IBM.
Should each of us decide to continue our relationship for an additional term
upon expiration of the term of this Agreement, this Agreement shall remain in
effect until terminated by both parties or replaced by a new Agreement.
Relationship Approval/Acceptance of AdditionalTerms:
Each of us agrees to the terms of the following by signing this Agreement.
Copies of the Attachments are included.
Approved Relationship Attachment Reference
Solution Provider Attachment BXSP-02-00 11/98
Remarketer Terms Attachment BXRT-02-00 11/98
IBM Global Services' Network Services BPIGN 4/99 (SM)
Terms Attachment for Remarketing
International Attachment BPIA-00 1/99 Draft 3
You are approved to remarket Eligible Services to Customers in the countries
specified in this Profille.
Eligible Services Approval:
You are approved to market under Remarketer Terms Eligible Services in the
following IBM Global Services offering categories from the Network Services
business segment. The terms of the Exhibit apply to these Eligible Services.
o Managed Internet and Intranet Services
o IBM Internet Connection Services
o Customized Internet Access Kit Redistribution, Supplement for Custom
Solution Number ____________
1. Minimum Revenue Commitment
The minimum gross revenue commitment for the Agreement will be based on the
number of End Users as follows:
For each month of this agreement and for each country shown, StarMedia Network
shall commit to a monthly base level of end users asshown below, for the five
year term of End Users as shown below, from the Contract Start Date of this
Agreement, for the five year term for IBM Services outlined in this Agreement.
This volume commitment shall come from StarMedia Network's remarketing of IBM
Internet Connection Services (IBM ICS) directly to End Users in the countries
identified in this Agreement. All the End Users registering for IBM ICS using a
StarMedia offer code in each calendar month of the term of this Agreement shall
count toward this volume commitment.
Volume Commitment
---------------------------------------------------------------------------
Country Argentina Brazil Chile Colombia Mexico
---------------------------------------------------------------------------
Volume Commitment [****] [****] [****] [****] [****]
---------------------------------------------------------------------------
Months in Contract Year One [****] [****] [****] [****] [****]
---------------------------------------------------------------------------
**** Represents material which has been redacted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities Act of
1933, as amended.
Page 2 of 4
<PAGE>
(Note: Contracts Year two thru five require 12 month commitment in each country)
At the first annual reconciliation, the number of months in Contract Year One
will be adjusted for any delay in the start of service in each country.
Annual Reconciliation
The volume commitment will be reconciled annually based on the annual volume
commitments shown above. If StarMedia Network fails to achieve the annual volume
commitment levels specified above, IBM will assess an annual adjustment charge.
Such adjustment charge shall be calculated as follows:
1. Calculate the actual number of hours billed to StarMedia Network in the
contract year being reconciled in each country.
1. Calculate the committed hourly volume for each country by multiplying the
number of committed months in the contract year being reconciled by the
committed volume from the table above and multiplying the result by the
projected hours in the table below.
1. If the result from the calculation in item 2 is greater than the calculation
in item 1, a shortfall will exist and an adjustment charge will be calculated by
multiplying the corresponding hourly charge (basic charge + help desk + billing)
times the shortfall.
Projected Hourly Usage
-------------------------------------
Projected
Country Hourly Usage
-------------------------------------
Argentina [****] hours
-------------------------------------
Brazil [****] hours
-------------------------------------
Chile [****] hours
-------------------------------------
Columbia [****] hours
-------------------------------------
Mexico [****] hours
-------------------------------------
In the event you terminate this Agreement and you have not met your minimum
annual revenue commitment, the adjustment charges shall be calculated as of the
termination date and may be due and payable based on the terms of Section 1.7 of
the Exhibit. In the event IBM terminates this Agreement with cause, you will be
required to pay the adjustment charges. In the event IBM terminates this
Agreement without cause, you will not be required to pay the adjustment charges.
In no instance will the billing volumes used during the Wind Down Period be
counted toward the committed volume.
1. Value-Added Enhancement Description
You will provide the following value-added enhancement and support services with
Eligible Services:
o StarMedia Network Internet Home Page
o Identification of End Users
Participating Business Partner Companies and IBM Companies
- --------------------------------------------------------------------------------
Country Business Partner Company IBM Company Address
Address
- --------------------------------------------------------------------------------
Argentina StarMedia Network Inc. IBM Argentina S.A.
Av. Alicia Moreau deJusto 170 Ing. Enrique Butty 275
Piso 3, Dock 1 (1107) 1300 Buenos Aires
Buenos Aires, Argentina
- --------------------------------------------------------------------------------
**** Represents material which has been redacted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities Act of
1933, as amended.
Page 3 of 4
<PAGE>
- --------------------------------------------------------------------------------
Brazil StarMedia Network Inc. IBM Brasil
Ave. das Nacoes Unidas Rua Tutoia, 1157
12.551 15o. Andar, cjs.1508 10 Andar Cep 04707-900
Sao Paulo, SP Brazil Sao Paulo SP
04578-903
- --------------------------------------------------------------------------------
Chile StarMedia Network Inc. ISSC Chile
Alcantra 44, Piso 12 Avenida Providencia 655
Las Condes Santiago Chile Castilla 3630
Santiago
- --------------------------------------------------------------------------------
Colombia StarMedia Network Inc. IBM Colombia S.A.
Carrera 11 A, No. 93A-22 Transversal 38 No. 100-25
Oficina 405 Bogota
Santa Fe de Bogata,
Colombia
- --------------------------------------------------------------------------------
Mexico StarMedia Network Inc. IBM Global Services
Andres Bello, No. 10 Piso 12 Colonia Irrigacion
Colonia Polanco 11560 C.P. 11520 Mexico D.F.
Mexico D.F., Mexico
- --------------------------------------------------------------------------------
Page 4 of 4
<PAGE>
[LOGO] IBM
IBM Business Partner Agreement
IBM Global Services' Network Services Exhibit
- --------------------------------------------------------------------------------
This Transaction Document describes special charges, additional terms, and
modifications to the General Terms, Solution Provider Terms, Remarketer Terms,
and IBM Global Services' Network Services Terms Attachment for Remarketing,
which apply to your remarketing of IBM Global Services' network Services, to
which both of us have agreed.
1. Charges
Unless otherwise stated, all charges are measured and assessed at a
country level. Except as provided in section 1.1, the charges specified in
this Exhibit will not be increased during the Agreement term.
1.1 Internet Dial Services Charges
Charges for IBM Internet Connection Services are measured on an hourly
"per access" basis, from the initiation of the link to the IBM Global
Network until the connection terminates (modem synchronization to modem
hang-up at the Local Internet Gateways (LIGs)). Charges apply for each
physical connection regardless of the number of concurrent logical
sessions within that physical connection. Accordingly, the charge for
Internet Services shall be billed to StarMedia for each hour, or portion
of hour, of usage, per user ID and per physical connection.
IBM will bill StarMedia Network for the usage of this Service based on the
total number of hours of connection time to the LIG for all End Users.
Session time is calculated in 36 second intervals for every access, by
rounding up to the next 36 second interval, which is equivalent to
rounding up to the next 100th of an hour. IBM Internet Connection Services
are usage based, per connection session. IBM will multiply the session
time by the appropriate charges specified in this section 1.1. At the end
of each calendar month, IBM will total the cumulative session times and
charges for all of StarMedia's End Users.
IBM will use a Consolidated Statement to invoice you for all local user
IDs in US currency in the US. Consolidated statement terms are described
in the Attachment for Consolidated Statement. The Consolidated Statement
will not be used in countries where it would have an adverse tax effect on
either party or would not comply with local laws.
The hourly charges for the IBM Internet Connection Services are:
Charges for IBM Internet Connection Services
-------------------------------------
Country Hourly Charges
------- --------------
-------------------------------------
Argentina US$[****]
-------------------------------------
Brazil US$[****]
-------------------------------------
Chile US$[****]
-------------------------------------
Colombia US$[****]
-------------------------------------
Mexico US$[****]
-------------------------------------
31 March 1999 Page 1 of 17
**** Represents material which has been redacted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities Act of
1933, as amended.
<PAGE>
IBM and StarMedia Network agree to establish baseline prices for each
country. The baseline price shall be the average published price offered
by a mutually agreed to set (not to exceed four) of the largest Internet
service providers (ISP) in the respective countries, for unlimited
service. The initial baseline price shall be set by selecting the four
largest ISPs as identified in the 1998 International Data Corporation
(IDC) Latin America Internet Access Provider as of the Contract Start
Date.
The baseline market price for the delivery of IBM Internet Connection
Services as of the Contract Start Date, for each country, shall be for
each country, determined by mutual agreement of the parties within 30 days
following the date of the signing of this Agreement.
Every six months IBM and StarMedia Network agree to review the baseline
price in each country to determine its currency and competitiveness in
relationship to the current market conditions and price in the respective
countries at the time of such review. Such review shall be based on a
comparison between the current baseline price and the average of the then
current published unlimited usage price of a mutually agreed set (not to
exceed four) of the largest ISPs as identified in any mutually agreed to
independent publication. Further, either party may request such review at
any time but no more often than once per calendar quarter.
If after such review, the baseline price in a country varies by plus or
minus 10% from the calculated average price as described above, the
baseline price for that country shall be reset to the calculated average
price as described above.
In the event the baseline is reset during a review, either party shall
have the right to request that the parties adjust the hourly charges for
the IBM Internet Connection Services by the same percentage as the
adjustment in the baseline price with the exception that, if IBM does not
agree to reduce the price by this percentage, StarMedia Network will have
the option to terminate this Agreement with respect to the country being
adjusted. Upon such termination the non-PTT related termination charges
will be reduced by 50%.
1.2 Custom End User Support Services Charges
The charges for custom End User Support Services as specified in section 8
are as follows:
----------------------------------------
Country Charges Excess
Per Hour Call Rate
Charge Per
Ticket
----------------------------------------
Argentina US$[****] $[****]
----------------------------------------
Brazil US$[****] $[****]
----------------------------------------
Chile US$[****] $[****]
----------------------------------------
Colombia US$[****] $[****]
----------------------------------------
Mexico US$[****] $[****]
----------------------------------------
1.3 Global Roaming Charges
"Global Roaming Charges" are the rate surcharges applicable when use of
the IBM Internet Connection Services are used at a location outside of the
Geographic Region, as subsequently defined, in which a user ID was issued.
The four "Geographic Regions" used to determine such charges are: (i)
Europe, Middle East and Africa, (ii) Latin America, (iii) North America,
and (iv) Asia Pacific. Such Global Roaming Charges are charged in addition
to those rates normally charged for IBM Internet Connection Services usage
in the particular country within a Geographic Region in which a user ID
was issued.
Under the terms of section 9, "Billing," IBM will invoice you for End
Users' Global Roaming Charges generated by their usage of the IBM Internet
Connection Service outside of the Geographic Region in which their user ID
was issued.
The "Global Roaming Rates" applicable to IBM Internet Connection Service
End Users will be the generally
31 March 1999 Page 2 of 17
**** Represents material which has been redacted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities Act of
1933, as amended.
<PAGE>
available rates in effect as of the Contract Start Date and specified by
country in the IBM Global Services Managed Internet and Intranet Services
Schedule of Charges. Such Global Roaming Rates are subject to change as
IBM adjusts its generally available Global Roaming Rates for all IBM
Internet Connection Services customers from time to time.
IBM Internet Connection Services shall not be available to End Users who
(i) reside or travel in a single country for more than thirty one (31)
consecutive days in a calendar year outside of the country in which their
user ID was issued or (ii) who reside or travel in a single country for
more than ninety (90) non-consecutive days in a calendar year outside of
the country in which their user ID was issued. Such End Users residing or
traveling for longer than said periods described above must secure new
user IDs from the appropriate local IBM Affiliate.
1.4 Billing Charges
There are ongoing monthly charges for the development, customization and
provisioning of the billing services as described in section 8.
Billing Charges
- --------------------------------------------------------------------------------
Argentina Brazil Chile Colombia Mexico
- --------------------------------------------------------------------------------
Monthly US$[****] US$[****] US$[****] US$[****] US$[****]
Charge per
hour
- --------------------------------------------------------------------------------
1.5 Project Office Charges
There shall be an on-going monthly charge for the IBM Project Management
as described in section 4. These charges will be billed in the United
States.
- --------------------------------------------------------------------------------
Contract Contract Contract Contract Contract
Year 1 Year 2 Year 3 Year 4 Year 5
- --------------------------------------------------------------------------------
Annual Project
Management Charges $[****] $[****] $[****] $[****] $[****]
- --------------------------------------------------------------------------------
1.6 Taxes
All prices are exclusive of any applicable taxes.
1.7 Termination Charges
In the absence of any material default by IBM under this Agreement, there
are one time charges, payable by StarMedia Network, in the event of
StarMedia Network's termination of this Agreement prior to the expiration
of the term of this Agreement. Upon termination of this Agreement by
StarMedia Network without cause, StarMedia Network shall be liable for the
greater of (1) the adjustment charges calculated under the terms of the
Profile or (2) the termination charges specified below. In either case IBM
will additionally invoice StarMedia Network the actual termination charges
imposed on IBM by local Post Telegraph Telephone (PTT) or other
telecommunication circuit providers. The parties agree to work together
with the PTT to minimize the PTT termination charges and develop an
appropriate wind down plan. StarMedia Network shall have the right to
particpate in all discussions related to the discontinuance of PTT
services and have access to the relevant documents.
The charges associated with the volume commitment stated in the Profile
are shown in the following table:
31 March 1999 Page 3 of 17
**** Represents material which has been redacted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities Act of
1933, as amended.
<PAGE>
Base Termination Charges
- --------------------------------------------------------------------------------
Argentina Brazil Chile Colombia Mexico
- --------------------------------------------------------------------------------
Contract Year One $[****] $[****] $[****] $[****] $[****]
- --------------------------------------------------------------------------------
Contract Year Two $[****] $[****] $[****] $[****] $[****]
- --------------------------------------------------------------------------------
Contract Year Three $[****] $[****] $[****] $[****] $[****]
- --------------------------------------------------------------------------------
Contract Year Four $[****] $[****] $[****] $[****] $[****]
- --------------------------------------------------------------------------------
Contract Year Five $[****] $[****] $[****] $[****] $[****]
- --------------------------------------------------------------------------------
If, during any month prior to StarMedia Network's termination of this
Agreement without cause, the actual number of End Users exceeds the
committed number of End Users (based on a monthly proration) additional
termination charges will be due and payable by StarMedia Network. For each
additional increment of users shown below, the additional charges shall be
assessed. The charges shall be based on eighty percent (80%) of the number
of End Users in excess of the committed volume. Such usage and termination
charges shall be prorated for usage not in multiples of 10,000.
Excess Usage Termination Charges
----------------------------
Excess
Usage
Termination
Excess Usage Charge
----------------------------
[****] End Users $[****]
----------------------------
1.8 Favored Business Partner
IBM will extend to StarMedia Network the benefit of prices, terms and
conditions at least as favorable as those IBM offers to other Business
Partner Remarketers providing private branded Internet access services to
individual end users in Latin America, who have made commitments and
agreed to terms substantially similar to those in this Agreement.
2. Implementation Dates
IBM agrees to implement the Services, capable of supporting the specified
volumes, on the dates specified below:
- --------------------------------------------------------------------------------
Country Implementation Date Month 4 forecast volume
- --------------------------------------------------------------------------------
Brazil 30 June 1999 [****]
- --------------------------------------------------------------------------------
Mexico 31 July 1999 [****]
- --------------------------------------------------------------------------------
Argentina 31 July 1999 [****]
- --------------------------------------------------------------------------------
Chile 31 July 1999 [****]
- --------------------------------------------------------------------------------
Colombia 30 August 1999 [****]
- --------------------------------------------------------------------------------
3. Project Office
As part of a global Project Office, IBM shall appoint the following
qualified staff members to act as the principal points of interface
between IBM and StarMedia Network during the country-specific roll-out of
any IAK to new End Users and to provide on-going management of the
delivery of IBM Services during the term of this Agreement. The IBM
Project Office personnel shall be staffed based on the staffing levels
identified in the table below and shall perform the services described
below.
Part of the responsibility of the Project Office is to be responsible to
monitor the IBM web site for changes in the information that has been
downloaded by StarMedia Network to its web site. For major changes to the
structure and/or content of the IBM web site IBM will use commercially
reasonable effort to provide StarMedia Network 60 days' prior notice of
such change to the IBM web site.
IBM Project Executive
31 March 1999 Page 4 of 17
**** Represents material which has been redacted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities Act of
1933, as amended.
<PAGE>
The Project Executive shall act as an overall project manager with respect
to the performance by IBM of its obligations hereunder.
The IBM PE will serve as StarMedia Network's single-point-of-contact for
the complete range of services contracted. To effectively respond to
StarMedia Network's needs, StarMedia Network will provide its list of
authorized representatives to act as interface to the IBM PE. The PE has
his staff as well as the resources of IBM Global Services' Network
Services at his disposal to ensure an efficient transition and delivery of
high quality services. The IBM PE, being the central point of contact for
StarMedia, has authority and responsibility for all aspects of IBM's
performance including customer service and customer satisfaction.
IBM Service Executive
The Service Executive shall act as the focal point for service delivery
and reporting issues. The Service Manager will review and analyze
StarMedia Network's service performance and will sustain communication
channels with the customer to review action plans to resolve service
issues. In addition, he/she will inform StarMedia Network of scheduled
changes being performed to enhance the Service.
IBM Project Manager
The IBM Project Manager shall have responsibility for the coordination of
IBM support for the production ramp up of the IBM Services. This person
shall be the key day-to-day contact during the transition phases of this
project.
The Project Manager works with the PE and focuses on the implementation of
specific phases of the implementation of IBM Services, including initial
network installation and IAK development and deployment. The Project
Manager provides StarMedia Network a focal point for planning, scheduling
and resolution of any issues that may arise throughout the deployment of
IBM Services. In addition to the lead Project Manager, IBM may assign
Project Managers in other countries or geographies to support the lead
Project Manager. These support personnel will take direction from the lead
Project Manager.
IBM Delivery Executive
The IBM Delivery Executive is responsible for the coordination of day to
day delivery of IBM Services. Working directly with the IBM Service
Executive the Delivery Executive is responsible for among other things
addressing network operation issues, coordinating help desk services and
billing.
StarMedia Network Service Executive
StarMedia Network shall have a single point of contact for the IBM Project
Executive.
Project Office Staffing Levels
- --------------------------------------------------------------------------------
Support Classification Contract Contract Contract Contract Contract
- --------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5
- --------------------------------------------------------------------------------
Project Executive [****] [****] [****] [****] [****]
- --------------------------------------------------------------------------------
Project Manager [****] [****] [****] [****] [****]
- --------------------------------------------------------------------------------
Service Executive [****] [****] [****] [****] [****]
- --------------------------------------------------------------------------------
Delivery Executive [****] [****] [****] [****] [****]
- --------------------------------------------------------------------------------
While not reducing the total amount of support provided to StarMedia
Network during the term of the contract, and in order to maintain
flexibility to allocate resources to support the complete range of issues
and service requirements, except for the Project Executive, IBM shall have
the sole right to determine the specific levels of each support
classification and the selection of individuals providing such support.
4. End User Charges
31 March 1999 Page 5 of 17
**** Represents material which has been redacted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities Act of
1933, as amended.
<PAGE>
StarMedia Network is solely responsible for establishing its End User
Internet access charges. StarMedia Network will notify IBM by the tenth
day of the calendar month preceeding the month in which a plan change or
new plan is to take effect.
31 March 1999
Page 6 of 17
<PAGE>
5. Forecast
On a monthly basis, beginning on the Contract Start Date, StarMedia
Network shall provide IBM with a good faith eight month rolling forecast
by LIG area as specified below, forecasting by month the anticipated
number of IBM Intenet Connection Service End Users. Each StarMedia Network
forecast shall include a commentary on potential forecasting variances
which may result from marketing campaigns or special promotions. StarMedia
Network will use commercially reaasonable efforts to provide IBM 120 days'
advance notice of major marketing campaigns. Each rolling eight month
forecast shall be provided to IBM by StarMedia Network by the fifth
business day of each month. In the absence of a city by city forecast, it
is understood that a situation may temporarily occur where an overage or
underage of physical infrastructure may exist in one or more locations.
IBM capacity planning for the LIG infrastructure in each country shall
include the StarMedia Network forecast.
In conjunction with the StarMedia Network forecast, IBM shall make
commercially reasonable efforts to expand the physical infrastructure
required to meet its obligations under this Agreement relative to the
actual and forecasted number of StarMedia Network End Users. Such
expansion will be based on IBM's capacity planning models, taking into
consideration the StarMedia Network forecast. IBM shall maintain the
physical infrastructure capable of supporting the StarMedia Network End
User forecast at a month ahead of the current month's forecast.
At its sole discretion, IBM shall determine the required physical
infrastructure to support the number of forecasted StarMedia Network End
Users. IBM will review with StarMedia Network, on a quarterly basis upon
StarMedia Network's request, technology status for the purpose of
exploring more efficient means of providing Services hereunder.
In the event the actual number of StarMedia Network End Users in a single
month falls more than 10% below the forecasted number of End Users for
that month (Variance Factor), IBM's obligation to continue the expansion
of the physical infrastructure shall be waived until such time as the
StarMedia Network forecast to actual comparison is within the Variance
Factor.
-------------------------
LIG area
-------------------------
Buenos Aires
-------------------------
Remainder of
Argentina
-------------------------
Rio de Janeiro
-------------------------
Sao Paulo
-------------------------
Remainder of Brazil
-------------------------
Chile
-------------------------
Colombia
-------------------------
Mexico City
-------------------------
Remainder of Mexico
-------------------------
6. Compliance With Laws
The following terms are added to item 1 in section 2 in the IBM Global
Services' Network Services Terms Attachment for Remarketing.
"Further, you agree to comply with the laws and business practices of each
country outside of the United States where you are enabling or marketing
Eligible Services as an IBM Business Partner, including, but not limited
to --
a. obtaining a business license is each country as required by local
law,
b. to the extent reasonably possible, establishing a presence by
engaging an agent, representative or any other satisfactory means to
receive mail, business notices, legal notices, and the like,
31 March 1999 Page 7 of 17
<PAGE>
c. paying business, income, service, VAT or any other taxes required by
the country as required by law,
d. representing StarMedia Network to your customers and prospects
consistent with the terms or this Agreement, local business
practices and local laws, and
e. becoming aware of and staying current with local laws and business
practices in each country where you conduct business as an
authorized IBM Business Partner;"
The following terms are added at the end of the paragraph titled "Your
Liability" in section 9 of the IBM Business Partner Agreement - General
Terms.
"..., or your failure to comply with local laws and regulations for doing
business in each country where you are an IBM Business Partner for network
services, as specified in the Profile."
7. End User Customer Care
7.1 Support Services
Upon StarMedia Network's request, as an option under this Exhibit and for
the charges stated in Section 1.2, IBM will provide End User Support
Services via help desk services for the following:
o Installation, setup and usage of the IAK,
o Connectivity related access, problems and outages,
o registering for and using the Internet Connection Service,
o obtaining IAK updates we may provide, and
o billing.
This help desk will provide native language telephone contact for
StarMedia Network End Users, and will be available in each country during
the hours shown in the table below, and can be accessed via a number
specified in the IAK, such number to be a local call in Sao Paulo and toll
free elsewhere in Brazil. IBM will use commercially reasonable efforts to
implement toll free numbers in all other countries. We will identify
ourselves as "StarMedia Network" or such other identity which StarMedia
Network reasonably designates. All calls received will be logged and
assigned a unique ticket number.
There may be instances where undetected, non-network management, End User
related issues may arise during the non-operational help desk hours. IBM
and StarMedia Network agree to implement procedures to minimize such
occurences.
IBM shall also provide support to StarMedia Network End Users by providing
StarMedia Network the ability to receive relevant customer care and
support content from the IBM web site. StarMedia Network shall be solely
responsible for any changes it makes to the customer care and support
content it downloads from IBM. IAK program updates may be made available
at StarMedia Network's Internet web site. StarMedia Network may translate
and make such content available on its Internet web site.
------------------------------------------------
Country Customer Care Hours
------------------------------------------------
Argentina 9 am to midnight 7 days/week
9 am to 11 pm 7 days/week
(winter)
------------------------------------------------
Brazil 7 am to 1 am 5 days per week
(Brasilia 7 am to 7 pm S/S/national
Time) holidays
------------------------------------------------
Chile 9 am to Midnight 7 days/week
9 am to 11 pm 7 days/week
(winter)
------------------------------------------------
Colombia 7 am to 10 pm 5 days per week
10 am to 3 pm Saturday
------------------------------------------------
Mexico 8am - 7pm M-F
------------------------------------------------
IBM will direct all other End User suppport issues to StarMedia Network
for resolution. Accordingly, StarMedia Network will establish procedures
for handling all other End User Support issues not related to
31 March 1999 Page 8 of 17
<PAGE>
those specified above and IBM and StarMedia Network shall establish
mutually agreed procedures for call transfer to StarMedia Network.
The charges specified in section 1.2 are based on an assumption of an End
User Support call rate of 1.1% per day. This means that 1.1% of the End
User population will contact the End User Support Center, requiring the
opening of a problem ticket, each day. IBM will supply StarMedia Network
an End User Support report identifying the total number of monthly calls
handled. Call rates per country in excess of this 1.1% shall be charged to
StarMedia Network at the rates shown in section 1.2.
Calls placed to the help desk during normal maintenance windows as
specified in section 12.1 and unscheduled network outages that are calls
related to network outages whether taken through the VRU or ticketed as a
result of the outage will not be counted toward the 1.1% call rate
calculation and will not be charged to StarMedia Network.
7.2 Customer Care Measurements
The service design objective of the IBM Customer Care Service is that an
IBM Customer Care representative will answer calls from StarMedia Network
or End Users within the Average Speed of Answer shown below during the
hours shown in section 7.1. When a help desk telephone call is received by
IBM, a single help desk representative will be assigned the responsibility
for such telephone call and such representative will manage the problem
reported or the request made until the matter is resolved and StarMedia
Network or the End User is contacted.
IBM Customer Care Service shall perform to the following measurements:
One-stop servicing [****]
Average Speed of [****]
Answer
Calls abandoned [****]
"One-stop servicing" means the IBM representative taking a help desk call
is responsible to resolve the reported problem.
Average Speed of Answer is measured from the time a call leaves the IBM
VRU via option selection and enters the agent queue until such time as an
IBM representative takes the call.
7.3 Customer Care Response
The response time measurements for the IBM Customer Care Service are shown
below. IBM prioritizes work to resolve StarMedia Network and End User
reported problems based on the severity levels described below:
---------------------------------------------------------------------------
Severity Level Reported Problems Assigned to IBM Help Desk Representative
---------------------------------------------------------------------------
1 Within [****] minutes
---------------------------------------------------------------------------
2 Within [****] hours
---------------------------------------------------------------------------
3 Within [****] hours
---------------------------------------------------------------------------
4 Within [****] hours
---------------------------------------------------------------------------
IBM will achieve the response times stated above for [****] of the
problems reported.
The following definitions are the guidelines for the assignment of problem
management severity levels:
31 March 1999 Page 9 of 17
**** Represents material which has been redacted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities Act of
1933, as amended.
<PAGE>
----------------------------------------------------------------------------
Severity Level Description
----------------------------------------------------------------------------
SEV1 (Critical) The End User or StarMedia
Network has described a problem
which causes a severe and
pervasive impact to the use of
the IBM Services. The IBM
Services are unusable and/or
not available. The End User is
completely out of service and
unable to do any productive
work.
----------------------------------------------------------------------------
SEV2 (Major) End Users can connect to the
network but normal service
and/or functions are either
interrupted or severely
degraded: work may be performed
by the End User but not at
expected levels of performance
and productivity.
----------------------------------------------------------------------------
SEV3 (Minor) The End User is experiencing a
problem which does not affect
product or network availability
and functionality.
----------------------------------------------------------------------------
SEV4 (Miscellaneous) There is no significant impact
to the End User. This code may
reflect either dissatisfaction
with some aspects of the
product or service or that a
circumvention to the problem
has been found.
----------------------------------------------------------------------------
IBM may reassign, with StarMedia Network's consent, the severity level of
a reported problem if the requested severity differs from the above
definitions. IBM will notify StarMedia Network of all changes of severity
level for a problem impacting End Users.
7.4 Web Site Information for End User Support
IBM will provide and StarMedia Network will use the IBM provided facility
to create a private branded, customized account center environment in
which the following tools will be available to End Users:
o Manage your account: change address, change credit card, change
access plan if applicable, cancel account, obtain billing
information
o Manage your user ID: add user ID, change user ID, cancel user ID,
change password, reset password, obtain user information.
o Manage your IBM provided e-mail, forward your IBM provided e-mail,
change IBM provided e-mail ID, delete IBM provided e-mail, delete
IBM provided e-mail ID.
IBM will also provide StarMedia Network with areas linked from the account
center, described above, containing facilities for downloading StarMedia
Network's Internet access kit, frequently asked questions, help desk
files, network status and access numbers. StarMedia Network will be
responsible for all translations from the English language and will be
required to work with IBM's web development team to create their own
custom environment.
IBM and StarMedia Network agree to jointly establish procedures for the
development and maintenance of the account center environment.
8. Billing Services
IBM shall provide to StarMedia Network administrative billing services to
facilitate the billing of End Users on StarMedia Network's behalf at rates
solely determined by StarMedia Network. The parties agree to modify the
individual responsibilities in each country to conform to with local and
national laws and customs.
IBM shall be responsible for the following:
1. real time credit card verification. Such verification will
include the fee for the first month's charges based
31 March 1999 Page 10 of 17
<PAGE>
on StarMedia Network's rate plan unless otherwise specified by
StarMedia Network;
2. initiating access only upon valid credit verification;
3. monthly billing for the base rate in advance, excess usage
billing in arrears;
4. including all appropriate taxes in the amount passed to the
credit card company to be billed to each End User's credit card. The
credit card company will remit collected taxes and a report
concerning such taxes to StarMedia Network for direct payment by
StarMedia Network to the appropriate governmental agency;
5. following StarMedia Network's approval, termination, and
communication guidelines;
6. recording End User usage;
7. extracting the StarMedia Network End User billing data on a 30
day delay basis and posting the data to an IBM web site branded for
StarMedia Network under IBM's functional design and operational
control;
8. supporting international credit cards and national credit cards
which are co-branded with international credit cards. The support
for national credit cards will be limited to those supported by the
international banking system. IBM will work with StarMedia Network
to develop and maintain the list of accepted credit cards;
9. dispute resolution with the credit card company with StarMedia
Network's assistance;
10. making current billing data for End Users available to Customer
Care; and
11. ensuring that the remitted funds are deposited to the account
specified by StarMedia Network.
IBM will indemnify and hold StarMedia Network harmless for losses arising
out of billing activities that IBM performs at its sole discretion,
without direction from StarMedia Network, under this section.
StarMedia Network shall be responsible for the following:
1. setting the rate plan;
2. providing IBM End User approval, termination, and communications
guidelines;
3. referring End Users to the web site identified in item 7 above
for current billing issues;
4. providing IBM appropriate StarMedia Network branding for the web
site in item 7 above;
5. providing IBM the necessary information to allow credit card
companies to remit funds to StarMedia Network;
6. assumption and collection of bad debt;
7. the direct relationship with each governmental agency;
8. working with IBM, upon request, to resolve issues arising from
End User questions and or issues.
9. Wind-Down Period
Upon receipt of the other party's notice of termination of this Agreement
for convenience or for cause, the party receiving such notice may exercise
the wind-down period described in this section. Notwithstanding the
foregoing, if StarMedia Network is in default of its payment obligations,
and has failed to place all disputed amounts in a standard escrow account,
StarMedia Network shall not be entitled to a wind-down period, as
hereinafter defined.
The wind-down period will commence upon receipt of the other party's
request to exercise this option, and will continue until such date as
StarMedia Network specifies in writing to IBM that the IBM Services are no
longer required to be provided; provided, however, that in no event shall
IBM be required to provide wind-down period support for more than 270 days
following commencement of the wind-down period.
During the wind-down period, IBM will provide the IBM Services in
accordance with the terms and conditions of this Agreement. IBM will
provide mutually agreeable transition assistance to StarMedia Network, and
will cooperate with StarMedia Network and any successor service provider
designated by StarMedia Network to ensure a coordinated orderly transition
for StarMedia Network and StarMedia Network End Users without service
disruptions or service quality issues.
Throughout the wind-down period, this Agreement shall continue in effect
without modification. StarMedia Network shall make any other undisputed
payments as set forth in this Agreement during the Service Wind-Down
Period.
31 March 1999 Page 11 of 17
<PAGE>
StarMedia Network will use reasonable efforts to advise IBM initially and
on a continuing basis of its plan to transfer StarMedia Network End Users
to a successor service provider. Thirty days after the termination date of
this Agreement, StarMedia Network and IBM shall prepare, review with their
respective Project Executives, modify and approve a detailed wind-down
period project plan to be effective over the remaining days of the
wind-down period. To the extent feasible and upon request by StarMedia
Network, during the wind-down period, IBM will transfer all applicable
electronic and/or magnetic information to any successor service provider,
including but not limited to, the registered user names of and billing
information for all users of the StarMedia Network services.
10. Cure Period
In the event of IBM's written notification to you of your failure to
comply with material business or financial terms of this Agreement, IBM
will provide you 30 days to cure such default. This cure period does not
apply to network usage issues, where IBM may have to act immediately to
prevent damage to the network and other customer and users. However, IBM
will take reasonable steps to implement less disruptive protective
measures before exercising termination or service disconnection where
reasonably possible. You agree to provide IBM with 30 days to cure IBM's
default following your written notification.
11. Withdrawal of Services from Marketing
IBM shall provide StarMedia Network 12 months' prior written notice of the
withdrawal of Eligible Services from marketing. In the event of such
written notice by IBM to StarMedia Network, StarMedia Network may
terminate this Agreement without obligation to pay the termination charges
specified in section 1.7 and exercise the wind-down provisions described
in this Exhibit. Such notice of termination shall be made within 90 days
of receipt of the IBM written notice to withdraw an Eligible Service from
marketing.
12. Network Maintenance Windows, Availability, and Reports
12.1 Network Maintenance Windows
The normal network maintenance window for changes is 2:00 AM to 6:00 AM
EST on Sunday. For Brazil, the normal network maintenance window for
changes is 1:00 AM to 5:00 AM local time. Should a change be planned that
extends beyond this designated window, IBM shall make reasonable effort to
provide StarMedia Network 14 days' advance notice of such outage. IBM may
perform scheduled Local Interface Gateway (LIG) maintenance for individual
LIGs between 3:00 am and 5:00 am local time on a single morning per week
other than Sunday. IBM will use reasonable efforts to limit such scheduled
maintenance outside the standard Sunday morning maintenance window to an
assigned day of the week for each city. Although we use reasonable efforts
to notify customers in advance of emergency maintenance outages, we are
unable to provide advance notice to customers in some situations. We use
reasonable effort to schedule extended maintenance and emergency
maintenance during regularly scheduled maintenance windows or at times
which will minimize disruption to customers' network Services usage.
12.2 Backbone Availability
The IBM Latin America network backbone availability shall be [****] (not
including the scheduled maintenance windows) as measured on a monthly
basis in each country in which IBM delivers IBM Services under this
Agreement. IBM will report the availability of the backbone to StarMedia
Network on a monthly basis. If IBM fails to meet this service level
objective in one or more countries, IBM will pay StarMedia Network [****]
percent ([****]%) of the gross charges invoiced by IBM to StarMedia
Network for IBM ICS in the particular month in which the failure occurred
for the countries in which IBM has failed to meet this service level
objective.
12.3 LIG Availability
The IBM Latin America network LIG availability shall be [****]% (not
including the scheduled maintenance windows) as measured on a monthly
basis in each country in which IBM delivers IBM Services under this
31 March 1999 Page 12 of 17
**** Represents material which has been redacted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities Act of
1933, as amended.
<PAGE>
Agreement. IBM will report LIG availability to StarMedia Network on a
monthly basis. If IBM fails to meet this service level objective in one or
more countries, IBM will pay StarMedia Network one percent (1%) of the
gross charges invoiced by IBM to StarMedia Network for IBM Services in the
particular month in which the failure occurred for the countries in which
IBM has failed to meet this service level objective.
12.4 Availability Action Plans
Failure to meet the monthly performance measurements stated above shall
require the development of action plans by IBM which shall include
documentation and implemention plans for any needed corrections to the IBM
Services.
12.5 Reports
IBM shall provide StarMedia Network with quantitative and qualitative
reports for the purpose of measuring and analyzing End User usage
activities and trends.
The reports below shall be generated and distributed to StarMedia Network
on a monthly basis:
o LIG Availability
o Backbone Network Availability
o Help Desk tickets by Severity Level with associated mean time to
repair (MTTR) data
o Average Speed of Answer
o Calls Abandoned Rate
o Billing information.
12.6 Additional Terms
You agree that your sole remedy for our failure to meet service level
objectives is as specified in this Exhibit. You may terminate this
Agreement for IBM's failure to comply with IBM's service level objectives
if you do not accept payment for failure to meet backbone or LIG
availability in any month, by providing notice and a cure period to IBM as
provided in this Agreement.
IBM will not be responsible for our failure to meet service level
objectives because of:
1. major network upgrade and maintenance activities up to four times
per year communicated to you in writing or electronically via the
IBM Global Network with at least 30 days' prior notice;
2. local or international regulatory or governmentally imposed
ethical issues that limit or prevent the ability of IBM to offer or
comply with service level objectives; and
3. your lack of availability to respond to incidents which require
your participation for resolution. Times you are not available may
include times that you have requested IBM not to contact you, such
as times outside your normal business hours.
The following terms amend or otherwise modify the terms in the referenced parts
of the IBM Business Partner Agreement only for your remarketing of IBM Global
Services' network Services. All terms not modifed or amended remain in effect.
13. Customers and End Users
For the purpose of this Agreement, references to "your Customers and their
End Users" in the IBM Global Services' Network Services Attachment for
Remarketing mean StarMedia Network's End Users, because StarMedia Network
is remarketing Services directly to End Users rather than through
intermediary companies.
IBM may use the data it gathers from End Users in the management of the
IBM Global Network and the delivery of the Services described herein.
However, IBM shall not use the data gathered from End Users in any direct
marketing campaign or sell the data. Except as may be necessary for the
management of the IBM
31 March 1999 Page 13 of 17
<PAGE>
Global Network, IBM agrees to use commercally reasonable efforts to locate
and transfer to StarMedia Network all End User data in its possession in
the event of termination or expiration of the Agreement. With the
exception of the End User data gathered by IBM for the purposes of
managing the IBM Global Network, StarMedia shall have the right to use End
User data in any way. StarMedia Network shall indemnify IBM against all
claims arising out of its use of such End User data.
14. General Terms
14.1 Section 2, "Agreement Structure and Contract Duration"
Conflicting Terms, item 1, is modified:
1. a transaction document prevail over those of all the other documents;
14.2 Section 3, "Our Relationship"
Responsibilities
Item 3 is replaced with the following:
3. neither of us will disclose the terms of this Agrement, unless both
of us agree in writing to do so, or unless required by law. However,
either of us may disclose the existence of and purpose of this
Agreement without further permission from the other;
Item 10 is replaced with the following:
10. each of the parties shall be excused from any delay or failure in
its performance hereunder caused by reason of any acts of God,
fires, floods, wars, civil disturbances, sabotage or disputes with
organized labor; provided however, that each party agrees to use
reasonable effort to minimize the extent and the impact of any
inability by it to perform hereunder. The obligations and rights of
the party so excused shall be extended on a day-to-day basis for the
period of time equal to that of the underlying cause of the delay;
Other Responsibilities
Item 1 is replaced with the following:
1. to be responsible for customer satisfaction for all your activities,
and to participate in the development and implementation of customer
satisfaction programs that we jointly determine;
Item 5 is replaced with the following:
5. not to assign or otherwise transfer this Agreement, your rights
under this Agreement, or any of its approvals, or delegate any
duties, unless expressly permitted to do so in this Agreement or as
we otherwise agree, such permission not to be unreasonably withheld.
Otherwise, any attempt to do so is void;
Item 6 is deleted as not applicable. If network services other than IBM
Internet Connection Services are added to this Agreement, both of us will
agree to appropriate processes for order entry.
Item 8 is replaced with the following:
8. to promptly provide us with documents relevant to the Services we
provide to you, which we may reasonably require from you or the End
User when applicable; and
Our Review of Your Compliance with this Agreement
The first two sentences of the first paragraph are replaced with the
following:
31 March 1999 Page 14 of 17
<PAGE>
We may periodically review your compliance with this Agreement. Upon our
request, but no more than once per year, you agree to provide us with
records that are relevant to your performance under the terms of this
Agreement.
The following is added as an additional paragraph between the existing
first and second paragraphs:
Upon your request, but no more than once per year, we agree to provide you
with a billing tape and such other reasonable information to allow you to
verify our charges to you and to your End Users.
14.3 Section 4, "Status Change"
The following sentences replace the last sentence of this section,
beginning "Upon notification ...":
Upon notification of such change, (or in the event of failure to give
notice of such change) IBM may, at its sole discretion, immediately
terminate this Agreement if such change materially and adverse affects our
business relationship or your ability to perform your responsibilities
under this Agreement. IBM will not terminate this Agreement if the only
change to your status is an ownership change due to an initial public
stock offering. You will notify IBM of such a status change when it takes
effect. Advance notification is not required.
14.4 Section 9, "Liability"
The following is added to this Section:
Items for Which You are Liable
Circumstances may arise where, because of a default on your part or other
liability, we are entitled to recover damages from you. In each such
instance, regardless of the basis on which we are entitled to claim
damages from you (including fundamental breach, negligence,
misrepresentation, or other contract or tort claim), you are liable for no
more than:
1. damages for bodily injury (including death) and damage to real
property and tangible personal property;
2. any damages associated with your infringement or violation of IBM's
intellectual property rights, specifically including, but not
limited to, your violation of your obligations with respect to
Programs specified in the section entitled "Programs" in the
Remarketer Terms Attachment and your obligations with respect to
licensed internal code, or your infringement or violation of a third
party's intellectual property rights; and
3. the amount of any other actual direct damages, including any lost
profits associated with the product or Service which were inherent
in the Agreement, up to the greater of US $100,000 (or equivalent in
local currency) or the charges (if recurring or usage, 12 months'
charges apply) for the Service or Program that is the subject of the
claim.
Items for Which You are Not Liable
Under no circumstances are you liable for any of the following:
1. third party claims against us for any losses or damages (other than
those in the first two items listed above); or
2. special, incidental, or indirect damages or for any economic
consequential damages (including lost profits or savings), even if
you are informed of their possibility; however, notwithstanding the
foregoing, you shall be liable for consequential or incidental
damages associated with the damages for which you are liable as set
forth above in items 1 and 2, "Items For Which You are Liable."
14.5 Section 11, "Changes to the Agreement Terms"
An additional sentence is added following the first sentence in this
section:
31 March 1999 Page 15 of 17
<PAGE>
Notwithstanding the foregoing, IBM will give you at least three months'
advance written notice of any changes to the IBM Global Services' Network
Services Exhibit. Further, the sections titled "Eligible Services
Approval," Minimum Revenue Commitment," "Annual Reconciliation," and
"Value-Added Enhancement Description" in the Solution Provider Profile
will not be changed except upon mutual agreement of both of us. Upon your
receipt of notice of an IBM change which materially and adversely affects
your business relationship with IBM, you may terminate this Agreement
without obligation to pay the termination charges specified in section 1.7
and may exercise the wind-down provisions described in the IBM Global
Services' Network Services Exhibit.
14.6 Section 12, "Internal Use Products"
This section is replaced by section 3 in the IBM Global Services' Network
Services Terms Attachment for Remarketing.
14.7 Section 13, "Demonstration, Development and Evaluation Products"
This section is deleted because it does not apply to this engagement.
15. Solution Provider Terms Attachment
15.1 Section 3, "Your Responsibilities to IBM"
Item 1 is replaced with the following:
1. to develop a business plan with us, if we require one. Such plan
will document each of our marketing plans as they apply to our
relationship. We will review the plan, at a minimum, once a year.
Such business plan will include a basic go-to-market strategy
outlining marketing plans, advertising campaigns, market
segmentation and other business items relevant to the attraction of
End Users to StarMedia Network services and IBM Services:
Item 5 is replaced with the following:
5. to provide us, on our request but no more than once a year,
reasonably relevant financial information about your business,
indicating your ability to perform your responsibilities under this
Agreement. Such information shall not be unreasonably withheld;
15.2 Section 4, "Your Responsibilities to End Users"
Item 1 is replaced with the following:
1. assist the End Users to select the appropriate services you provide
to meet the End Users' needs, to achieve productive use of your
solution, and assist IBM as reasonably necessary to communicate with
the End User about IBM Products and Services you remarket under this
Agreement;
Item 2 is deleted because it does not apply to this business engagement.
Item 3 is deleted. Its terms have been included in the revised item 1
above.
Item 4 is replaced with the following:
4. not make representations that IBM is responsible for the Product
configurations and/or Services and their ability to satisfy the End
User's requirements;
Item 5 is replaced with the following:
5. advise the End User of Product installation requirements as provided
by IBM;
31 March 1999 Page 16 of 17
<PAGE>
Item 6 is deleted. Its terms have been included in the revised item 1
above.
Item 7 is deleted because it does not apply to this business engagement.
Item 8 is deleted because it is replaced by more pertinent terms in the
Statement of Work for Custom Solution and the IBM Global Services' Network
Services Exhibit.
Item 9 is deleted because it does not apply to this business engagement.
Item 10 is deleted because it does not apply to this business engagement.
Item 11 is replaced with the following:
11. provide warranty information to the End User. This requirement is
satisfied by your use of license and Service terms provided by IBM
that are included in your license and service terms to your End
Users.
16. Remarketer Terms Attachment
16.1 Section 1, "Our Relationship"
Item 4 is deleted because it does not apply to this business engagement.
16.2 Section 2, "Ordering and Delivery"
This section is deleted because it does not apply to this business
engagement.
16.3 Section 3, "Inventory Adjustments"
This section is deleted because it does not apply to this business
engagement.
16.4 Section 4, "Price, Invoicing, Payment and Taxes"
Failure to Pay Any Amounts Due
Item 1 is replaced with the following:
1. impose a finance charge, up to 1.5 percent per month on the unpaid
balance of your invoice which was not paid during the required
period;
Item 3 is deleted because it does not apply to this business engagement.
16.5 Section 6, "Machine Code"
This section is deleted because it does not apply to this business
engagement.
16.6 Section 16, "Ending the Agreement"
The following sentence is added to the end of the first paragraph of this
section:
Upon either party's termination of this Agreement for convenience, the
wind-down provisions described in section 9, "Wind-Down Period," of the
IBM Global Services' Network Services Exhibit may be exercised.
Additionally, in the event of either party's notice of termination for
cause, the cure provisions in section 10, "Cure Period," in that Exhibit
will apply. StarMedia Network may terminate this Agreement, for
convenience or for cause, entirely or separately for any participating
country listed in the Profile
17. IBM Global Services' Network Services Terms Attachment for Remarketing
31 March 1999 Page 17 of 17
<PAGE>
17.1 Section 2, "Our Relationship"
Item 6 is modified to add the following sentence at the end of the item:
For the purpose of this business engagement, provision of the service
license containing IBM terms to End Users, is sufficient to satisfy this
requirement for End Users;
Item 9 is modified to add the following sentence at the end of the item:
For the purpose of this business engagement, including a statement in your
terms to End Users to the effect that "No third party provider of network
connectivity services is liable to the End User for information and data
the End User transmits using the services," is sufficient to satisfy this
requirement;
17.2 Section 5, "Price, Invoicing, Payment, and Taxes"
Price and Discount Changes
The first paragraph of this subsection is replaced with the following:
Mutually agreed to increases become effective on the first day of a month.
If the effective date as we mutually agree is other than the first day of
a month, the increase applies on the first day of the following month.
31 March 1999 Page 18 of 17
<PAGE>
IBM Business Partner Agreement [IBM LOGO]
Remarketer Terms Attachment
- --------------------------------------------------------------------------------
1. Our Relationship
As our IBM Business Partner, you market to your Customers the Products and
Services (including shrink-wrap Services) we provide to you. These terms
apply to a Business Partner whose method or distribution is under our
remarketer terms, and includes Distributors, Resellers, Solution
Providers, and Systems Integrators.
Responsibilities
Each of us agrees:
1. each of us is free to set its own prices and terms; and
2. neither of us will discuss its Customer prices and terms in the
presence of the other.
Other Responsibilities
You agree to:
1. refund the amount paid for a Product or Service returned to you if
such return is provided for in its warranty or license. You may
return the Product to us for credit at our expense, as we specify in
the operations guide;
2. provide us with sufficient, free and safe access to your facilities,
at a mutually convenient time, for us to fulfill our obligations;
3. retain records, as we specify in the operations guide, of each
Product and Service transaction (for example, a sale or credit) for
three years;
4. provide us with marketing, soles, installation reporting and
inventory information for our Products and Services, as we specify
in the operations guide;
5. when you are approved to market to Remarketers, market Products and
Services which require certification, only to Remarketers who are
certified to market them;
6. comply with all terms regarding Program upgrades;
7. provide a dated sales receipt (or its equivalent, such as an
invoice) as we specify in the operations guide, to your Customers,
before or upon delivery of Products and Services; and
8. report to us any suspected Product defects or safety problems, and
to assist us in tracing and locating Products.
2. Ordering and Delivery
You may order Products and Services from us as we specify in the
operations guide. You agree to order them in sufficient time to count
toward your minimum annual attainment, if applicable.
We will agree to a location to which we will ship. We may establish
criteria for you to maintain at such location (for example, certain
physical characteristics, such as a loading dock), as we specify in the
operations guide.
Upon becoming aware of any discrepancy between cur shipping manifest and
the Products and Services received from us, you agree to notify us
immediately. We will work with you to reconcile any differences.
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<PAGE>
IBM Business Partner Agreement [IBM LOGO]
Remarketer Terms Attachment
- --------------------------------------------------------------------------------
Table of Contents
Section Title Page
1. Our Relationship ............................................ 2
2. Ordering and Delivery ....................................... 2
3. Inventory Adjustments ....................................... 3
4. Price, Invoicing, Payment and Taxes ......................... 3
5. Licensed Internal Code ...................................... 4
6. Machine Code ................................................ 5
7. Programs .................................................... 5
8. Export ...................................................... 5
9. Title ....................................................... 5
10. Risk of Loss ................................................ 6
11. Installation and Warranty ................................... 6
12. Warranty Service ............................................ 7
13. Marketing of Services ....................................... 7
14. Marketing of Financing ...................................... 8
15. Engineering Changes ......................................... 8
16. Ending the Agreement ........................................ 9
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<PAGE>
Although we do not warrant delivery dates, we will use reasonable efforts
to meet your requested delivery dates.
We select the method of transportation and pay associated charges for
Products and Services we ship.
We may not be able to honor your request for modification or cancellation
of an order. We may apply a cancellation charge for orders you cancel
within 10 business days before the order is scheduled to be shipped. If a
cancellation charge applies, we will specify the cancellation percentage
in the Exhibit. We will advise you if the cancellation charge applies to
an order you cancel.
3. Inventory Adjustments
We will specify in your Exhibit the Products and Services to which this
section applies.
Products and Services you return to us for credit must have been acquired
directly from us. You must request and receive approval from us to return
the Products and Services.
Products and Services must be received by us within one month of our
approving their return, unless we specify otherwise to you in writing. We
will issue a credit to you when we accept the returned Products and
Services.
Certain Products may be acquired only as Machines and Programs packaged
together as a solution. These Products must be returned with all their
components intact.
For certain Products and Services you return, a handling charge applies.
We will specify the handling charge percentage in the Exhibit. We
determine your total handling charge by multiplying the inventory
adjustment credit amount for the Products and Services by the handling
charge percent.
You agree to pay transportation and associated charges for Products and
Services you return.
Unless we specify otherwise, returned Products and Services must be in
their unopened and undamaged packages.
You agree to ensure the returned Products and Services are free of any
legal obligations or restrictions that prevent their return. We accept
them only from locations within the country to which we ship Products and
Services.
We will reject any returned Products and Services that do not comply with
these terms.
4. Price, Invoicing, Payment and Taxes
Price and Discount
The price, and discount if we specify one, for each Product and Service
will be made available to you in a communication which we provide to you
in published form or through our electronic information systems or a
combination of both.
The price for each Product and Service is the lower of the price in effect
on the date we receive your order, or the date we ship a product or
"shrink wrap" Service, or the start date of a Service, if it is within six
months of the date we receive your order.
Price and Discount Changes
We may change prices and increase discounts at any time. We may decrease
discounts on one month's written notice.
We will specify in your Exhibit if the following credit terms do not apply
to Products and Services we approve you to market.
BXRT-02-00 11/98 Page 3 of 28
<PAGE>
If we decrease the price or increase the discount for a Product or
Service, you will be eligible to receive a price decrease credit or a
discount increase credit for those you acquired directly from us that are
in your inventory, or in transit, or if the Products date of installation
or Service start date has not occurred. However, Products acquired from us
under a special offering (for example, a promotional price or a special
incentive) may not be eligible for a full credit. You must certify your
inventory to us in writing within one month of the effective date of the
change. The credit is the difference between the price you paid, after any
adjustments, and the new price.
The following terms apply to Programs licensed on a recurring-charge
basis:
We may increase a recurring charge for a Program by giving you three
months' written notice. An increase applies on the first day of the
invoice or charging period on or after the effective date we specify in
the notice.
Invoicing Payment and Taxes
Amounts are due upon receipt of invoice and payable as specified in a
transaction document. You agree to pay accordingly, including any late
payment fee. Details of any late payment fee will be provided upon request
at the time of order and will be included in the notice.
You may use a credit only after we issue it.
If any authority requires us to include in our invoice to you a duty, tax,
levy, or fee which they impose, excluding those based on our net income,
upon any transaction under this Agreement then you agree to pay that
amount.
Failure to Pay Any Amounts Due
If you fail to pay any amounts due in the required period of time, you
agree that we may do one or more of the following, unless precluded by
law:
1. impose a finance charge, as we specify to you in writing, up to the
maximum permitted by law, on the portion which was not paid during
the required period;
2. require payment on or before delivery of Products and Services;
3. repossess any Products and Services for which you have not paid. If
we do so, you agree to pay all expenses associated with repossession
and collection, including reasonable attorneys' fees. You agree to
make the Products and Services available to us at a site that is
mutually convenient;
4. not accept your order until any amounts due are paid;
5. terminate this Agreement; or
6. pursue any other remedy available at law.
We may offset any amounts due you, or designated for your use (for
example, marketing funds or promotional offerings), against amounts due us
or any of our Related Companies.
In addition, if your account with any of our Related Companies becomes
delinquent, we may invoke any of these options when allowable by
applicable law.
5. Licensed Internal Code
Machines (Specific Machines) containing Licensed Internal Code (Code) will
be identified in the Exhibit. We grant the rightful possessor of a
Specific Machine a license to use the Code (or any replacement we provide)
on, or in conjunction with, only the Specific Machine, designated by
serial number, for which the Code is provided. We license the Code to only
one rightful possessor at a time. You agree that you are bound by the
terms of the separate license agreement that we will provide to you.
BXRT-02-00 11/98 Page 4 of 28
<PAGE>
Your Responsibilities
You agree to inform your Customer, and record on the sales receipt, that
the Machine you provide is a Specific Machine using Licensed Internal
Code. The license agreement must be provided to the Customer before the
sale is finalized.
6. Machine Code
For certain Machines we may provide basic input/output system code,
utilities, diagnostics, device drivers, or microcode (collectively called
"Machine Code"). This Machine Code is licensed to the End User under the
terms of the agreement provided with it. You agree to ensure the End User
is provided such agreement.
7. Programs
You agree to ensure the End User has signed the license agreement for a
Program requiring a signature, as we specify in the Exhibit, before such
Program is provided to the End User, and to provide any required
documentation to us. All other Programs are licensed under the terms of
the agreement provided with them. You agree, where applicable, to provide
the Program license to the End User before such Program is provided to the
End User.
We will ship the media and documentation to you or to the End User, as
specified in your order transaction document.
Programs licensed to you on a recurring-charge basis are licensed for the
period indicated in our invoice. You may market such Programs only on the
same basis as licensed to you. You may not charge an End User a one-time
charge for a Program you license from us on a recurring-charge basis.
However, you may charge the End User whatever amount you wish for the
recurring-charge.
Program Services
Program Services are described in the Program's license agreement. You are
responsible to provide your Customers, who are licensed for a Program, the
Program Services we make available to you.
If the End User agrees in writing, you may:
1. delegate this responsibility to another IBM Business Partner who is
approved to market the Program, or
2. provide an enhanced version of this support through the applicable
IBM Service you market to the End User.
If you delegate your support responsibilities to another IBM Business
Partner, you retain customer satisfaction responsibility. However, if you
market our applicable Services to the End User, we assume customer
satisfaction responsibility for such support.
8. Export
You may actively market Products and Services only within the geographic
scope specified in this Agreement. You may not market outside this scope,
and you agree not to use anyone else to do so.
If a Customer acquires a Product for export, our responsibilities, if any,
under this Agreement no longer apply to that Product unless the Product's
warranty or license terms state otherwise. You agree to use your best
efforts to ensure that your Customer complies with all export laws and
regulations, including those of the United States and the country
specified in the Governing Law Section of this Agreement, and any laws and
regulations of the country in which the Product is imported or exported.
Before your sale of such Product, you agree to prepare a support plan for
it and obtain your Customer's agreement to that plan. Within one month of
sale, you agree to provide us with the Customers name and address, Machine
type/model, and serial number if applicable, date of sale, and destination
country.
We exclude these Products from:
BXRT-02-00 11/98 Page 5 of 28
<PAGE>
1. any of your attainment toward your objectives; and
2. qualification for applicable promotional offerings and marketing
funds.
We may also reduce future supply allocations to you by the number of
exported Products.
9. Title
When you order a Machine, we transfer title to you upon payment of all
amounts due.
Any prior transfer to you of title to a Machine reverts back to IBM when
it is accepted by us as a returned Machine.
We do not transfer a Program's title.
10. Risk of Loss
We bear the risk of loss of, or damage to, a Product or Service up to and
including its initial delivery from us to you or, if you request and we
agree, delivery from us to your Customer. Thereafter, you assume the risk.
11. Installation and Warranty
We will ensure that Machines we install are free from defects in materials
and workmanship and conform to specifications, We provide instructions to
enable the setoup of Customer-Set-Up Machines. We are not responsible for
the installation of Programs or non-IBM Machines, We do, however, preload
Programs onto certain Machines. We provide a copy of our applicable
warranty statement to you. You agree to provide it to the End User for
review before the sale is finalized, unless we specify otherwise.
We calculate the expiration date of an IBM Machine's warranty period from
the Machine's Date of Installation. Warranty terms for Programs are
described in the Programs' license terms.
We provide non-IBM Products WITHOUT WARRANTIES OF ANY KIND, unless we
specify otherwise. However, non-IBM manufacturers, suppliers, or
publishers may provide their own warranties to you.
For non-IBM Products we approve you to market, you agree to inform your
Customer in writing 1) that the Products are non-IBM, 2) the manufacturer
or supplier who is responsible for warranty (if any), and 3) of the
procedure to obtain any warranty service.
Date of Installation for a Machine We are Responsible to install
The Date of Installation for a Machine we are responsible to install is
the business day after the day 1) we install it or, 2) it is made
available for installation, if you (or the End User) defer installation.
Otherwise (for example, if others install or break its warranty seal), it
is the day we deliver the Machine to you (or the End User). In such event,
we reserve the right to inspect the Machine to ensure its qualification
for warranty entitlement.
The Date at Installation for a Customer-Set-Up Machine
The Date of Installation for a Customer-Set Up Machine is the date the
Machine is installed which you or your Remarketer, if applicable, record
on the End Users sales receipt, You must also notify us of this date upon
our request.
BXRT-02-00 11/98 Page 6 of 28
<PAGE>
Installation of Machine Features, Conversions, and Upgrades
We sell features, conversions and upgrades for installation on Machines,
and, in certain instances, only for installation on a designated, serial
numbered Machine. Many of these transactions involve the removal of parts
and their return to us. As applicable, you represent that you have the
permission from the owner and any lien holders to 1) install features,
conversions and upgrades and 2) transfer the ownership and possession of
removed parts (which become our property) to us. You further represent
that all removed parts are genuine, and unaltered, and free from defects
in materials and workmanship and conform to specifications. A part that
replaces a removed part will assume the warranty and maintenance Service
status of the replaced part. You agree to allow us to install the feature,
conversion, or upgrade within 30 days of its delivery. Otherwise, we may
terminate the transaction and you must return the feature, conversion, or
upgrade to us at your expense.
12. Warranty Service
We will specify in the Exhibit whether you or we are responsible to
provide Warranty Service for a Machine.
When we are responsible for providing Warranty Service for Machines, you
are not authorized to provide such Service, unless we specify otherwise in
the Exhibit.
When you are responsible for providing Warranty Service, you agree to do
so according to the terms we specify in the Warranty Service Attachment.
13. Marketing of Services
The following are the conditions under which you may market Services:
1. if you marketed a Product to the End User, you may market the
Services, specified in the Exhibit; or
2. regardless of whether you marketed a Product to the End User you may
market the Services we specify in your Profile.
If you are an IBM Distributor the following paragraph applies:
The following are the conditions under which you may market Services:
1. If your Remarketer marketed a Product to the End User, you may
market the Services, specified in the Exhibit, to your Remarketer
only for the Remarketer's marketing to such End User; and
2. regardless of whether your Remarketer marketed a Product to the End
User you may market the Services we specify in your Profile to your
Remarketer, who may market such Services.
You may market Services on eligible non-IBM Products regardless of whether
you marketed a Machine or Program to the End User.
Marketing of Services for a Fee
The terms of this subsection apply when we perform the Services to the End
User at prices we set and under the terms of our Service agreement, signed
by the End User. We pay you a fee for marketing such Services.
You will receive a fee for marketing eligible Services when 1) you
identify the opportunity and perform the marketing activities, 2) you
provide us with the order and any required documents signed by the End
User, and 3) a standard Statement of Work is used and there are no
changes, and no marketing assistance from us is required.
BXRT-02-00 11/98 Page 7 of 28
<PAGE>
Alternatively, you will receive a fee for a lead for eligible Services
when it 1) is submitted on the form we provide to you, 2) is for an
opportunity which is not known to us, and 3) results in the End User
ordering the Service from us within six months from the date we receive
the lead from you.
We will not pay you the fee if 1) the machine or program is already under
the applicable Service, 2) we have an agreement with the End User to place
the machine or program under the applicable Service, or 3) the Service was
terminated by the End User within the last six months.
If the Service is terminated within three months of the date payment from
the End User was due us, you agree to reimburse us for any associated
payments we made to you. The reimbursement may be prorated if the Service
is on a recurring charge basis.
We periodically reconcile amounts we paid you to amounts you actually
earned. We may deduct amounts due us from future payments we make to you,
or ask you to pay amounts due us. Each of us agrees to promptly pay the
other any amounts due.
Remarketing of Services
We provide terms in an applicable Service Attachment governing your
remarketing of eligible Services the End User acquires from you and which
we perform under the terms of the IBM Service agreement with the End User.
Shrink-wrap Services are performed under the terms or the agreement
provided with them. If the terms of the agreement are not visible on the
shrink-wrap package, you agree to provide (or, if applicable, request your
Remarketer to provide) the Services terms to the End User before such
Services are acquired by the End User.
Services We Perform As Your Subcontractor
If approved on your Profile, we will provide terms in an applicable
Service Attachment governing our provision of the Services we perform as
your subcontractor. Such Services are those an End User purchases from you
under the terms of your service agreement.
14. Marketing of Financing
If we approve you on your Profile, you may market our Financing Services
for Products and Services and any associated products and services you
market to the End User. If you market our Financing Services, we will pay
you a fee as we specify to you in your Exhibit.
We provide Financing Services to the End User under the terms of our
applicable agreements signed by the End User. You agree, that for the
items that will be financed, 1) you will promptly provide us any required
documents including invoices, with serial numbers, if applicable, 2) the
supplier will transfer clear title to us, and 3) you will not transfer to
us any obligations under your agreements with the End User.
We will make payment for the items to be financed when the End User has
initiated financing and acknowledged acceptance of the items being
financed. Payment will be made to you, or the supplier, as appropriate.
15. Engineering Changes
You agree to allow us to install mandatory engineering changes (such as
those required for safety) on all Machines in your inventory, and to use
your best efforts to enable us to install such engineering changes on your
Customers' Machines. Mandatory engineering changes are installed at our
expense and any removed parts become our property.
During the warranty period, we manage and install engineering changes at:
1. your or your Customer's location for Machines for which we provide
Warranty Service; and
2. your location for other Machines.
BXRT-02-00 11/98 Page 8 of 28
<PAGE>
Alternatively, we may provide you with the parts (at no charge) and
instructions to do the installation yourself. We will reimburse you for
your labor as we specify.
16. Ending the Agreement
Regardless of the contract duration specified in the Profile, or any
renewal period in effect, either of us may terminate this Agreement, with
or without cause, on three months' written notice. if, under applicable
law, a longer period is mandatory, then the notice period is the minimum
notice period allowable.
If we terminate for cause (such as you not meeting your minimum annual
attainment), we may, at our discretion, allow you a reasonable opportunity
to cure. If you fail to do so, the date of termination is that specified
in the notice.
However, if either party breaches a material term of the Agreement, the
other party may terminate the Agreement on written notice. Examples of
such breach by you are: if you do not maintain customer satisfaction; if
you do not comply with the terms of a transaction document; if you
repudiate this Agreement; or if you make any material misrepresentations
to us. You agree that our only obligation is to provide the notice called
for in this section and we are not liable for any claims or losses if we
do so.
At the end of this Agreement, you agree to:
1. pay for or return to us, at our discretion, any Products or
shrink-wrap Services for which you have not paid; and
2. allow us, at our discretion, to acquire any that are in your
possession or control, at the price you paid us, less any credits
issued to you.
Products and shrink-wrap Services to be returned must be in their unopened
and undamaged packages and in your inventory (or in transit from us) on
the day this Agreement ends. We will inspect them, and reserve the right
of rejection. You agree to pay all the shipping charges.
At the end of this Agreement, each of us agrees to immediately settle any
accounts with the other. We may offset any amounts due you against amounts
due us, or any of our Related Companies as allowable under applicable law.
You agree that if we permit you to perform certain activities after this
Agreement ends, you will do so under the terms of this Agreement.
BXRT-02-00 11/98 Page 9 of 28
<PAGE>
COUNTRY UNIQUE TERMS FOR THE REMARKETER TERMS ATTACHMENT
The following modify the terms of this Attachment in the specific countries, as
noted.
ASIA PACIFIC
The following terms apply to all countries in Asia Pacific:
Section 4- Price, Invoicing, Payment and Taxes
Add the following term as the last paragraph in the subsection entitled
"Invoicing, Payment and Taxes":
If you are claiming any income or transaction tax exemption relating to the
Products and Services you acquired from us or that we provided, then you agree
to provide us with all appropriate documentation.
The following terms apply to the specific countries in Asia Pacific, as noted:
ASEAN COUNTRIES
The following terms apply to all the Asean countries:
Section 2- Ordering and Delivery
The following replaces the fifth paragraph:
You or your carrier will take delivery at a location we specify.
Section 10- Risk of loss
The following replaces the first sentence in this Section:
We bear the risk of loss of, or damage to, a Product until its initial delivery
from us to you or your agent or carrier.
AUSTRALIA
Section 4- Price Invoicing Payment and Taxes
Add the following as the third paragraph of the subsection entitled "Invoicing,
Payment and Taxes":
You agree to pay importation cost recovery charges where applicable. Such
charges include freight, insurance, duties and taxes.
INDOCHINA COUNTRIES
The following terms apply to all the Indochina countries (Cambodia, Laos,
Myanmar and Vietnam):
Section 4- Price, Invoicing, Payment and Taxes
The following is added as the last sentence in the first paragraph:
All products are provided F.O.B. at the designated shipping location unless we
specify otherwise in the operations guide.
The following replaces the first sentence in the subsection entitled "Invoicing,
Payment and Taxes":
BXRT-02-00 11/98 Page 10 of 28
<PAGE>
You agree to pay in full all prices and charges in accordance with our invoice,
in United States Dollars, by irrevocable confirmed letters of credit in favor of
IBM, drawn on a bank acceptable to IBM, at least 45 days prior to our shipment
to you, or by telegraphic transfer. Mode of payment will be determined at IBM's
discretion.
Section 9- Title
The following replaces the first sentence:
When you order a Machine, we transfer title to you over international waters,
prior to entry into the port of importation in (country name).
The following terms apply to the specific country in Asia Pacific, as noted:
JAPAN
Section 4- Price, Invoicing, Payment and Taxes
Delete Item 1 in the subsection entitled "Failure To Pay Any Amounts Due".
Section 7- Programs
The following follows the first sentence of the first paragraph of this Section:
Alternatively, if we specify approval in your Profile, we authorize you to sign
the applicable license agreement on behalf of IBM under the following
conditions:
1. Agreements
a. The agreement that you are authorized to sign on behalf of IBM will
be the IBM designated agreement entitled "Terms and Conditions for
IBM Licensed Programs and IBM Internal Code" (called "IBM Licensed
Terms and Conditions").
b. If you acquire prior written approval from us, you may use your own
contract document with the IBM License Terms and Conditions
incorporated into it in lieu of the IBM License Terms and
Conditions.
c. You agree to fill in any details regarding the program on the IBM
License Terms and Conditions in accordance with IBM's guidance.
2. Scope of Authorization
a. Your authorization is limited to signing the IBM License Terms and
Conditions with the End User on behalf of IBM. You have no authority
or rights to add, amend, modify or delete any of its terms. You will
be liable for any damages resulting from your addition, amendment,
modification or deletion of its terms.
b. You agree to obtain the End User's signature on the IBM License
Terms and Conditions prior to ordering an applicable Program or a
Machine containing Licensed Internal Code (called Specific Machine)
from IBM.
c. Unless we give you prior written authorization, you are not
authorized to delegate, assign or transfer your authority to sign
the IBM License Terms and Conditions on behalf of IBM to any third
party.
d. Your authorization to sign on behalf of IBM is limited to the IBM
License Terms and Conditions and IBM does not authorize any rights
regarding system integration, software development, outsourcing nor
procurement of machines or equipment.
3. Custody of Agreements
a. You agree to keep the applicable IBM license agreements or your
contract documents that are signed by End Users, and present or
submit them to us immediately on our request.
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<PAGE>
Section 11- Installation and Warranty
The following replaces the first sentence of the subsection entitled "Date of
Installation for a Machine We Are Responsible To Install":
The Date of Installation for a Machine we are responsible to install is 1) the
expiration date of the inspection period (the inspection period for a Machine
commences on the day following the day IBM installs it and will expire on the
tenth day), or 2) the business day after the day it is made available for
installation, if you or the End User defer installation,
Section 16- Ending the Agreement
Delete the following from the next to last paragraph in this Section:
or any of our Related Companies.
NEW ZEALAND
Section 4- Price, Invoicing, Payment and Taxes
The following term replaces Item 1 in the subsection entitled "Failure to Pay
Any Amounts Due":
Impose a penalty interest, as we specify in writing, up to the maximum permitted
by law, on the portion that was not paid during the required period:
PEOPLE'S REPUBLIC OF CHINA
Section 4 Price, Invoicing, Payment and Taxes
The following replaces the first sentence of the third paragraph of the
subsection entitled "Price and Discount Changes":
If we decrease the price or increase the discount for a Product or Service, you
will be eligible to receive a price decrease credit or discount increase credit
for those you acquired directly from us during the two months prior to the
effective date of the change.
The following are additional terms in the subsection entitled "Invoicing,
Payment and Taxes":
You will pay by Letter of Credit for each shipment, or other form of payment as
instructed by us.
If the government imposes a duty, tax (other than an income tax) or fee on the
Agreement or any Product or Service provided under it, not otherwise provided
for in our prices and charges, you agree to pay it when we invoice you.
Letter of Credit for Each Shipment
Payment in full for each Product and Service and for other charges referred to
herein will be made in United States dollars through an irrevocable and
confirmed Letter of Credit which shall be in a form acceptable to us. You agree
to open such an irrevocable Letter of Credit no later than 14 days prior to our
scheduled shipment date on the basis of a pro forma invoice indicating the
current price of the Product and Service and other estimated charges. Such
Letter of Credit shall expire no earlier than 30 days after the latest shipment
date on which the Products and Services are delivered to your designated
location as agreed to by us. You further agree to adjust the amount of such
Letter of Credit on the basis of shipment and other charges referred to herein.
The irrevocable Letter of Credit shall be negotiable by us upon submission to
the bank of the related commercial invoices and the shipping documents specified
in the credit, evidencing shipment.
Any fees, however designated, levied by a bank to open or amend a Letter of
Credit, or effect payment in United States dollars by the opening bank, shall be
borne by you. Any fees, however designated, levied by the advising or collecting
bank shall be borne by the IBM World Trade Corporation.
Other invoices for adjustments, additional charges, taxes, etc., if any, payable
or reimbursable by you to us under this Agreement, may be issued subsequent to
delivery to you and shall be payable in full in United States dollars within
thirty days of the date of the invoice.
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<PAGE>
Failure by you to establish a Letter of Credit in accordance with the provisions
of this Section will entitle us to cancel this Agreement without liability on
our part.
Section 9- Title
The following replaces the first paragraph:
We transfer title to a Product to you at the point of entry into the People's
Republic of China unless we specify otherwise in the Exhibit.
EMEA
The following terms apply to all countries in EMEA:
Section 1- Our Relationship
In the subsection entitled "Other Responsibilities" the following replaces Item
5:
5. when you are approved to market to Remarketers selective distribution
Products and Services, market them only to Remarketers that IBM specifically
approves to market such Products and Services;
Section 4- Price, Invoicing, Payment and Taxes
In the subsection entitled "Price and Discount", in the second paragraph,
replace "six months" with "three months"
In the subsection entitled "Price and Discount Changes", paragraph four which
applies to Programs licensed on a recurring charge, is not applicable.
The following replaces the first paragraph in the subsection entitled "Invoicing
Payment and Taxes":
Amounts are due upon receipt of invoice and payable in accordance with the
payment option you selected. Details of any payment options will be specified in
the operations guide. You agree to pay accordingly, including any late payment
fee.
In the subsection entitled "Failure to Pay Any Amounts Due":
In item 1, replace the words "in writing" with "in the operations guide"
The following replaces the second paragraph:
We may offset any amounts due you, or designated for your use (for example,
marketing funds or promotional offerings), against any amounts due us.
The third paragraph is not applicable.
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<PAGE>
Section 7- Programs
The following replaces the first sentence in the first paragraph:
You agree to ensure the End User and you have signed the license agreement for a
Program requiring a signature, as we specify in the Exhibit, before such Program
is provided to the End User, and to provide any required documentation to us.
The third paragraph is not applicable.
Section 11- Installation and Warranty
The following replaces the first sentence of the second paragraph:
We calculate the expiration date of an IBM Machine's warranty period from the
Machine's Date of Installation for Machines we install and from the Warranty
Start Date for Customer-Set-Up Machines.
Change the title of the subsection entitled Date of Installation for a Customer
Set-Up-Machine" to "Warranty Start Date For a Customer Set-Up-Machine" and
replace the first sentence in the subsection with the following:
The Warranty Start Date is the date of first purchase by an End User, which you
or your Remarketer, if applicable, record on the End Users sales receipt.
Section 13- Marketing of Services
The following replaces the first paragraph:
You may market the Services we specify in your applicable Profile.
Paragraphs two and three are not applicable.
Add the following as the first paragraph in the subsection entitled "Marketing
of Services for a Fee":
Refer to your applicable Profile to determine whether the terms of this
subsection apply.
The subsection entitled "Services We Perform As Your Subcontractor" is not
applicable.
Section 14- Marketing of Financing
The following two paragraphs replace the first paragraph:
Refer to your applicable Profile to determine whether the terms of this section
apply.
If we approve you on your Profile, you may market our Financing Services, as we
specify in the Exhibit, for Products and Services and any associated products
and services you market to the End User.
Section 15- Engineering Changes
The following replaces the last sentence in this Section:
We will reimburse you for your labor as we specify in the operations guide.
Section 16- Ending the Agreement
The following replaces the second sentence in the sixth paragraph:
We may offset any amounts due you against amounts due us.
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<PAGE>
The following terms apply to the countries in EMEA, as noted:
Section 8- Export
The following terms apply to all countries in Western Europe:
The following replaces the entire Section:
You may actively market Products and Services only within Western Europe. You
may market Programs as permitted by their licensing terms. You may not market
outside this scope, and you agree not to use anyone else to do so. Your
responsibilities under this Agreement apply wherever you provide Products and
Services in Western Europe.
If a Customer acquires a Product for export outside Western Europe, our
responsibilities, if any, under this Agreement no longer apply to that Product
unless the Product's warranty or license terms state otherwise. Before your sale
of such Product, you agree to prepare a support plan for it and obtain your
Customer's agreement to that plan. Within one month of sale, you agree to
provide us with the Customer's name and address, Machine type/model, and serial
number if applicable, date of sale, and destination country.
We exclude such Products from:
1. any of your attainment toward your objectives; and
2. qualification for applicable promotional offerings and marketing funds.
We may also reduce future supply allocations to you by the number of exported
Products. In all cases, you agree to use your best efforts to ensure that your
Customer complies with all export laws and regulations, including those or the
United States and the country specified in the Governing Law Section of this
Agreement, and any laws and regulations of the country in which the Product is
imported or exported.
The following terms apply to the Republic of South Africa. Namibia, Swaziland
and Lesotho.
The following replaces the entire Section:
You may actively market Products and Services only within the Republic of South
Africa, Namibia, Swaziland and Lesotho. You may market Programs as permitted by
their licensing terms. You may not market outside this scope, and you agree not
to use anyone else to do so. Your responsibilities under this Agreement apply
wherever you provide Products and Services in such countries.
If a Customer acquires a Product for export outside such countries, our
responsibilities, if any, under this Agreement no longer apply to that Product
unless the Product's warranty or license terms state otherwise. Before your sale
of such Product, you agree to prepare a support plan for it and obtain your
customers agreement to that plan. Within one month of sale, you agree to provide
us with the Customer's name and address, Machine type/model, and serial number
if applicable, date of sale, and destination country.
We exclude such Products from:
1. any of your attainment toward your objectives; and
2. qualification for applicable promotional offerings and marketing funds.
We may also reduce future supply allocations to you by the number of exported
Products. in all cases, you agree to use your best efforts to ensure that your
Customer complies with all export laws and regulations, including those of the
United States and the country specified in the Governing Law Section of this
Agreement and any laws and regulations of the country in which the Product is
imported or exported.
The following terms apply to all other countries in EMEA:
The following replaces the first paragraph:
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You may actively market Products and Services only within (country name). You
may market Programs as permitted by their licensing terms. You may not market
outside this scope, and you agree not to use anyone else to do so.
The following terms apply to the specific country, or group of countries, in
EMEA, us noted:
AFRICAN COUNTRIES
The following terms apply to all countries in Africa:
Section 3- Inventory Adjustments
The terms of this Section are not applicable.
The following terms apply to the following African countries:
Algeria, Benin, Burkina Faso, Cameroon, Cape Verde, Central African Republic,
Chad, Congo, Djibouti, D.R. of Congo, Equatorial Guinea, Gabon, Gambia, Guinea,
Guinee Bissau, Ivory Coast, Mali, Mauritania, Morocco, Niger, Senegal, Togo,
and Tunisia.
Section 2- Ordering and Delivery
The following replaces the second paragraph:
We will deliver the Products and Services in France to the forwarding agent you
designate in accordance with the 1990 FCA Incoterm.
The fifth paragraph (starting with "We select...") is not applicable.
Section 9- Title
The following replaces the first paragraph in this Section:
When you order a Machine, we transfer title to you upon delivery in France to
your forwarding agent.
Section 10- Risk of Loss
The following replaces the entire section:
We bear risk of loss, or damage to, a Product or Service until its initial
delivery from us to your forwarding agent in France or, if you request and we
agree, delivery from us to your Customer in France. Thereafter, you assume the
risk.
AUSTRIA
Section 9- Title
The following replaces the first paragraph in this Section:
We retain title to Machines until full payment has been received. You agree to
assign your claim against your Customer in the event you sell Products before we
receive full payment.
Section 11- Installation and Warranty
The following replaces the fourth paragraph:
For non-IBM Products we provide to you, the same warranties apply as for IBM
Products, unless we specify otherwise in a transaction document Warranty Service
for non-IBM Products may be performed by other than IBM personnel.
CENTRAL AFRICA
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<PAGE>
The following terms apply to all countries in Central Africa:
Section 2- Ordering and Delivery
The following replaces the second paragraph:
Products ordered will be delivered Free Carrier at Schipol Airport, Amsterdam or
any other exporting point as IBM may direct from time to time.
The following replaces the fifth paragraph;
You pay all transportation and associated charges from the IBM shipping
location.
Section 4- Price, Invoicing, Payment and Taxes:
The following replaces the first sentence in the subsection entitled "Invoicing,
Payment and Taxes";
Unless otherwise agreed to by us in writing, payment for each order shall be due
and payable to our account in New York, U.S.A. (or another such account as is
designated by IBM in writing) by means of a confirmed and irrevocable Letter of
Credit, in a form acceptable to us, to be issued prior to delivery to Free
Carrier in accordance with INCOTERMS 1980 of the International Chamber of
Commerce.
Add the following as the second paragraph:
All payments by either party to the other under any provisions of this Agreement
shall be made in United States dollars.
Section 9- Title
The following replaces the first paragraph:
When you order a Machine, we transfer title to you upon payment of all amounts
due, or upon delivery, whichever occurs later.
CENTRAL EUROPE and RUSSIA
The following terms apply to all countries in Central Europe and Russia except
Czech Republic:
Section 2- Ordering and Delivery
The following two paragraphs replace the second paragraph:
The Products are delivered to the local country platform under standard delivery
terms. In this connection, if the Agreement refers to shipment to you or your
End User, it is understood as the designation of the party entitled to receive
the Products at the local country platform. In specific situations we may agree
to deliver Products to your platform. You will act as importer and pay customs
duties.
In specific situations we may agree to deliver Products to a different location,
provided you comply with the relevant provisions set forth in the operations
guide or as we otherwise specify to you in writing.
Add the following as the last sentence in the fifth paragraph:
However, you agree to pay handing and transportation charges when we specify.
Section 3- inventory Adjustments
The following replaces the second sentence in the third paragraph:
We will issue a credit or refund the price you paid, to your account at our
discretion.
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<PAGE>
Section 4- Price, Invoicing, Payment and Taxes
In the subsection entitled "Invoicing, Payment and Taxes" the following replaces
the first paragraph:
You agree to pay in accordance with the payment terms specified on the invoice
or as otherwise agreed and communicated by IBM, including any late payment fee.
Details of payment terms are specified in the operations guide.
Add the following at the end of the second paragraph:
However, IBM reserves the right to make the respective payment at its election
in U.S. dollars or in local currency, based on the official exchange rate on the
date of payment, to your account in the country in which you are located instead
of crediting your account with IBM.
Section 8- Export
The following replaces the entire Section:
You may actively market Products and Services only within your applicable
Territory. You may market Programs as permitted by their licensing terms. You
may not market outside this scope, and you agree not to use anyone else to do
so. Your responsibilities under this Agreement apply whenever you provide
Products and Services in your applicable Territory.
If a Customer acquires a Product for export, our responsibilities, if any, under
this Agreement no longer apply to that Product unless the Product's warranty or
license terms or our own separate agreement with this Customer state otherwise.
Before your sale of such Product, you agree to prepare a support plan for it and
obtain your Customers agreement to that plan. Within one month of sale, you
agree to provide us with the Customer's name and address, Machine type/model and
serial number if applicable, date of sale, and destination country.
Unless such export is otherwise approved in our own separate agreement with this
Customer we exclude Products exported outside your approved Territory from any
of your attainment objectives and qualification for applicable promotional
offerings and marketing funds.
In all cases, you agree to use your best efforts to ensure that your Customer
complies with all export laws and regulations including those of the United
States and the original county of export, and any laws and regulations of the
country in which the Product is imported or exported.
Section 9- Title
The following replaces the first sentence in the first paragraph:
When you order a Machine, title passes to you upon shipment provided IBM has
received payment in full. Otherwise, title passes when IBM receives payment in
full.
Section 13- Marketing of Services
Add the following as the first paragraph of the Section:
Where IBM Services are available, this Section is assigned to the local IBM
Company, listed in the operations guide. Local law and local jurisdiction will
apply to such transactions. Payment terms will be included in the operations
guide. All other provisions of the Agreement apply.
DENMARK
Section 9- Title
The following replaces the first sentence in this Section:
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<PAGE>
When you order a Machine, we transfer title to you on the date you receive
delivery from IBM.
EGYPT
Section 3- Inventory Adjustments
The terms of this Section are not applicable.
Section 4- Price, Invoicing, Payment and Taxes
The following are additional terms in the subsection entitled "Invoicing,
Payment and Taxes":
You will pay by Letter of Credit for each shipment, or other form of payment as
instructed by us.
If the government imposes a duty, tax (other than an income tax), or fee on the
Agreement or any Product or Service provided under it, not otherwise provided
for in our prices and charges, you agree to pay it when we invoice you.
Letter of Credit for Each Shipment
Payment in full for each Product and Service and for other charges referred to
herein will be made in United States dollars through an irrevocable and
confirmed Letter of Credit which shall be in a form acceptable to us. You agree
to open such an irrevocable Letter of Credit no later than 14 days prior to our
scheduled shipment date on the basis of a pro forma invoice indicating the
current price of the Product and Services and other estimated charges. Such
Letter of Credit shall expire no earlier than 30 days after the latest shipment
date on which they are delivered to your designated location as agreed to by us.
You further agree to adjust the amount of such Letter of Credit on the basis of
shipment and other charges referred to herein. The irrevocable Letter of Credit
shall be negotiable by us upon submission to the bank of the related commercial
invoices and the shipping documents specified in the credit, evidencing
shipment.
Any fees, however designated, levied by a bank to open or amend a Letter of
Credit, or effect payment in United States dollars by the opening bank, shall be
borne by you. Any fees, however designated, levied by the advising or collecting
bank shall be borne by the IBM World Trade Corporation.
Other invoices for adjustments, additional charges, taxes, etc., if any, payable
or reimbursable by you to us under this Agreement, may be issued subsequent to
delivery to you and shall be payable in full in United States dollars within
thirty days of the date of the invoice.
Failure by you to establish a Letter of Credit in accordance with the provisions
of this Section will entitle us to cancel this Agreement without liability on
our part.
Section 9- Title
The following replaces the first sentence in this Section:
When you order a Machine, we transfer title to you when the Machine is shipped.
ESTONIA
Section 9- Title
The following replaces the first sentence in this Section:
When you order a Machine, we transfer title to you on the date you receive
delivery from IBM.
FINLAND
Section 9- Title
The following replaces the first sentence in this Section:
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<PAGE>
When you order a Machine, we transfer title to you on the date of delivery from
IBM.
GERMANY
Section 9- Title
The following replaces the first paragraph in this Section:
We retain title to Machines until full payment has been received. You agree to
assign your claim against your Customer in the event you sell Products before we
receive full payment.
Section 11- Installation and Warranty
Add the following as the first paragraph:
We provide warranty to you only by repair or replacement. If we are unable to do
so in reasonable time, you may request either a partial refund equal to the
reduced value of the unrepaired Machine or return the Machine and receive a full
refund of the amount paid.
The following replaces the terms in the fourth paragraph:
For non-IBM Products we provide to you, the same warranties apply as for IBM
Products, unless we specify otherwise in a transaction document. Warranty
Service for non-IBM Products may be performed by other than IBM personnel.
Section 13- Marketing of Services
The following replaces the first sentence in the fifth paragraph in the
subsection entitled "Marketing of Services for a Fee":
If the Service is terminated within three months of the date the payment from
the End User was due us and IBM is not responsible for the termination, you
agree to reimburse us for any payments we made to you associated with it.
ITALY
Section 1- Our Relationship
The following replaces the second sentence in Item 1 in the subsection entitled
"Other Responsibilities":
You may return the Products to us at our expense, as we specify in the
operations guide. We will issue credit to you after we accept the returned
Products and we receive your invoice for them.
Section 3- Inventory Adjustments
The following replaces the second sentence in paragraph three:
We will issue a credit to you after we accept the returned Products and we
receive your invoice for the returned Products.
Section 4- Price, Invoicing, Payment and Taxes
Add the following at the end of the first paragraph in the subsection entitled
"Invoicing, Payment and Taxes":
Such fees will be apportioned to the number of days of the delay. We may
transfer the credit to a factoring company. If we do so we will advise you in
writing.
Section 9- Title
The following replaces the first sentence in this Section:
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<PAGE>
When you order a Machine, we transfer title to you on delivery from IBM to you.
LATVIA
Section 9- Title
The following replaces the first sentence in this Section:
When you order a Machine, we transfer title to you on the date you receive
delivery from IBM.
LITHUANIA
Section 9- Title
The following replaces the first sentence in this Section:
When you order a Machine, we transfer title to you on the date you receive
delivery from IBM.
NAMIBIA
Section 4- Price Invoicing, Payment and Taxes
Add the following as the last paragraph of the subsection entitled "Price and
Discount":
The price of Index-Linked Machines shall be increased or decreased by a currency
adjustment which is equal to the price specified in the order, adjusted, if
applicable, in terms of any price changes, multiplied by a percentage specified
in the Order (Index-Link Percentage), multiplied by (Closing index minus Base
index) divided by the Base Index.
Definitions
Base Index: means the index on which IBM's current Product prices are based, and
is specified on the invoice and upon request from IBM.
Closing Index: means the Index ruling on the Business Day prior to Shipment and
is specified on the invoice and upon request from IBM.
Index: means the South African Rand, equivalent to one European Currency Unit
(ECU), at any time, and any other currency unit as specified by IBM in the
Order.
Index-Linked Machine: means any Machine so designated by IBM, which is subject
to a currency adjustment.
NORWAY
Section 9- Title
The following replaces the first sentence in this Section:
When you order a Machine, we transfer title to you on the date you receive
delivery from IBM.
SOUTH AFRICA
Section 4- Price, Invoicing, Payment and Taxes.
Add the following as the last paragraph of the subsection entitled "Price and
Discount":
The price of Index-Linked Machines shall be increased or decreased by a currency
adjustment which is equal to the price specified in the order, adjusted, if
applicable, in terms of any price changes, multiplied by a percentage specified
in the Order (Index-Link Percentage), multiplied by (Closing Index minus Base
Index) divided by the Base Index.
Definitions
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<PAGE>
Base Index: means the Index on which IBM's current Product prices are based, and
is specified on the invoice and upon request from IBM.
Closing Index: means the Index ruling on the Business Day prior to Shipment and
is specified on the invoice and upon request from IBM.
Index: means the South African Rand. equivalent to one European Currency Unit
(ECU), at any time, and any other currency unit as specified by IBM in the
Order,
Index-Linked Machine: means any Machine so designated by IBM, which is subject
to a currency adjustment.
SPAIN
Section 4- Price, Invoicing, Payment and Taxes
And the following at the end of the first paragraph in the subsection entitled
"Invoicing. Payment and Taxes:
Such fee will be apportioned to the number of days of the delay. We may transfer
the credit to a factoring company.
Section 9- Title
The following replaces the first sentence in this Section:
When you order a Machine, we transfer title to you when the Machine is shipped.
Section 16- Ending the Agreement
The following replaces the first sentence:
Regardless of the contract duration specified in the Profile, or any renewal
period in effect, you may terminate this Agreement, with or without cause, on
three months' written notice and we may terminate, with or without cause, on six
months' written notice.
SWEDEN
Section 9- Title
The following replaces the first sentence in this Section:
When you order a Machine, we transfer title to you on the date you receive
delivery from IBM.
TURKIYE
Section 2- Ordering and Delivery
The following replaces the fifth paragraph in this Section:
We select the method of transportation. We will specify in the related
transaction document the party who is responsible for the associated
transportation charges.
Section 4- Price, Invoicing, Payment and Taxes
Add the following as the last sentence of the subsection entitled "Failure To
Pay Any Amounts Due":
For future legal obligations, the related party will be responsible for its own
part.
Section 9- Title
The following replaces the first sentence in this Section:
When you order a Machine, we transfer title to you when the Machine is shipped.
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<PAGE>
United Kingdom
Section 9- Title
The following terms replace the entire Section:
When you order a Product we transfer title to you upon payments of all amounts
due under this Agreement to 1) IBM, or 2) IBM United Kingdom Financial Services
Limited (FSL), if you have entered into a Dealer Financing Agreement with FSL.
We do not transfer a Program's title.
Products are owned by IBM until title has been transferred to you.
You shall clearly identify Products as IBM property. Such Products are presumed
to belong to IBM unless you can prove otherwise.
Your right to possession of Products owned by IBM will cease if 1) your actions
entitle any person to appoint a receiver or administrative receiver of your
property, 2) you become subject to any form of insolvency proceedings (or IBM
has reason to believe any of the preceding events is likely to occur), 3) you
fail to make payments hereunder when due, or 4) the Agreement is terminated. We
may then, in addition to any other remedies available to us, enter any premises
to recover our property and require you not to resell or part with possession or
Products until you have paid us, in full, all sums due us.
You will pass title to any returned Products to IBM free from all encumbrances.
ZIMBABWE
Section 4- Price, Invoicing, Payment and Taxes
Add the following as the last paragraph of the subsection entitled "Price and
Discount":
The price of a Machine shall be increased or decreased by a currency adjustment
which is equal to the currency exchange differential between the Opening Index
and the Closing index.
Definitions:
Closing index: means the Index specified on the Customs Bill of Entry.
Customs Bill of Entry: means the document provided by the Zimbabwean Customs
Authority to IBM upon clearance of the Machine through such Customs into
Zimbabwe.
Index: means the Zimbabwean Dollar equivalent, at any time, to one United States
of America dollar.
Opening Index: means the index specified in the order.
LATIN AMERICA
The following terms apply to all countries in Latin America:
Section 2- Ordering and Delivery
The following replaces the fifth paragraph in this Section:
We select the method of transportation. We are responsible for payment of
transportation charges unless we specify otherwise to you in writing.
Section 4- Price, Invoicing, Payment and Taxes
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<PAGE>
In the subsection entitled "Price and Discount Changes", paragraph four which
applies to Programs licensed on a recurring charge, is not applicable.
Section 9- Title
The following replaces the first sentence in this Section:
When you order a Machine, we transfer title to you on the date of delivery from
IBM.
The following terms apply to the specific countries in Latin America, as noted:
BRAZIL
Section 4- Price, Invoicing, Payment and Taxes
Add the following as the last paragraph of the subsection entitled "Price and
Discount":
If country law regarding price policies is altered, allowing monetary
readjustment of price in shorter periods of time than the one already in effect,
each of us agrees that our prices to you may be revised as frequently and as
soon as the law allows. However, it for any reason the official adjustment index
becomes extinct or worthless, it is agreed that monetary readjustment will be
based upon any similar index produced by the second most important economic
institution in the country, or by a new official index the local government
establishes.
In the subsection entitled "Price and Discount Changes", paragraph four which
applies to Programs licensed on a recurring charge, is not applicable.
The following replaces the second paragraph in the subsection entitled "Failure
To Pay Any Amounts Due":
We may offset any amounts due you, or designated for your use (for example,
marketing funds or promotional offerings), against any amounts due us.
The third paragraph is not applicable.
Section 9- Title
The following replaces the entire Section:
Property to an IBM Machine is not transferred when the Machine is delivered to
the Business Partner. IBM holds domain, property and the constructive possession
of a Machine and the Business Partner holds only actual possession of such
Machine until IBM receives payments of all amounts due, at which time title
passes to the Business Partner.
We do not transfer a Program's title. We only grant a license to a Program.
Section 16- Ending the Agreement
The following replaces the second sentence in the sixth paragraph:
We may offset any amounts due you against amounts due us.
CHILE
Section 4- Price, Invoicing, Payment and Taxes
Add the following as the second paragraph in the subsection entitled "Price and
Price Discount Changes":
When our price to you is in local currency, price increases or discount
reductions apply. When our price to you is in United States dollars, price
increases do not apply.
LATIN AMERICA SOUTH
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<PAGE>
The following terms apply to all countries in Latin America South:
Section 4- Price, Invoicing, Payment and Taxes
Add the following as the second paragraph of the subsection entitled "Invoicing,
Payment and Taxes":
The invoiced amounts shall be paid in United States dollars or their equivalent
in legal currency, at the exchange rate applicable to dividends and/or, profits,
foreign transfers made by private natural or legal persons, on the payment date,
at the domicile of IBM, or whatever it may be determined by the latter, on the
dates established in the respective invoices. In the case of a bank holiday, the
opening exchange rate shall be applied.
The payment shall be considered as duly made when IBM effectively receives the
funds. in the subsection entitled "Failure to Pay Any Amounts Duet
The following replaces the second paragraph:
We may offset any amounts due you, or designated for your use (for example,
marketing funds or promotional offerings), against any amounts due us.
The third paragraph is not applicable.
Section 18- Ending the Agreement
The following replaces the second sentence in the sixth paragraph:
We may offset any amounts due you against amounts due us.
MEXICO
Section 4- Price, Invoicing, Payment and Taxes
Add the following as the second paragraph in the subsection entitled "Price and
Discount Changes":
When our price to you is in local currency, price increases are effective on the
date of announcement.
Add the following after the first paragraph in the subsection entitled
"Invoicing, Payment and Taxes":
The invoiced amounts shall be paid in United States dollars or their equivalent
in legal currency, at the exchange rate applicable to dividends end/or profits,
foreign transfers made by private natural or legal persons, on the payment date,
at the domicile of IBM, or whatever it may be determined by the latter, on the
dates established in the respective invoices. In the case of a bank holiday, the
opening exchange rate shall be applied.
The payment shall be considered as duly made when IBM effectively receives the
funds.
The following replaces the first item in the list in the subsection entitled
"Failure to Pay Any Amounts Due":
Impose a finance charge, as we specify to you in writing, on the portion which
was not paid during the required period;
PERU
Section 4- Price, Invoicing, Payment and Taxes
In the subsection entitled "Failure to Pay Any Amounts Due" the following
replaces the second paragraph:
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We may offset any amounts due you, or designated for your use (for example,
marketing funds or promotional offerings), against any amounts due us.
The last paragraph is not applicable.
VENEZUELA
Section 4- Price, Invoicing. Payment and Taxes
Add the following as the last paragraph of the subsection entitled "Price and
Discount":
If country law regarding price policies is altered, allowing monetary
readjustment of price in shorter periods of time than the one already in effect,
each of us agrees that our prices to you may be revised as frequently and as
soon as the law allows. However, if for any reason the official adjustment index
becomes extinct or worthless, it is agreed that monetary readjustment will be
based upon any similar index produced by the second most important economic
institution in the country, or by a new official index the local government
establishes.
The following replaces the second paragraph in the subsection entitled "Failure
To Pay Any Amounts Due":
We may offset any amounts due you, or designated for your use (for example,
marketing funds or promotional offerings), against any amounts due us.
The third paragraph is not applicable.
Section 16- Ending the Agreement
The following replaces the second sentence in the sixth paragraph:
We may offset any amounts due you against amounts due us.
NORTH AMERICA
The following terms apply to the specific countries in North America, as noted:
CANADA
Section 4- Price, Invoicing, Payment and Taxes
The following is an additional subsection and follows the subsection entitled
"Invoicing, Payment and Taxes":
Purchase Money Security Interest
You grant us a purchase money security interest in your proceeds from the sale
of, and your accounts receivable for, Products and Services, until we receive
the amounts due. You agree to sign an appropriate document, to permit us to
perfect our purchase money security interest.
Section 7- Programs
The following replaces the second paragraph:
We will ship the media and documentation to you.
Section 9- Title
The following replaces the first sentence in this Section:
When you order a Machine, we transfer title to you when we ship the Machine.
BXRT-02-00 11/98 Page 26 of 28
<PAGE>
CARIBBEAN NORTH DISTRICT
Section 4- Price, Invoicing, Payment and Taxes
Add the following as the next to last paragraph in the section:
If any authority requires us to withhold taxes from our payments to you, we will
do so and remit such to the taxing authority. if we are assessed withholding
taxes, interest or penalties by such authority with respect to payments we made
to you, you will reimburse us for such tax and for interest and penalties which
are not due to IBM's negligence.
UNITED STATES OF AMERICA
Section 1- Our Relationship
Add the following as the first item in the subsection entitled
"Responsibilities":
1. we offer a money-back guarantee to End Users for certain Products. You agree
to inform the End User of the terms of this guarantee before the applicable
sale. For any such Product, you agree to 1) accept its return in the time frame
we specify 2) refund the full amount paid to you for it, and 3) dispose of it
(including all its components) as we specify. We will pay a transportation
charge for return of the Product to us and will give you an appropriate credit.
Section 2- Ordering and Delivery
Add the following as the last paragraph in the Section:
If we are unable to stop shipment of an order you cancel, and you return such
Product to us after shipment, our inventory adjustment terms apply.
The following replaces the last two sentences in the last paragraph:
The Exhibit will specify if a cancellation charge applies and where we will
specify the charge.
Section 4- Price, Invoicing, Payment and Taxes
Add the following as the second sentence, in the first paragraph, in the
subsection entitled "Price and Discount":
Unless we specify otherwise, discounts do not apply to Program upgrades,
accessories, or field-installed Machine features conversions, or upgrades.
The following are additional subsections and follow the subsection entitled
"Invoicing, Payment and Taxes":
Reseller Tax Exemption
You agree to provide us with your valid reseller exemption documentation for
each applicable taxing jurisdiction to which we ship Products and Services, if
we do not receive such documentation, we will charge you applicable taxes and
duties. You agree to notify us promptly if this documentation is rescinded or
modified. You are liable for any claims or assessments that result from any
taxing jurisdiction refusing to recognize your exemption.
Purchase Money Security Interest
You grant us a purchase money security interest in your proceeds from the sale
of, and your accounts receivable for, Products and Services, until we receive
the amounts due. You agree to sign an appropriate document (for example, a
"UCC-1") to permit us to perfect our purchase money security interest.
Section 7- Programs
The following replaces the second paragraph:
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<PAGE>
We will designate in the Exhibit if 1) we will ship the media and documentation
to you or, if you request and we agree, to the End User, 2) you may copy and
redistribute the media and documentation to the End User, or 3) you must copy
and redistribute the media and documentation to the End User. If we ship the
media and documentation, we may charge you. We will specify such charge 10 you
in writing. If you copy and redistribute, you must be licensed to use the
Program from which you make the copies. A Program license you acquired for use
under the Demonstration, Development and Evaluation Products terms fulfill this
requirement.
Section 9- Title
The following replaces the first sentence in this Section:
When you order a Machine, we transfer title to you when we ship the Machine.
BXRT-02-00 11/98 Page 28 of 28
<PAGE>
IBM Business Partner Agreement [IBM LOGO]
Solution Provider Attachment
- --------------------------------------------------------------------------------
These terms prevail over and are in addition to or modify the Remarketer Terms
Attachment and the Complementary Marketing Terms Attachment.
1. Marketing Approval
You may be approved as a Solution Provider under a remarketer relationship
or under a complementary marketing relationship, or both, if we approve
you to market the same Products and Services under both remarketer and
complementary marketing terms, all transactions will be under remarketer
terms. You may unilaterally elect not to participate under remarketer
terms for a specific transaction or business segment by providing us a
signed IBM Business Partner Statement of Election. if you meet the
requirements of the Marketing Approval section of the Complementary
Marketing Terms Attachment, you may participate under those terms.
2. Value Added Enhancement
For Products we specify in the Exhibit, you are required to have a
solution which is a value added enhancement that we approve and specify on
your Profile and which significantly adds to the Product's function and
capability.
3. Your Responsibilities To IBM
You agree:
1. to develop a mutually acceptable business plan with us, if we
require one. Such plan will document each of our marketing plans as
they apply to our relationship. We will review the plan, at a
minimum, once a year;
2. that, unless precluded by applicable law, one of the requirements
for you to retain this relationship is that you achieve the minimum
annual attainment we specify in your Profile;
3. to order Products and Services, as we specify in the operations
guide;
4. to maintain trained personnel, as we specify in your Profile or
Exhibit, as applicable;
5. to provide us, on our request, relevant financial information about
your business so we may, for example, use this information in our
consideration to extend credit terms to you;
6. to have access to the Products you are approved to market for 1)
demonstration purposes, 2) providing support to your End Users and
3) supporting your value added enhancement;
7. to maintain the capability to demonstrate Products we approve you to
market; and
8. that the products and deliverables you market in conjunction with
IBM Products and Services are Year 2000 Ready. A product (for
example, a machine or program) or a deliverable is Year 2000 Ready
if the product or deliverable when used in accordance with its
associated documentation is capable of correctly processing,
providing and/or receiving date data within and between the
twentieth and twenty-first centuries, provided that all products
used with the product or deliverable properly exchange accurate date
data with it.
BXSP-02-00 11/98 Page 1 of 5
<PAGE>
4. Your Responsibilities To End Users
You agree to:
1. assist the End User to achieve productive use of your solution and
the Products and Services you marketed;
2. configure Products we approve you to market. On your request, we may
assist you;
3. identify and select the required technology based upon the End
User's requirements, and confirm that the Product configuration is
fully capable of the satisfactory performance of your solution;
4. not make representations that IBM is responsible for the Products'
configuration and their ability to satisfy the End Users
requirements;
5. advise the End User of Product installation requirements;
6. develop a plan, agreed to by the End User, for installation and
post-installation support for the offering you market. For Products
and Services we approve you to market, such support includes your
being the primary contact for Product and Services Information,
technical advice and operational advice associated with the
offering.
However, you may delegate these support responsibilities for
Products and any other associated products to another IBM Business
Partner who is approved to market such Products. If you do, you
retain customer satisfaction responsibility. Alternatively, such
support responsibilities will be provided by IBM if you market the
applicable IBM Services to the End User. If you do, we assume
customer satisfaction responsibility for such support;
7. assist the End User in Product problem determination and resolution,
unless this responsibility is delegated as specified in Item 6
above;
8. give written notice to the End User of any modification you make to
a Product and the name of the warranty service provider and advise
that such modification may void the warranty for the Product;
9. support the End User in planning fulfillment of Product training and
education requirements, including informing the End User of
educational offerings, as applicable;
10. inform the End User that the sales receipt (or other documentation,
such as Proof of Entitlement, if it is required) will be necessary
for proof of warranty entitlement or for Program upgrades; and
11. provide warranty information to the End User.
BXSP-02-00 11/98 Page 2 of 5
<PAGE>
Country Unique Terms For The Solution Provider Attachment
The following modify the terms of this Attachment in the specific countries, as
noted:
ASIA PACIFIC
The following applies to all countries in Asia Pacific:
Section 1- Marketing Approval
The following replaces all the terms of the Section:
You may be approved as a Business Partner under a remarketer relationship or
under a complementary marketing relationship, or both, but not for the same
Product or Service.
The following applies to all countries in Asia Pacific, except Australia:
Section 1- Marketing Approval
The following is an additional term:
We may specify the type of account in your Profile or specific industry codes to
which you may market Products and Services. if we do so, you agree to comply.
The following applies to the countries in Asia Pacific, as noted:
AUSTRALIA
Section 2- Value Added Enhancement
The following are additional terms to this Section:
Your value added enhancement must be the primary justification for the End
User's acquisition of the Products and Services you market. The exception to
this is when the End User is acquiring an upgrade to a system you installed with
your value added enhancement which is still in productive use. However, your
value added enhancement must be the primary justification for a processor
upgrade requiring a processor serial number change. Upgrades include processor
upgrades, peripherals, and programs. A sale to an End User without your value
added enhancement, when it is required, is a material breach of the Agreement.
EMEA
The following terms apply to ill the countries in EMEA:
Section 4- Your Responsibilities To End Users
Delete items 8 and 11 and add the following as the last item in the Section:
Inform the End User, in writing, from whom to obtain warranty service and of any
other applicable warranty information, as well as any modification made to a
Product and advise that such modification may void the warranty.
BXSP-02-00 11/98 Page 3 of 5
<PAGE>
NORTH AMERICA
The following applies to the countries in North America, as noted:
CANADA
Section 1- Marketing Approval
The following are additional terms to this Section:
We may specify the type of account or specific industry codes to which you may
market Products and Services. When you do so, you agree that, at a minimum, 80%
of your annual IBM system unit sales (measured by the price you paid IBM) will
be to those accounts.
Section 2- Value Added Enhancement
The following are additional terms to this Section:
You agree to market Products and Services only with your approved value added
enhancement as part of an integrated solution for End Users. Certain Products we
specify do not require a value added enhancement.
In the event we withdraw approval of your value added enhancement, we also
withdraw your approval as an IBM Business Partner for that value added
enhancement.
We may, at any time, modify the criteria for approval of your value added
enhancement. You are responsible to modify your value added enhancement to meet
these criteria.
You agree to market Products, including processor upgrades requiring a processor
serial number change, to only End Users for whom your value added enhancement is
their primary reason for acquiring the Products, and who intend the on-going use
of such enhancement. A sale to an End User without a value added enhancement,
when required, is a material breach of the Agreement.
However, your value added enhancement is not required to be the End User's
primary reason for acquiring upgrades to systems you previously installed with
your enhancement and where your enhancement is still in productive use. Upgrades
include processor upgrades (non-serial number change), peripherals and programs.
Unless we specify otherwise in writing, you may market upgrades only to those
End Users where you have installed your value added enhancement, and who intend
on-going use of that value added enhancement.
UNITED STATES OF AMERICA
Section 1- Marketing Approval
The following is an additional term to this Section:
We may specify the specific industry codes to which you may market Products and
Services, if we do so, you agree to comply.
Section 2- Value Added Enhancement
The following are additional terms to this Section:
BXSP-02-00 11/98 Page 4 of 5
<PAGE>
You agree to market Products and Services only with your approved value added
enhancement as part of an integrated solution for End Users. Certain Products we
specify do not require a value added enhancement.
In the event we withdraw approval of your value added enhancement we also
withdraw your approval as an IBM Business Partner for that value added
enhancement.
We may, at any time modify the criteria for approval of your value added
enhancement. You are responsible to modify your value added enhancement to meet
these criteria.
You agree to market Products, including processor upgrades requiring a processor
serial number change, to only End Users for whom your value added enhancement is
their primary reason for acquiring the Products, and who intend the on-going use
of such enhancement. A sale to an End User without a value added enhancement,
when required, is a material breach of the Agreement.
However, your value added enhancement is not required to be the End User's
primary reason for acquiring upgrades to systems you previously installed with
your enhancement and where your enhancement is still in productive use. Upgrades
include processor upgrades (non-serial number change), peripherals and programs.
Unless we specify otherwise in writing, you may market upgrades only to those
End Users where you have installed your value added enhancement, and who intend
on-going use of that value added enhancement.
Section 4- Your Responsibilities to End Users
Add the following as the preamble to this Section:
When you market Products and Services under complementary marketing terms, Items
2 and 5 only apply when you use our central order facility. Items 10 and 11 are
not applicable.
BXSP-02-00 11/98 Page 5 of 5
<PAGE>
IBM Business Partner Agreement -
General Terms
- --------------------------------------------------------------------------------
Table of Contents
Section Title Page
1. Definitions .......................................................2
2. Agreement Structure and Contract Duration .........................3
3. Our Relationship ..................................................4
4. Status Change .....................................................5
5. Confidential Information ..........................................5
6. Marketing Funds and Promotional Offerings .........................6
7. Production Status .................................................6
8. Patents and Copyrights ............................................6
9. Liability .........................................................7
10. Trademarks ........................................................7
11. Changes to the Agreement Terms ....................................8
12. Internal Use Products .............................................8
13. Demonstration, Development and Evaluation Products ................8
14. Electronic Communications .........................................9
15. Geographic Scope ..................................................9
18. Governing Law .....................................................9
BXGT-02-00 11/98 Page 1 of 25
<PAGE>
IBM Business Partner Agreement -
General Terms
- --------------------------------------------------------------------------------
1. Definitions
Business Partner is a business entity which is approved by us to market
Products and Services under this Agreement.
Customer is either an End User or a Remarketer. We specify in your Profile
if we approve you to market to End Users or Remarketers, or both.
End User is anyone, who is not part of the Enterprise of which you are a
part, who uses Services or acquires Products for its own use and not for
resale.
Enterprise is any legal entity (such as a corporation) and the
subsidiaries it owns by more than 50 percent. An Enterprise also includes
other entities as IBM and the Enterprise agree in writing.
Licensed Internal Code is called "Code". Certain Machines we specify
(called "Specific Machines") use Code. International Business Machines
Corporation or one of its subsidiaries owns copyrights in Code or has the
right to license Code. IBM or a third party owns all copies of Code,
including all copies made from them.
Machine is a machine, its features, conversions, upgrades, elements,
accessories, or any combination of them. The term "Machine" includes an
IBM Machine and any non-IBM Machine (including other equipment) that we
approve you to market.
Product is a Machine or Program, that we approve you to market, as we
specify in your Profile.
Program is an IBM Program or a non-IBM Program provided by us, under its
applicable license terms, that we approve you to market.
Related Company is any corporation, company or other business entity:
1. more than 50 percent of whose voting shares are owned or controlled,
directly or indirectly, by either of us, or
2. which owns or controls, directly or indirectly, more than 50 percent
of the voting shares of either of us, or
3. more than 50 percent of whose voting shares are under common
ownership or control, directly or indirectly, with the voting shares
of either of us.
However, any such corporation, company or other business entity is
considered to be a Related Company only so long as such ownership or
control exists. "Voting shares" are outstanding shares or securities
representing the right to vote for the election of directors or other
managing authority.
Remarketer is a business entity which acquires Products and Services, as
applicable, for the purpose of marketing.
Service is performance of a task, provision of advice and counsel,
assistance, or access to a resource (such as a network and associated
enhanced communication and support) that we approve you to market.
BXGT-02-00 11/98 Page 2 of 25
<PAGE>
2. Agreement Structure and Contract Duration
Profiles
We specify the details of our relationship (for example, the type of
Business Partner you are) in a document called a "Profile." Each of us
agrees to the terms of the Profile, the General Terms, the applicable
Attachments referred to in the Profile, and the Exhibit (collectively
called the "Agreement") by signing the Profile.
General Terms
The General Terms apply to all of our Business Partners.
Attachments
We describe, in a document entitled an "Attachment", additional terms that
apply. Attachments may include, for example, terms that apply to the
method of Product distribution (Remarketer Terms Attachment or
Complementary Marketing Terms Attachment) and terms that apply to the type
of Business Partner you are, for example, the terms that apply to a
Distributor relationship as described in the Distributor Attachment. We
specify in your Profile the Attachments that apply.
Exhibits
We describe in an Exhibit, specific information about Products and
Services, for example, the list of Products and Services, and warranty
information about the Products.
Transaction Documents
We will provide to you the appropriate "transaction documents." The
following are examples of transaction documents, with examples of the
information and responsibilities they may contain:
1. invoices (item, quantity, payment terms and amount due); and
2. order acknowledgements (confirmation of Products and quantities
ordered).
Conflicting Terms
If there is a conflict among the terms in the various documents, the terms
of:
1. a transaction document prevail over those of all the documents;
2. an Exhibit prevail over the terms of the Profile, Attachments and
the General Terms;
3. a Profile prevail over the terms of an Attachment and the General
Terms; and
4. an Attachment prevail over the terms of the General Terms.
If there is an order of precedence within a type of document, such order
will be stated in the document (for example, the terms of the Distributor
Attachment prevail over the terms of the Remarketer Terms Attachment, and
will be so stated in the Distributor Attachment).
Our Acceptance of Your Order
Products and Services become subject to this Agreement when we accept your
order by:
1. sending you a transaction document; or
2. providing the Products or Services.
BXGT-02-00 11/98 Page 3 of 25
<PAGE>
Acceptance of the Terms in a Transaction Document
You accept the terms in a transaction document by doing any of the
following:
1. signing it (those requiring a signature must be signed);
2. accepting the Product or Services;
3. providing the Product or Services to your Customer; or
4. making any payment for the Product or Services.
Contract Duration
We specify the contract start date and the duration in your Profile.
Unless we specify otherwise in writing, the Agreement will be renewed
automatically for subsequent two year periods. However, you may advise us
in writing not to renew the Agreement. Each of us is responsible to
provide the other three months' written notice if this Agreement will not
be renewed.
3. Our Relationship
Responsibilities
Each of us agrees that:
1. you are an independent contractor, and this Agreement is
non-exclusive. Neither of us is a legal representative or legal
agent of the other. Neither of us is legally a partner of the other
(for example, neither of us is responsible for debts incurred by the
other), and neither of us is an employee or franchise of the other,
nor does this Agreement create a joint venture between us:
2. each of us is responsible for our own expenses regarding fulfillment
of our responsibilities and obligations under the terms of this
Agreement;
3. neither of us will disclose the terms of this Agreement, unless both
of us agree in writing to do so, or unless required by law;
4. neither of us will assume or create any obligations on behalf of the
other or make any representations or warranties about the other,
other than those authorized;
5. any terms of this Agreement, which by their nature extend beyond the
date this Agreement ends, remain in effect until fulfilled and apply
to respective successors and assignees;
6. we may withdraw a Product or Service from marketing at any time;
7. we will allow the other a reasonable opportunity to comply before it
claims the other has not met its obligations, unless we specify
otherwise in the Agreement;
8. neither of us will bring a legal action against the other more than
two years after the cause of action arose, unless otherwise provided
by local law without the possibility of contractual waiver;
9. failure by either of us to insist on strict performance or to
exercise a right when entitled does not prevent either of us from
doing so at a later time, either in relation to that default or any
subsequent one;
10. neither of us is responsible for failure to fulfill obligations due
to causes beyond the reasonable control of either of us:
11. IBM reserves the right to assign, in whole or in part, this
Agreement to a Related Company, but may assign its rights to payment
or orders placed hereunder to any third party;
12. IBM does not guarantee the results of any of its marketing plans;
and
13. each of us will comply with all applicable laws and regulations
(such as those governing consumer transactions).
BXGT-02-00 11/98 Page 4 of 25
<PAGE>
Other Responsibilities
You agree:
1. to be responsible for customer satisfaction for all your activities,
and to participate in customer satisfaction programs as we
determine:
2. that your rights under this Agreement are not property rights and,
therefore, you can not transfer them to anyone else or encumber them
in any way. For example, you can not sell your approval to market
our Products or Services or your rights to use our Trademarks;
3. to maintain the criteria we specified when we approved you;
4. to achieve and maintain the certification requirements for the
Products and Services you are approved to market, as we specify in
your Profile;
5. not to assign or otherwise transfer this Agreement, your rights
under this Agreement, or any of its approvals, or delegate any
duties, unless expressly permitted to do so in this Agreement.
Otherwise, any attempt to do so is void;
6. to conduct business activities with us (including placing orders)
which we specify in the operations guide, using our automated
electronic system if available. You agree to pay all your expenses
associated with it such as your equipment and communication costs;
7. that when we provide you with access to our information systems, it
is only in support of your marketing activities. Programs we provide
to you for your use with our information systems, which are in
support of your marketing activities, are subject to the terms of
their applicable license agreements, except you may not transfer
them;
6. to promptly provide us with documents we may require from you or the
End User (for example, our license agreement signed by the End User)
when applicable; and
9. to comply with the highest ethical principles in performing under
the Agreement. You will not offer or make payments or gifts
(monetary or otherwise) to anyone for the purpose of wrongfully
influencing decisions in favor of IBM, directly or indirectly. IBM
may terminate this Agreement immediately in case of 1) a breach of
this clause or 2) when IBM reasonably believes such a breach has
occurred or is likely to occur.
Our Review of Your Compliance with this Agreement
We may periodically review your compliance with this Agreement. You agree
to provide us with relevant records on request. We may reproduce and
retain copies of these records. We, or an independent auditor, may conduct
a review of your compliance with this Agreement on your premises during
your normal business hours.
If, during our review of your compliance with this Agreement, we find you
have materially breached the terms of this relationship, in addition to
our rights under law and the terms of this Agreement, for transactions
that are the subject of the breach, you agree to refund the amount equal
to the discount (or fee, if applicable) we gave you for the Products or
Services or we may offset any amounts due to you from us.
4. Status Change
You agree to give us prompt written notice (unless precluded by law or
regulation) of any change or anticipated change in your financial
condition, business structure, or operating environment (for example, a
material change in equity ownership or management or any substantive
change to information supplied in your application). Upon notification of
such change, (or in the event of failure to give notice of such change)
IBM may, at its sole discretion, immediately terminate this Agreement.
5. Confidential Information
This section comprises a Supplement to the IBM Agreement for Exchange of
Confidential information. "Confidential Information" means:
1. all information IBM marks or otherwise states to be confidential;
2. any of the following prepared or provided by IBM;
BXGT-02-00 11/98 Page 5 of 25
<PAGE>
a. sales leads,
b. information regarding prospects or Customers
c. unannounced information about Products and Services,
d. business plans, or
e. market intelligence;
3. any of the following written information you provide to us on our
request and which you mark as confidential;
a. reporting data,
b. financial data, or
c. the business plan.
All other information exchanged between us is nonconfidential, unless
disclosed under a separate Supplement to the IBM Agreement for Exchange of
Confidential Information.
6. Marketing Funds and Promotional Offerings
We may provide marketing funds and promotional offerings to you. If we do,
you agree to use them according to our guidelines and to maintain records
of your activities regarding the use of such funds and offerings for three
years. We may withdraw or recover marketing funds and promotional
offerings from you if you breach any terms of the Agreement. Upon
notification of termination of the Agreement, marketing funds and
promotional offerings will no longer be available for use by you, unless
we specify otherwise in writing.
7. Production Status
Each IBM Machine is manufactured from new parts, or new and used parts. In
some cases, the IBM Machine may not be new and may have been previously
installed. Regardless of the IBM Machine's production status, our
appropriate warranty terms apply. You agree to inform your Customer of
these terms in writing (for example, in your proposal or brochure).
8. Patents and Copyrights
For the purpose of this section only, the term Product includes Licensed
Internal Code (if applicable).
If a third party claims that a Product we provide under this Agreement
infringes that party's patents or copyrights, we will defend you against
that claim at our expense and pay all costs, damages, and attorneys' fees
that a court finally awards, provided that you:
1. promptly notify us in writing of the claim; and
2. allow us to control, and cooperate with us in, the defense and any
related settlement negotiations.
If you maintain an inventory, and such a claim is made or appears likely
to be made about a Product in your inventory, you agree to permit us
either to enable you to continue to market and use the Product, or 10
modify or replace it. If we determine that none of these alternatives is
reasonably available, you agree to return the Product to us on our written
request. We will then give you a credit, as we determine, which will be
either 1) the price you paid us for the Product (less any price-reduction
credit), or 2) the depreciated price.
This is our entire obligation to you regarding my claim of infringement.
Claims for Which We Are Not Responsible
We have no obligation regarding any claim based on any of the following:
1. anything you provide which is incorporated into a Product;
BXGT-02-00 11/98 Page 6 of 25
<PAGE>
2. your modification of a Product, or a Program's use in other than its
specified operating environment;
3. the combination, operation, or use of a Product with any Products
not provided by us as a system, or the combination, operation, or
use of a Product with any product, data, or apparatus that we did
not provide; or
4. infringement by a non-IBM Product alone, as opposed to its
combination with Products we provide to you as a system.
9. Liability
Circumstances may arise where, because of a default or other liability,
one of us is entitled to recover damages from the other. In each such
instance, regardless of the basis on which damages can be claimed, the
following terms apply as your exclusive remedy and our exclusive
liability.
Our Liability
We are responsible for no more than:
1. payments referred to in the "Patents and Copyrights" section above;
2. damages for bodily injury (including death) caused by our
negligence;
3. actual direct loss or damage to real property or tangible personal
property caused by our negligence; and
4. the amount of any other actual direct loss or damage arising from
our negligence or breach of this Agreement, up to the greater of
U.S. $100,000 (or equivalent) or the charges for the Product or
Service that is the subject of the claim.
Items for Which We Are Not Liable
Under no circumstances (except as required by law) are we liable for any
of the following:
1. third-party claims against you for damages (other than those under
the first three items above in the subsection entitled "Our
Liability");
2. loss of, or damage to, your records or data; or
3. special, incidental, or indirect damages, or for any economic
consequential damages (including lost profits or savings) even if we
are informed of their possibility.
Your Liability
In addition to damages for which you are liable under law and the terms of
this Agreement, you will indemnify us for claims made against us by others
(particularly regarding statements, representations or warranties not
authorized by us) arising out of your conduct under this Agreement or as a
result of your relations with anyone else.
10. Trademarks
We will notify you in written guidelines of the IBM Business Partner title
and emblem which you are authorized to use. You may not modify the emblem
in any way. You may use our Trademarks (which include the title, emblem,
IBM trade marks and service marks) only:
1. within the geographic scope of this Agreement;
2. in association with Products and Services we approve you to market;
and
3. as described in the written guidelines provided to you.
The royalty normally associated with non-exclusive use of the Trademarks
will be waived, since the use of this asset is in conjunction with
marketing activities for Products and Services.
You agree to promptly modify any advertising or promotional materials that
do not comply with our guidelines. If you receive any complaints about
your use of a Trademark, you agree to promptly notify us. When this
Agreement ends, you agree to promptly stop using our
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Trademarks, if you do not, you agree to pay any expenses and fees we incur
in getting you to stop.
You agree not to register or use any mark that is confusingly similar to
any of our Trademarks.
Our Trademarks, and any goodwill resulting from your use of them, belong
to us.
11. Changes to the Agreement Terms
We may change the terms of this Agreement by giving you one month's
written notice. We may, however, change the following terms without
advance notice:
1. those we specify in this Agreement as not requiring advance notice;
2. those of the Exhibit unless otherwise limited by this Agreement; and
3. those relating to safety and security.
Otherwise, for any other change to be valid, both of us must agree in
writing. Changes are not retroactive. Additional or different terms in any
written communication from you (such as an order), are void.
12. Internal Use Products
You may acquire Products you are approved to market for your internal use
within your Business Partner operations. Except for personal computer
Products, you are required to advise us when you order Products for your
internal use.
We will specify in your Exhibit the discount or price, as applicable, at
which you may acquire the Products for internal use. Except for personal
computer Products, such Products do not count toward 1) your minimum
annual attainment 2) determination of your discount or price, as
applicable or 3) determining your marketing or promotional funds.
Any value added enhancement or systems integration services otherwise
required by your relationship is not applicable when you acquire Products
for internal use. You must retain such Products for a minimum of 12
months, unless we specify otherwise in the Exhibit.
13. Demonstration, Development and Evaluation Products
You may acquire Products you are approved to market for demonstration,
development and evaluation purposes, unless we specify otherwise in the
Exhibit. Such Products must be used primarily in support of your Product
marketing activities.
We will specify in your Exhibit the Products we make available to you for
such purposes, the applicable discount or price, and the maximum quantity
of such Products you may acquire and the period they are to be retained.
The maximum number of input/output devices you may acquire is the number
supported by the system to which they attach.
If you acquired the maximum quantity of Machines, you may still acquire a
field upgrade, if available.
We may decrease the discount we provide for such Products on one month's
written notice.
You may make these Products available to Customer for the purpose of
demonstration and evaluation. Such Products may be provided to an End User
for no more than three months. For a Program, you agree to ensure the
Customer has been advised of the requirement to accept the terms of a
license agreement before using the Program.
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<PAGE>
14. Electronic Communications
Each of us may communicate with the other by electronic means, and such
communication is acceptable as a signed writing to the extent permissible
under applicable law. Both of us agree that for all electronic
communications, an identification code (called a "user ID") contained in
an electronic document is sufficient to verify the sender's Identity and
the document's authenticity.
15. Geographic Scope
All the rights and obligations of both of us are valid only in (country
name).
16. Governing Law
The laws of (country name) govern this Agreement.
The "United Nations Convention on Contracts for the International Sale of
Goods" does not apply.
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<PAGE>
IBM Business Partner Agreement -
General Terms
- --------------------------------------------------------------------------------
Country Unique General Terms
The following terms amend the General Terms, in the specific Countries, as
noted.
ASIA PACIFIC
The following terms apply to all countries in Asia Pacific except Australia and
New Zealand.
Section 1- Definitions
The following replaces the definition of End User
End User is anyone who uses Services or acquires Products for its own use and
not for resale
Section 12- Internal Use Products
The following paragraph replaces the second paragraph:
We will specify in your Exhibit the discount or price, as applicable, at which
you may acquire the Products for Internal use.
The following terms apply to the specific countries in Asia Pacific, as noted:
ASEAN COUNTRIES
Section 16- Governing Law
For personal computer Products acquired X-hub, add the following at the end of
this Section:
Disputes and differences arising out of or in connection with this Agreement
shall be finally settled by arbitration which shall be held in Singapore in
accordance with the Rules of the International Chamber of Commerce (ICC). The
arbitrator or arbitrators designated in conformity with those rules shall have
power to rule on their own competence and on the validity of the Agreement to
submit to arbitration. The arbitration award shall be final and binding for the
parties, without appeal, and the arbitral award shall be in writing and set
forth the findings of fact and the conclusion of law.
All proceedings shall be conducted, including all documents presented in such
proceedings, in the English language. The number of arbitrators shall be three,
with each side to the dispute being entitled to appoint one arbitrator. The two
arbitrators appointed by the Parties shall appoint a third arbitrator before
proceeding upon the reference. The third arbitrator shall act as chairman of the
proceedings. Vacancies to the post of chairman shall be filled by the president
of the ICC. Other vacancies shall be filled by the respective nominating party.
Proceedings shall continue from the stage they were at when the vacancy
occurred.
If one of the parties refuses or otherwise fails to appoint an arbitrator within
one month of the date the other party appoints its, the first appointed
arbitrator shall be the sole arbitrator, provided that the arbitrator was
validly and properly appointed.
AUSTRALIA
Section 9- Liability
Add the following after the subsection entitled "Our Liability":
Where we are in breach of a condition or warranty implied by the Trade Practices
Act of 1974: 1) our liability is limited to, for services, the payment of the
cost of having the services supplied again, and for goods, the repair or
replacement of the goods or the supply of equivalent goods; and 2) where this
condition or warranty relates to the right to sell, quiet possession or clear
title (i.e.,
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<PAGE>
Section 69 of the Trade Practices Act), or the goods are of a kind ordinarily
acquired for personal, domestic, or household use or consumption, then none of
the limitations in this Section apply.
INDIA
Section 3- Our Relationship
In the subsection entitled "Responsibilities" the following replaces Item 8:
If no suit or other legal action is brought within two years after the cause of
action arose, in respect to any claim that either of us may have against the
other, the rights of the concerned party in respect to such claim shall be
forfeited and the other party shall stand released from its obligations in
respect to such claim;
Section 9- Liability
In the subsection entitled "Our Liability" the following replaces Items 2, 3,
and 4:
2. liability for bodily injury (including death) or damage to real property and
tangible personal property shall be limited to that caused by our negligence;
and
3. as to any other actual loss or damage arising in any situation involving
non-performance by us pursuant to, or in any way related to the subject of this
Agreement, our liability will be limited to the charge paid by you for the
individual Product or Service that is the subject of the claim. For purposes of
this tern, the term "Product" includes License Internal Code and Materials.
INDOCHINA COUNTRIES
The following terms apply to all countries in Indochina (Cambodia, Laos, Myanmar
and Vietnam):
Section 8. Patents and Copyrights
Add the following after the third paragraph in the Section:
We make no representation or warranties regarding the copyright status of
Products and Services in (country name).
Section 16- Governing Law
Add the following after the second paragraph in this Section:
Disputes and differences arising out of or in connection with this Agreement
shall be finally settled by arbitration which shall be held in Singapore in
accordance with the Rules of the International Chamber of Commerce (ICC). The
arbitrator or arbitrators designated in conformity with those rules shall have
power to rule on their own competence and on the validity of the Agreement to
submit to arbitration. The arbitration award shall be final and binding for the
parties without appeal and the arbitral award shall be in writing and set forth
the findings of fact and the conclusions of law.
All proceedings shall be conducted, including all documents presented in such
proceedings, in the English language. The number of arbitrators shall be three,
with each side to the dispute being entitled to appoint one arbitrator.
The two arbitrators appointed by the parties shall appoint a third arbitrator
before proceeding upon the reference. The third arbitrator shall act as chairman
of the proceedings. Vacancies in the post of chairman shall be filled by the
president of the ICC. Other vacancies shall be filled by the respective
nominating party. Proceedings shall continue from the stage they were at when
the vacancy occurred.
If one or the parties refuses or otherwise fails to appoint an arbitrator within
3D days of the date the other party appoints its, the first appointed arbitrator
shall be the sole arbitrator, provided that the arbitrator was validly and
properly appointed.
The English language version of this Agreement prevails over any (country name)
language version.
JAPAN
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<PAGE>
When creating the local Japan contract do not include items 9 and 10 in Section
3- Our Relationship, subsection "Responsibilities".
Section 8- Patents and Copyrights
After the word "patents" in the second paragraph, add the following:
(including utility model registrations and design registrations)
Section 9- Liability
The following is an additional term and follows item 4 in the subsection
entitled "Our Liability":
However, if you cancel the contract for the Machine that is the subject of the
claim and you purchase a substitute Machine as a replacement for that Machine
during its warranty period, IBM will only be liable for the difference of the
price between the substitute Machine and the subject Machine.
You agree to insert the following IBM Limitation of Liability statement into
your contract with your End User. If you do not, you agree to compensate IBM for
any End User claim, which we settle and pay, which exceeds IBM's limitation of
liabilities as described in this Section.
"For any defects in an IBM Machine which an End User acquires from you, IBM (for
the purpose of this article only, the term IBM includes IBM Corporation and its
direct or indirect Related Companies) will be liable, including but not limited
to, liability under Japan's Product Liability Law, to the End User only within
the limit set forth hereunder:
1. repair or replacement of the IBM Machine as specified in the Statement of
Limited Warranty provided with the IBM Machine; and
2. bodily injury, including death, or damage to tangible property for which
IBM is legally liable.
In no event will IBM be liable for loss of intangible property including, but
not limited to, data or programs.
If there is a conflict between the terms of the Statement of Limited Warranty
and these terms, the term of the Statement of Limited Warranty will prevail."
Section 16- Governing Law
Add the following after the first paragraph in this Section:
Any doubts concerning this Agreement will be initially resolved between us in
good faith and in accordance with the principle of mutual trust.
NEW ZEALAND
Section 9- Liability
Add the following after the subsection entitled "Our Liability":
The Consumer Guarantees Act 1993 will not apply in respect to any goods and
services which we provide if you require the goods or services for the purpose
of a business as defined in the Act. The implied warranties of merchantability
and fitness for a particular purpose are also excluded. Where services are not
required for the purposes of a business as defined in the Consumer Guarantees
Act 1993 the limitations in this Section are subject to the limitations in that
Act.
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<PAGE>
PEOPLE'S REPUBLIC OF CHINA
Section 16- Governing Law
The following replaces the first paragraph in this Section:
The laws of the State of New York govern this Agreement.
EMEA (EUROPE, MIDDLE EAST, AFRICA)
Listings of the countries or group of countries follows:
ALGERIA
CAPE VERDE
CENTRAL AFRICAN REPUBLIC
CHAD
D.R. OF CONGO
EGYPT
EQUATORIAL GUINEA
ESTONIA
GUINEE BISSAU
ISRAEL
IVORY COAST
LATVIA
LITHUANIA
MOROCCO
PAKISTAN
SOUTH AFRICA
TUNISIA
TURKIYE
IBM CENTRAL AFRICA
Benin Eritrea Malta Sudan
Botswana Ethiopia Mauritania Tanzania
Burkina Faso Gabon Mozambique Toga
Burundi Gambia Niger Uganda
Cabo Verde Ghana Nigeria Zambia
Cameroon Guinea Republique Centre Africaine Zimbabwe
Congo Kenya Rwanda
Cote d'Ivoire Malawi Senegal
Djibouti Mali Sierra
IBM CENTRAL EUROPE AND RUSSIA
Albania Croatia Kirghizia Russia
Armenia Czech Republic Moldavia Slovakia
Azerbaijan
Belarus Georgia Poland Slovenia
Tajikistan
Turkmenistan
Bosnia-Hercegovina Hungary Romania Ukraine
Uzbekistan
Bulgaria Kazakhstan FR Yugoslavia
Former Yugoslav Republic of Macedonia-FYROM
WESTERN EUROPE
Austria Germany Luxembourg Sweden
Belgium Greece Netherlands Switzerland
Denmark Iceland Norway United Kingdom
Finland Ireland Portugal
France Italy Spain
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<PAGE>
EMEA
The following terms apply to all countries in EMEA:
Section 1- Definitions
Enterprise
The second sentence of the definition is not applicable.
Section 3- Our Relationship
The following replaces item 6 of the subsection entitled "Responsibilities":
we may withdraw a Product or Service from 1) a type of Business Partner or a
method of distribution with six months notice, and 2) marketing at any time;
In the subsection entitled "Other Responsibilities":
- the following replaces item 3
- - to maintain the criteria we specify, if any, in the Exhibit;
- Item 4 is not applicable.
- in item 5, add at the end of the first sentence: "or in writing"
the following replaces item 8:
to promptly provide us with documents we may require from you or the End User
(for example, our license agreement signed by the End User and you) when
applicable;
Section 15- Geographic Scope
The terms of this section are not applicable.
The following terms apply to the countries in EMEA, as noted:
The following terms apply to Western Europe:
Section 1- Definitions
Add the following definition:
Western Europe is the following countries:
Austria Germany Luxembourg Sweden
Belgium Greece Netherlands Switzerland
Denmark Iceland Norway United Kingdom
Finland Ireland Portugal
France Italy Spain
The following terms apply to all countries in EMEA except Austria, Germany,
Italy, South Africa and Switzerland, and the countries of Central Europe and
Russia:
Section 3- Our Relationship
Add the following as the last item of the subsection entitled "Other
Responsibilities";
that we may use data about your organization, including your addresses, contact
names revenue data and any other types of data you provide under this Agreement
(Your Data), for the purpose of this Agreement, other related purposes including
the marketing of, and provisions of information about, Products, offerings and
other activities, and for any other business purpose.
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<PAGE>
Additionally, you agree that for the above purposes we may disclose or transfer
Your Data to any of our Related Companies (which may also use and transfer Your
Data as described) and to third parties, including subcontractors and
consultants. You agree that Your Data may be transferred to such Related Company
or third party in any country whether or not a member of the European Union.
To the extent that Your Data comprises data about a natural person (for example,
a contact name), you agree to inform that person of the purpose for which such
data are disclosed to us, to obtain their informed consent to that disclosure
and the subsequent use or transfer of that data by us, and to fulfill all other
legal requirements necessary to make such use and transfers legal.
Section 10- Trademarks
The following terms of the TRADEMARKS Section apply to the countries in EMEA, as
noted:
The following terms apply to all countries in Western Europe:
The following replaces item 1 in the first paragraph;
within Western Europe;
The following terms apply to the Republic of South Africa, Namibia, Swaziland
and Lesotho:
The following replaces item 1 in the first paragraph;
in the Republic of South Africa, Namibia, Swaziland and Lesotho;
The following terms apply to all countries in Central Europe and Russia, except
Czech Republic:
The following replaces item 1 in the first paragraph:
within your applicable Territory.
The following terms apply to all other countries in EMEA:
The following replaces item 1 in the first paragraph:
within (country name);
The following terms apply to the specific countries in EMEA, as noted:
AFRICAN COUNTRIES
The following terms apply to the following African countries:
Algeria, Benin, Burkina Paso, Cameroon, Cape Verde, Central African Republic,
Chad, Congo, Djibouti, D.R. of Congo, Equatorial Guinea, Gabon, Gambia, Guinea,
Guinee Bissau, Ivory Coast, Mali, Mauritania, Morocco, Niger, Senegal, Togo, and
Tunisia.
Section 16- Governing Law
The following replaces the entire section:
The laws of France govern this Agreement.
The "United Nations Convention on Contracts for the International Sale of Goods"
does not apply.
All disputes arising out of this Agreement or relating to its violation or
execution, shall be settled by the Commercial Courts of Paris even in matters
concerning multiple parties or impleader actions or emergency protective actions
in summary proceedings or on ex parte motion,
AUSTRIA
Section 3- Our Relationship
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<PAGE>
Add the following as the last item of the subsection entitled "Other
Responsibilities":
that we may use data about your organization, including your addresses, contact
names, revenue data and any other types of data you provide under this Agreement
(Your Data), for the purpose of this Agreement, other related purposes including
the marketing of, and provisions of information about, Products, offerings and
other activities, and for any other business purpose.
Additionally, you agree that for the above purposes we may disclose or transfer
Your Data to any of our Related Companies (which may also use and transfer Your
Data as described) and to third parties, including subcontractors and
consultants. You agree that Your Data may be transferred to such Related Company
or third party in any country whether or not a member of the European Union.
To the extent that Your Data comprises data about a natural person (for example,
a contact name) or a legal person (for example, your customer's data), you agree
to inform these persons of the purpose for which such data are disclosed to us,
to obtain their informed consent to that disclosure and the subsequent use or
transfer of that data by us, and to fulfill all other legal requirements
necessary to make such use and transfers legal.
Section 9- Liability
The following replaces item 4 in the subsection entitled "Our Liability":
the amount of any other actual direct loss or damage arising from our slight
negligence in case of the violation of essential contractual terms or breach of
this Agreement, up to the greater of ATS 1,500,000 or the charges for the
Product that is the subject of the claim. This limitation does not apply to
damages caused by us with fraud or gross negligence and for express warranty.
Section 16- Governing Law
The following replaces the first paragraph in this Section:
This Agreement is governed by the substantive laws of Austria.
CENTRAL AFRICA
The following terms apply to all countries in Central Africa:
Section 9- Liability
The following replaces item 4 in the subsection entitled "Our Liability":
the amount of any other actual direct loss or damage arising from our negligence
or breach of this Agreement up to the charges for the Product or Service that
is the subject of the claim.
CENTRAL EUROPE AND RUSSIA
The following terms apply to all countries in Central Europe and Russia except
Czech Republic:
Section 1- Definitions
Add the following at the end of the definition of "Service":
Any reference to IBM with regard to Service shall mean the respective local IBM
Company to which such part of the Agreement has been assigned.
Section 2- Agreement Structure and Contract Duration
Add the following as a new paragraph before the subsection entitled "Pro
files":
IBM World Trade Corporation's signature may be replaced by a written
confirmation by IBM Central Europe and Russia Inc. or the relevant IBM country
organization, that IBM World Trade Corporation has accepted the subject
Agreement or other documents as applicable.
The following replaces the terms of the subsection entitled "Our Acceptance of
Your Order":
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<PAGE>
Products and Services become subject to this Agreement when we accept your order
by confirming our acceptance of your order in writing, but no later than when
the Products or Services are provided to you.
Section 3- Our Relationship
In the subsection entitled "Responsibilities":
Add the following as the second sentence of item 3:
However, you agree that IBM may disclose the terms of the Agreement and submit
relevant documents to a financial institution under a non-disclosure obligation
if you request deviations from the pre-payment terms. For this purpose, such
information shall not be considered confidential even if so marked.
In item 8 replace the words "local law" with "applicable law".
The following is added to Item 11:
IBM reserves the right to have this Agreement or any part thereof performed by
another IBM organization or designee. The names of the local IBM organizations
and designees are provided in the operations guide.
Add the following as the last items in the Section:
14. IBM's or its designee's performance under this Agreement is subject to
export licensing, and that such licensing is beyond IBM's control and that IBM
does not assume any responsibility for it. You agree to provide any information
necessary to apply for such approvals and to comply with all conditions of such
approvals.
Notwithstanding the definition of your authorization to market Products and
Services, you should be aware that export, relocation or re-direction of
Products and Services and related items is subject to regulations, for example,
of the country of installation, the United States of America and the original
country of export, and may be prohibited by law. It is your responsibility to
comply with any such regulations and to obtain all necessary licenses as
applicable.
We may terminate this Agreement on written notice if we have reason to believe
that you have violated these terms or that such violation is likely to occur;
15. IBM will make any payments under this Agreement at its election in U.S.
dollars or in the local currency of the country in which the responsibilities
have been performed, based on the official exchange rate on the date of payment,
to your bank account held in your name in the country in which the
responsibilities have been performed or in which you are located.
Add the following as the last item in the subsection entitled "Other
Responsibilities":
that, to the extent permitted by applicable law, we may use data about your
organization, including your addresses, contact names, revenue data and any
other types of data you provide under this Agreement (Your Data), for the
purpose of this Agreement, other related purposes including the marketing of,
and provisions of information about, Products, offerings and other activities,
and for any other business purpose.
Additionally, you agree that for the above purposes we may disclose or transfer
Your Data to any of our Related Companies (which may also use and transfer Your
Data as described) and to third parties. Including subcontractors and
consultants. You agree that Your Data may be transferred to such Related Company
or third party in any country whether or not a member of the European Union.
To the extent that Your Data comprises data about a natural person (for example,
a contact name), you agree to inform that person of the purpose for which such
data are disclosed to us, to obtain their informed consent to that disclosure
and the subsequent use or transfer of that data by us, and to fulfill all other
legal requirements necessary to make such use and transfers legal.
Section 16- Governing Law
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<PAGE>
Change the title of the "Governing Law" section to "Governing Law and
Arbitration/Jurisdiction".
The following replaces the first paragraph in this Section:
All disputes arising out of this Agreement or related to its violation,
termination or nullity shall be finally settled under Rules of Arbitration and
Conciliation of the Federal Economic Chamber in Vienna (Vienna Rules) by three
arbitrators appointed in accordance with these rules. The arbitration shall be
held in Vienna, Austria and the official language of the proceedings shall be
English. The decision of the arbitrators shall be final and binding upon both
parties and therefore the parties pursuant to paragraph 598 (2) of the Austrian
Code of Civil Procedure expressly waive the application of paragraph 595 (1)
Figure 7 of the said code. The clause set forth above shall, however, in no way
limit IBM's right to institute proceedings in any competent court.
This Agreement is governed by the substantive laws of Austria exclusive or its
conflict of laws provisions.
CZECH REPUBLIC
Section 3. Our Relationship
Add the following as the last item in the subsection entitled "Other
Responsibilities":
that, to the extent permitted by applicable law, we may use data about your
organization, including your addresses, contact names, revenue data and any
other types of data you provide under this Agreement (Your Data), for the
purpose of this Agreement, other related purposes including the marketing of,
and provisions of information about, Products, offerings and other activities,
and for any other business purpose.
Additionally, you agree that for the above purposes we may disclose or transfer
Your Data to any of our Related Companies (which may also use and transfer Your
Data as described) and to third parties, including subcontractors and
consultants. You agree that Your Data may be transferred to such Related Company
or third party in any country whether or not a member of the European Union.
To the extent that Your Data comprises data about a natural person (for example,
a contact name), you agree to inform that person of the purpose for which such
data are disclosed to us, to obtain their informed consent to that disclosure
and the subsequent use or transfer of that data by us, and to fulfill all other
legal requirements necessary to make such use and transfers legal.
Section 18- Governing Law
Add the following as the second paragraph of this Section:
All disputes arising out of this Agreement or related to its violation,
termination or nullity shall be finally settled by Commercial Court in Prague.
ESTONIA
Section 15- Governing Law The following replaces the first paragraph of this
Section:
All disputes arising in conjunction with this Agreement shall be settled in
arbitration. Each party shall appoint an arbitrator and the parties shall
jointly appoint the Chairman. If the parties can not agree on who the Chairman
will be, then the Central Chamber of Commerce in Helsinki will appoint the
Chairman. In arbitration, the Law on Arbitration will be binding. The
arbitrators shall come together in Helsinki.
Finnish law will apply.
FRANCE
Section 16- Governing Law
Add the following as the second paragraph of this Section:
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<PAGE>
All disputes arising out of this Agreement or related to its violation or
execution, including summary proceedings, shall be settled exclusively by the
Commercial Court of Paris.
GERMANY
Section 1- Definitions
Add the following at the end of the definition of End User:
The End User may also be a lessor when it finances Products for use by a
designated End User and a Certification is signed by the lessor and the
designated End User.
Section 3- Our Relationship
Add the following to the beginning of item 5 in the subsection entitled "Other
Responsibilities":
notwithstanding the regulations set forth in 354a HGB.
Add the following in bold typeface, as the last item of the subsection entitled
"Other Responsibilities":
that we may use data about your organization, including your addresses, contact
names, revenue data and any other types of data you provide under this Agreement
including personal data (Your Data), for the purpose of this Agreement, other
related purposes including the marketing of, and provisions of information
about, Products, offerings and other activities, and for any other business
purpose.
Additionally, you agree that for the above purposes we may disclose or transfer
Your Data to any of our Related Companies (which may also use and transfer Your
Data as described) and to third parties, including subcontractors and
consultants. You agree that Your Data may be transferred to such Related Company
or third party in any country whether or not a member of the European Union.
To the extent that Your Data comprises data about a natural person (for example,
a contact name), you agree to inform that person of the purpose for which such
data are disclosed to us, to obtain their informed consent to that disclosure
and the subsequent use or transfer of that data by us, and to fulfill all other
legal requirements necessary to make such use and transfers legal.
Section 9- Liability
The following replaces item 4 in the subsection entitled "Our Liability":
The amount of any other actual direct loss or damage arising from our slight
negligence in case of the violation of essential contractual terms or breach of
this Agreement, up to the greater of DM 1.000.000 or the charges for the Product
that is the subject of the claim. This limitation does not apply to damages
caused by us with fraud or gross negligence and for express warranty.
IRELAND
Section 9- Liability
The following replaces the fourth item in the subsection entitled "Our
Liability":
The amount of any other actual direct loss or damage arising from our negligence
or breach of this Agreement up to the greater of U.S. $100,000 (or equivalent)
or 125% of the charges for the Product or Service that is the subject of the
claim.
Add the following as the last item in the subsection entitled "Items for Which
We Are Not Responsible":
except as expressly provided in these terms and Section 12 of the Sale of Goods
Act 1893 as amended by (Section 39 of) the Sale of Goods and Supply of Services
Act 1980, all conditions and warranties (express or implied, statutory or
otherwise) are excluded, including without limitation any warranties implied by
the Sale of Goods Act 1893 as amended by the Sale of Goods and Supply of
Services Act 1980.
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<PAGE>
ITALY
Section 2- Agreement Structure and Contract Duration
Add the following as the last paragraph of the subsection entitled "Acceptance
of the Terms in a Transaction Document":
You must give your express acceptance of specific clauses.
Section 3- Our Relationship
Add the following as the last item of the subsection entitled "Other
Responsibilities":
that we may use data about your organization, including your addresses, contact
names, revenue data and any other types of data you provide under this Agreement
(Your Data), for the purpose of this Agreement, other related purposes including
the marketing of, and provisions of information about, Products, offerings and
other activities, and for any other business purpose.
Additionally, you agree that for the above purposes we may disclose or transfer
Your Data to any of our Related Companies (which may also use and transfer Your
Data as described) and to third parties, including subcontractors and
consultants. You agree that Your Data may be transferred to such Related Company
or third party in any country whether or not a member of the European Union.
To the extent that Your Data comprises data about a natural person (for example,
a contact name) or a legal person (for example, your customers data), you agree
to inform these persons of the purpose for which such data are disclosed to us,
to obtain their informed consent to that disclosure and the subsequent use or
transfer of that data by us, and to fulfill all other legal requirements
necessary to make such use and transfers legal.
Section 7- Production Status
The following replaces the first sentence:
Each IBM Machine is manufactured from new parts, or new and recycled parts.
Section 9- Liability
The following replaces, in its entirety, the subsection entitled "Our
Liability":
Unless otherwise provided by mandatory law, we are liable only for:
1. payments referred to in the "Patents and Copyrights" section above;
2. damages for bodily injury (including death) and damage to real property
and tangible personal property caused solely by our negligence; and
3. as to any other actual loss or damage arising in all situations involving
non-performance by us pursuant to, or in any way related to, the subject
matter of this Agreement, our liability will be limited to the total
amount you paid for the Product or Service that is the subject of the
claim. For purposes of this Item, the term "Product" includes Licensed
internal Code and Materials.
This limit also applies to any of our subcontractors and Program
developers. It is the maximum for which we and our subcontractors and
Program developers are collectively responsible.
The following replaces in its entirety the terms in the subsection entitled
"Items for Which We Are Not Liable":
Unless otherwise provided by mandatory law, we, our subcontractors and our
Program developers are not liable for any of the following:
1. third party claims against you for damages (other than those under the
first two items above in the subsection entitled "Our Liability"):
2. loss of, or damage to, your records or data; or
3. indirect damages, even if we are informed of their possibility.
Section 16- Governing Law
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<PAGE>
Add the following as the second paragraph in this Section:
All disputes arising out of this Agreement or related to its violation and
execution shall be exclusively settled by the court of Milan.
LATVIA
Section 16- Governing Law
The following replaces the first paragraph in this Section:
All disputes arising in conjunction with this Agreement shall be settled in
arbitration. Each party shall appoint an arbitrator and the parties shall
jointly appoint the Chairman. If the parties can not agree on who the Chairman
will be, then the Central Chamber of Commerce in Helsinki will appoint the
Chairman. In arbitration, the Law on Arbitration will be binding. The
arbitrators shall come together in Helsinki.
Finnish law will apply.
LITHUANIA
Section 16- Governing Law
The following replaces the first paragraph in this Section:
All disputes arising in conjunction with this Agreement shall be settled in
arbitration. Each party shall appoint an arbitrator and the parties shall
jointly appoint the Chairman. If the parties can not agree on who the Chairman
will be, then the Central Chamber of Commerce in Helsinki will appoint the
Chairman. In arbitration, the Law on Arbitration will be binding. The
arbitrators shall come together in Helsinki.
Finnish law will apply.
SOUTH AFRICA
Section 3- Our Relationship
Add the following as the last item of the subsection entitled "Other
Responsibilities":
that we may use data about your organization, including your addresses, contact
names, revenue data and any other types of data you provide under this Agreement
(Your Data), for the purpose of this Agreement, other related purposes including
the marketing of, and provisions of information about, Products, offerings and
other activities, and for any other business purpose.
Additionally, you agree that for the above purposes we may disclose or transfer
Your Data to any of our Related Companies (which may also use and transfer Your
Data as described) and to third parties, including subcontractors and
consultants. You agree that Your Data may be transferred to such Related Company
or third party in any country whether or not a member of the European Union.
To the extent that Your Data comprises data about a natural person (for example,
a contact name) or a legal person (for example, your customer's data), you agree
to inform these persons of the purpose for which such data are disclosed to us,
to obtain their informed consent to that disclosure and the subsequent use or
transfer of that data by us, and to fulfill all other legal requirements
necessary to make such use and transfers legal.
Section 9- Liability
The following replaces item 4 in the subsection entitled "Our Liability":
the amount of any other actual direct loss or damage arising from our negligence
or breach of this Agreement, up to the charges for the Product or Service that
is the subject of the claim.
SPAIN
BXGT-02-00 11/98 Page 21 of 25
<PAGE>
Section 2- Agreement Structure and Contract Duration
The following replaces the last sentence in the subsection entitled "Contract
Duration":
You are responsible to provide us with three months' written notice if you will
not be renewing this Agreement. We are responsible to provide you with six
months' written notice if we will not be renewing this Agreement.
SWITZERLAND
Section 3- Our Relationship
Add the following as the last item of the subsection entitled "Other
Responsibilities":
that we may use data about your organization, including your addresses, contact
names, revenue data and any other types of data you provide under this Agreement
(Your Data), for the purpose of this Agreement, other related purposes including
the marketing of, and provisions of information about, Products, offerings and
other activities, and for any other business purpose.
Additionally, you agree that for the above purposes we may disclose or transfer
Your Data to any of our Related Companies (which may also use and transfer Your
Data as described) and to third parties including subcontractors and
consultants. You agree that Your Data may be transferred to such Related Company
or third party in any country whether or not a member of the European Union.
To the extent that Your Data comprises data about a natural person (for example,
a contact name) or a legal person (for example, your customer's date), you agree
to inform these persons of the purpose for which such data are disclosed to us,
to obtain their informed consent to that disclosure and the subsequent use or
transfer of that data by us, and to fulfill all other legal requirements
necessary to make such use and transfers legal.
TURKIYE
Section 3- Our Relationship
The following replaces the last item in the subsection entitled
"Responsibilities":
each of us will comply with all laws and regulations (such as the provisions of
the Consumer Protection Law and all related communiques).
Section 7- Production Status
The following replaces the terms in the Section:
IBM fulfills Customer orders for IBM Machines as newly manufactured in
accordance with IBM's production standards.
Section 15.. Governing Law
Add the following as the second paragraph in this Section:
All conflicts arising from this Agreement will be finally settled by the Courts
of Commerce and Execution Offices of the Main Courthouse of Istanbul
(Sultanahmet).
UNITED KINGDOM
Section 9- Liability
The following replaces item 4 in the subsection entitled "Our Liability":
the amount of any other actual direct loss or damage arising from our negligence
or breach of this Agreement up to the greater of U.S. $100,000 (or equivalent)
or 125% of the charges for the Product or Service that is the subject of the
claim.
BXGT-02-00 11/98 Page 22 of 25
<PAGE>
Add the following as item 5 in the subsection entitled "Our Liability":
any breach of the obligations implied by Section 12 of the Sales of Goods Act
1979 or Section 2 of the Supply of Goods and Services Act 1982.
LATIN AMERICA
Listings of the countries and groups of countries follow:
Brazil
Costa Rica
Dominican Republic*
El Salvador*
Guatemala*
Honduras'
Mexico
Nicaragua*
Panama*
Andean
Bolivia
Colombia
Ecuador
Peru
Venezuela
Latin America South
Argentina
Chile
Paraguay
Uruguay
(*) This country is covered by General Business Machines (GBM) and not by IBM
locally.
The following terms apply to all countries in Latin America:
Section 2- Agreement Structure and Contract Duration
The following term replaces Item 1 in the subsection entitled "Conflicting
Terms"
a transaction document if it is a signed document, prevails over those of all
the documents;
The following terms apply in the specific country in Latin America, as noted:
COLOMBIA
Section 1- Definitions
Add the following at the end of the End User definition:
and who is not on the Colombia Denial List.
NORTH AMERICA
Listing of the countries and group of countries follows:
CANADA
CARIBBEAN NORTH DISTRICT
BXGT-02-00 11/98 Page 23 of 25
<PAGE>
Bahamas and its sales territories of:
Turks and Caicos Islands
Barbados and its sales territories of:
Antigua Dominica, Grenada, St Kitts, St Lucia and Tortolla
Bermuda
Jamaica and its sales territory of:
Cayman Islands
Netherlands Antilles and its sales territories of:
St. Maarten, Bonaire and Aruba
Suriname
Trinidad and its sales territory of:
Guyana
UNITED STATES OF AMERICA
The following terms apply to Canada and the United States of America:
Section 12- Internal Use Products
The following replaces the second sentence in the second paragraph in this
Section:
Such Products do not count, unless we specify otherwise in the Exhibit, toward
1) your minimum annual attainment, 2) determination of your discount or price,
as applicable, or 3) determining your marketing or promotional funds.
Section 13- Demonstration, Development and Evaluation Products:
Add the following as the third sentence in the first paragraph in this Section;
Additionally, such Products do not count, unless we specify otherwise in the
Exhibit, toward 1) your minimum annual attainment, 2) determination of your
discount or price, as applicable, or 3) determining your marketing or
promotional funds.
The following terms apply in the specific country in North America. as noted;
CANADA
Section 9- Liability
The following replaces items 2, 3 and 4 in the subsection entitled "Our
Liability":
2) bodily injury (including death), and damage to real property and tangible
personal property caused by our negligence: and
3) the amount of any other actual direct damage arising from our negligence or
breach of this Agreement, including fundamental breach, tort or our
misrepresentation, up to the greater of $100,000 or the charges (if recurring,
12 months' charges apply) for the Product or Service that is the subject of the
claim.
The following replaces item 1 the subsection entitled "Items for Which We Are
Not Liable":
1) third-party claims against you for damages (other than those under the first
two items above in the subsection entitled `Our Liability'):"
Section 16- Governing Law
The following replaces the first paragraph in this Section:
The laws of the Province of Ontario govern this Agreement.
BXGT-02-00 11/98 Page 24 of 25
<PAGE>
CARIBBEAN NORTH DISTRICT
Section 9 - Liability
The following replaces items 2, 3 and 4 in the subsection entitled "Our
Liability":
2) bodily injury (including death), and damage to real property and tangible
personal property caused by our negligence; and
3) the amount of any other actual direct damage arising from our negligence or
breach of this Agreement, including fundamental breach, tort or our
misrepresentation, up to the greater of US $100,000 or the charges (if
recurring, 12 months' charges apply) for the Product that is the subject of the
claim.
The following replaces item 1 in the subsection entitled "Items for Which We Are
Not Liable":
1) third-party claims against you for damages (other than those under the first
two items above in the subsection entitled `Our Liability');"
UNITED STATES OF AMERICA
Section 9- Liability
The following replaces items 2, 3 and 4 in the subsection entitled "Our
Liability":
2) bodily injury (including death), and damage to real property and tangible
personal property caused by our Products; and
3) the amount of any other actual loss or damage, up to the greater of $100,000
or the charges (if recurring, 12 months' charges apply) for the Product or
Service that is the subject of the claim.
The following replaces Item 1 in the subsection entitled "Items for Which We Are
Not Liable":
1) third-party claims against you for damages (other than those under the first
two items above in the subsection entitled `Our Liability');"
Section 16- Governing Law
The following replaces the first paragraph in this Section:
The laws of the State of New York govern this Agreement.
BXGT-02-00 11/98 Page 25 of 25
<PAGE>
International Business Partner Agreement [IBM LOGO]
Attachment for Consolidated Statement
- --------------------------------------------------------------------------------
1. Description
The IBM Lead Company ("we") will provide to the Business Partner Lead
Company ("you") a consolidation of your Invoices and those of your local
Business Partner Companies and others we approve (for the purpose of this
Attachment, collectively referred to as "Business Partner Companies") into
a single billing statement (called a "Consolidated Statement"). The local
IBM Companies also will send invoices to you or, at your request, to the
applicable local Business Partner Companies. There is no charge for the
Consolidated Statement Service.
2. Your Responsibilities
You agree to:
1. give us the names and addresses of your Business Partner Companies
that will be included in the Consolidated Statement;
2. notify your Business Partner Companies that you are receiving this
Service and ensure that they have a copy of the IBM Business Partner
Agreement, or any equivalent agreement, that has been signed by you
and us;
- --------------------------------------------------------------------------------
Each of us agrees that the complete agreement between us about this transaction
consists of 1) this Attachment, any other applicable Attachments and Transaction
Documents, and 3) the IBM Business Partner Agreement (or any equivalent
agreement signed by both of us).
Agreed to: (Business Partner Lead Company name)
StarMedia Network Inc.
By: /s/ Betsy Scolnik
------------------------
Authorized Signature
Name (type or print):
Date:
Agreement Number:
Business Partner Lead Company number:
Business Partner Lead Company address:
29 W 36th Street
New York, NY 10016
Agreed to: (IBM Lead Company name)
International Business Machines Corporation
By: /s/ R.L. Dudley
------------------------
Authorized Signature
Name (type or print):
Date:
Attachment number:
IBM Lead Company address:
3405 W. Dr. M. L. King, Jr. Blvd.
Tampa, FL 33607
Attention: Order Fulfillment Services
- --------------------------------------------------------------------------------
After signing, please return a copy of this Agreement to the
"IBM Lead Company address" shown above.
- --------------------------------------------------------------------------------
3/99 Page 1 of 3
<PAGE>
3. comply with the applicable terms we provide to you covering invoices
you will pay on behalf of organizations outside your Enterprise that
you desire to be included in your Consolidated Statement;
4. let us know which currency you want to use to pay the amount
invoiced to you in your Consolidated Statement. Your currency of
choice is subject to our approval. The approved currency will be
specified in the Consolidated Statement. It is the only currency you
may use to make payment under these terms;
5. pay the following by wire (electronic transfer) --
a. undisputed amounts specified in the Consolidated Statement.
Payment must be made to the bank we designate. You must notify
the responsible IBM Lead Company coordinator of any disputed
items in an invoice. The IBM Lead Company coordinator is
identified on each Consolidated Statement;
b. the late payment fee described in section 3, if applicable.
You will not be responsible for payment of late payment fees
on reasonably disputed items; and
c. any banking fees related to your use of this Service,
including any foreign exchange losses suffered by us due to
your fault: and
6. verify that this Service is adequate to meet your needs.
3. Overdue Payments
Your account will be overdue unless you have paid the full amount
specified in your Consolidated Statement within 30 days after the
statement date. When your account becomes overdue, and for each 30 day
period thereafter, we will charge you a late payment fee equal to 1 1/2%
of the unpaid balance. If payment has not been received within 90 days
after the statement date, we will:
1. suspend Invoice consolidation and send unpaid current invoices and
all future invoices to your local Business Partner Companies, who
will be responsible to pay the invoices upon receipt; and
2. keep open unpaid outstanding Consolidated Statements until payment
has been received by our facilitator bank.
When all outstanding amounts due from you and your Business Partner
Companies have been paid, we will reactivate the Consolidated Statement
Service. However, if any Consolidated Statement is not fully paid after
six months, we will immediately terminate the Consolidated Statement
Service and you will be responsible for the charges associated with our
then canceling outstanding Consolidated Statements with our facilitator
bank. Upon cancellation of a Consolidated Statement, we will refer unpaid
balances to the applicable local IBM Companies for collection under their
terms.
4. Credits and Adjustments
Credit entries referring to a previous month's invoice will be converted
to the single currency specified in the Consolidated Statement, using the
current month's foreign exchange rate, not the foreign exchange rate in
effect for the previous month. Invoices received prior to the
consolidation date from a local IBM Company will be included in your
monthly consolidated statement. Invoices received after the consolidation
date will be included in the next month's Consolidated Statement.
5. Termination
You may terminate this Attachment and discontinue your use of the Service
provided under this Attachment, at the end of any month, by giving one
month's written notice to us.
3/99 Page 2 of 3
<PAGE>
We may terminate this Attachment and discontinue the provision of the
Service provided under this Attachment upon three months' written notice
to you, and for late payment as described in section 3 above.
Your obligation to pay in full to us certain charges (for example,
applicable late fees) will survive the termination of this Attachment or a
Consolidated Statement. If applicable, we will inform you of the charges
you are required to pay.
3/99 Page 3 of 3
<PAGE>
[IBM LOGO] Business Partner Agreement
Statement of Work for Custom Solution
- --------------------------------------------------------------------------------
1. Term
This Statement of Work for Custom Solution ("SOW") began upon execution of
the Letter of Authorization to Begin Services between IBM and StarMedia
Networks, dated February 10, 1999, ("Start Date") and shall end
concurrently with the term of your IBM Business Partner Agreement.
2. Definitions
a. "Dialer and Registration Client program" (DRC) shall mean the IBM
owned interactive, communication driven, event-oriented code,
including enhancements and maintenance modifications thereto, which
provides automated dialer, setup and help screen function to the
branded Internet access that will be provided to StarMedia Network
for access to the IBM network and/or IBM Global Network.
b. "StarMedia-branded" shall mean products or services bearing or
reflecting the trademarks or service marks of StarMedia Network.
c. "Enhancements" shall mean any changes or additions to the DRC and
related documentation, including new releases or updates and all
local versions, that improve function, add new function, or improve
performance by changes in system design or coding.
d. "Internet Access Kit" shall mean packaging material, documentation
supplied with and/or containing the DRC customized for StarMedia
Network, StarMedia Network and third party trademarks or service
marks required by all parties.
- --------------------------------------------------------------------------------
Each of us agrees that the complete agreement between us about this transaction
consists of 1) this Statement of Work, 2) the IBM Business Partner Agreement and
its applicable Attachments (or any equivalent agreement signed by both or us),
and 3) other applicable Transaction Documents.
Agreed to
StarMedia Network Inc.
By: /s/ Betsy Scolnik
------------------------
Authorized Signature
Name(type or print): Betsy Scalnik
Date: 3/31/99
Enterprise number:
Business Partner address:
29 W. 36th Street
New York, NY 10018
Agreed to:
International Business Machines Corporation
By: /s/ R.L. Dudley
------------------------
Authorized Signature
Name(type or print): R.L. Dudley
Date: 4-1-99
Agreement number:
Custom Solution number:
IBM Office address:
3405 W. Dr. M. L. King, Jr. Blvd.
Tampa, FL 33607
Attention: Order Fulfillment Services
- --------------------------------------------------------------------------------
After signing, please return a copy of this Statement of Work
to the IBM Office address above.
- --------------------------------------------------------------------------------
March 31, 1999 Page 1 of 6
<PAGE>
3. Description
IBM will provide to you, as a Service ("Custom Solution"), a package of
programs ("Internet Access Kit" or "IAK") that you will remarket to your
End Users for accessing the Internet through the IBM Internet Connection
Service. End Users install the IAK on personal computers that they
provide. We assist End Users with installing the IAK and registering and
connecting to your service. We will customize the IAK program (for
example, to access a World Wide Web home page of your choice) and the
packaging of the IAK (for example, to identify your company). We provide
an Internet electronic mailbox for each registered User Identification.
Each End User will contract with you via an Agreement for Access to
Internet Services and its associated fee schedule that appear when the End
User initially installs the IAK and registers for the Service and which
the End User accepts by using the Service. We will charge the End User for
IBM Internet Connection Service usage by invoicing a credit card number
that the End User provides us during registration.
An End User of the IBM Internet Connection Service may access a range of
Internet applications and utilities such as e-mail, news groups and the
World Wide Web. Some of the networks through which an End User may access
the Internet will be neither owned nor under the control of IBM. We
provide the entry point through which the End User may access these other
networks and the Internet.
End Users that register for your Internet Connection Service will be
identified with a unique identification code ("Offer Code") we assign to
you. This Offer Code enables us to recognize the IAKs you distribute.
IBM does not provide any information or data content hosting services to
you under this SOW and assumes no liability for data or information you
may provide to End Users of the IAK or others.
Neither party makes any representations, or assumes or creates any
obligations, on behalf of the other.
3.1 IAK Components
The IAK consists of:
1. the following programs and documentation on CD-ROM media:
a. an IBM Dialer and Registration Client program ("DRC"),
b. a third party Transmission Control Protocol/Internet Protocol
("TCP/IP") program,
c. a third party World Wide Web browser program, either Microsoft
Internet Explorer or Netscape Navigator as selected by
StarMedia Network, including an integrated e-mail program, and
d. files containing an online user's installation guide; and
2. the following hard copy documents:
a. an IBM Program License Agreement for the IAK branded for
StarMedia Network; and
b. End User instructions for Installing the IAK branded for
StarMedia Network, registering for the Service, and requesting
assistance from IBM.
The DRC provides:
1. dialing to the IBM Internet Connection Service. End Users can dial
any access number provided by IBM Global Services. End Users are
responsible for selecting their initial dial access number during
registration. End Users may subsequently change their dial access
number; and
2. End User registration to the IBM Internet Connection Service. This
includes presenting the End User with the Agreement for StarMedia
Network Access to Internet Services, which contains the terms for
use of the IBM Internet Connection Service, and a fee schedule
specifying the charges
March 31, 1999 Page 2 of 6
<PAGE>
for the IBM Internet Connection Service usage. StarMedia Network may
include customized header and trailer text around IBM'S standard
service agreement and licensing terms.
The IAK Is provided for installation on personal computers running
Windows(R) 3.1, Windows(R) 95, Windows(R) 98, or Windows(R) NT 4.0 with
Service Pack 3 only, and Apple(R) Macintosh. We license TCP/IP programs,
World Wide Web browser programs, and e-mail programs from third party
providers, and we provide them in the IAK as a convenience to End Users.
IBM (or its licensors) retains all title and ownership of the IAK; the
individual programs in the IAK; and any fixes, updates, enhancements or
revisions thereto. IBM reserves the right to change the program components
of the AK without notice to you. You or any other party shall have no
right to modify the IAK or to create derivative works thereof You agree
not to:
1. reverse assemble, reverse compile, or translate the AK programs
except as permitted bylaw without the possibility of contractual
waiver;
2. transfer, rent, lease, or assign the IAK programs, or any copy of
them, except as specifically set forth herein; and
3. modify, patch, alter, or otherwise change the IAK programs, except
as specifically set forth herein
You agree not to alter the terms of the IBM Program License Agreement, the
Agreement for IBM Global Network Access to Internet Services, and its
associated fee schedule, except by adding a customized header and trailer
to which we mutually agree.
THE SERVICE AND ANY PROGRAM OR PRODUCT WE PROVIDE TO YOU AS PART OF THE
SERVICE ARE PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS
OR IMPLIED, INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WE AND OUR LICENSORS
DO NOT WARRANT THAT THE SERVICE OR ANY PROGRAM OR PRODUCT WE PROVIDE WILL
MEET YOUR REQUIREMENTS OR THE REQUIREMENTS OF THE END USERS, OR THAT THEIR
OPERATION WILL BE UNINTERRUPTED OR ERROR-FREE. IN ADDITION, WE DO NOT
WARRANT THAT THE SERVICE OR ANY PROGRAM OR PRODUCT WE PROVIDE TO YOU AS
PART OF THE SERVICE IS CAPABLE OF CORRECTLY TRANSMITTING, PROCESSING,
PROVIDING AND/OR RECEIVING DATE DATA WITHIN AND BETWEEN THE TWENTIETH AND
TWENTY-FIRST CENTURIES.
3.2 Traveling User Support
Traveling User Support is intended for incidental travel usage and not to
be used for longer than thirty consecutive days or for more than ninety
nonconsecutive days in a year. Traveling User Support is provided under
the terms and conditions of the IBM Global Services local country network
services provider. End Users who use the IAK and the IBM Internet
Connection Service to access the Internet from countries other than the
United States are responsible for complying with all applicable laws,
including (but not limited to) all matters related to the import and
export of technical data, computer equipment, and software. End Users are
responsible for local country dial telephone access charges as applicable,
3.3 IAK Program Customization
We will provide you with a copy of the "Customizing the IBM Internet
Connection" document, which specifies the guidelines for customization of
the IAK programs. At your request, we will customize the programs to meet
your requirements subject to these guidelines. IBM agrees that we will
customize the IAK Programs so the entire End User interface shall be in
Spanish or Portuguese languages, depending on the local native language.
March 31, 1999 Page 3 of 6
<PAGE>
3.4 IAK Packaging Customization
StarMedia Network shall have the right to distribute the IAK to personal
computer manufacturers and vendors.
We will provide you a copy of the "IBM Internet Connection Packaging
Guidelines" document, and all customized packaging shall be in strict
accordance with this document and this Section 3.4. At your request, we
will customize the packaging to meet your requirements subject to these
guidelines. You agree to provide IBM a sample or representative mockup of
your desired IAK package. CD-ROM labels, and flyers and/or hard copy
inserts for our review and you agree to make changes that IBM may request
before distributing the AK.
Only StarMedia Network's branding and branding of third parties designated
by StarMedia Network will appear on the IAK shipping package, CD-ROM,
installation screens; registration; icon and program group names: default
installation directory; dialer message screens during installation and
documentation; marketing materials, press releases, promotional or sales
presentations; and in advertising, (collectively "Marketing Materials")
Some IBM and third party trademarks, service marks, and logos may be
necessary on the packaging to refer to product content, as opposed to
branding. Each party acknowledges the other party's rights in and to their
respective trademarks, service marks. logos, and other proprietary marks
(collectively "Marks"). Nothing in this SOW shall be construed to grant
either party any rights in or to the other party's Marks.
Each party shall use its specific trademark(s), trade name(s) and product
name(s) (designated as either "IBM Marks" (which shall include third party
Marks licensed to IBM) or "Your Marks") as mutually agreed between the
parties from time to time in conjunction with the advertising and
marketing of the IAK and the IBM Service. Each party shall be responsible
for determining the artwork and communication standards related to the use
of its Marks. The parties shall mutually review and comment on any
proposed Marketing Materials which reference its Marks and take reasonable
steps (at such part/s sole expense) to modify such Marketing Materials if
necessary. Each party must obtain written approval from the other in order
to use the other's Marks.
The use of each party's Marks shall comply with any local laws or customs.
Any goodwill generated by the use of the IBM Marks shall accrue to the
sole benefit of IBM or its licensors, as the case may be. Any goodwill
generated by the use of Your Marks shall accrue to your sole benefit.
Neither party nor its successors in interest shall (or shall cause others
to) challenge, file suit, or initiate proceedings, or contest in any
manner the other party's ownership rights or rights to use such party's
Marks to identify any goods of such party.
The owner or licensor of the Mark may discontinue the use of any or all of
its Marks on any Marketing Materials or the like if the other party fails
to abide by the conditions set forth herein, or if the owner or licensor
of the Mark is threatened with a claim of infringement by a third party
relating to the use of such Mark.
Neither party shall disclose, publish or release any advertising,
publicity, press release or the like which references the other party's
name or Marks, without the prior written approval of the other party.
3.5 IAK Indemnification
Notwithstanding anything to the contrary, IBM shall indemnify, defend, and
hold you and your directors, officers, and employees harmless from and
against any claim or action and expenses (including reasonable attorney's
fees and court costs) arising out of your marketing of the DRC where it is
alleged that the DRC contains defects or the DRC or IBM Marks infringe on
any US copyright trademark, trade secret, patent, or any other proprietary
right protected under US law of any third party or where IBM has
misrepresented the capabilities of the DRC. Such indemnification shall be
predicated upon your providing IBM with prompt written notice of any such
claim; your providing all reasonable assistance and cooperation to IBM in
its defense against such claim; IBM having control over the litigation,
March 31, 1999 Page 4 of 6
<PAGE>
defense of such claim, and any settlement related thereto; and your not
making any admission or taking any action which may be prejudicial to the
defense of the claim or which may adversely affect IBM's ability to
negotiate settlement to the claim.
Notwithstanding the foregoing, IBM will have no liability under this
Section for any claim or suit of copyright, trademark, trade secret,
patent or other intellectual property right infringement to the extent
such claim or suit is based upon the IAK programs (except as otherwise
specifically set forth above relating to IBM's indemnification obligations
for the DRC); the integration, combination, or modification of the DRC or
IAK programs with any other programs or equipment not provided by IBM; or
use of the DRC or IAK programs in a manner not intended by IBM or its
licensors in the respective published specifications.
Notwithstanding anything to the contrary, you shall indemnify, defend, and
hold IBM and its licensors and their respective affiliates, directors,
officers, and employees harmless from and against any claim or action and
expenses (including reasonable attorney's fees and court costs) arising
out of your marketing of the INC where it is alleged that you have
misrepresented the capabilities of the IAK (including, but not limited to.
the DRC and/or the IBM Service) or any other claim relating to your
distribution of the IAK for which IBM is not otherwise liable hereunder.
Such indemnification shall be predicated upon IBM providing you with
prompt written notice of any such claim: IBM providing all reasonable
assistance and cooperation to you in your defense against such claim; your
having control over the litigation, defense of such claim, and any
settlement related thereto; and IBM not making any admission or taking any
action which may be prejudicial to the defense of the claim or which may
adversely affect your ability to negotiate settlement to the claim,
3.6 IAK Enhancements or Other Modifications
IBM shall promptly notify StarMedia Networks of any proposed enhancements
(other than bug fixes) not less than 45 days prior to such enhancements
becoming available, and subject to StarMedia Network's consent, which
consent shall not be unreasonably withheld or delayed, IBM shall include
such enhancement in the IAK and notify StarMedia Network's End Users by
e-mail of such enhancement, or such notification will be posted on
StarMedia Network's Internet home page. IBM shall offer such enhancements
or other modifications (1) if provided to other similar regular customers
of IBM at no additional charge, then at no additional charge to you,
and/or your End Users, or (2) if provided to other users at an additional
charge, then at an additional charge to you and/or your End Users, such
charge not to exceed the additional charge that IBM charges to other
similar End Users. Such enhancements shall automatically become a part of
the IAK.
3.7 Registration
Each End User is responsible for complying with all applicable terms and
conditions, including but not limited to, payment of all applicable
charges. During registration, each End User will be asked to provide,
among other information, your Offer Code and their credit card number to
which charges will be invoiced.
3.8 Ordering the IAK
When you place your order for this Custom Solution, specify that you are
using the "Bulk order option." You must order the IAK in minimum order
quantities of 100,000 with the lead times specified in the table below.
IBM grants you the right to distribute to your End Users these IAKs only
in the countries specified in your Solution Provider Profile, Nothing
herein shall be deemed to grant you a license to distribute any program in
the IAK separately or otherwise unbundle the IAK. You are responsible for
the distribution of the IAK and for all costs associated with the
distribution of the IAK.
- --------------------------------------------------------------------------------
IAK Order Quantity Minimum Lead Order Time
- --------------------------------------------------------------------------------
100,000 - 499,999 2 weeks
- --------------------------------------------------------------------------------
500,000 - 999,999 3 weeks
- --------------------------------------------------------------------------------
1,000,000 or greater 4 weeks
- --------------------------------------------------------------------------------
March 31, 1999 Page 5 of 6
<PAGE>
4. Your Additional Responsibilities
You agree:
1. not to promote the use of applications involving the transmission of
voice or fax with this Custom Solution. This does not apply to third
party advertisements about their separate services that do not use
this Custom Solution;
2. to be responsible for invoicing and collection of any fees which you
charge to users of the Internet who access your home page
information and data content; and
3. to be solely responsible for all support relating to the use of your
home page information and data content and for ensuring that your
information and data does not contain any data or information which
violates any law or regulation.
5. Charges
5.1 IAK Customization and Updates
You agree to pay:
1. a $[****] one time charge for our customization of the IAK
packaging and a $[****] one time charge for each artwork
change you request after our initial production of the IAK
packaging. This version will allow StarMedia Network to brand
the IAK with its brand, graphics, trademarks and service marks
or those of a third party designated by StarMedia Network,
with the exception of trademarks, service marks required by
our third party software providers. StarMedia Network is
responsible for providing all artwork, graphics in accordance
with "Customizing IBM Internet Connection Packaging
Guidelines.
2. a $[****] charge for each subsequent changes to the
packaging, per occurrence;
3. a $[****] one time charge for our customization of the IAK
programs for each operating system client code based upon the
parameters outlined in "Customizing IBM Internet Connection
Service;" and
4. a $[****] one time charge for any program customization you
request after the completion of our initial program testing.
5.2 CD-ROM Manufacturing
You agree to pay $1.50 for each CD-ROM ordered under this Statement of
Work for CD-ROM manufacturing. This charge does not include shipping
costs, taxes, and broker's fees which will be mutually agreed upon by the
parties and documented separately from this Statement of Work.
6. Changes and Termination
Changes to and termination of this SOW are subject to the terms of your
IBM Business Partner Agreement.
March 31, 1999 Page 6 of 6
**** Represents material which has been redacted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities Act of 1933,
as amended.
<PAGE>
IBM Business Partner Agreement [IBM LOGO]
International Attachment
- --------------------------------------------------------------------------------
The terms at this Attachment are in addition to and prevail over the terms of
the IBM Business Partner Agreement.
Under the terms of this Attachment, the Business Partner Lead Company agrees to
coordinate the activities of its local Business Partner Companies, and the IBM
Lead Company agrees to coordinate the activities of the local IBM organizations
(local IBM Companies). All such local Business Partner Companies and local IBM
Companies are specified in your Profile in the Schedule of Participating Local
Companies. The IBM Lead Company may, through notice to the Business Partner Lead
Company, terminate approval or any such local Business Partner Company.
The "Schedule of Local Participating Companies" identifies for each country the
Local Business Partner Company and the Local IBM Company that are approved to
transact under this Agreement For each such country 1) all references in the
Agreement to "Country Name" are deemed to be the country associated with the two
parties, 2) terms that are unique to such country are included in each of the
Agreement's applicable documents, and 3) Products and Services acquired from the
Local IBM Company may be marketed only in such country unless specified
otherwise in this Agreement.
The Business Partner Lead Company will distribute copies of the Agreement
(including this Attachment) to their local Business Partner Companies. The IBM
Lead Company will distribute copies of the Agreement (including this Attachment)
to their local IBM Companies. The local Business Partner Company and the local
IBM Company will acknowledge between each other, written acceptance of the
Agreement either by the initial order or Products and Services under this
Agreement, or by other written confirmation.
As the Business Partner Lead Company, you warrant that, in accepting the terms
of this Attachment, all your local Business Partner Companies are Related
Companies.
The Agreement (including this Attachment, but not necessarily transaction
documents and the Exhibit) is written in English.
BPIA-00 1/99 Draft 3 Page 1 of 1
<PAGE>
QUOTA PURCHASE AGREEMENT
Dated as of April 13, 1999
by and among
STARMEDIA NETWORK, INC.,
STARMEDIA DO BRASIL LTDA.,
QUOTAHOLDERS OF KD SISTEMAS
DE INFORMACAO LTDA.,
KD SISTEMAS
DE INFORMACAO LTDA.
and
INDIVIDUALS LISTED HEREIN
<PAGE>
THIS QUOTA PURCHASE AGREEMENT (with Schedules and Exhibits attached hereto
and made part of, this "Agreement"), dated as of April 13, 1999, is by and among
STARMEDIA NETWORK, INC., a Delaware corporation (the "Parent"), STARMEDIA DO
BRASIL LTDA., a Brazilian sociedade por quotas de responsabilidade limitada (the
"Buyer"), KD SISTEMAS DE INFORMACAO LTDA., a Brazilian sociedade por quotas de
responsabilidade limitada (the "Company"), GGV2000 SISTEMAS DE INFORMACAO LTDA.,
a Brazilian sociedade por quotas de responsabilidade limitada ("GGV2000"),
GUSTAVO GUILLERMO VIBERTI, resident and domiciled in the city of Rio de Janeiro,
state of Rio de Janeiro at Av. Nossa Senhora de Copacabana n(0) 827, suite 1101,
bearer of Identity Card R.G. No. 0.997.199 and enrolled with the C.P.F. under
No. 885.816.757-00 ("Viberti"), FABIO GONCALVES DE OLIVEIRA, resident and
domiciled in the city of Rio de Janeiro, state of Rio de Janeiro at Praia de
Botafogo, 526, suite 1402 Rio de Janeiro, bearer of Identity Card R.G. No.
06.619.743-5 and enrolled with the C.P.F. under No. 822.139.607-72 ("Oliveira,"
together with GGV2000 and Viberti, each a "Seller" and collectively, the
"Sellers"), GUILLERMO JOSE VIBERTI, resident and domiciled in the city of Rio de
Janeiro, state of Rio de Janeiro, at Rua Barao de Mesquita n(0) 850, suite 203,
bearer of Identity Card R.G. No. W 549.579-U and enrolled with the C.P.F. under
No. 527.932. 577, ROTHKO EMPREENDIMENTOS PARTICIPACOES E ASSESSORIA LTDA., a
limited liability company with headquarters in the City of Rio de Janeiro, State
of Rio de Janeiro, at Averida Passos n. 101-11(0) andar-parte, enrolled with
Taxpayers' General Registry (CGC-MF) under the number 35.794.346/0001-93, herein
represented by its managing partner, MARCOS SPINOLA MONTENEGRO, Brazilian
citizen, single, engineer, resident and domiciled in the City of Rio de Janeiro,
State of Rio de Janeiro, at rua Afranio de Melo Franco, n(0) 70 - apto. 101,
bearer of Identity Card R.G. No. W 79-1-04372-0 issued by CREA-RJ, and enrolled
with Individual Taxpayers' Registry (CPF-MF) under the number 627.685.737-87,
CARLOS AUGUSTO MONTENEGRO, resident and domiciled in the city of Rio de Janeiro,
state of Rio de Janeiro, at Epitacio Pessoa, n(0) 2244, suite 801, bearer of
Identity Card R.G. No. 2.894.894 and enrolled with the C.P.F. under No.
316.943.147-15, LUIS PAULO SAADE MONTENEGRO, resident and domiciled in the city
of Rio de Janeiro, state of Rio de Janeiro, at Rua Barao de Jaguaribe n(0) 313,
suite 102, bearer of Identity Card R.G. No. W 4.008.913-8 and enrolled with the
C.P.F. under No. 630.578.917-72 and JOSE CAETANO PAULA DE LACERDA, resident and
domiciled in the city of Rio de Janeiro, state of Rio de Janeiro, at Rua General
Tasso Fragoso n(0) 33, Bl 01, suite 301, bearer of Identity Card R.G. No. W
774.383 SSP/BA and enrolled with the C.P.F. under No. 111.439.085-20 (each,
including Viberti and Oliveira, a "Former Quotaholder," and collectively along
with Viberti and Oliveira, the "Former Quotaholders"). Each of the Former
Quotaholders and the Sellers shall hereinafter sometimes be referred to
individually as a "Quotaholder" and collectively as the "Quotaholders."
WHEREAS, the Buyer, the Parent, the Former Quotaholders and the Company
have entered into a Quota Purchase Agreement, dated as of March 14, 1999 (the
"Former Quota Purchase Agreement"), pursuant to which the Former Quotaholders
have agreed to sell to the Buyer, and the Buyer has agreed to purchase from the
Former Quotaholders, all of the issued and outstanding quotas of the Company
(the "Company Quotas");
<PAGE>
WHEREAS, Section 11.11 of the Former Quota Purchase Agreement permits the
Former Quotaholders to transfer, in one or a series of transfers (a "Transfer"),
the Company Quotas to any Brazilian company which is wholly owned, directly or
indirectly, by the Former Quotaholders, provided that, such transferees shall be
obligated to sell the Company Quotas to the Buyer;
WHEREAS, pursuant to Section 11.11 of the Former Quota Purchase Agreement,
the Former Quotaholders have transferred, or caused to be transferred, to the
Sellers, the Company Quotas and the Sellers are the beneficial and record
holders of the Company Quotas; and
WHEREAS, the Sellers desire to sell to the Buyer, and the Buyer desires to
purchase from the Sellers, the Company Quotas, upon the terms and subject to the
conditions of this Agreement; and
NOW, THEREFORE, in reliance upon the representations, warranties and
covenants made herein and in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SALE AND PURCHASE OF QUOTAS
Sale and Purchase of Quotas.
At the closing provided for in Section 2.01 (the "Closing") and upon
the terms and subject to the conditions of this Agreement, the Sellers shall
sell to the Buyer, and the Buyer shall purchase from the Sellers, the Company
Quotas in consideration of a purchase price (the "Purchase Price") equal to:
Six Million U.S. Dollars (US$6,000,000), subject to adjustments,
if any, as set forth in Sections 1.02(b) and (d), payable to the Sellers as
provided in Section 1.02(a) (the "Guaranteed Payment"); and
the additional amounts specified in Schedule 1.01(b) attached
hereto, subject to the conditions and adjustments set forth therein and in
Section 1.02(d), payable to the Sellers as provided in Section 1.02(c) (the
"Additional Payments"), which amounts shall be calculated by the Buyer no later
than March 15, 2000 (the "Calculation Date"). The sale and purchase of the
Company Quotas hereunder and the other transactions contemplated by this
Agreement and the Transaction Agreements (as defined in Section 1.04) shall
hereinafter be referred to collectively as the "Transactions."
Payment of Price.
The Parent and the Buyer shall pay to the Sellers the Purchase Price as
set forth in this Section 1.02.
<PAGE>
Closing Payment. (i) At the Closing, the Buyer shall deliver to
the Sellers Five Million U.S. Dollars (US$5,000,000) in immediately available
funds by check or by wire transfer to an account designated by the Sellers no
less than two (2) business days prior to the Closing Date (as defined in Section
2.01).
(ii)The balance of the Guaranteed Payment, an amount equal to
One Million U.S. Dollars (US$1,000,000), subject to adjustment, if any, as
set forth in Sections 1.02(b) and (d) (the "Balance Payment"), shall be
paid to the Sellers out of the Escrow Funds (as hereinafter defined) as
provided in Section 1.02(b)(ii) on March 31, 2000 (the "Balance Payment
Date").
Escrow Deposit. At the Closing, the Parent shall deposit with
the Chase Manhattan Bank, a New York state chartered bank (the "Escrow Agent"),
an amount equal to Four Million U.S. Dollars (US$4,000,000) (together with any
additional amounts added thereto or subtracted therefrom, the "Escrow Funds") to
secure the Balance Payment, the Additional Payments and the Quotaholders'
obligation to indemnify the Buyer Indemnitees (as defined in Section 9.01) under
this Agreement. The Escrow Funds shall be held by the Escrow Agent pursuant to
the terms of an escrow agreement substantially in the form of Exhibit C attached
hereto (the "Escrow Agreement"). In addition, if the amount of the Additional
Payments, as calculated by the Buyer pursuant to Schedule 1.01(b), exceeds Three
Million U.S. Dollars (US$3,000,000), the Parent shall, no less than ten (10)
business days after the Calculation Date, deposit such excess amount with the
Escrow Agent, which amount shall be added to the Escrow Funds. In the
alternative, if the amount of the Additional Payments, as calculated by the
Buyer pursuant to Schedule 1.01(b), is less than Three Million U.S. Dollars
(US$3,000,000), the Parent and the Sellers shall, and hereby agree to, execute
and deliver to the Escrow Agent, no less than ten (10) business days after the
Calculation Date, a joint written instruction, instructing the Escrow Agent to
release and distribute immediately to the Parent an amount equal to the
difference between the amount of the Additional Payments as calculated by the
Buyer pursuant to Schedule 1.01(b) and Three Million U.S. Dollars
(US$3,000,000).
Subject to Sections 1.02(b)(iv) and 1.02(d), the Parent and
the Sellers shall, and hereby agree to, execute and deliver to the Escrow
Agent, no less than five (5) business days prior to the Balance Payment
Date, a joint written instruction, instructing the Escrow Agent to release
and distribute to the Sellers on the Balance Payment Date, the Balance
Payment or that amount of the Balance Payment available in the event that
the Escrow Funds have been reduced pursuant to either Section 1.02(b)(iv)
or Section 1.02(d).
Subject to Sections 1.02(b)(iv) and 1.02(d), the Parent and
the Sellers shall, and hereby agree to, execute and deliver to the Escrow
Agent, no less than five (5) business days prior to each Additional
Payment Date (as hereinafter defined), a joint written instruction,
instructing the Escrow Agent to release and distribute to the Sellers, on
the respective Additional Payment Date, that amount of the Additional
Payments due and payable on such date or that amount of such Additional
Payment available in the
<PAGE>
event that the Escrow Funds have been reduced pursuant to either Section
1.02(b)(iv) or Section 1.02(d).
In the event that a Buyer Indemnitee believes that he is
entitled to indemnification by the Quotaholders under this Agreement and
such Buyer Indemnitee has complied with the notice provisions set forth in
Sections 9.05, 9.06 or 9.07, the Sellers and the Parent shall, and hereby
agree to execute and deliver to the Escrow Agent, no more than ten (10)
business days after receipt by the Quotaholders of a notice of such claim
from a Buyer Indemnitee, a joint written instruction, instructing the
Escrow Agent to release and distribute immediately to such Buyer
Indemnitee, the amount of such claim or the remaining balance of the
Escrow Funds in the event that the amount of such claim exceeds the amount
of the Escrow Funds then available. Amounts paid to a Buyer Indemnitee out
of the Escrow Funds pursuant to this Section 1.02(b)(iv), shall first be
deemed to come from the Balance Payment and then from the Additional
Payments, which amounts shall constitute an adjustment to the Balance
Payment or the Additional Payments, as the case may be, and with respect
to which the Parent and the Buyer shall have no further obligation to the
Sellers.
Additional Payments. The Buyer shall pay to the Sellers the
Additional Payments, if any, in three (3) equal installments on March 31, 2000,
March 31, 2001 and March 31, 2002 (each an "Additional Payment Date"). The
Additional Payments, if any, shall be delivered to the Sellers in immediately
available funds by wire transfer to an account designated by the Sellers no less
than two (2) business days prior to such dates.
Adjustment to Balance Payment and Additional Payments. (i) If
either Viberti or Oliveira breach his respective employment agreement entered
into with the Buyer pursuant to Section 1.04 of this Agreement, the entire
amount of the Balance Payment and the Additional Payments shall be reduced by
twenty-one and six tenths percent (21.6%). If both Messrs. Viberti and Oliveira
breach their employment agreements, the entire amount of the Balance Payment and
the Additional Payments shall be reduced by forty-three and two tenths percent
(43.2%).
(ii) The Sellers and the Parent shall, and hereby agree to execute
and deliver to the Escrow Agent, no more than ten (10) business days after
receipt of a written notice from the Buyer stating that either Mr. Viberti or
Mr. Oliveira or both, has breached his respective employment agreement, a joint
written instruction, instructing the Escrow Agent to release and distribute to
the Parent, that amount of the Escrow Funds by which the Balance Payment and the
Additional Payments have been reduced pursuant to Section 1.02(d)(i).
Late Payments. With respect to the Balance Payment or any
Additional Payment that is due and payable to the Sellers and not the subject of
any dispute, the payment of which is more than ninety (90) days late, the Buyer
shall pay to the Sellers a late fee equal to five tenths percent (0.5%) per
month for every month that such payment has not been paid after the date that
such payment became due and payable to the Sellers.
Delivery of Quotas.
<PAGE>
At the Closing, the Sellers shall deliver to, or cause to be delivered to,
the Buyer all of the Company Quotas by means of executing the appropriate
amendment to the Company Articles (as defined in Section 3.01) in proper form
for transfer, and with all appropriate seals or stamps affixed, as required by
any applicable statute, law, ordinance, rule or regulation ("Applicable Law").
Transaction Agreements.
At the Closing, in addition to this Agreement and the Escrow
Agreement, the parties hereto shall execute and deliver, or cause to be executed
and delivered, the following agreements, which agreements are referred to herein
collectively as the "Transaction Agreements."
The Sellers shall cause each of the Company executives listed on
Schedule 1.04 attached hereto to execute and deliver an employment agreement
(the "Employment Agreements"), dated as of the Closing Date, by and between each
such executive and the Buyer or an Affiliate of the Buyer, substantially in the
form of Exhibit A attached hereto and (ii) each of the Former Quotaholders
listed on Schedule 1.04 shall execute and deliver a non-competition agreement
(the "Non-Competition Agreements") dated as of the Closing Date, by and between
each such Former Quotaholder and the Buyer, substantially in the form of Exhibit
B attached hereto; and
The Buyer shall execute and deliver the Non-Competition
Agreements and shall execute and deliver or cause to be executed and delivered,
the Employment Agreements.
CLOSING
Closing Date.
The Closing of the sale and purchase of the Company Quotas contemplated
hereby shall take place at the offices of Barbosa, Mussnich & Aragao, Avenida
Almirante Barroso 52, 32nd Floor, 20031-000 Rio de Janeiro, Brazil, at 4:00 p.m.
local time, on April 13, 1999, or such other place, time or date as the Buyer
and the Sellers may agree to in writing. The time and date upon which the
Closing occurs is hereinafter referred to as the "Closing Date."
Representations and Warranties of THE SELLERS AND the Company
The Sellers, the Former Quotaholders and the Company each represent and
warrant, jointly and severally, to the Buyer as follows:
Organization, Standing and Power.
<PAGE>
The Company is duly organized, validly existing and in good
standing under the laws of the Federative Republic of Brazil and has full
corporate power and authority and possesses all governmental franchises,
licenses, permits, authorizations and approvals necessary to enable it to own,
lease or otherwise hold its properties and assets and to conduct its businesses
as currently conducted. The Company is duly qualified to do business in each
jurisdiction where the nature of its business or the ownership or leasing of its
properties make such qualification necessary and the failure to so qualify could
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect (as defined in Section 11.03(a)) on the Company. The Company has
delivered to the Buyer true and complete copies of the articles of association
of the Company, as amended to the date of this Agreement (as so amended, the
"Company Articles").
Each of GGV2000, CAPGV Sistemas de Informacao S/A ("CAPGV") and
Rothko Empreendimentos Participacoes e Assessoria Ltda. ("Rothko," together with
GGV2000 and CAPGV, each a "Transferee" and collectively, the "Transferees") is
duly organized, validly existing and in good standing under the laws of the
Federative Republic of Brazil and has full corporate power and authority and
possesses all governmental franchises, licenses, permits, authorizations and
approvals necessary to enable it to own, lease or otherwise hold its properties
and assets and to conduct its businesses as currently conducted. Each Transferee
is duly qualified to do business in each jurisdiction where the nature of its
business or the ownership or leasing of its properties make such qualification
necessary and the failure to so qualify could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on such
Transferee. The Sellers have delivered to the Buyer true and complete copies of
the articles of association of each Transferee, as amended to the date of this
Agreement.
Company Subsidiares; Equity Interests.
Except as set forth on Schedule 3.02 the Company has no Subsidiaries
(as defined in Section 11.03(a)) and does not own, directly or indirectly, any
quotas or capital stock, membership interest, partnership interest, joint
venture interest or other ownership interest in any Person (as defined in
Section 11.03(a)).
Capital Structure.
The capital of the Company is equivalent to One Hundred Ten
Thousand Reais (R$110.000,00) and is divided into One Hundred Ten Thousand
(110.000) quotas, each worth One Real (R$ 1,00), all of which are issued and
outstanding.
Except as set forth above, no quotas or other voting securities
of the Company have been issued, are reserved for issuance or are outstanding.
The Sellers are the record owners of all of the Company Quotas. All outstanding
quotas of the Company Quotas are duly authorized, validly issued, fully paid and
nonassessable and not subject to or issued in violation of any preemptive right,
subscription right or any similar right under any provision of any Applicable
Law, the Company Articles, or any contract to which any Seller or the Company is
a party or otherwise bound. There are not any bonds, debentures, notes or other
indebtedness
<PAGE>
of the Company having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which the
quotaholders of the Company may vote ("Voting Company Debt"). There are not any
options, warrants, rights, convertible or exchangeable securities, commitments,
contracts, arrangements or undertakings of any kind to which the Company is a
party or by which it is bound (i) obligating the Company to issue, deliver or
sell, or cause to be issued, delivered or sold, additional quotas or other
equity interests in, or any security convertible or exercisable for or
exchangeable into any quotas of or other equity interest in, the Company, (ii)
obligating the Company to issue, grant, extend or enter into any such option,
warrant, call right, security, commitment, contract, arrangement or undertaking
or (iii) that give any Person the right to receive any economic benefit or right
similar to or derived from the economic benefits and rights accruing to holders
of any Company Quotas. There are not any outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any quotas of the
Company.
Each Seller represents and warrants that such Seller has good and
valid title to the number of Company Quotas set forth next to such Seller's name
on Schedule 1.01(a) attached hereto, free and clear of all pledges, liens,
charges, mortgages, encumbrances and security interests of any kind whatsoever
(collectively, "Liens"). GGV2000 represents and warrants that it acquired good
and valid title to the Company Quotas set forth next to its name on Schedule
1.01(a), pursuant to a cisao of CAPGV duly authorized by CAPGV's quotaholders in
compliance with Applicable Law and CAPGV's Articles of Association. Each Seller
further represents and warrants that, other than this Agreement, no Company
Quotas are or may become subject to any Lien or voting trust agreement or other
contract, agreement, arrangement, commitment or understanding, including any
such agreement, arrangement, commitment or understanding restricting or
otherwise relating to the voting, dividend rights or disposition of such quotas.
Upon the delivery of the Company Quotas in the manner contemplated under this
Agreement, the Buyer will acquire the beneficial and legal, valid and
indefeasible title to the Company Quotas, free and clear of all Liens.
Authority; Execution and Delivery; Enforceability.
The Company has all requisite corporate power and authority to
execute this Agreement and each of the Transaction Agreements to which it is a
party and to consummate the Transactions. The execution and delivery by the
Company of each Transaction Agreement to which it is a party and the
consummation by the Company of the Transactions has been duly authorized by all
necessary corporate action on the part of the Company. The Company has duly
executed and delivered this Agreement and each Transaction Agreement to which it
is a party, and this Agreement and each Transaction Agreement to which it is a
party constitutes its legal, valid and binding obligation, enforceable against
it in accordance with its terms.
Each Seller has all requisite power, corporate and otherwise, and
authority to execute this Agreement. The execution and delivery by the Sellers
of this Agreement and the consummation of the Transactions has been duly
authorized by all necessary corporate action on the part of GGV2000. Each Seller
has duly executed and delivered this Agreement and this Agreement constitutes
its legal, valid and binding obligation, enforceable against it in accordance
<PAGE>
with its terms.
Each Former Quotaholder represents and warrants he has the
requisite capacity to enter into this Agreement and each Transaction Agreement
to which he is a party and to consummate the transactions contemplated by this
Agreement and each Transaction Agreement to which he is a party, and this
Agreement and the Transaction Agreements to which he is a party have been duly
executed and delivered by him and constitutes his valid and binding obligation,
enforceable against him in accordance with their terms.
No Conflicts; Consents.
The execution and delivery by the Company, the Sellers and the Former
Quotaholder of this Agreement and each Transaction Agreement to which such
person or entity is a party do not, and the consummation of the Transactions and
compliance with the terms hereof and thereof will not, conflict with, or result
in any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or to
increased, additional, accelerated or guaranteed rights or entitlements of any
Person under, or result in the creation of any Lien upon any of the properties
or assets of the Company under, any provision of (i) the Company Articles, (ii)
any contract, lease, license, indenture, note, bond, agreement, permit,
concession, franchise or other instrument to which the Company is a party or by
which any of its properties or assets are bound or (iii) subject to the filings
and other matters referred to in the following sentence, any judgment, order or
decree ("Judgment") or any Applicable Law applicable to the Company or its
properties or assets, other than, in the case of clause (ii) above, any such
items that, individually or in the aggregate, have not had and could not
reasonably be expected to have a Material Adverse Effect on the Company. No
consent, approval, license, permit, order or authorization ("Consent") of, or
registration, declaration or filing with, any federal, state, local or foreign
government or any court of competent jurisdiction, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign (a "Governmental Entity") is required to be obtained or made by or with
respect to the Company in connection with the execution, delivery and
performance of this Agreement or any Transaction Agreement to which it is a
party or the consummation of the Transactions.
Financial Statements; Undisclosed Liabilities.
Schedule 3.06 sets forth (i) the unaudited balance sheet of the
Company as at December 31, 1998 (the "Balance Sheet"), and the unaudited
statement of income and cash flows of the Company for the period ended December
31, 1998, together with the notes to such financial statements (collectively,
the "1998 Financial Statements"), and (ii) the unaudited balance sheet of the
Company as at February 28, 1999, and the unaudited statement of income and cash
flows of the Company for the period ended February 28, 1999, together with the
notes to such financial statements (the financial statements described in
clauses (i) and (ii) above, together with the notes to such financial
statements, collectively, the "Financial Statements"). The Financial Statements
have been prepared in conformity with generally accepted accounting principles
in Brazil ("GAAP") (except in each case as described in the notes thereto) and
on that
<PAGE>
basis accurately present the financial condition and results of operations of
the Company as of the respective dates thereof and for the respective periods
indicated.
The Company does not have any liabilities or obligations of any
nature (whether accrued, absolute, contingent, unasserted or otherwise) except
(i) as disclosed, reflected or reserved against in the Balance Sheet and the
notes thereto, (ii) for items set forth in Schedule 3.06 and (iii) for
liabilities and obligations for Taxes (as defined in Section 3.08(a)).
Absence of Certain Changes or Events.
From the date of the Balance Sheet, the Company has conducted its business
only in the ordinary course, substantially and consistently in the same manner
as previously conducted, and during such period there has not been any:
event, change, effect or development that, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect on the Company;
declaration, setting aside or payment of any dividend or other
distribution (whether in cash, quotas or property) with respect to the Company
Quotas or any repurchase for value by the Company of any of the Company Quotas;
split, combination or reclassification of the Company Quotas or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for the Company Quotas;
(i) granting, or agreement to grant, by the Company to any
employee, director or executive officer of the Company of any increase in
compensation, except as was required under employment agreements in effect as of
the date of the Balance Sheet and delivered to the Buyer, or (ii) any granting
by the Company to any such employee, director or executive officer of any
increase in severance or termination pay, except as was required under any
employment, severance or termination agreements in effect as of the date of the
Balance Sheet and delivered to the Buyer;
any change in accounting methods, principles or practices by the
Company materially affecting the combined consolidated assets, liabilities or
results of operations of the Company, taken as a whole, except insofar as may
have been required by a change in GAAP;
any incurrence of Indebtedness (as defined in Section 11.03(a));
or
any capital expenditure or expenditures that, individually, is in
excess of R$20.000,00 or, in the aggregate, are in excess of R$40.000,00.
Taxes.
For purposes of this Agreement, (i) "Tax" or "Taxes" shall mean all
federal, state, local, foreign or other taxes (including, without limitation,
income (net or gross), gross receipts, profits, alternative or add on minimum,
franchise, license, capital, intangible, service,
<PAGE>
premium, mining, ICMS, IPI, COFINS, PIS, CSLL, ISS, IPTU, IR, IOF, transfer,
sales, value added, use, ad valorem, occupation, property (real or personal),
windfall profits, import, excise, custom, stamp, withholding and similar taxes
or governmental charges of any kind whatsoever (including interest, penalties,
additions to taxes or additional amounts with respect to any of the foregoing);
(ii) "Pre-Closing Tax Period" shall mean all taxable periods ending on or before
the Closing Date and the portion ending on the Closing Date of any taxable
period that includes (but does not end on) the Closing Date; and (iii) "Returns"
shall mean returns, reports or forms, including information returns.
Except as disclosed on Schedule 3.08, the Company and each
Transferee has filed or caused to be filed in a timely manner (within any
applicable extension periods) all Returns required to be filed and each such
Return is true, complete and correct.
Except as disclosed on Schedule 3.08, the Company and each
Transferee has timely paid or adequately accrued, or has caused to be timely
paid or adequately accrued, all Taxes, whether or not shown to be due on any
such Return described in Section 3.08(b).
All Taxes that the Company and each Transferee is required to
withhold or collect have been duly withheld or collected and timely paid to the
appropriate Governmental Entity to the extent due and payable.
Except as set forth in Schedule 3.08, no deficiencies for any
Taxes have been proposed, threatened, asserted or assessed against the Company
or any Transferee, and no requests for waivers of the time to assess any Taxes
exist on any of the Company's or any Transferee's assets.
Except as disclosed in Schedule 3.08, there is no action, suit,
proceeding, investigation, audit or claim currently pending or threatened
regarding any Taxes of the Company or any Transferee or any group of which the
Company or any Transferee is a member.
There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any Returns required to be filed
by or on behalf of the Company or any Transferee, and neither the Company nor
any Transferee has requested any extension of time within which to file any
Return, which Return has not yet been filed.
Except as disclosed in Schedule 3.08, neither the Company nor any
Transferee is a party to any agreement with respect to Taxes.
Company Benefits Matters.
Except as set forth on Schedule 3.09, the employees of the
Company are not tenured, or entitled to any termination benefits in excess of
those provided for in the labor legislation, and all of them have opted for the
FGTS (Unemployment Compensation Fund). Except as set forth on Schedule 3.09,
through the Closing Date, the Company has not been served process or received
notice of any labor suits, claims or disputes between the Company and its
employees and those renderors of services, or between the Company and the unions
with
<PAGE>
which its employees are affiliated. Schedule 3.09 sets forth a full list of all
the employees of the Company, with title or function, current salary and other
benefits (date granted), as well as their vacation status.
The Company has not established any retirement plan for any of
its employees. Except as set forth on Schedule 3.09, the Company has not
established any benefits, bonus or profit participation program for any of its
employees, including, but not limited to, any quota purchase or quota purchase
option plans or agreements.
All FGTS and INSS payments and withholdings were timely made
under applicable laws regarding the Company's employees for all periods ending
on or prior to the Closing Date.
Litigation.
There is no suit, action or proceeding pending or, to the knowledge of the
Company, threatened against or directly affecting the Company (and none of the
Sellers nor the Company is aware of any basis for any such suit, action or
proceeding) that, individually or in the aggregate, has had or could reasonably
be expected to have a Material Adverse Effect on the Company, nor is there any
Judgment outstanding against the Company that has had or could reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company.
Compliance with Applicable Laws.
The Company is (and during the past five (5) years has been) in compliance
in all material respects with all Applicable Laws, including those relating to
occupational health and safety, except for instances of noncompliance that,
individually and in the aggregate, have not had and could not reasonably be
expected to have a Material Adverse Effect on the Company. The Company has not
received any written communication during the past three (3) years from any
Governmental Entity that alleges that the Company is not in compliance in any
material respect with any Applicable Law.
Environmental Matters.
The Company is not in violation of any applicable environmental
protection rules, permits, ordinances, normative rulings, laws, regulations and
requirements issued by the appropriate federal, state or local agencies
(collectively, the "Environmental Regulations"), and has all authorizations,
licenses, approvals, certificates, permits and municipal, state and federal
government authorizations required to operate and exercise its activities. To
the knowledge of the Company, there are no acts, facts, omissions and/or events
that may result in an action, proceeding or investigation as regards the
Company's compliance with the Environmental Regulations, nor is there any such
action, proceeding or investigation currently under way. All of the Company's
headquarters, manufacturing facilities, branches, agencies, offices, warehouses
and/or deposits (both bonded and otherwise), if any, are in compliance with the
Environmental Regulations. There has been no discharge, unloading, spill,
emission, injection, leakage, storage or release in any real property used by
the Company, or in the environment or third-party
<PAGE>
properties, of any toxic or hazardous substances.
Real Property.
Schedule 3.13 sets forth each and every parcel of real property or
interest in real estate held under a lease or used by, or necessary for the
conduct of the business of, the Company (the "Real Property"). The Company owns
no real property and has no interest in any real estate other than the Real
Property. The Sellers have heretofore delivered to the Buyer complete and
correct copies of each and every of the following, if any, in the possession of
the Sellers or the Company: leases of the Real Property and all documents
relating thereto, including any amendments thereto and any assignment thereof.
Except as set forth in Schedule 3.13, the Company:
is in peaceful and undisturbed possession of the space
and/or estate under each lease under which it is a tenant, and there are
no defaults by it as tenant thereunder; and
has good and valid rights of ingress and egress to and
from all the Real Property from and to the public street systems for all
usual street, road and utility purposes and other purposes necessary or
incidental to the business of the Company.
None of the Sellers, the Company nor the Former Quotaholders has
received any notice of any appropriation, condemnation or like proceeding, or of
any violation of any applicable zoning law, regulation or other law, order,
regulation or requirement relating to or affecting the Real Property, and to the
best knowledge of the Company, no such proceeding has been threatened or
commenced.
All of the buildings, structures, improvements and fixtures used
by or useful in the business of the Company, owned or leased by the Company, are
in a good state of repair, maintenance and operating condition and, except as so
disclosed and, except for normal wear and tear, there are no defects with
respect thereto which would impair the day-to-day use of any such buildings,
structures, improvements or fixtures or which would subject the Company to
liability under Applicable Law.
The buildings and other improvements of each parcel included in
the Real Property do not encroach on any easements or on any land not included
within the boundary lines of such Real Property and there are no neighboring
improvements encroaching on such Real Property, except for such of the foregoing
as do not and will not individually or in the aggregate interfere with the
current and proposed use(s) of such Real Property in the business.
The current use of the Real Property does not violate or conflict
with (i) any covenants, conditions or restrictions applicable thereto, or (ii)
the terms and provisions of any contractual obligations relating thereto.
Intellectual Property.
<PAGE>
Schedule 3.14 sets forth a true and complete list of all patents,
trademarks (registered or unregistered), trade names, service marks and
copyrights and applications therefor and other material intellectual property
and proprietary rights, whether or not subject to statutory registration or
protection (collectively, "Intellectual Property"), owned, used, filed by or
licensed to the Company. With respect to registered trademarks, Schedule 3.14
sets forth a list of all jurisdictions in which such trademarks are registered
or applied for and all registration and application numbers. Except as set forth
in Schedule 3.14, the Company owns, and the Company has the exclusive right to
use, execute, reproduce, display, perform, modify, enhance, distribute, prepare
derivative works of and sublicense, without payment to any other Person, all
Intellectual Property and the consummation of the transactions contemplated
hereby will not conflict with, alter or impair any such rights. The Company has
all rights to Intellectual Property as are necessary in connection with the
business of the Company as currently conducted.
The Company has not granted any options, licenses or agreements
of any kind relating to the Intellectual Property or the marketing or
distribution thereof. The Company is not bound by or a party to any options,
licenses or agreements of any kind relating to the Intellectual Property of any
other Person, except as set forth in Schedule 3.14 and except for agreements
relating to computer software licensed to the Company in the ordinary course of
business. Subject to the rights of third parties set forth in Schedule 3.14, all
Intellectual Property is free and clear of the claims of others and of all
Liens. The conduct of the business of the Company as currently conducted does
not violate, conflict with or infringe the Intellectual Property of any other
Person. Except as set forth in Schedule 3.14, (i) no claims are pending or, to
the knowledge of the Company, threatened, against the Company by any Person with
respect to the ownership, validity, enforceability, effectiveness or use of any
Intellectual Property and (ii) during the past two (2) years, the Company has
not received any communications alleging that the Company has violated any
rights relating to the Intellectual Property of any Person.
The Intellectual Property has been maintained in confidence in
accordance with protection procedures customarily used in the industries of the
Company to protect rights of like importance. All former and current members of
management and key personnel of the Company, including all former and current
employees, agents, consultants and independent contractors who have contributed
to or participated in the conception and development of software or other
Intellectual Property (collectively, "Personnel"), have executed and delivered
to the Company a proprietary information agreement restricting such Person's
right to disclose proprietary information of the Company, and its respective
clients. No former or current Personnel have any claim against the Company in
connection with such Person's involvement in the conception and development of
any Intellectual Property and no such claim has been asserted or is threatened.
None of the current officers and employees of the Company have any patents
issued or applications pending for any device, process, design or invention of
any kind now used or needed by the Company in the furtherance of its business
operations, which patents or applications have not been assigned to the Company,
with such assignment duly recorded in Brazil at the Brazilian Institute of
Industrial Property.
Contracts.
<PAGE>
Except as set forth in Schedule 3.15, the Company is not a party to or
bound by any:
employment agreement or employment contract that has an aggregate
future liability in excess of R$20.000,00 and is not terminable by the Company
by notice of not more than thirty (30) days for a cost of less than R$30.000,00;
employee collective bargaining agreement or other contract with
any labor union;
covenant of the Company not to compete (other than pursuant to
any radius restriction contained in any lease, reciprocal easement or
development, construction, operating or similar agreement) or other covenant of
the Company restricting the development, manufacture, marketing or distribution
of the products and services of the Company that materially impairs the
operation of the business of the Company, as currently conducted;
agreement, contract or other arrangement with (i) any quotaholder
or any Affiliate or (ii) any officer, director or employee of the Company, or
any Affiliate of any quotaholder (other than employment agreements covered by
clause (a) above);
lease, sublease or similar agreement with any Person under which
the Company is a lessor or sublessor of, or makes available for use to any
Person (i) any property owned, leased or used by the Company or (ii) any portion
of any premises otherwise occupied by the Company;
lease or similar agreement with any Person under which (i) the
Company is lessee of, or holds or uses, any machinery, equipment, vehicle or
other tangible personal property owned by any Person or (ii) the Company is a
lessor or sublessor of, or makes available for use by any Person, any tangible
personal property owned, leased or used by the Company, in any such case which
has an aggregate future liability or receivable, as the case may be, in excess
of R$10.000,00 and is not terminable by the Company by notice of not more than
thirty (30) days for a cost of less than R$15.000,00;
(i) continuing contract for the future purchase of materials,
supplies or equipment (other than purchase contracts and orders for inventory in
the ordinary course of business consistent with past practice), (ii) management,
service, consulting or other similar type of contract or (iii) advertising
agreement or arrangement, in any such case, which has an aggregate future
liability to any Person in excess of R$10.000,00 and is not terminable by the
Company by notice of not more than thirty (30) days for a cost of less than
R$15.000,00;
agreement, contract or other instrument under which the Company
has borrowed any money from, or issued any note, bond, debenture or other
evidence of indebtedness to any Person or any other note, bond, debenture or
other evidence of indebtedness issued to any Person in any such case which,
individually, is in excess of R$10.000,00;
agreement, contract or other instrument under which (i) any
Person
<PAGE>
(including the Company) has directly or indirectly guaranteed indebtedness,
liabilities or obligations of the Company or (ii) the Company has directly or
indirectly guaranteed indebtedness, liabilities or obligations of any Person (in
each case other than endorsements for the purpose of collection in the ordinary
course of business), in any such case which, individually, is in excess of
R$10.000,00;
agreement, contract or other instrument under which the Company
has, directly or indirectly, made any advance, loan, extension of credit or
capital contribution to, or other investment in, any Person, in any such case
which, individually, is in excess of R$10.000,00;
mortgage, pledge, security agreement, deed of trust or other
instrument granting a Lien upon any property of the Company;
agreement or instrument providing for indemnification of any
Person with respect to material liabilities relating to any current or former
business of the Company or any predecessor Person; or
other agreement, contract, lease, license, commitment or
instrument to which the Company is a party or by or to which it or any of its
assets or businesses is bound or subject, which has an aggregate future
liability to any Person in excess of R$10.000,00 and is not terminable by the
Company by notice of not more than thirty (30) days for a cost of less than
R$15.000,00.
All agreements, contracts, leases, licenses, commitments or instruments of the
Company listed in the Schedules hereto (collectively, the "Contracts") are
valid, binding and in full force and effect and are enforceable by the Company
in accordance with its terms subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other laws affecting
creditors' rights generally, general principles of equity and the discretion of
courts in granting equitable remedies. The Company has performed all material
obligations required to be performed by it to date under the Contracts and it is
not (with or without the lapse of time or the giving of notice, or both) in
breach or default in any material respect thereunder and, to the knowledge of
the Company, no other party to any of the Contracts is (with or without the
lapse of time or the giving of notice, or both) in breach or default in any
material respect thereunder.
Insurance.
The Company does not maintain any insurance policies in connection with
the Company. No insurance policies are required by Applicable Law and the
absence of such insurance has not had and will not in the future have a Material
Adverse Effect on the Company.
Employee and Labor Matters.
Except as set forth on Schedule 3.17, the Company is not a party to, or
engaged in negotiating, any collective bargaining agreement. The Company is not
the subject of any claim which is pending or, to the knowledge of the Company,
threatened, asserting that the Company
<PAGE>
has committed an unfair labor practice or seeking to compel the Company to
bargain with any labor organization as to wages and conditions of employment. No
strike or other labor dispute involving the Company is pending or, to the
knowledge of the Company, threatened, and there is no activity involving any
employees of the Company seeking to certify a collective bargaining unit or
engaging in any other organization activity.
Customer Accounts Receivable.
All customer accounts receivable of the Company, whether reflected
on the Balance Sheet or subsequently created, have arisen from bona fide
transactions in the ordinary course of business. To the knowledge of the
Company, all such customer accounts receivable are good and collectible at the
aggregate recorded amounts thereof, net of any applicable reserves for doubtful
accounts reflected on the Balance Sheet. The Company has good and marketable
title to its accounts receivable, free and clear of all Liens. Since the date of
the Balance Sheet, there have not been any write-offs as uncollectible of any
notes or accounts receivable of the Company, except for write-offs in the
ordinary course of business and consistent with past practice which have not
had, either individually or in the aggregate, a Material Adverse Effect on the
Company.
Licenses; Permits.
The Company possesses all material licenses, permits and authorizations
issued or granted to the Company by Governmental Entities which are necessary or
desirable for the conduct of the business of the Company. All such licenses,
permits and authorizations are validly held by the Company, and the Company has
complied in all material respects with all terms and conditions thereof, and the
same will not be subject to suspension, modification, revocation or nonrenewal
as a result of the execution and delivery of this Agreement, the other
Transaction Agreements or the consummation of the Transactions. All such
licenses, permits and authorizations that are held in the name of any employee,
officer, director, quotaholder, agent or otherwise on behalf of the Company
shall be deemed included under this warranty.
Accounts; Safe Deposit Boxes; Powers of Attorney; Officers
and Directors.
Schedule 3.20 sets forth (i) a true and correct list of all bank and
savings accounts, certificates of deposit and safe deposit boxes of the Company
and those Persons authorized to sign thereon, (ii) true and correct copies of
all corporate borrowing, depository and transfer resolutions and those Persons
entitled to act thereunder, (iii) a true and correct list of all powers of
attorney granted by the Company and those Persons authorized to act thereunder
and (iv) a true and correct list of all officers and directors of the Company.
Transactions with Affiliates.
Other than the Transaction Agreements, after the Closing no Seller, Former
Quotaholder or Affiliate of the Company will have any interest in any property
(real or personal, tangible or intangible) or contract used in or pertaining to
the business of the Company. No Seller, Former
<PAGE>
Quotaholder or Affiliate of the Company has any direct or indirect ownership
interest in any Person in which the Company has any direct or indirect ownership
interest or with which the Company competes or has a business relationship. No
Seller, Former Quotaholder or Affiliate of the Company provides any material
services to the Company.
Corporate Name.
The Company (i) has the exclusive right to use its name as the name of a
corporation in any jurisdiction in which the Company does business, and the only
jurisdiction in which the Company does business is Brazil and (ii) the Company
has not received any notice of conflict during the past two (2) years with
respect to the rights of others regarding the corporate name of the Company. No
Person is currently authorized by the Company to use the name of the Company.
Customers.
Except for the customers named in Schedule 3.23, the Company does not have
any customer to which it made more than five percent (5%) of its sales during
its most recent full fiscal year and the period ended on the date of this
Agreement. Except as set forth in Schedule 3.23, since the date of the Balance
Sheet, there has not been (i) any material adverse change in the business
relationship of the Company with any customer named in Schedule 3.23 or (ii) any
change in any material term (including credit terms) of the sales agreements or
related agreements with any such customer. During the past two (2) years, the
Company has not received any customer complaints concerning its products and
services, nor has it had any of its products returned by a purchaser thereof,
other than complaints and returns in the ordinary course of business which have
not, and are not likely to have, individually or in the aggregate, a Material
Adverse Effect.
Personal Property.
Schedule 3.24 sets forth (i) the tangible physical assets of the
Company that do not constitute Real Property (including machinery, equipment,
tools, dies, furniture, furnishings, leasehold improvements, vehicles, buildings
and fixtures) and that have a value in excess of R$10.000,00 per item or per
category of items and the location of such items; (ii) individual refundable
deposits, prepaid expenses, deferred charges and "other assets" in excess of
R$10.000,00 or R$20.000,00 in the aggregate; and (iii) all loans or advances
made by the Company to any Person in excess of R$10.000,00.
The Company has good title to all of the tangible physical assets
of the Company that do not constitute Real Property, free and clear of all
Liens. The Company has valid contractual rights to use, all of the assets,
tangible and intangible, used by, or necessary for the conduct of the businesses
of the Company as now being conducted.
The machinery, tools, equipment and other tangible physical
assets of the Company (other than items of inventory), taken as a whole, are in
good working order, normal wear and tear excepted, are being used or are useful
in the business of the Company at its present
<PAGE>
level of activity and constitute all of the assets necessary to conduct the
business of the Company as now being conducted.
Brokers; Schedule of Fees and Expenses.
No broker, investment banker, financial advisor or other Person, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of the Company, any Seller or any Former Quotaholder.
Entire Business.
No Seller, Former Quotaholder or Affiliate of the Company owns any assets
that are used exclusively by the Company, or that are necessary for the conduct
of the Company's businesses as conducted on the date of this Agreement.
Liabilities.
There exists no debt, obligation or liability of, or with respect to, any
Transferee that, individually or in the aggregate, has had or could reasonably
be expected to have a Material Adverse Effect on any Transferee, nor is there
any Judgment outstanding against any Transferee that has had or could reasonably
be expected, individually or in the aggregate, to have a Material Adverse Effect
on any Transferee.
Disclosure.
No representations or warranties by the Sellers or the Company in
this Agreement, including the Schedules, and no statement contained in any
document furnished or to be furnished by any Seller, any Former Quotaholder or
the Company to the Buyer, the Parent or any representative of either, pursuant
to the provisions hereof or in connection with the transactions contemplated
hereby (including, without limitation, the Financial Statements, certificates,
or other writing), contains or will contain any untrue statement of material
fact or omits or will omit to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading. There is no fact known to any Seller, any Former
Quotaholder, which has or could have a Material Adverse Effect on the Company
which has not been set forth in this Agreement, including the Financial
Statements (including the footnotes thereto), any schedule, exhibit, or
certificate delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by or on behalf of any Seller, any
Former Quotaholder, the Company or by any director or officer of the Company or
GGV2000 in connection with the transactions contemplated by this Agreement.
The Sellers, the Former Quotaholders and the Company have
furnished or caused to be furnished to the Buyer complete and correct copies of
all agreements, instruments and documents set forth on any Schedule or
underlying a disclosure set forth on any Schedule. Each of the Schedules is
complete and correct.
<PAGE>
Knowledge.
The term "knowledge of the Company" shall mean the knowledge of any
director, officer, quotaholder or key employee of the Company, after due
inquiry.
Representations and Warranties of THE BUYER
The Buyer represents and warrants to the Sellers as follows:
Organization, Standing and Power.
The Buyer is duly organized, validly existing and in good standing under
the laws of the state of Delaware and has full corporate power and authority to
conduct its businesses as currently conducted.
Authority; Execution and Delivery; Enforeceability.
The Buyer has all requisite corporate power and authority to execute this
Agreement and each Transaction Agreement to which it is a party and to
consummate the Transactions. The execution and delivery by the Buyer of this
Agreement and each Transaction Agreement to which it is a party and the
consummation by it of the Transactions have been duly authorized by all
necessary corporate action on the Buyer. The Buyer has duly executed and
delivered this Agreement and each Transaction Agreement to which it is a party,
and each Transaction Agreement to which it is a party constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms.
Consents.
No Consent of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained or made by or with respect to the
Buyer in connection with the execution, delivery and performance of this
Agreement or any Transaction Agreement to which the Buyer is a party or the
consummation of the Transactions, other than (i) compliance with and such
filings as may be required under applicable environmental laws, (ii) such
immaterial Consents as may be required under the laws of any jurisdiction in
which the Company is qualified to do business and (iii) those that may be
required solely by reason of the Company (as opposed to any third party's)
participation in the transactions contemplated hereby.
Covenants Relating to Conduct of Business
Conduct of Business by the Company.
<PAGE>
Except as expressly permitted by this Agreement, from the date of this
Agreement to the Closing Date, the Sellers shall cause the Company to, and the
Company shall, conduct its business in the usual, regular and ordinary course,
in substantially the same manner as previously conducted and use all reasonable
efforts to preserve intact its current business organization, keep available the
services of its current officers and employees and keep its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with them to the end that its goodwill and ongoing business
shall be unimpaired at the Closing Date. In addition, and without limiting the
generality of the foregoing, except as expressly permitted by this Agreement or
set forth in Schedule 5.01, from the date of this Agreement to the Closing Date,
the Company shall not do any of the following without the prior written consent
of Buyer:
(i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its quotas, (ii) split, combine or
reclassify any of its quotas or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its quotas
or (iii) purchase, redeem or otherwise acquire any quotas of the Company or any
other securities thereof or any rights, warrants or options to acquire any such
quotas or other securities;
issue, deliver, sell or grant (i) any quotas of the Company (ii)
any Voting Company Debt or other voting securities or (iii) any securities
convertible into or exchangeable for, or any options, warrants or rights to
acquire, any such quotas, Voting Company Debt or voting securities or
convertible or exchangeable securities;
amend the Company Articles;
acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, joint venture, association or
other business organization or division thereof or (ii) any assets that are
material, individually or in the aggregate, to the Company, except purchases of
inventory in the ordinary course of business consistent with past practice;
(i) grant to any employee or renderor of services, officer or
director of the Company any increase in compensation, except to the extent
required under employment agreements in effect as of the date of the Balance
Sheet, (ii) grant to any employee, officer or director of the Company any
increase in severance or termination pay, except to the extent required under
any agreement in effect as of the date of the Balance Sheet, (iii) enter into
any employment, consulting, indemnification, severance or termination agreement
with any such employee, officer or director, (iv) establish, adopt, enter into
or amend in any material respect any collective bargaining agreement or (v) take
any action to accelerate any rights or benefits, or make any material
determinations not in the ordinary course of business consistent with prior
practice, under any collective bargaining agreement;
make any change in accounting methods, principles or practices
materially affecting the reported combined consolidated assets, liabilities or
results of operations of the Company, except insofar as may have been required
by a change in GAAP;
<PAGE>
except as set forth in Schedule 5.01 attached hereto, sell,
lease, license or otherwise dispose of or subject to any Lien any properties or
assets that are material, individually or in the aggregate, to the Company,
except sales of inventory and excess or obsolete assets in the ordinary course
of business consistent with past practice;
(i) incur any Indebtedness (except for short-term borrowings
incurred in the ordinary course of business consistent with past practice),
issue or sell any debt securities or warrants or other rights to acquire any
debt securities of the Company, guarantee any Indebtedness of another Person,
enter into any agreement to maintain any financial statement condition of
another Person or enter into any arrangement having the economic effect of any
of the foregoing, or (ii) make any loans, advances or capital contributions to,
or investments in, any other Person;
make or agree to make any new capital expenditure or expenditures
that, individually, is in excess of R$20.00,00 or, in the aggregate, are in
excess of R$50.000,00;
make any Tax election or settle or compromise any material Tax
liability or refund;
pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the Balance Sheet (or the
notes thereto), (ii) cancel any material Indebtedness (individually or in the
aggregate) or waive any claims or rights of substantial value or (iii) waive the
benefits of, or agree to modify in any manner, any confidentiality, standstill
or similar agreement to which the Company is a party; or
authorize any of, or commit or agree to take any of, the
foregoing actions.
Other Actions.
The parties hereto shall not take any action that would, or that could
reasonably be expected to, result in (i) any of the representations and
warranties of such party as set forth in this Agreement or any Transaction
Agreement to which it is a party, that are qualified as to materiality, becoming
untrue, or (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect.
Advice of Changes.
The Sellers, the Company and the Former Quotaholders shall notify the
Buyer orally and in writing of (i) any representation or warranty made by them
contained in this Agreement that is qualified as to materiality, becoming untrue
or inaccurate in any respect or any such representation or warranty that is not
so qualified becoming untrue or inaccurate in any material respect or (ii) any
change or event or impending occurrence of any change or event of which
<PAGE>
either of them has knowledge and which has resulted, or which, insofar as can
reasonably be foreseen, could result, in any of the conditions to the Closing,
set forth in Article VII, not being satisfied. No such notification given
pursuant to this Section 5.03 shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
Declarations; Certificates.
(a) With respect to each of GGV2000 and CAPGV, the Sellers, no more than
sixty (60) day after the Closing Date, shall deliver to the Buyer copies of: (i)
updated certificates issued by the notary public responsible for the
registration of unpaid debts in the administrative region(s) where each of
GGV2000 and CAPGV has maintained its establishments since its date of
organization (Certidao Negativa de Cartorios de Protesto de Titulos); (ii)
certificates attesting to the non-occurrence of any debt (Social Security
Contributions Clearance) issued by the Institute of Financial Administration of
Social Security (IAPAS), under the name of each of GGV2000 and CAPGV in each
city where each has maintained its respective establishment (Certidao Negativa
de Debitos - CND); (iii) certificates of payment of federal taxes and
contributions (Income Tax (IR), Excise Tax (tax on manufactured products (IPI),
social contribution on the net profit (CSL), National Institute of Social
Security Contribution (INSS), Government Severance Indemnity Fund for Employees
(FGTS), Tax for Social Security Financing (Social Contribution on Billings)
(COFINS), Contribution to Employee's Profit Participation Program (Certidao de
Quitacao de Tributos Federais - CQTF), state taxes and contributions, municipal
Taxes and tributes, Services Tax (ISS), issued under the name of each of GGV2000
and CAPGV (Certidao de Quitacao de Tributos Municipais); and (iv) certificates
of non-pending administrative and judicial lawsuits with respect to each of
GGV2000 and CAPGV (Certidao Negativa dos Distribuidores Civeis Estadual e
Federal ).
(b) In the event that the Sellers shall not have delivered to the Buyer
any declaration or certificate that they are required to deliver to the Buyer
pursuant to Section 5.04(a), by the date that is sixty (60) days after the
Closing Date, the Sellers shall pay to the Buyer an amount equal to Five
Thousand U.S. Dollars (US$5,000) per day for each day after such sixtieth (60th)
day that any such declaration or certificate has not been delivered.
Year 2000 Compliance.
As soon as reasonably possible after the Closing, the Buyer and the
Sellers will cooperate to ensure that the software and systems, including all
equipment used by the Company is Year 2000 Compliant. "Year 2000 Compliant"
means that neither the performance nor functionality of the software and
systems, including all equipment of the Company, will be adversely affected by
dates prior to, during or after the year 2000. The Buyer and the Sellers shall
ensure that the software and systems, including all equipment, used by the
Company, are capable of providing the following functions without any additional
processing, with the same degree of timeliness, efficiency and accuracy as on or
before December 31, 1999, and all software and systems have been tested to
verify that they are Year 2000 Compliant:
effectively process date information before, on and after January
1, 2000;
<PAGE>
function accurately and without interruption before, on and after
January 1, 2000, without any change in operation associated with the advent of
the year 2000, the new century or the leap year in the year 2000;
respond to two-digit year input in a way that resolves the
ambiguity as to the century in a disclosed, defined and predetermined manner;
process two-digit year information in ways that are similarly
unambiguous as to century; and
store and provide output of date information in ways that are
similarly unambiguous as to century.
Additional Agreements
Access to Information; Confidentiality.
The Sellers shall cause the Company to afford to the Buyer and to the
officers, employees, accountants, counsel, financial advisors and other
representatives of the Buyer, reasonable access during normal business hours,
during the period prior to the Closing Date, to all the properties, books,
contracts, commitments, personnel and records of the Company and, during such
period, shall furnish promptly to the Buyer (i) a copy of each report, schedule
and other document filed by it during such period with any Governmental Entity
and (ii) all other information concerning its business, properties and personnel
as the Buyer may reasonably request. No investigation by the Buyer shall affect
the representations and warranties of any party hereto. Except as required by
law, the Sellers shall hold, and shall cause its respective officers, employees,
accountants, counsel, financial advisors and other representatives and
Affiliates to hold, any nonpublic information in confidence until such time as
such information becomes publicly available (otherwise than through the wrongful
act of any such Person) and shall use its best efforts to ensure that such
Persons do not disclose such information to others without the prior written
consent of the Buyer.
Best Efforts; Notification.
Upon the terms and subject to the conditions set forth in this Agreement,
each of the parties shall use its best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Transactions, including (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings (including filings with
Governmental Entities, if any) and the taking of all reasonable
<PAGE>
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity, (ii) the obtaining of all
necessary consents, approvals or waivers from third parties, (iii) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or any other Transaction Agreement or the
consummation of the Transactions, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (iv) the execution and delivery of any additional
instruments necessary to consummate the Transactions and to fully carry out the
purposes of the Transaction Agreements.
Right to Withdraw Funds.
The Company shall pay to the Sellers or an Affiliate of the Sellers
designated by them, an amount of money equal to the lesser of (i) US$320,000 and
(ii) the retained earnings reflected on the 1998 Financial Statements and
certified by one of the accounting firms generally referred to as the "big six;"
provided, however, that such date shall not be earlier than the date sixty (60)
days following the Closing Date, nor later than March 1, 2000.
Fees and Expenses.
All fees and expenses incurred in connection with the Transactions shall
be paid by the party incurring such fees or expenses, whether or not the
Transactions are consummated.
Public Announcements.
The Buyer, on the one hand, and the Company and the Sellers, on the other
hand, shall consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any press release or other public
statements with respect to the Transactions and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by Applicable Law.
1999 Audit.
The Buyer shall cause the Company to contract with one of the accounting
firms generally referred to as the "big six" to audit the Company's 1999
financial statements in accordance with GAAP, which audit shall be completed not
later than March 15, 2000.
Conditions Precedent
Conditions to Each Party's Obligation to Consummate the
Transactions.
The respective obligation of each party to consummate the Transactions is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
No Injunctions or Restraints. No temporary restraining order,
preliminary or
<PAGE>
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
shall be in effect; provided, however, that, subject to Section 6.02, each of
the parties shall have used its best efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any such
injunction or other order that may be entered.
Transaction Agreements. All the Transaction Agreements shall have
been executed and delivered by the respective parties to such agreements and be
in full force and effect.
Conditions to Obligations of the Buyer and the Parent.
The obligations of the Buyer and the Parent to consummate the ent.
Transactions are further subject to the following conditions:
Representations and Warranties. The representations and
warranties set forth in Article III shall be true and correct as of the date of
this Agreement and as of the Closing Date as though made on the Closing Date.
The Buyer and the Parent shall have received from each of the Sellers, the
Company and the Former Quotaholders, a certificate dated as of the Closing Date
and respectively signed by the Sellers, an appropriate officer of the Company
and the Former Quotaholders, to such effect.
Performance of the Obligations of the Sellers and the Company.
The Sellers, the Company and the Former Quotaholders (i) shall have performed in
all material respects all obligations (other than obligations pursuant to
Section 5.03) required to be performed by it under this Agreement at or prior to
the Closing Date and (ii) shall have performed all obligations pursuant to
Section 5.03, at or prior to the Closing Date. The Buyer shall have received
from each of the Sellers, the Company and the Former Quotaholders, a certificate
dated as of the Closing Date and respectively signed by the Sellers, an
appropriate officer of the Company and the Former Quotaholders, to such effect.
Absence of Material Adverse Effect. Since the date of this
Agreement, there shall not have been any event, change, effect or development
that, individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect on the Company.
No Litigation. There shall not be pending or threatened any suit,
action or proceeding by any Governmental Entity or any other Person, in each
case, that has a reasonable likelihood of success, (i) challenging the
acquisition by the Buyer of the Company Quotas, seeking to restrain or prohibit
the consummation of the Transactions or seeking to obtain from any of the
parties hereto any damages that are material in relation to the Company, (ii)
seeking to prohibit or limit the ownership or operation by the Company or the
Buyer of any material portion of the business or assets of the Company or the
Buyer, or to compel the Company or the Buyer to dispose of or hold separate any
material portion of the business or assets of the Company or the Buyer, as a
result of the Transactions, (iii) seeking to impose limitations on the ability
of the Buyer to acquire or hold, or exercise full rights of ownership of, the
Company Quotas, including
<PAGE>
the right to vote the Company Quotas on all matters properly presented to the
quotaholders of the Company, (iv) seeking to prohibit the Buyer from effectively
controlling in any material respect the business or operations of the Company or
(v) which otherwise is reasonably likely to have a Material Adverse Effect on
the Company.
Consents. All consents of third parties necessary on the part of
the Buyer, the Sellers or the Company, to the execution and delivery of this
Agreement and the consummation of the Transactions and to permit the continued
operation of the respective businesses of the Buyer and the Company in
substantially the same manner after the Closing Date as theretofore conducted,
other than routine post-closing notifications or filings, shall have been
obtained or effected.
Resignations. The resignations of each director and officer of
the Company that have been previously requested by the Buyers shall have been
delivered to the Buyer.
Opinions of Counsel. The Buyer shall have received (i) an opinion
dated the Closing Date of Escritorio Villemor Amaral Advogados, counsel to the
Former Quotaholders, the Sellers and the Company ("EVA"), substantially in the
form of Exhibit D attached hereto and with respect to such other matters as the
Buyer shall reasonably request and (ii) an opinion of EVA dated the Closing
Date, with respect to the legality and validity of the Transfers permitted under
Section 11.11 of the Former Quota Purchase Agreement, substantially in the form
of Exhibit E attached hereto.
Opinion of Arthur Andersen S/C. The Buyer shall have received an
opinion letter from Arthur Andersen S/C with respect to the validity of the
Transfers permitted under Section 11.11 of the Former Quota Purchase Agreement,
the form and substance of which are acceptable to the Buyer.
Satisfactory Investigation. The Buyer shall have completed its
investigation of (i) the business, assets and financial conditions of the
Company and it legal status, (ii) the terms and conditions of any Transfer
permitted under Section 11.11 of the former Quota Purchase Agreement and (iii)
the business, assets and financial conditions of the Transferees and legal
status of each, and in each case the Buyer shall have been satisfied with the
results thereof.
Declarations; Certificates. With respect to Rothko, the Sellers
shall have provided to the Buyer copies of: (i) updated certificates issued by
the notary public responsible for the registration of unpaid debts in each
administrative region where Rothko has maintained its establishments since its
date of organization (Certidao Negativa de Cartorios de Protesto de Titulos);
(ii) certificates attesting to the non-occurrence of any debt (Social Security
Contributions Clearance) issued by the Institute of Financial Administration of
Social Security (IAPAS), under the name of Rothko in each city where Rothko has
maintained its establishment (Certidao Negativa de Debitos - CND); (iii)
certificates of payment of federal taxes and contributions (Income Tax (IR),
Excise Tax (tax on manufactured products (IPI), social contribution on the net
profit (CSL), National Institute of Social Security Contribution (INSS),
Government Severance Indemnity Fund for Employees (FGTS), Tax for Social
Security
<PAGE>
Financing (Social Contribution on Billings) (COFINS), Contribution to Employee's
Profit Participation Program (Certidao de Quitacao de Tributos Federais - CQTF),
state taxes and contributions, municipal Taxes and tributes, Services Tax (ISS),
issued under the name of Rothko (Certidao de Quitacao de Tributos Municipais);
and (v) certificates of non-pending administrative and judicial lawsuits with
respect to Rothko (Certidao Negativa dos Distribuidores Civeis Estadual e
Federal).
Conditions to Obligation of the Sellers.
The obligation of the Sellers to consummate the Transactions is further
subject to the following conditions:
Representations and Warranties. The representations and
warranties of the Buyer set forth in this Agreement that are qualified as to
materiality shall be true and correct (determined without regard for any
qualification as to materiality or Material Adverse Effect), and the
representations and warranties of the Buyer set forth in this Agreement that are
not so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and on the Closing Date, as though made on
the Closing Date. The Sellers shall have received a certificate signed on behalf
of the Buyer by an appropriate officer of the Buyer to such effect.
Performance of Obligations of the Buyer. The Buyer shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and the Sellers shall
have received a certificate signed on behalf of the Buyer by an appropriate
officer of the Buyer to such effect.
Termination, Amendment and Waiver
Termination.
This Agreement may be terminated at any time prior to the Closing Date:
by mutual written consent of the Buyer and each of the Sellers;
by either the Buyer or each of the Sellers:
if the Transactions are not consummated on or before
April [30], 1999 (the "Outside Date"), unless the failure to consummate
the Transactions is the result of a material breach of this Agreement by
the party seeking to terminate this Agreement; or
if any Governmental Entity issues an order, decree or
ruling or takes any other action permanently enjoining, restraining or
otherwise prohibiting the
<PAGE>
Transactions, and such order, decree, ruling or other action shall have
become final and nonappealable.
by the Buyer, if any condition to the obligation of the Buyer to
consummate the Transactions set forth in Section 7.02 becomes incapable of
satisfaction prior to the Outside Date and shall not have been waived by the
Buyer, or
by the Sellers, if any condition to the obligation of the Sellers
to consummate the Transactions, set forth in Section 7.03 becomes incapable of
satisfaction prior to the Outside Date and shall not have been waived by the
Sellers.
Effect of Termination.
In the event of termination of this Agreement by either the Buyer or the
Sellers as provided in Section 8.01, this Agreement shall forthwith become void
and have no effect, without any liability or obligation on the part of any party
hereto other than the last sentence of Section 6.01, Section 6.04, this Section
8.02 and Article IX and except to the extent that such termination results from
the material breach by a party of any representation, warranty or covenant set
forth in this Agreement.
Amendment.
This Agreement may be amended by the parties at any time. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
Extension; Waiver.
At any time prior to the Closing Date, the parties may (i) extend the time
for the performance of any of the obligations or other acts of the other
parties, (ii) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement or (iii) waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
Indemnification
Tax Indemnification.
Each Quotaholder shall be jointly and severally liable for and
shall indemnify the Buyer and its Affiliates (including the Company) and each of
their respective officers, directors, employees, quotaholders, stockholders,
agents and representatives (the "Buyer Indemnitees") and hold them harmless from
and against (i) all liability for Taxes of the Company
<PAGE>
for the Pre-Closing Tax Period, irrespective of whether any such liability was
disclosed by the Quotaholders or discovered by the Buyer prior to the Closing,
(ii) any liability for Taxes attributable to a breach by the Company, the
Sellers or the Former Quotaholders of their respective obligations under this
Agreement or any Transaction Agreement and (iii) all liability for reasonable
legal fees and expenses for any item attributable to any item in clause (i) or
(ii) above. Notwithstanding the foregoing, the Quotaholders shall not indemnify
and hold harmless the Buyer Indemnitees from any liability for Taxes
attributable to any action taken after the Closing by the Buyer or any of its
Affiliates (including the Company) (a "Buyer Tax Act").
In the case of any taxable period that includes (but does not end
on) the Closing Date (a "Straddle Period"):
real, personal and intangible property Taxes and any other
Taxes not measured in whole or in part by reference to income or revenues
of the Company ("Property Taxes") allocable to the Pre-Closing Tax Period
shall be equal to the amount of such Property Taxes for the entire
Straddle Period multiplied by a fraction, the numerator of which is the
number of days during the Straddle Period that are in the Pre-Closing Tax
Period and the denominator of which is the number of days in the Straddle
Period; and
the Taxes of the Company other than Property Taxes allocable
to the Pre-Closing Tax Period shall be computed as if such taxable period
ended as of the close of business on the Closing Date.
the Quotaholders' indemnity obligation in respect of Taxes
for a Straddle Period shall initially be fulfilled by the payment by the
Sellers to the Buyer of the excess of (A) such Taxes for the Pre-Closing
Tax Period over (B) the amount of such Taxes for the Pre-Closing Tax
Period paid by the Sellers or any of its Affiliates (other than the
Company) at any time, plus the amount of such Taxes for the Pre-Closing
Tax Period paid by the Company on or prior to the Closing Date. The
Sellers shall initially pay such excess amounts to the Buyer within thirty
(30) days after the Return with respect to the liability for such Taxes is
required to be filed (or, if later, is actually filed). If the amount of
such Taxes paid by the Sellers or any of their Affiliates (other than the
Company) at any time exceeds the amount payable by the Sellers pursuant to
the preceding sentence, the Buyer shall pay to the Sellers the amount of
such excess within thirty (30) days after the Return with respect to the
liability for such Taxes is required to be filed.
Other Indemnification by the Sellers.
Except as relates to Taxes, for which the sole indemnification is
provided in Section 9.01, each Quotaholder shall jointly and severally indemnify
the Buyer Indemnitees against and hold them harmless from any loss, liability,
claim, damage or expense (including reasonable legal fees and expenses) suffered
or incurred by any such indemnified party to the extent arising from:
<PAGE>
any breach of any representation or warranty of the Sellers,
the Company or the Former Quotaholders contained in this Agreement, the
Transaction Agreements or in any certificate delivered pursuant hereto;
any breach of any covenant of the Sellers, the Company or
the Former Quotaholders contained in this Agreement or any Transaction
Agreement; or
any Transfer permitted under Section 11.11 of the Former
Quota Purchase Agreement.
Other Indemnification by the Buyer.
Except as relates to Taxes, for which the sole indemnification is provided
in Section 9.01, the Buyer shall indemnify the Sellers against and hold them
harmless from any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses) suffered or incurred by any such indemnified
party to the extent arising from (i) any breach of any representation or
warranty of the Buyer contained in this Agreement or in any certificate
delivered pursuant hereto, or (ii) any breach of any covenant of the Buyer
contained in this Agreement.
Termination of Indemnification.
The obligations to indemnify and hold harmless a party hereto (i) pursuant
to Section 9.01, shall terminate ninety (90) days after the time the applicable
statutes of limitations with respect to the Tax liabilities in question expire
(giving effect to any extension thereof), (ii) pursuant to Sections 9.02(i) and
9.03, shall terminate when the applicable representation or warranty terminates
pursuant to Section 11.01 and (iii) pursuant to the other clauses of Sections
9.02 and 9.03 shall not terminate; provided, however, that as to clauses (i) and
(ii) above, such obligations to indemnify and hold harmless shall not terminate
with respect to any item as to which the Person to be indemnified or the related
party thereto shall have, before the expiration of the applicable period,
previously made a claim by delivering a notice of such claim (stating in
reasonable detail the basis of such claim) to the indemnifying party.
Procedures Relating to Indemnification for Third Party Claims
(other than Tax Claims).
In order for a party (the "indemnified party") to be entitled to any
indemnification provided for under this Agreement (other than indemnification
for a Tax Claim under Section 9.01 which shall be governed by Section 9.09) in
respect of, arising out of or involving a claim or demand made by any Person
against the indemnified party (a "Third Party Claim"), such indemnified party
must notify the indemnifying party in writing, and in reasonable detail, of the
Third Party Claim within five (5) business days after receipt by such
indemnified party of written notice of the Third Party Claim; provided, however,
that failure to give such notification shall not affect the indemnification
provided hereunder except to the extent the indemnifying party shall have been
actually prejudiced as a result of such failure. Thereafter, the indemnified
party shall deliver to the indemnifying party, promptly after the indemnified
party's
<PAGE>
receipt thereof, copies of all notices and documents (including court papers)
received by the indemnified party relating to the Third Party Claim.
If a Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense thereof and,
if it so chooses and acknowledges its obligation to indemnify the indemnified
party therefor, to assume the defense thereof with counsel selected by the
indemnifying party; provided that such counsel is not reasonably objected to by
the indemnified party. Should the indemnifying party so elect to assume the
defense of a Third Party Claim, the indemnifying party shall not be liable to
the indemnified party for legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof. If the indemnifying
party assumes such defense, the indemnified party shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the indemnifying party, it being
understood that the indemnifying party shall control such defense. The
indemnifying party shall be liable for the fees and expenses of counsel employed
by the indemnified party for any period during which the indemnifying party has
failed to assume the defense thereof.
If the indemnifying party so elects to assume the defense of any
Third Party Claim, all of the indemnified parties shall cooperate with the
indemnifying party in the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the indemnifying party's request) the provision
to the indemnifying party of records and information which are reasonably
relevant to such Third Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Whether or not the indemnifying party shall have
assumed the defense of a Third Party Claim, the indemnified party shall not
admit any liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the indemnifying party's prior written consent (which
consent shall not be unreasonably withheld).
Procedures Related to Indemnification for Other Claims (other
than Tax Claims under Section 9.01).
In the event any indemnified party should have a claim against any
indemnifying party under Section 9.02 or 9.03 that does not involve a Third
Party Claim being asserted against or sought to be collected from such
indemnified party, the indemnified party shall deliver notice of such claim with
reasonable promptness to the indemnifying party. The failure by any indemnified
party to notify the indemnifying party shall not relieve the indemnifying party
from any liability which it may have to such indemnified party under Section
9.02 or 9.03, except to the extent that the indemnifying party demonstrates that
it has been materially prejudiced by such failure.
Procedures Relating to Indemnification of Tax Claims.
If a claim shall be made to an indemnified party by any taxing
authority, which, if successful, might result in an indemnity payment pursuant
to Section 9.01 (a "Tax Claim") by any indemnifying party, the indemnified party
shall promptly notify the indemnifying party in writing of such Tax Claim.
Failure to give notice of a Tax Claim shall not affect the rights of the
<PAGE>
indemnified party, any of its Affiliates or any of its respective officers,
directors, employees, stockholders, agents or representatives, to
indemnification unless the indemnifying party's position is materially
prejudiced as a result thereof.
With respect to any Tax Claim relating to a Pre-Closing Tax
Period (other than a Tax Claim relating solely to Taxes of the Company for a
Straddle Period), the Sellers shall control all audits or proceedings taken in
connection with such Tax Claim; provided, however, that the Buyer shall have the
right to participate in any such audit or proceeding to the extent that any such
audit or proceeding may affect the Tax liability of the Buyer, any of its
Affiliates or the Company for any period ending after the Closing Date and to
employ counsel of its choice at its own expense for purposes of such
participation. Notwithstanding anything to the contrary contained or implied in
this Agreement, without the prior written approval of the Buyer, neither the
Sellers nor any Affiliate of the Sellers shall agree or consent to compromise or
settle, either administratively or after the commencement of litigation, any
issue or claim arising in any such audit or proceeding, or otherwise agree or
consent to any Tax liability, to the extent that any such compromise,
settlement, consent or agreement may affect the Tax liability of the Buyer, any
of its Affiliates, or the Company for any period ending after the Closing Date.
Tax Matters
Responsibility for Preparation and Filing of Returns and
Amendments.
For any Straddle Period, the Buyer shall timely prepare and file or cause
to be timely prepared and filed with the appropriate authorities, all Returns
required to be filed by the Company and shall pay, or cause to be paid, all
Taxes shown to be due on such Returns; provided that, the Sellers or the Former
Quotaholders shall reimburse the Buyer (in accordance with the procedures set
forth in Section 9.01) for any amount owed by the Sellers pursuant to Section
9.01 with respect to the taxable periods covered by such Returns.
For any taxable period of the Company that ends on or before the
Closing Date, the Sellers shall timely prepare and file, or cause to be timely
prepared and filed, with the appropriate authorities, all Returns required to be
filed by the Company, and shall pay or cause to be paid, all Taxes shown to be
due on such Returns. To the extent that they relate to the Company, all such
Returns shall be prepared on a basis consistent with the past practice of the
Company and in a manner that does not distort taxable income (e.g., by deferring
income or accelerating deductions). The Buyer and the Sellers agree to cause the
Company to file all Returns for the period including the Closing Date on the
basis that the relevant taxable period ended as of the close of business on the
Closing Date, unless the relevant taxing authority will not accept a Return
filed on that basis.
Cooperation.
After the Closing Date, the Buyer and the Sellers shall provide each
other, and the Buyer
<PAGE>
shall cause the Company to provide the Sellers, with such cooperation and
information relating to the Company as either party reasonably may request in
(i) filing any Return, amended Return or claim for refund, (ii) determining any
Tax liability or a right to refund of Taxes, (iii) conducting or defending any
audit or other proceeding in respect of Taxes or (iv) effectuating the terms of
this Agreement. The parties shall retain, and the Buyer shall cause the Company
to retain, all Returns, schedules and work papers, and all material records and
other documents relating thereto, until the expiration of the statute of
limitations (and, to the extent notified by any party, any extensions thereof)
of the taxable years to which such returns and other documents relate and,
unless such Returns and other documents are offered and delivered to the Sellers
or the Buyer, as applicable, until the final determination of any Tax in respect
of such years. Any information obtained under this Section 10.02 shall be kept
confidential, except as may be otherwise necessary in connection with filing any
Return, amended return, or claim for refund, determining any Tax liability or
right to refund of Taxes, or in conducting or defending any audit or other
proceeding in respect of Taxes. Notwithstanding the foregoing, neither the
Sellers nor the Buyer, nor any of their Affiliates, shall be required
unreasonably to prepare any document, or determine any information not then in
its possession, in response to a request under this Section 10.02.
Transfer Taxes.
All transfer, documentary, sales, use, value added, registration and other
such Taxes (including all applicable real estate transfer or gains Taxes) and
related fees (including any penalties, interest and additions to Taxes) incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the Sellers, and the Sellers and the Buyer shall cooperate in timely
making all filings, returns, reports and forms as may be required to comply with
the provisions of such Tax laws.
General Provisions
Survival of Representations and Warranties.
The representations and warranties in this Agreement or in any other
document delivered in connection herewith shall survive the Closing solely for
purposes of Section 9.02 and 9.03 of this Agreement and shall terminate at the
close of business on the date that is three (3) years after the Closing Date
except for (i) Section 3.08 which shall survive the Closing until ninety (90)
days after the expirations of the applicable statute of limitations (giving
effect to any extension thereof) and (ii) the representations and warranties set
forth in Section 3.01, 3.03, 3.04 or 3.28 which shall not terminate. This
Section 11.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Closing Date.
Notices.
All notices, requests, claims, demands and other communications under this
Agreement
<PAGE>
shall be in writing, shall be delivered by hand or sent by telefax or sent
postage prepaid, by registered, certified or express mail or a reputable
overnight courier service and shall be deemed given when so delivered by hand or
telefax or if by mail, three (3) days after mailing (one (1) business day in the
case of express mail or overnight courier service) by the parties at the
following addresses or telefax numbers (or at such other address or telefax
numbers for a party as shall be specified by like notice):
if to the Buyer or the Parent, to:
StarMedia do Brasil Ltda.
Avenida dos Nacoes Unidas
12251 - 1508/1509
Sao Paolo, SP
Telefax: 5511-3043-7507
Attention: Indio Brasileiro Guerra Neto
with copy to:
StarMedia Network, Inc.
29 West 36th Street
New York, NY 10018
Telefax: (212) 631-9100
Attention: Steve Heller
and with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004
Telefax: (212) 858-1500
Attention: Justin Macedonia, Esq.
if to the Sellers or the Former Quotaholders, to:
Fabio Goncalves de Oliveira
Av. Rui Barbosa 170, Bl 1, 4(0) floor
Rio de Janeiro - RJ
Telefax: 55 (021) 553.5777
with a copy to:
Gustavo Guillermo Viberti
Av. Rui Barbosa 170, Bl 1, 4(0) floor
Rio de Janeiro - RJ
Telefax: 55 (021) 553.5777
<PAGE>
if to the Company, to:
KD Sistemas de Informacao Ltda.
Av. Rui Barbosa, 170-Bloco B1-4(degree) andar
22250-020-Flamengo
Rio de Janeiro - RJ
Telefax:55 (021) 553.5777
Attention: Gustavo Viberti and Fabio G. de Oliveira
with a copy to:
Escritorio Villemor Amaral Advogados
Rua da Gloria, No 290, 14(0) floor
Rio de Janeiro - RJ
Telefax:55 (021) 224.1608
Attention: Jose Roberto Faveret
Definitions
With respect to the defined terms used in this Agreement, the
singular shall include the plural and the masculine gender shall include the
feminine and the neuter, and vice versa, as the context requires.
"Affiliate" of any Person means (i) another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person and (ii) that Person's spouse,
estate, personal representative as lineal descendants or any trust for the
benefit of such Person or such Person's spouse or such Person's lineal
descendants or any entities controlled by such Person.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all obligations of such Person for borrowed money, or with respect to deposits
or advances of any kind, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations of such Person
upon which interest charges are customarily paid (other than trade payables
incurred in the ordinary course of business), (iv) all obligations of such
Person under conditional sale or other title retention agreements relating to
property purchased by such Person, (v) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (excluding
obligations of such Person to creditors for raw materials, inventory, services
and supplies incurred in the ordinary course of such Person's business), (vi)
all lease obligations of such Person capitalized on the books and records of
such Person, (vii) all obligations of others secured by a Lien on property or
assets owned or acquired by such Person, whether or not the obligations secured
thereby have been assumed, (viii) all obligations of such Person under interest
rate or currency hedging transactions (valued at the termination value thereof)
(other than forward or spot foreign currency exchange contracts entered into in
the ordinary course of business consistent with past practice), (ix) all letters
of credit issued for the account of such
<PAGE>
Person (excluding letters of credit issued for the benefit of suppliers to
support accounts payable to suppliers incurred in the ordinary course of
business) and (x) all guarantees and arrangements having the economic effect of
a guarantee of such Person of any Indebtedness of any other Person.
"Material Adverse Effect" means (i) for any party, a material adverse
effect on the business, assets, condition (financial or otherwise), prospects,
or results of operations of such party and its subsidiaries, taken as a whole
and (ii) in the case of the Company, also means a material adverse effect on the
ability of the Company to perform its obligations under the Transaction
Agreements to which it is a party or on the ability of the Company to consummate
the Transactions.
"Person" means any individual, firm, corporation, partnership, company,
limited liability company, trust, joint venture, association, Governmental
Entity or other entity.
"Subsidiary" of any Person means another Person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its board of directors or other
governing body (or, if there are no such voting interests, fifty (50%) percent
or more of the equity interests of which) is owned directly or indirectly by
such first Person.
The following terms have the meanings set forth in the Sections
set forth below:
Term Section
---- -------
Additional Payments 1.01(b)
Additional Payment Date 1.02(c)
Affiliate 11.03(a)
Balance Payment 1.02(a)
Balance Payment Date 1.02(a)
Balance Sheet 3.06(a)
Buyer Preamble
Buyer Indemnitees 9.01(a)
Buyer Tax Act 9.01(a)
Calculation Date 1.01(b)
Closing 1.01
Closing Date 2.01
Company Preamble
Company Articles 3.01
Company Quotas Preamble
Consent 3.05
Contracts 3.15
Employment Agreements 1.04
Environmental Regulations 3.12(a)
Escrow Agent 1.02(b)
<PAGE>
Escrow Agreement 1.02(b)
Escrow Funds 1.02(b)
Financial Statements 3.06(a)
Former Quotaholders Preamble
GAAP 3.06
GGV2000 Preamble
Guaranteed Payment 101(a)
Governmental Entity 3.05
Indebtedness 11.03(a)
indemnified party 9.05
Intellectual Property 3.14(a)
Judgment 3.05
knowledge of the Company 3.29
Liens 3.03(c)
Material Adverse Effect 11.03
Newco 11.11
Newco Agreement 11.11
Non-Competition Agreements 1.04(a)
Outside Date 8.01(b)(i)
Parent Preamble
Person 11.03(a)
Personnel 3.14(c)
Pre-Closing Tax Period 3.08(a)
Property Taxes 9.01(b)(i)
Purchase Price 1.01
Real Property 3.13(a)
Returns 3.08(a)
Seller and Sellers Preamble
Straddle Period 9.01(b)
Subsidiary 11.03(a)
Tax and Taxes 3.08(a)
Tax Claim 9.07
Third Party Claim 9.05
Transactions 1.01
Transaction Agreements 1.05
Transfer Preamble
Transferee and Transferees 3.01
Quotaholder and Quotaholders Preamble
Year 2000 Compliant 5.05
Voting Company Debt 3.03(b)
1998 Financial Statements 3.06(a)
Interpretation.
When a reference is made in this Agreement to a Section, such reference
shall be to a
<PAGE>
Section of this Agreement unless otherwise indicated. When a reference is made
in this Agreement to a Schedule, such reference shall be to a Schedule hereto.
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". Any matter disclosed in any Schedule shall be deemed disclosed only
for the purposes of the specific Sections of this Agreement to which such
section relates.
Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule or law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner, to the end that
transactions contemplated hereby are fulfilled to the extent possible.
Counterparts.
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties.
Entire Agreement; No Third-Party Beneficiaries.
This Agreement and the other Transaction Agreements, taken together, (i)
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
Transactions, (ii) except for the Former Quota Purchase Agreement and (iii)
except for the provisions of this Agreement and the other Transaction Agreements
that are not intended to confer upon any Person other than the parties any
rights or remedies.
Assignment.
Neither this Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned, in whole or in part, by operation of law
or otherwise by any of the parties without the prior written consent of the
other parties. Any other purported assignment without consent shall be void.
Subject to the preceding sentences, this Agreement will be binding upon, inure
to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
Governing Law.
This Agreement shall be governed and construed in accordance with the laws
of the
<PAGE>
Federative Republic of Brazil, especially articles 639 and 640 of the Brazilian
Code of Civil Procedure, as well as articles 461 and 632 of the new wording
pursuant to Laws 8952 and 8953/94, in case of default on the obligations
provided for herein.
Enforcement.
The parties agree that irreparable damage would occur in the event that
any of the provisions of any Transaction Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of any Transaction Agreement and to enforce
specifically the terms and provisions of each Transaction Agreement in any Court
of the Judicial District of Rio de Janeiro, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (i) consents to submit itself to the personal jurisdiction of any
Court of the Judicial District of Rio de Janeiro in the event any dispute arises
out of any Transaction Agreement or any Transaction, (ii) agrees that it will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (iii) agrees that it will not bring
any action relating to any Transaction Agreement or any Transaction in any court
other than any Court of the Judicial District of Rio de Janeiro.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
all as of the date first written above.
STARMEDIA NETWORK, INC.
By:
Name: Fernando Espuelas
Title: CEO and Chairman
STARMEDIA DO BRASIL LTDA.
By:
Name: Fernando Espuelas
Title: CEO and Chairman
By:
Name: Indio Brasileiro Guerra Neto
Title: General Manager Brazil
KD SISTEMAS DE INFORMACAO LTDA.
By:
Name: Fabio Goncalves de Oliveira
Title: Director
By:
Name: Gustavo Guillermo Viberti
Title: Director
<PAGE>
SELLERS
GGV2000 SISTEMAS DE INFORMACAO LTDA.
By:
Name: Fabio Goncalves de Oliveira
Title: Director
By:
Name: Gustavo Guillermo Viberti
Title: Director
Gustavo Guillermo Viberti
Fabio Goncalves de Oliveira
FORMER QUOTAHOLDERS
Gustavo Guillermo Viberti
Fabio Goncalves de Oliveira
Guillermo Jose Viberti
_________________________________________
Marcos Montenegro, individually
Carlos Augusto Montenegro
<PAGE>
Luis Paulo Montenegro
Jose Caetano Lacerda
Rothko Empreendimentos Participacoes e
Assessoria Ltda.
By:
Name: Marcos Montenegro
Title: Managing Partner
WITNESS:
By:
Atademes Branco Pereira
RG. 98477069-4 IFP
CPF. 036.762.147-90
WITNESS:
By:
Paula Secaf Adde
RG. 08467069 SSP-SP
CPF. 049.623.868-08
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
SALE AND PURCHASE OF QUOTAS
Section 1.01 Sale and Purchase Quotas 2
Section 1.02 Payment of Purchase Price 2
Section 1.03 Delivery of Quotas 4
Section 1.04 Transaction Agreements
4
ARTICLE II
CLOSING
Section 2.01 Closing Date 5
ARTICLE III
Representations and Warranties of THE SELLERS AND the Company
Section 3.01 Organization, Standing and Power 5
Section 3.02 Company Subsidiaries; Equity Interests 6
Section 3.03 Capital Structure 6
Section 3.04 Authority; Execution and Delivery; Enforceability 7
Section 3.05 No Conflicts; Consents 7
Section 3.06 Financial Statements; Undisclosed Liabilities 8
<PAGE>
Section 3.07 Absence of Certain Changes or Events 8
Section 3.08 Taxes 9
Section 3.09 Company Benefit Matters. 10
Section 3.10 Litigation. 10
Section 3.11 Compliance with Applicable Laws. 10
Section 3.12 Environmental Matters. 10
Section 3.13 Real Property. 11
Section 3.14 Intellectual Property. 12
Section 3.15 Contracts. 12
Section 3.16 Insurance. 14
Section 3.17 Employee and Labor Matters. 14
Section 3.18 Customer Accounts Receivable. 14
Section 3.19 Licenses; Permits. 15
Section 3.20 Accounts; Safe Deposit Boxes; Powers of Attorney;
Officers and Directors. 15
Section 3.21 Transactions with Affiliates. 15
Section 3.22 Corporate Name. 15
Section 3.23 Customers. 15
Section 3.24 Personal Property. 16
Section 3.25 Brokers; Schedule of Fees and Expenses. 16
Section 3.26 Entire Business. 16
Section 3.27 Liabilities. 16
Section 3.28 Disclosure. 16
Section 3.29 Knowledge. 17
<PAGE>
ARTICLE IV
Representations and Warranties of THE BUYER
Section 4.01 Organization, Standing and Power. 17
Section 4.02 Authority; Execution and Delivery; Enforceability. 17
Section 4.03 Consents. 17
ARTICLE V
Convenants Relating to Conduct of Business
Section 5.01 Conduct of Business by the Company. 18
Section 5.02 Other Actions. 19
Section 5.03 Advice of Changes. 19
Section 5.04 Declarations; Certificates. 20
Section 5.05 Year 2000 Compliance. 20
ARTICLE VI
Additional Agreements
Section 6.01 Access to Information; Confidentiality. 21
Section 6.02 Best Efforts; Notification. 21
Section 6.03 Right to Withdraw Funds. 22
Section 6.04 Fees and Expenses. 22
Section 6.05 Public Announcements. 22
Section 6.06 1999 Audit. 22
<PAGE>
ARTICLE VII
Conditions Precedent
Section 7.01 Conditions to Each Party's Obligation to Consummate
the Transactions. 22
Section 7.02 Conditions to Obligations of the Buyer and
the Parent. 22
Section 7.03 Conditions to Obligations of the Sellers. 24
ARTICLE VIII
Termination, Amendment and Waiver
Section 8.01 Termination. 25
Section 8.02 Effect of Termination. 25
Section 8.03 Amendment. 26
Section 8.04 Extension; Waiver. 26
ARTICLE IX
Indemnification
Section 9.01 Tax Indemnification. 26
Section 9.02 Other Indemnification by the Sellers. 27
Section 9.03 Other Indemnification by the Buyer. 27
Section 9.04 Terminiation of Indemnification. 27
Section 9.05 Procedures Relating to Indemnification for Third
Party Claims (other than Tax Claims). 28
Section 9.06 Procedures Related to Indemnification for Other
Claims (other than Tax Claims under Section 9.01). 28
Section 9.07 Procedures Relating to Indemnification of Tax Claims. 29
<PAGE>
ARTICLE X
Tax Matters
Section 10.01 Responsibility for Preparation and Filing of
Returns and Amendments. 29
Section 10.02 Cooperation. 30
Section 10.03 Transfer Taxes. 30
ARTICLE XI
General Provisions
Section 11.01 Survival of Representations and Warranties. 30
Section 11.02 Notices. 30
Section 11.03 Definitions. 32
Section 11.04 Interpretation. 34
Section 11.05 Severability. 35
Section 11.06 Counterparts. 35
Section 11.07 Entire Agreement; No Third-Party Beneficiaries. 35
Section 11.08 Assignment. 35
Section 11.09 Governing Law. 35
Section 11.10 Enforcement. 35
<PAGE>
Exhibit 10.11
Master Loan and Security Agreement No. 4231
DEBTOR: StarMedia Network, Inc. SECURED PARTY: Charter Financial, Inc.
29 West 36th Street 153 East 53rd Street
New York, NY 10018 New York, NY 10022
In consideration of the mutual covenants set forth herein, the above named
Debtor and the above named Secured Party hereby enter into this Master Loan and
Security Agreement and agree to the terms and conditions set forth herein. Each
Loan Schedule which may be executed by Debtor and Secured Party from time to
time pursuant to this Master Loan and Security Agreement shall be deemed to be a
separate loan transaction incorporating all of the terms and conditions of this
Master Loan and Security Agreement. References in this Master Loan and Security
Agreement to "Agreement", "hereunder" and "herein" shall mean a Loan Schedule
which incorporates this Master Loan and Security Agreement.
1. Loan Schedules. Debtor shall evidence its agreement to enter into each
Agreement incorporating the terms hereof by executing and delivering to Secured
Party a Loan Schedule in the form annexed hereto as Exhibit 1. Debtor's
execution of a Loan Schedule shall obligate Debtor to make all of the payments
set forth in the Schedule of Obligations as set forth in the Loan Schedule. The
Loan Schedule shall set forth the amount of the Loan, the Term of the Loan, the
number of payments to be made and the amount and dates upon which such payments
are due. The Loan Schedule shall also set forth the Time Balance which means the
aggregate amount of all payments which are payable under the Agreement evidenced
by such Loan Schedule. Secured Party and Debtor shall have no obligation to
enter into or accept any Loan Schedule and no Loan Schedule shall be binding
upon a party until accepted by such party which acceptance shall be evidenced
only by the execution of such Loan Schedule by such party.
2. Grant of Security Interest. Debtor hereby grants to Secured Party a
security interest in the personal property referred to and/or described in each
Loan Schedule (hereinafter with all renewals, substitutions and replacements and
all parts, repairs, improvements, additions and accessories incorporated therein
or affixed thereto referred to as the "Equipment"), together with any and all
proceeds thereof and any and all insurance policies and proceeds with respect
thereto.
3. Obligations Secured. The aforesaid security interest is granted by
Debtor as security for (a) the payment of the Time Balance (as set forth in the
Loan Schedule) and the payment and performance of all other indebtedness and
obligations now or hereafter owing by Debtor to Secured Party, of any and every
kind and description, under the Agreement evidenced by such Loan Schedule, and
any and all renewals and extensions of the foregoing, and all interest, fees,
charges, expenses and attorneys' fees accruing or incurred in connection with
any of the foregoing (all of which Time Balance, indebtedness and obligations
are hereinafter referred to as the "Liabilities") and (b) the payment and
performance of all other indebtedness and obligations now or hereafter owing by
Debtor to Secured Party, of any and every kind and description, howsoever
arising or evidenced including without limitation those arising under other Loan
Schedules, (all of which indebtedness and obligations are hereinafter referred
to as the "Other Liabilities"). Subject to Paragraph 16, any nonpayment of any
installment or other amounts within 7 days of when due hereunder shall result in
the obligation on the part of Debtor promptly to pay also an amount equal to
five percent (5%), (or the maximum rate permitted by law, whichever is less) of
the installment or other amounts overdue.
4. Disclaimer of Warranties. DEBTOR ACKNOWLEDGES THAT SECURED PARTY MAKES
NO WARRANTIES, EXPRESS OR IMPLIED, IN RESPECT OF THE EQUIPMENT, INCLUDING,
WITHOUT LIMITATION. ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY
PARTICULAR PURPOSE. Secured Party shall not be liable to Debtor for any loss,
damage or expense of any kind or nature caused, directly or indirectly, by any
Equipment secured hereunder or the use or maintenance thereof or the failure of
operation thereof, or the repair, service or adjustment thereof, or by any delay
or failure to provide any such maintenance, repairs, service or adjustment, or
by any interruption of service or loss of use thereof or for any loss of
business howsoever caused. The Equipment shall be shipped directly to Debtor by
the supplier thereof and Debtor agrees to accept such delivery. No defect or
unfitness of the Equipment, nor any failure or delay on the part of the
manufacturer or the shipper of the Equipment to deliver the Equipment or any
part
<PAGE>
thereof to Debtor, shall relieve Debtor of the obligation to pay the Time
Balance or any other obligation under this Agreement. Secured Party shall have
no obligation under this Agreement in respect of the fitness, quality,
condition, performance or usefulness of the Equipment and shall have no
obligation to install, erect, test, adjust or service the Equipment. Secured
Party agrees, so long as there shall not have occurred or be continuing any
Event of Default hereunder or event which with lapse of time or notice, or both,
might become an Event of Default hereunder, that Secured Party will permit
Debtor to enforce in Debtor's own name at Debtors sole expense any supplier's or
manufacturer's warranty or agreement in respect of the Equipment to the extent
that such warranty or agreement is assignable.
5. Assignment. Any transaction evidenced by a Loan Schedule shall be
assignable by Secured Party, and by its assigns, without the consent of Debtor,
but Debtor shall not be obligated to any assignee except upon written notice of
such assignment from Secured Party or such assignee. The obligation of Debtor to
pay and perform the Liabilities to such assignee shall be absolute and
unconditional and shall not be affected by any circumstance whatsoever, and such
payments shall be made without interruption or abatement notwithstanding any
event or circumstance whatsoever, including, without limitation, the late
delivery, non-delivery, destruction or damage of or to the Equipment, the
deprivation or limitation of the use of the Equipment, the bankruptcy or
insolvency of Secured Party or Debtor or any disaffirmance of this Agreement by
or on behalf of Debtor and notwithstanding any defense, set-off, recoupment or
counterclaim or any other right whatsoever, whether by reason of breach of this
Agreement or of any warranty in respect of the Equipment or otherwise which
Debtor may now or hereafter have against Secured Party, and whether any such
event shall be by reason of any act or omission of Secured Party (including,
without limitation, any negligence of Secured Party) or otherwise; provided,
however, that nothing herein contained shall affect any right of Debtor to
enforce against Secured Party any claim which Debtor may have against Secured
Party in any manner other than by abatement, attachment or recoupment of,
interference with, or set-off, counterclaim or defense against, the
aforementioned payments to be made to such assignee. Debtor's undertaking herein
to pay and perform the Liabilities to an assignee of Secured Party shall
constitute a direct, independent and unconditional obligation of Debtor to said
assignee. Said assignee shall have no obligations under this Agreement or in
respect of the Equipment and shall have no obligation to install, erect, test,
adjust or service the Equipment. Debtor also acknowledges and agrees that any
assignee of Secured Party's interest in any Loan Schedule which incorporates the
provisions of this Agreement shall have the right to exercise such rights,
privileges and remedies under the Agreement (either in its own name or in the
name of Secured Party) which by the terms of this Agreement are permitted to be
exercised by Secured Party.
6. Damage to or Loss of the Equipment; Requisition. Debtor assumes and
shall bear the entire risk of loss or damage to the Equipment from any and every
cause, whatsoever. No loss or damage to the Equipment or any part thereof shall
affect any obligation of Debtor with respect to the Liabilities and this
Agreement, which shall continue in full force and effect. Debtor shall advise
Secured Party in writing promptly of any item of Equipment lost or damaged and
of the circumstances and extent of such damage. If the Equipment is totally
destroyed, irreparably damaged, lost, stolen or title thereto shall be
requisitioned or taken by any governmental authority under the power of eminent
domain or otherwise, Debtor shall either replace the same with like equipment in
good repair, condition and working order, or pay to Secured Party the "Make
Whole Amount" as defined below, less the net amount of the recovery, if any,
actually received by Secured Party from insurance or otherwise for such
destruction, damage, loss, theft, requisition or taking. If no Event of Default
shall have occurred, Debtor shall make the choice between replacing the
Equipment or making payment as required by the preceding sentence. If an Event
of Default has occurred, Secured Party shall make such choice. Whenever the
Equipment is destroyed or damaged and, in the sole discretion of Secured Party,
such destruction or damage can be repaired, Debtor shall, at its expense,
promptly effect such repairs as Secured Party shall deem necessary for
compliance with clause (a) of paragraph 8 below (provided that if the estimated
costs of effecting such repairs exceeds the replacement cost of such equipment
or the estimated insurance proceeds of such equipment, Debtor may elect to
replace such equipment rather than effecting such repairs. Any proceeds of
insurance received by Secured Party with respect to such reparable damage to the
Equipment shall, at the election of Secured Party, be applied either to the
repair of the Equipment by payment by Secured Party directly to the party
completing the repairs, or to the reimbursement of Debtor for the cost of such
repairs; provided, however, that Secured Party shall have no obligation to make
such payment or any part thereof until receipt of such evidence as Secured Party
shall deem satisfactory that such repairs have been completed and further
provided that Secured Party may apply such proceeds to the payment of any of
<PAGE>
the Liabilities or the Other Liabilities due if at the time such proceeds are
received by Secured Party there shall have occurred and be continuing any Event
of Default hereunder or any event which with lapse of time or notice, or both,
would become an Event of Default. Debtor shall, when and as requested by Secured
Party, undertake, by litigation or otherwise, in Debtor's name, the collection
of any claim against any person for such destruction, damage, loss, theft,
requisition or taking, but Secured Party shall not be obligated to undertake, by
litigation or otherwise, the collection of any claim against any person for such
destruction, damage, loss, theft, requisition or taking.
7. Representations and Warranties of Debtor. Debtor represents and
warrants that: it has the right, power and authority to enter into and carry out
the terms and provisions of this Agreement; this Agreement constitutes a valid
obligation of the Debtor and is enforceable in accordance with its terms; and
entering into this Agreement and carrying out its terms and provisions will not
violate the terms or constitute a breach of any other agreement to which Debtor
is a party.
8. Affirmative Covenants of Debtor. Debtor shall (a) cause the Equipment
to be kept in good condition and use the Equipment only in the manner for which
it was designed and intended so as to subject it only to ordinary wear and tear
and cause to be made all needed and proper repairs, renewals and replacements
thereto; (b) maintain at all times property damage, fire, theft and
comprehensive insurance for the full replacement value of the Equipment, with
loss payable provisions in favor of Secured Party and any assignee of Secured
Party as their interests may appear, and maintain public liability insurance in
amounts satisfactory to Secured Party, with all of said insurance and loss
payable provisions to be in form, substance and amount and written by companies
approved by Secured Party, and deliver the policies therefor, or duplicates
thereof, to Secured Party; (c) pay (or reimburse Secured Party if Secured Party
has made payment) for any and all taxes, assessments and other governmental
charges of whatever kind or character, however designated (together with any
penalties, fines or interest thereon) levied or based upon or with respect to
the Equipment, or upon the manufacture, purchase, ownership, delivery,
possession, use, storage, operation, maintenance, repair, return or other
disposition of the Equipment, or upon any receipts or earnings arising
therefrom, or for titling or registering the Equipment, or upon the income or
other proceeds received with respect to the Equipment or this Agreement
provided, however, that Debtor shall not pay taxes on or measured by the net
income of Secured Party; (d) pay all shipping and delivery charges and other
expenses incurred in connection with the Equipment and pay all lawful claims,
whether for labor, materials, supplies, rents or services, which might or could
if unpaid become a lien on the Equipment; (e) comply with all governmental laws,
regulations, requirements and rules, all instructions and warranty requirements
of Secured Party or the manufacturer of the Equipment, and with the conditions
and requirements of all policies of insurance with respect to the Equipment and
this Agreement; (f) mark and identify the Equipment with all information and in
such manner as Secured Party may request from time to time and replace promptly
any such marking or identification which are removed, defaced or destroyed; (g)
at any and all times during business hours, grant to Secured Party free access
to enter upon the premises wherein the Equipment shall be located and permit
Secured Party to inspect the Equipment; (h) reimburse Secured Party for all
reasonable charges, costs and expenses (including reasonable attorneys' fees)
incurred by Secured Party in defending or protecting its interests in the
Equipment, in the attempted enforcement or enforcement of the provisions of this
Agreement or in the attempted collection or collection of any of the
Liabilities; (i) indemnify and hold any assignee of Secured Party, and Secured
Party, harmless from and against all claims, losses, liabilities, damages,
judgments, suits, and all legal proceedings, and any and all costs and expenses
in connection therewith (including reasonable attorneys' fees) arising out of or
in any manner connected with the manufacture, purchase, ownership, delivery,
possession, use, storage, operation, maintenance, repair, return or other
disposition of the Equipment or with this Agreement, including, without
limitation, claims for injury to or death of persons and for damage to property,
and give Secured Party prompt notice of any such claim or liability (provided
however, that Debtor shall not indemnify and shall not hold Secured Party or any
assignee of Secured Party harmless from any loss, damage, cost or expense caused
by Secured Party's, or such assignee's own willfull misconduct, gross negligence
or knowing violations of law); and (j) maintain a system of accounts established
and administered in a manner which permits the issuance of financial statements
in accordance with generally accepted accounting principles and practices
consistently applied, and, within forty five (45) days after the end of each
fiscal quarter, deliver to Secured Party a balance sheet as at the end of such
quarter and statement of operations for such quarter, and, within one hundred
and thirty five (135) days after the end of each fiscal year, deliver to Secured
Party a balance sheet as at the end of such year and statement of operations for
such year, in each case prepared in
<PAGE>
accordance with generally accepted accounting principles and practices
consistently applied and certified by Debtor's chief financial officer as fairly
presenting the financial position and results of operation of Debtor, and, in
the case of year end financial statements, certified by an independent
accounting firm acceptable to Secured Party.
9. Negative Covenants of Debtor. Debtor shall not (a) create, incur,
assume or suffer to exist any mortgage, lien, pledge or other encumbrance or
attachment of any kind whatsoever upon, affecting or with respect to the
Equipment or this Agreement or any of Debtor's interests hereunder; (b) make any
changes or alterations in or to the Equipment except as necessary for compliance
with clause (a) of paragraph 8 above or as permitted by suppliers warranties so
long as such changes or alterations do not reduce the value or marketability of
the equipment; (c) permit the name of any person, association or corporation
other than Secured Party to be placed on the Equipment as a designation that
might be interpreted as a claim of interest in the Equipment; (d) part with
possession or control of or suffer or allow to pass out of its possession or
control any of the Equipment or change the location of the Equipment or any part
thereof from the location shown above, provided, however that Debtor may do so
with the prior written consent of Secured Party, which consent shall not
unreasonably be withheld so long as Debtor has taken all steps reasonably
required by Secured Party to protect the Equipment and perfect Secured Party's
interests in the Equipment at the new location, including, without limitation,
filing UCC financing statements; (e) assign or in any way dispose of all or any
part of its rights or obligations under this Agreement or enter into any lease
of all or any part of the Equipment, provided, however that Debtor may lease the
Equipment with the prior written consent of Secured Party, which consent shall
not unreasonably be withheld so long as (i) the proposed lessee meets Charter's
standard credit criteria and signs a form of lease acceptable to Charter, (ii)
the rights of the lessee under such lease shall be subject and subordinate to
Charter's rights and interests in the Equipment,(iii) such lease shall be
collaterally assigned to Charter, and (iv) such leasing shall not relieve Debtor
of any of its obligations hereunder; (f) change its name or address from that
set forth above unless it shall have given Secured Party no less than thirty
(30) days prior written notice thereof; or (g) sell, transfer, lease or
otherwise dispose of all or substantially all of Debtor's assets to any person
or entity without Secured Party's prior written consent which will not
unreasonably be withheld so long as such proposed sale, transfer, lease or other
disposition would not have a material adverse effect on Debtor's financial
condition or ability to continue its business.
10. Equipment Personalty. The Equipment is, and shall at all times be and
remain, personal property notwithstanding that the Equipment or any part thereof
may now be, or hereafter become, in any manner affixed or attached to, or
imbedded in, or permanently resting upon, real property or attached in any
manner to real property by cement, plaster, nails, bolts, screws or otherwise.
If requested by Secured Party with respect to any item of Equipment, Debtor will
obtain and deliver to Secured Party waivers of interest or liens in recordable
form, satisfactory to Secured Party, from all persons claiming any interest in
the real property on which such item of Equipment is installed or located.
11. Events of Default and Remedies. If any one or more of the following
events ("Events of Default") shall occur:
(a) Debtor shall fail to make any payment in respect of the
Liabilities within seven (7) days of when due; or
(b) any certification, statement, representation, warranty or
financial report or statement heretofore or hereafter furnished by or on behalf
of Debtor or any guarantor of any or all of the Liabilities proves to have been
false in any material respect at the time as of which the facts therein set
forth were stated or certified or has omitted any material contingent or
unliquidated liability or claim against Debtor or any such guarantor; or
(c) Debtor or any guarantor of any or all of the Liabilities shall
fail to perform or observe any covenant, condition or agreement to be performed
or observed by it hereunder or under any guaranty agreement and such failure
continues for fifteen (15) days from the date Secured Party gives Debtor notice
of such failure; or
(d) Debtor or any guarantor of any or all of the Liabilities shall
be in breach of or in default in the payment and performance of any obligation
relating to any of the Other Liabilities; or
<PAGE>
(e) Debtor or any guarantor of any of Debtor's obligations hereunder
shall be in breach of or in default in the payment or performance of any
material obligation owing to any bank, lender, lessor or financial institution,
howsoever arising, present or future, contracted for or acquired, and whether
joint, several, absolute, contingent, secured, unsecured, matured or unmatured
(it is understood and agreed that obligations to pay money and compliance with
financial covenants constitute material obligations); or
(f) Debtor or any guarantor of any or all of the Liabilities shall
cease doing business as a going concern, make an assignment for the benefit of
creditors, admit in writing its inability to pay its debts as they become due,
file a petition commencing a voluntary case under any chapter of Title 11 of the
United States Code entitled "Bankruptcy" (the "Bankruptcy Code"), be adjudicated
as insolvent, file a petition seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
arrangement under any present or future statute, law, rule or regulation or file
an answer admitting the material allegations of a petition filed against it in
any such proceeding, consent to the filing of such a petition or acquiescence in
the appointment of a trustee, receiver or liquidator of it or of all or any part
of its assets or properties, or take any action looking to its dissolution or
liquidation; or
(g) an order for relief against Debtor or any guarantor of any or
all of the Liabilities shall have been entered under any chapter of the
Bankruptcy Code or a decree or order by a court having jurisdiction in the
premises shall have been entered approving as properly filed a petition seeking
reorganization, arrangement, readjustment, liquidation, dissolution or similar
relief against Debtor or any guarantor of any or all of the Liabilities under
any present or future statute, law, rule or regulation, or within forty five
(45) days after the appointment without Debtor's or such guarantor's consent or
acquiescence of any trustee, receiver or liquidator of it or such guarantor or
of all or any part of its or such guarantor's assets and properties, such
appointment shall not be vacated, or an order, judgment or decree shall be
entered against Debtor or such guarantor by a court of competent jurisdiction
and shall continue in effect for any period of twenty (20) consecutive days
without a stay of execution, or any execution or writ or process shall be issued
under any action or proceeding against Debtor whereby the Equipment or its use
may be taken or restrained; or
(h) Debtor shall fail to have and maintain unrestricted cash or cash
equivalents ( as those terms are used in accordance with generally accepted
accounting principles) of at least $10,000,000.00 at all times during the Term
of all Loan Schedules;
then and in any such event, Secured Party may, at the sole discretion of Secured
Party, without notice or demand and without limitation of any rights and
remedies of Secured Party under the Uniform Commercial Code, take any one or
more of the following steps:
(1) declare all of the Time Balance to be due and payable, whereupon
the same shall forthwith mature and become due and payable as provided for in
paragraph 16 below, provided, however, upon the occurrence of any of the events
specified in subparagraphs (f) and (g) above, all sums as specified in this
clause (1) shall immediately be due and payable without notice to Debtor (the
date on which Secured Party declares all of the Time Balance to be due and
payable is hereinafter referred to as the "Declaration Date");
(2) proceed to protect and enforce its rights by suit in equity,
action at law or other appropriate proceedings, whether for the specific
performance of any agreement contained herein, or for an injunction against a
violation of any of the terms hereof, or in aid of the exercise of any other
right, power or remedy granted hereby or by law, equity or otherwise; and
(3) at any time and from time to time, with or without judicial
process and with or without the aid or assistance of others, enter upon any
premises wherein any of the Equipment may be located and, without resistance or
interference by Debtor, take possession of the Equipment on any such premises,
and require Debtor to assemble and make available to Secured Party at the
expense of Debtor any part or all of the Equipment at any place or time
designated by Secured Party; and remove any part or all of the Equipment from
any premises wherein the same may be located for the purpose of effecting the
sale or other disposition thereof; and sell, resell, lease, assign and deliver,
grant options for or otherwise dispose of any or all of the Equipment in its
then condition or following any commercially reasonable preparation or
processing, at public or private sale or proceedings, by one or more contracts,
in one or more parcels, at the same or different times,
<PAGE>
with or without having the Equipment at the place of sale or other
disposition (provided that Secured Party shall not prevent the prospective
purchaser from inspecting the Equipment prior to such sale), for cash and/or
credit, and upon any terms, at such place(s) and time(s) and to such persons,
firms or corporations as Secured Party shall deem best, all without demand
for performance or any notice or advertisement whatsoever, except that Debtor
shall be given ten (10) business days' written notice of the place and time
of any public sale or of the time after which any private sale or other
intended disposition is to be made, which notice Debtor hereby agrees shall
be deemed reasonable notice thereof. If any of the Equipment is sold by
Secured Party upon credit or for future delivery, Secured Party shall not be
liable for the failure of the purchaser to pay for same and in such event
Secured Party may resell such Equipment. Secured Party may buy any part or
all of the Equipment at any public sale and if any part or all of the
Equipment is of a type customarily sold in a recognized market or which is
the subject of widely distributed standard price quotations Secured Party may
buy at private sale and may make payment therefor by application of all or a
part of the Liabilities and of all or a part of any Other Liabilities. Any
personalty in or attached to the Equipment when repossessed may be held by
Secured Party without any liability arising with respect thereto, and any and
all claims in connection with such personalty shall be deemed to have been
waived unless notice of such claim is made by certified or registered mail
upon Secured Party within three business days after repossession.
Secured Party shall apply the cash proceeds from any sale or other
disposition of the Equipment first, to the reasonable expenses of re-taking,
holding, preparing for sale, selling, leasing and the like, and to reasonable
attorneys' fees and other expenses which are to be paid or reimbursed to
Secured Party pursuant hereto, and second, to all outstanding portions of the
Liabilities and to any Other Liabilities in such order as Secured Party may
elect, and third, any surplus to Debtor, subject to any duty of Secured Party
imposed by law to the holder of any subordinate security interest in the
Equipment known to Secured Party; provided however, that Debtor shall remain
liable with respect to unpaid portions of the Liabilities owing by it and
will pay Secured Party on demand any deficiency remaining with interest as
provided for in paragraph 16 below.
(4) Within 10 days after the end of each calendar month, Debtor's
chief Financial Officer or other authorized officer having knowledge, shall
provide Secured Party with a written statement setting forth Debtor's
unrestricted cash/cash equivalent balance as at the end of such calendar
month. In the event that Debtor fails to be in compliance with provision (h)
set forth hereinabove, Debtor must cure the Event of Default resulting from
such failure by delivering to Secured Party no later than forty (40) days
following the end of the calendar month to which such failure applies, a
letter of credit in an amount equal to the then present value all remaining
payments due under the Agreement, computed using a discount rate equal to the
Make Whole Rate as defined below, which letter of credit shall be
substantially in the form annexed hereto as exhibit 1, and issued by a bank
acceptable to Secured Party (the "LC"). It shall be an Event of Default under
the Agreement if Debtor, at any time prior to the end of the term of the
Agreement, the LC is not in full force and effect or Secured Party receives
notice that the LC will not be replaced or renewed
12. Secured Party's Right to Perform for Debtor. If Debtor fails to
perform or comply with any of its agreements contained herein Secured Party may
perform or comply with such agreement and the amount of any payments and
expenses incurred by Secured Party in connection with such performance or
compliance, together with interest thereon at the rate provided for in paragraph
16 below, shall be deemed a part of the Liabilities and shall be payable by
Debtor upon demand.
13. Further Assurances. Debtor will cooperate with Secured Party for the
purpose of protecting the interests of Secured Party in the Equipment,
including, without limitation, the execution of all Uniform Commercial Code
financing statements requested by Secured Party. Secured Party and any assignee
of Secured Party are each authorized to the extent permitted by applicable law
to file one or more Uniform Commercial Code financing statements disclosing any
security interest in the Equipment without the signature of Debtor. Debtor will
pay all costs of filing any financing, continuation or termination statements
with respect to this Agreement, including, without limitation, any documentary
stamp taxes relating thereto. Debtor will do whatever may be necessary to have a
statement of the interest of Secured Party and of any assignee of Secured Party
in the Equipment noted on any certificate of title relating to the Equipment and
will deposit said certificate with Secured Party or such assignee. Debtor shall
execute and deliver to Secured Party, upon request, such other instruments and
assurances as Secured Party deems necessary or advisable for the implementation,
effectuation, confirmation or perfection of this Agreement and any rights of
Secured Party hereunder.
<PAGE>
14. Non-Waiver; Etc. No course of dealing by Secured Party or Debtor or
any delay or omission on the part of Secured Party or Debtor in exercising any
rights hereunder shall operate as a waiver of any rights of Secured Party or
Debtor, as the case may be. No waiver or consent shall be binding upon Secured
Party or Debtor unless it is in writing and signed by the party granting such
waiver or consent. A waiver on any one occasion shall not be construed as a bar
to or a waiver of any right and/or remedy on any future occasion. To the extent
permitted by applicable law, Debtor hereby waives the benefit and advantage of,
and covenants not to assert against Secured Party, any valuation, inquisition,
stay, appraisement, extension or redemption laws now existing or which may
hereafter exist which, but for this provision, might be applicable to any sale
or other disposition made under the judgment, order or decree of any court or
under the powers of sale and other disposition conferred by this Agreement or
otherwise. Debtor hereby waives any right to a jury trial with respect to any
matter arising under or in connection with this Agreement.
15. Entire Agreement; Severability; Etc. This Agreement constitutes the
entire agreement between Secured Party and Debtor and all conversations,
agreements and representations relating to this Agreement or to the Equipment
are integrated herein. If any provision hereof or any remedy herein provided for
shall be invalid under any applicable law, such provision or remedy shall be
inapplicable and deemed omitted, but the remaining provisions and remedies
hereunder shall be given effect in accordance with the intent hereof. Neither
this Agreement nor any term hereof may be changed, discharged, terminated or
waived except in an instrument in writing signed by the party against which
enforcement of the change, discharge, termination or waiver is sought. This
Agreement shall in all respects be governed by and construed in accordance with
the internal laws of the State of New York, including all matters of
construction, validity and performance, and shall be deemed a purchase money
security agreement within the meaning of the Uniform Commercial Code. The
captions in this Agreement are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof. This Agreement shall
inure to the benefit of and be binding upon Secured Party and Debtor and their
respective successors and assigns, subject, however, to the limitations set
forth in this Agreement with respect to Debtors assignment hereof. No right or
remedy referred to in this Agreement is intended to be exclusive but each shall
be cumulative and in addition to any other right or remedy referred to in this
Agreement or otherwise available to Secured Party at law or in equity, and shall
be in addition to the provisions contained in any instrument referred to herein
and any instrument supplemental hereto. Debtor shall be liable for all
reasonable costs and expenses, including reasonable attorneys' fees and
disbursements, incurred by reason of the occurrence of any Event of Default or
the exercise of Secured Party's remedies with respect thereto. Time is of the
essence with respect to this Agreement and all of its provisions.
16. Prepayment; Rebate; Interest. Except as set forth in a written
prepayment agreement signed by Secured Party and Debtor, the Debtor may not
prepay the Time Balance, in whole or in part, at any time. In the event Secured
Party declares all of the Time Balance to be due and payable pursuant to clause
(1) of paragraph 11 above, Debtor shall pay to Secured Party an amount equal to
the sum of (a) all accrued and unpaid amounts as of the Declaration Date plus
interest thereon, (b) the present value of all future installments set forth in
this Agreement over the remaining unexpired term of this Agreement discounted to
present value using the "Make Whole Rate" as the discount rate, (provided that
the amount of interest earned by Secured Party computed as aforesaid shall not
exceed the highest amount permitted by applicable law) and (c) any costs,
expenses and fees incurred by Secured Party and/or the holder of the applicable
Loan Schedule in connection with the pay off of the Time Balance, including
without limitation any breakage fees and any other amounts due to be paid to any
securitization facility, assignee or interest rate hedge party. The sum of
"(a)", "(b)" and "(c)" is the "Make Whole Amount". The Make Whole Amount
computed in accordance with the preceding sentence shall bear interest from and
after the Declaration Date, and all other Liabilities due and payable under this
Agreement (including past due installments) shall bear interest from and after
their respective due dates, at the lesser of 1.25% per month or the highest rate
permitted by applicable law, provided, however, that Debtor shall have no
obligation to pay any interest on interest except to the extent permitted by
applicable law. The Make Whole Rate shall mean, (i) If Charter Financial is the
holder of the Agreement, the implicit rate upon which the payments under the
applicable Loan Schedule were calculated or, if the Loan Schedule is held by a
securitization facility or assignee of Charter Financial, lnc, the discount rate
upon which the amount paid by such facility or assignee was calculated, (ii) at
the Declaration Date, the yield of United States treasury notes having a
maturity equal to the then remaining unexpired term of the applicable
<PAGE>
Loan Schedule, or (iii) at the Declaration Date, the rate quoted for deposits
for a period equal to the then remaining unexpired term of the applicable Loan
Schedule in an interbank dollar market selected by Secured Party, whichever is
lowest. If no maturity of United States treasury notes or rate quoted for
deposits as at the Declaration Date exactly corresponds to the remaining
unexpired term of the applicable Loan Schedule, then the United States treasury
note or rate with the closest maturity, not exceeding the remaining unexpired
term shall be used.
17. Consent to Jurisdiction. Debtor hereby irrevocably consents to the
jurisdiction of the courts of the State of New York and of any federal court
located in such state in connection with any action or proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby. Any such
action or proceeding will be maintained in the United States District Court for
the Southern District of New York or in any court of the State of New York
located in the County of New York and Debtor waives any objections based upon
venue or forum non conveniens in connection with any such action or proceeding.
Debtor consents that process in any such action or proceeding may be served upon
it by registered mail directed to Debtor at its address set forth at the head of
this Agreement or in any other manner permitted by applicable law or rules of
court.
18. Notices. Notice hereunder shall be deemed given if served personally
or by certified or registered mail, return receipt requested, to Secured Party
and Debtor at their respective addresses set forth at the head of this
Agreement. Any party hereto may from to time by written notice to the other
change the address to which notices are to be sent to such party. A copy of any
notice sent by Debtor to Secured Party shall be concurrently sent by Debtor to
any assignee of Secured Party of which Debtor has notice.
The Debtor agrees to all the provisions set forth above. This Agreement is
executed pursuant to due authorization. DEBTOR ACKNOWLEDGES RECEIPT OF A SIGNED
TRUE COPY OF THIS AGREEMENT.
Date March 31 1999 Accepted on March 31, 1999
------------------ ---- ---------------- ----
StarMedia Network, Inc. Charter Financial, Inc.
(Signature of Proprietor or name
of Corporation or Partnership)
By [ILLEGIBLE] By: [ILLEGIBLE]
------------------------------------ -----------------------------------
Its VP Finance & Admin Its: Vice President
-----------------------------------
(if Corporation, President or Vice President
should sign and give official title; if Partnership,
state partner)
<PAGE>
Ex. 10.13
EXECUTION COPY
STOCK PURCHASE AGREEMENT
between
STARMEDIA NETWORK, INC.
and
HEARST COMMUNICATIONS, INC.
Dated as of April 30, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
THE PURCHASED SHARES
Section 1.1 Issuance, Sale and Delivery of the Purchased Shares.................... 1
Section 1.2 Closing................................................................ 1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 2.1 Organization; Corporate Power.......................................... 1
Section 2.2 Authorization of Agreement............................................. 2
Section 2.3 Validity............................................................... 2
Section 2.4 Authorized Capital Stock............................................... 2
Section 2.5 Financial Statements................................................... 2
Section 2.6 Litigation; Compliance with Law........................................ 3
Section 2.7 Intellectual Property.................................................. 3
Section 2.8 Taxes.................................................................. 3
Section 2.9 Governmental Approvals................................................. 3
Section 2.10 Brokers................................................................ 3
Section 2.11 Foreign Corrupt Practices Act.......................................... 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 3.1 Organization; Corporate Power.......................................... 4
Section 3.2 Authorization of Agreements............................................ 4
Section 3.3 Validity............................................................... 4
Section 3.4 Accredited Investor.................................................... 4
Section 3.5 Sufficient Knowledge................................................... 5
Section 3.6 Investment............................................................. 5
Section 3.7 No Registration........................................................ 5
Section 3.8 Brokers................................................................ 5
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
AND THE COMPANY
Section 4.1 Conditions to the Obligations of the Purchaser on the Closing Date..... 5
(a) Representations and Warranties to be True and Correct.............. 5
(b) Performance........................................................ 5
(c) Supporting Documents............................................... 6
(d) Registration Rights Agreement...................................... 6
Section 4.2 Condition to the Obligations of the Company on the Closing Date........ 6
(a) Representations and Warranties to be True and Correct.............. 6
(b) Performance........................................................ 6
(c) Lockup Agreement................................................... 7
ARTICLE V
MISCELLANEOUS
Section 5.1 Registration Rights Agreement.......................................... 7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 5.2 Lockup Agreement....................................................... 7
Section 5.3 Expenses............................................................... 7
Section 5.4 Brokerage.............................................................. 7
Section 5.5 Notices................................................................ 7
Section 5.6 Governing Law.......................................................... 8
Section 5.7 Entire Agreement....................................................... 8
Section 5.8 Counterparts........................................................... 8
Section 5.9 Amendments............................................................. 8
Section 5.10 Severability........................................................... 8
Section 5.11 Titles and Subtitles................................................... 8
Section 5.12 Certain Defined Terms.................................................. 8
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT dated as of April 30, 1999, between StarMedia
Network, Inc., a Delaware corporation (the "Company"), and Hearst
Communications, Inc. (the "Purchaser").
WHEREAS, the Company wishes to issue and sell to the Purchaser an
aggregate of 909,091 shares (the "Purchased Shares") of the authorized but
unissued common stock, $0.001 par value, of the Company (the "Common Stock");
and
WHEREAS, the Purchaser wishes to purchase the Purchased Shares on the
terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
THE PURCHASED SHARES
ISSUANCE, SALE AND DELIVERY OF THE PURCHASED SHARES.
The Company agrees to issue and sell to the Purchaser, and the Purchaser
hereby agrees to purchase from the Company, the Purchased Shares in exchange for
an amount equal to $10,000,000 (the "Purchase Price").
CLOSING.
The closing (the "Closing") shall take place at the offices of Winthrop,
Stimson, Putnam and Roberts, One Battery Park Plaza, New York, New York 10004 on
April 30, 1999, at 10:00 a.m., New York time, or at such other date and time as
may be agreed upon between the Purchaser and the Company (the "Closing Date").
At the Closing, the Company shall issue and deliver to the Purchaser a
stock certificate or certificates in definitive form, registered in the name of
the Purchaser representing the Purchased Shares. As payment in full for the
Purchased Shares, and against delivery of the stock certificate or certificates
therefor as aforesaid, on the Closing Date the Purchaser shall deliver to the
Company the Purchase Price, payable by (i) delivery to the Company of a
certified check payable to the order of the Company, or (ii) wire transfer of
immediately available funds to the account of the Company.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<PAGE>
The Company represents and warrants to the Purchaser that, except as
set forth in the Disclosure Schedule attached as SCHEDULE I:
ORGANIZATION; CORPORATE POWER.
The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated and
has the corporate power and authority to execute and deliver this Agreement, and
perform its obligations hereunder.
AUTHORIZATION OF AGREEMENT.
The execution and delivery by the Company of this Agreement and the
performance by the Company of its obligations hereunder have been duly
authorized by all requisite corporate action and will not violate any provision
of law, any order of any court or other agency of government, the Certificate of
Incorporation of the Company, as amended (the "Charter"), or the By-laws of the
Company, as amended.
The Purchased Shares have been duly authorized and, when issued and
delivered in accordance with this Agreement, will be validly issued, fully paid
and nonassessable shares of Common Stock and will be free and clear of all
liens, charges, restrictions, claims and encumbrances ("Liens") imposed by or
through the Company.
VALIDITY.
This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company, enforceable
in accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) as limited by
general equitable principles.
AUTHORIZED CAPITAL STOCK.
The authorized capital stock of the Company consists of (i) 60,000,000
shares of Preferred Stock, $0.001 par value (the "Preferred Stock"), of which
7,330,000 shares have been designated Series A Convertible Preferred Stock,
8,000,000 shares have been designated Series B Convertible Preferred Stock and
16,666,667 shares have been designated Series C Convertible Preferred Stock, and
(ii) 100,000,000 shares of Common Stock, $0.001 par value. Prior to the Closing
and to any other sale of Common Stock occurring on the Closing Date, (A)
10,427,000 shares of Common Stock will be validly issued and outstanding, fully
paid and nonassessable, (B) 7,330,000 shares of Series A Convertible Preferred
Stock, 8,000,000 shares of Series B Convertible Preferred Stock and 16,666,667
shares of Series C Convertible Preferred Stock will
<PAGE>
be validly issued and outstanding, fully paid and non-assessable. An aggregate
of 31,996,667 shares of Common Stock has been reserved for issuance upon
conversion of the Series A Convertible Preferred Stock, the Series B Convertible
Preferred Stock and the Series C Convertible Preferred Stock. Options to
purchase 8,579,100 shares of Common Stock have been granted and are currently
outstanding. The designations, powers, preferences, rights, qualifications,
limitation and restrictions in respect of each class and series of authorized
capital stock of the Company are as set forth in the Charter.
FINANCIAL STATEMENTS.
The Company has furnished to the Purchaser (i) the audited balance sheet of
the Company as of December 31, 1998 (the "Balance Sheet"), and the related
audited statements of income and stockholders' equity for the year then ended,
and (ii) the unaudited balance sheet of the Company as of March 30, 1999 and the
related unaudited statements of income and stockholders' equity for the three
months then ended (the "Unaudited Balance Sheet," and together with the Balance
Sheet, the "Financial Statements"). The Financial Statements have been prepared
in accordance with generally accepted accounting principles consistently applied
and fairly present the financial position of the Company and its results of
operation for and as of the dates set fort h therein. Since the date of the
Unaudited Balance Sheet, there has been no material adverse change in the
assets, liabilities or financial condition of the Company from that reflected in
the Unaudited Balance Sheet, except for changes in the ordinary course of
business.
LITIGATION; COMPLIANCE WITH LAW.
There is no action, suit, claim or proceeding pending or, to the Company's
knowledge, threatened against the Company or any of its subsidiaries, at law or
in equity, or before or by any foreign or domestic Federal, state, municipal or
other governmental department, commission, board, bureau agency or
instrumentality, except to the extent that any of the foregoing, if determined
adversely to the Company, would not have a material and adverse effect on the
business, financial condition, operations or property of the Company or any of
its subsidiaries ("Material Adverse Effect"). The Company and each of its
subsidiaries (i) has complied with all foreign and domestic laws, rules,
regulations and orders applicable to its business, operations, properties,
assets, products and services, (ii) has all necessary permits, licenses and
other authorizations required to conduct its business as conducted, and (iii)
has been operating its business pursuant to and in compliance with the terms of
all such permits, licenses and other authorizations, except to the extent that
the failure to do any of the foregoing would not have a Material Adverse Effect.
INTELLECTUAL PROPERTY.
The Company has the right to use all Intellectual Property (as defined
below) used by the Company or necessary in connection with the operation of the
Company's business, without, to the best knowledge of the Company, infringing on
or otherwise acting adversely to the rights of any person.
Except as set forth in the Disclosure Schedule, no claim is pending or, to
the best of the Company's knowledge, threatened to the effect that any domestic
or foreign patents, patent rights, patent applications, trademarks, trademark
applications, service marks, service mark
<PAGE>
applications, trade names or copyrights ("Intellectual Property") owned or
licensed by the Company or any of its subsidiaries or which the Company or any
of its subsidiaries otherwise has the right to use, is invalid or unenforceable
by the Company or any such subsidiary, except to the extent that any of the
foregoing, if determined adversely to the Company, would not have a Material
Adverse Effect.
TAXES.
The Company and each of its subsidiaries has filed all tax returns,
Federal, state, foreign, county and local, required to be filed by it, and the
Company and each of its subsidiaries has paid all taxes shown to be due by such
returns as well as all other taxes, assessments and governmental charges which
have become due or payable, other than those being contested in good faith. The
Company and each of its subsidiaries has established adequate reserves for all
taxes accrued but not yet payable.
GOVERNMENTAL APPROVALS.
Subject to the accuracy of the representations and warranties of the
Purchaser set forth in Article III, no registration or filing with, or consent
or approval of or other action by, any foreign or domestic Federal, state or
other governmental agency or instrumentality is or will be necessary for the
valid execution, delivery and performance by the Company of its obligations
hereunder, other than filings pursuant to Federal and state securities laws in
connection with the sale of the Purchased Shares.
BROKERS.
Except as set forth on the Disclosure Schedule, the Company has no
contract, arrangement or understanding with any broker, finder or similar agent
with respect to the transactions contemplated by this Agreement.
FOREIGN CORRUPT PRACTICES ACT.
Neither the Company nor any of its subsidiaries has taken any action which
would cause it to be in violation of the Foreign Corrupt Practices Act of 1977,
as amended, or any rules and regulations thereunder. To the best of the
Company's knowledge, there is not now, and there has never been, any employment
by the Company or any of its subsidiaries of, or beneficial ownership in the
Company or any of its subsidiaries by, any governmental or political official in
any country in the world.
Subsidiaries.
Each of the Company's subsidiaries is a corporation duly organized, validly
existing and in good stnading under the laws of its jurisdiction of
incorporation, and has full corporate power and authority to conduct its
business as and to the extent now conducted and to own, use and lease its assets
and properties. Each such subsidiary is duly qualified, licensed or admitted to
do business and is in good standing in those jurisdictions in which the
ownership, use or leasing of such subsidiary's assets and properties, or the
nature of its business, makes such qualification, licensing or admission
necessary, except to
<PAGE>
the extent the failure of any such subsidiary to be so qualified, licensed or
admitted would not have a Material Adverse Effect. All of the outstanding shares
of capital stock of each subsidiary of the Company are owned, beneficially and
of record, by the Company or other subsidiaries of the Company, free and clear
of all Liens. There are no outstanding options to purchase any capital stock of
any subsidiary of the Company.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company that:
ORGANIZATION; CORPORATE POWER.
The Purchaser is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has the power and
authority to execute, deliver and perform its obligations under this Agreement.
AUTHORIZATION OF AGREEMENTS.
The execution and delivery by the Purchaser of this Agreement, and the
performance by the Purchaser of its obligations hereunder have been duly
authorized by all requisite corporate action and will not violate any provision
of law, any order of any court or other agency of government, or the Purchaser's
organizational documents.
VALIDITY.
This Agreement has been duly executed and delivered by the Purchaser and
constitutes the legal, valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii) as
limited by general equitable principles.
ACCREDITED INVESTOR.
The Purchaser is an "accredited investor" within the meaning of Rule 501
under the Securities Act of 1933 (the "Securities Act") and was not organized
for the specific purpose of acquiring the Purchased Shares.
SUFFICIENT KNOWLEDGE.
The Purchaser has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of development
so as to be able to evaluate the risks and merits of its investment in the
Company and it is able financially to bear the risks thereof. The Purchaser has
had an opportunity to discuss the Company's business, management and financial
affairs with the Company's management.
<PAGE>
INVESTMENT.
The Purchaser is acquiring the Purchased Shares being purchased by it
hereunder for its own account, not as a nominee or agent, for the purpose of
investment and not with a view to the resale or distribution of any part
thereof, and the Purchaser does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Purchased Shares.
NO REGISTRATION.
The Purchaser understands that (i) the Purchased Shares have not been
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof or Rule 506 promulgated under the Securities Act, (ii) the
Purchased Shares must be held indefinitely unless a subsequent disposition
thereof is registered under the Securities Act or is exempt from such
registration, (iii) the Purchased Shares will bear a legend to such effect and
(iv) the Company will make a notation on its transfer books to such effect.
BROKERS.
The Purchaser has no contract, arrangement or understanding with any
broker, finder or similar agent with respect to the transactions contemplated by
this Agreement.
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
AND THE COMPANY
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER ON THE CLOSING
DATE.
The obligation of the Purchaser to purchase the Purchased Shares from the
Company on the Closing Date is subject to the satisfaction or waiver, on or
before the Closing Date, of the following conditions:
REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT.
The representations and warranties contained in Article II shall be true,
complete and correct in all material respects on and as of the Closing Date with
the same effect as though such representations and warranties had been made on
and as of such date, and the President and Treasurer of the Company shall have
certified to such effect to the Purchaser in writing.
PERFORMANCE.
The Company shall have performed and complied with all agreements contained
herein required to be performed or complied with by it prior to or on the
Closing Date, and the
<PAGE>
President and Treasurer of the Company shall have certified to the Purchaser in
writing to such effect and to the further effect that all of the conditions set
forth in this Section 4.1 have been satisfied.
SUPPORTING DOCUMENTS.
The Purchaser shall have received copies of the following documents:
(A) the Charter, certified as of a recent date by the Secretary of
State of the State of Delaware, (B) a certificate of said Secretary, dated
as of a recent date, as to the due incorporation and good standing of the
Company, the payment of all excise taxes by the Company and listing all
documents of the Company on file with said Secretary and (C) a certificate
of the Secretary of State of the State of New York, dated as of a recent
date, as to the good standing of the Company in such state; and
a certificate of the Secretary or an Assistant Secretary of the
Company dated the Closing Date and certifying: (A) that attached thereto is
a true and complete copy of the By-laws of the Company as in effect on the
date of such certification; (B) that attached thereto is a true and complete
copy of all resolutions adopted by the Board of Directors or the
stockholders of the Company authorizing the execution, delivery and
performance of this Agreement, the Lockup Agreement and the Registration
Rights Agreement, including the issuance, sale and delivery of the Purchased
Shares, and that all such resolutions are in full force and effect and are
all the resolutions adopted in connection with the transactions contemplated
hereby; (C) that the Charter has not been amended since the date of the last
amendment referred to in the certificate delivered pursuant to clause (i)(B)
above; and (D) to the incumbency and specimen signature of each officer of
the Company executing this Agreement, the stock certificates representing
the Purchased Shares and any certificate or instrument furnished pursuant
hereto, and a certification by another officer of the Company as to the
incumbency and signature of the officer signing the certificate referred to
in this clause (ii).
REGISTRATION RIGHTS AGREEMENT.
The Company shall have executed and delivered to the Purchaser a
registration rights agreement substantially in the form attached hereto as
EXHIBIT A (the "Registration Rights Agreement").
CONDITION TO THE OBLIGATIONS OF THE COMPANY ON THE CLOSING DATE.
The obligation of the Company to sell the Purchased Shares to the Purchaser
is subject to the satisfaction or waiver, on or before the Closing Date, of the
following conditions:
<PAGE>
REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT.
The representations and warranties contained in Article III shall be true,
complete and correct in all material respects on and as of the Closing Date with
the same effect as though such representations and warranties had been made on
and as of such date, and the Purchaser shall have certified to such effect to
the Company in writing.
PERFORMANCE.
The Purchaser shall have performed and complied with all agreements
contained herein required to be performed or complied with by it prior to or at
the Closing Date, and the Purchaser shall have certified to the Company in
writing to such effect and to the further effect that all of the conditions set
forth in this Section 4.2 have been satisfied.
LOCKUP AGREEMENT.
The Purchaser shall have executed and delivered to the Company a lockup
agreement substantially in the form attached hereto as EXHIBIT B (the "Lockup
Agreement").
MISCELLANEOUS
REGISTRATION RIGHTS AGREEMENT.
On or prior to the Closing Date, the Company shall execute and deliver to
the Purchaser the Registration Rights Agreement.
LOCKUP AGREEMENT.
On or prior to the Closing Date, the Purchaser shall execute and deliver to
the Company the Lockup Agreement.
EXPENSES.
Each party hereto will pay its own expenses in connection with the
transactions contemplated hereby, whether or not such transactions shall be
consummated; PROVIDED, HOWEVER, that the Company shall pay the reasonable legal
fees and expenses of Purchaser's counsel incurred in connection with the
transactions contemplated hereby, up to a maximum of $10,000.
BROKERAGE.
Each party hereto will indemnify and hold harmless the other against and in
respect of any claim for brokerage or other commissions relative to this
Agreement or to the transactions
<PAGE>
contemplated hereby, based in any way on agreements, arrangements or
understandings made or claimed to have been made by such party with any third
party, other than as described in Section 2.10 of the Disclosure Schedule.
NOTICES.
All notices, requests, consents and other communications hereunder shall be
in writing and shall be delivered in person, mailed by certified or registered
mail, return receipt requested, or sent by telecopier, addressed as follows:
To the Company:
StarMedia Network, Inc.
29 West 36th Street
5th Floor New York,
New York 10018
Attention: President
Fax Number: 212-631-9100
To the Purchaser:
Hearst Communications, Inc
959 Eighth Avenue
New York, New York 10019
Attention: _______________
Fax Number: ____________
with a copy to:
Rogers & Wells LLP
200 Park Avenue
New York, NY 10166
Attention: Steven A. Hobbs
Fax Number: 212-631-9100
or at such other address or fax number or to the attention of such other person
as the party to whom such information pertains may hereafter specify.
GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
ENTIRE AGREEMENT.
This Agreement, including the Schedules and Exhibits hereto, constitutes
the sole and
<PAGE>
entire agreement of the parties with respect to the subject matter hereof. All
Schedules and Exhibits hereto are hereby incorporated herein by reference.
COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
AMENDMENTS.
This Agreement may not be amended or modified, and no provisions hereof may
be waived, without the written consent of the Company and the Purchaser.
SEVERABILITY.
If any provision of this Agreement shall be declared void or unenforceable
by any judicial or administrative authority, the validity of any other provision
and of the entire Agreement shall not be affected thereby.
TITLES AND SUBTITLES.
The titles and subtitles used in this Agreement are for convenience only
and are not to be considered in construing or interpreting any term or provision
of this Agreement.
CERTAIN DEFINED TERMS.
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"PERSON" shall mean an individual, corporation, trust, partnership,
joint venture, unincorporated organization, government or any agency or
political subdivision thereof, or other entity.
"SUBSIDIARY" shall mean, as to the Company, any corporation of which
more than 50% of the outstanding stock having ordinary voting power to
elect a majority of the Board of Directors of such corporation
(irrespective of whether or not at the time stock of any other class or
classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time directly or indirectly
owned by the Company, or by one or more of its subsidiaries, or by the
Company and one or more of its subsidiaries.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
STARMEDIA NETWORK, INC.
By:
Name:
Title:
HEARST COMMUNICATIONS, INC.
By:
Name:
Title:
<PAGE>
As a result of the Class C preferred stock contingent issuance obligation
settlement, Mr. Whitman and the following persons or entities below, all
associated with Mr. Whitman, will receive upon the closing of this offering an
issuance of 1,782,000 shares of Class A common stock in the following amounts:
<TABLE>
<CAPTION>
Shares of Class A
Common Stock
------------
<S> <C>
John Whitman............................................. 1,800
The Whitman Children Irrevocable Trust(1)................ 1,800
Subir Ray (2)............................................ 400
Peter Gerry(2)........................................... 1,800
Kilin To (2)............................................. 7,100
CitiGrowth Fund II, Offshore L.P.(3)..................... 137,400
CG Asian-American Fund L.P.(3)........................... 137,400
Pnneetai Global Fund L.P.(2)............................. 68,700
Total............................... 356,500
</TABLE>
- ----------
(1) The Whitman Children Irrevocable Trust, is a trust for the benefit of Mr.
Whitman's children.
(2) Mr. Whitman has been granted with a power of attorney
for these shareholders.
(3) Mr. Whitman holds a minority interest in the entities that control these
limited partnerships.
<PAGE>
Exhibit 10.14
EXECUTION COPY
STOCK PURCHASE AGREEMENT
between
STARMEDIA NETWORK, INC.
and
REUTERS HOLDINGS SWITZERLAND SA
Dated as of April 30, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
THE PURCHASED SHARES
<S> <C>
Section 1.1 Issuance, Sale and Delivery of the Purchased Shares 1
Section 1.2 Closing 1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 2.1 Organization; Corporate Power 1
Section 2.2 Authorization of Agreement 2
Section 2.3 Validity 2
Section 2.4 Authorized Capital Stock 2
Section 2.5 Financial Statements 2
Section 2.6 Litigation; Compliance with Law 2
Section 2.7 Intellectual Property 3
Section 2.8 Taxes 3
Section 2.9 Governmental Approvals 3
Section 2.10 Brokers 3
Section 2.11 Foreign Corrupt Practices Act 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 3.1 Organization; Corporate Power 4
Section 3.2 Authorization of Agreements 4
Section 3.3 Validity 4
Section 3.4 Accredited Investor 4
Section 3.5 Sufficient Knowledge 4
Section 3.6 Investment 4
Section 3.7 No Registration 4
Section 3.8 Brokers 5
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
AND the company
Section 4.1 Conditions to the Obligations of the Purchaser on the Closing Date 5
(a) Representations and Warranties to be True and Correct 5
(b) Performance 5
(c) Supporting Documents 5
(d) Registration Rights Agreement 6
Section 4.2 Condition to the Obligations of the Company on the Closing Date 6
(a) Representations and Warranties to be True and Correct 6
(b) Performance 6
(c) Lockup Agreement 6
ARTICLE V
MISCELLANEOUS
Section 5.1 Registration Rights Agreement 6
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 5.2 Lockup Agreement 6
Section 5.3 Expenses 6
Section 5.4 Brokerage 6
Section 5.5 Notices 7
Section 5.6 Governing Law 7
Section 5.7 Entire Agreement 7
Section 5.8 Counterparts 7
Section 5.9 Amendments 7
Section 5.10 Severability 7
Section 5.11 Titles and Subtitles 7
Section 5.12 Certain Defined Terms 7
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT dated as of April 30, 1999, between StarMedia
Network, Inc., a Delaware corporation (the "Company"), and Reuters Holdings
Switzerland SA (the "Purchaser").
WHEREAS, the Company wishes to issue and sell to the Purchaser an
aggregate of 272,727 shares (the "Purchased Shares") of the authorized but
unissued common stock, $0.001 par value, of the Company (the "Common Stock");
and
WHEREAS, the Purchaser wishes to purchase the Purchased Shares on the
terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
ARTICLE I
ISSUANCE, SALE AND DELIVERY OF THE PURCHASED SHARES
The Company agrees to issue and sell to the Purchaser, and the
Purchaser hereby agrees to purchase from the Company, the Purchased Shares in
exchange for an amount equal to $3,000,000 (the "Purchase Price").
CLOSING.
The closing (the "Closing") shall take place at the offices of
Winthrop, Stimson, Putnam and Roberts, One Battery Park Plaza, New York, New
York 10004 on April 30, 1999, at 10:00 a.m., New York time, or at such other
date and time as may be agreed upon between the Purchaser and the Company (the
"Closing Date").
At the Closing, the Company shall issue and deliver to the Purchaser a
stock certificate or certificates in definitive form, registered in the name of
the Purchaser representing the Purchased Shares. As payment in full for the
Purchased Shares, and against delivery of the stock certificate or certificates
therefor as aforesaid, on the Closing Date the Purchaser shall deliver to the
Company the Purchase Price, payable by (i) delivery to the Company of a
certified check payable to the order of the Company, or (ii) wire transfer of
immediately available funds to the account of the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<PAGE>
The Company represents and warrants to the Purchaser that, except as
set forth in the Disclosure Schedule attached as SCHEDULE I:
ORGANIZATION; CORPORATE POWER.
The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated and
has the corporate power and authority to execute and deliver this Agreement, and
perform its obligations hereunder.
AUTHORIZATION OF AGREEMENT.
The execution and delivery by the Company of this Agreement and the
performance by the Company of its obligations hereunder have been duly
authorized by all requisite corporate action and will not violate any provision
of law, any order of any court or other agency of government, the Certificate of
Incorporation of the Company, as amended (the "Charter"), or the By-laws of the
Company, as amended.
The Purchased Shares have been duly authorized and, when issued and
delivered in accordance with this Agreement, will be validly issued, fully paid
and nonassessable shares of Common Stock and will be free and clear of all
liens, charges, restrictions, claims and encumbrances imposed by or through the
Company.
VALIDITY.
This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company, enforceable
in accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) as limited by
general equitable principles.
AUTHORIZED CAPITAL STOCK.
The authorized capital stock of the Company consists of (i) 60,000,000
shares of Preferred Stock, $0.001 par value (the "Preferred Stock"), of which
7,330,000 shares have been designated Series A Convertible Preferred Stock,
8,000,000 shares have been designated Series B Convertible Preferred Stock and
16,666,667 shares have been designated Series C Convertible Preferred Stock, and
(ii) 100,000,000 shares of Common Stock, $0.001 par value. Prior to the Closing
and to any other sale of Common Stock occurring on the Closing Date, (A)
10,427,000 shares of Common Stock will be validly issued and outstanding, fully
paid and nonassessable, (B) 7,330,000 shares of Series A Convertible Preferred
Stock, 8,000,000 shares of Series B Convertible Preferred Stock and 16,666,667
shares of Series C Convertible Preferred Stock will
<PAGE>
be validly issued and outstanding, fully paid and non-assessable. An aggregate
of 31,996,667 shares of Common Stock has been reserved for issuance upon
conversion of the Series A Convertible Preferred Stock, the Series B Convertible
Preferred Stock and the Series C Convertible Preferred Stock. Options to
purchase 8,579,100 shares of Common Stock have been granted and are currently
outstanding. The designations, powers, preferences, rights, qualifications,
limitation and restrictions in respect of each class and series of authorized
capital stock of the Company are as set forth in the Charter.
FINANCIAL STATEMENTS.
The Company has furnished to the Purchaser (i) the audited balance
sheet of the Company as of December 31, 1998 (the "Balance Sheet"), and the
related audited statements of income and stockholders' equity for the year then
ended. All such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied and fairly present
the financial position of the Company and its results of operation for and as of
the dates set forth therein. Since the date of the Balance Sheet, there has been
no material adverse change in the assets, liabilities or financial condition of
the Company from that reflected in the Balance Sheet, except for changes in the
ordinary course of business.
LITIGATION; COMPLIANCE WITH LAW.
There is no action, suit, claim or proceeding pending or, to the
Company's knowledge, threatened against the Company, at law or in equity, or
before or by any foreign or domestic Federal, state, municipal or other
governmental department, commission, board, bureau agency or instrumentality,
except to the extent that any of the foregoing, if determined adversely to the
Company, would not have a material and adverse effect on the business, financial
condition, operations or property of the Company ("Material Adverse Effect").
The Company and each of its subsidiaries (i) has complied with all foreign and
domestic laws, rules, regulations and orders applicable to its business,
operations, properties, assets, products and services, (ii) has all necessary
permits, licenses and other authorizations required to conduct its business as
conducted, and (iii) has been operating its business pursuant to and in
compliance with the terms of all such permits, licenses and other
authorizations, except to the extent that the failure to do any of the foregoing
would not have a Material Adverse Effect.
INTELLECTUAL PROPERTY.
Except as set forth in the Disclosure Schedule, no claim is pending or,
to the best of the Company's knowledge, threatened to the effect that any
domestic or foreign patents, patent rights, patent applications, trademarks,
trademark applications, service marks, service mark applications, trade names or
copyrights owned or licensed by the Company or any of its subsidiaries or which
the Company or any of its subsidiaries otherwise has the right to use, is
invalid or unenforceable by the Company or any such subsidiary, except to the
extent that any of the foregoing, if determined adversely to the Company, would
not have a Material Adverse Effect.
TAXES.
<PAGE>
The Company and each of its subsidiaries has filed all tax returns,
Federal, state, foreign, county and local, required to be filed by it, and the
Company and each of its subsidiaries has paid all taxes shown to be due by such
returns as well as all other taxes, assessments and governmental charges which
have become due or payable, other than those being contested in good faith. The
Company and each of its subsidiaries has established adequate reserves for all
taxes accrued but not yet payable.
GOVERNMENTAL APPROVALS.
Subject to the accuracy of the representations and warranties of the
Purchaser set forth in Article III, no registration or filing with, or consent
or approval of or other action by, any foreign or domestic Federal, state or
other governmental agency or instrumentality is or will be necessary for the
valid execution, delivery and performance by the Company of its obligations
hereunder, other than filings pursuant to Federal and state securities laws in
connection with the sale of the Purchased Shares.
BROKERS.
Except as set forth on the Disclosure Schedule, the Company has no
contract, arrangement or understanding with any broker, finder or similar agent
with respect to the transactions contemplated by this Agreement.
FOREIGN CORRUPT PRACTICES ACT.
Neither the Company nor any of its subsidiaries has taken any action
which would cause it to be in violation of the Foreign Corrupt Practices Act of
1977, as amended, or any rules and regulations thereunder. To the best of the
Company's knowledge, there is not now, and there has never been, any employment
by the Company or any of its subsidiaries of, or beneficial ownership in the
Company or any of its subsidiaries by, any governmental or political official in
any country in the world.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company that:
ORGANIZATION; CORPORATE POWER.
The Purchaser is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has the power and
authority to execute, deliver and perform its obligations under this Agreement.
AUTHORIZATION OF AGREEMENTS.
<PAGE>
The execution and delivery by the Purchaser of this Agreement, and the
performance by the Purchaser of its obligations hereunder have been duly
authorized by all requisite corporate action and will not violate any provision
of law, any order of any court or other agency of government, or the Purchaser's
organizational documents.
VALIDITY.
This Agreement has been duly executed and delivered by the Purchaser
and constitutes the legal, valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii) as
limited by general equitable principles.
ACCREDITED INVESTOR.
The Purchaser is an "accredited investor" within the meaning of Rule
501 under the Securities Act of 1933 (the "Securities Act") and was not
organized for the specific purpose of acquiring the Purchased Shares.
SUFFICIENT KNOWLEDGE.
The Purchaser has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of development
so as to be able to evaluate the risks and merits of its investment in the
Company and it is able financially to bear the risks thereof. The Purchaser has
had an opportunity to discuss the Company's business, management and financial
affairs with the Company's management.
INVESTMENT.
The Purchaser is acquiring the Purchased Shares being purchased by it
hereunder for its own account, not as a nominee or agent, for the purpose of
investment and not with a view to the resale or distribution of any part
thereof, and the Purchaser does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Purchased Shares.
NO REGISTRATION.
The Purchaser understands that (i) the Purchased Shares have not been
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof or Rule 506 promulgated under the Securities Act, (ii) the
Purchased Shares must be held indefinitely unless a subsequent disposition
thereof is registered under the Securities Act or is exempt from such
registration, (iii) the Purchased Shares will bear a legend to such effect and
(iv) the Company will make a notation on its transfer books to such effect.
BROKERS.
<PAGE>
The Purchaser has no contract, arrangement or understanding with any
broker, finder or similar agent with respect to the transactions contemplated by
this Agreement.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
AND THE COMPANY
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER ON THE CLOSING
DATE.
The obligation of the Purchaser to purchase the Purchased Shares from
the Company on the Closing Date is subject to the satisfaction or waiver, on or
before the Closing Date, of the following conditions:
REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT
The representations and warranties contained in Article II shall be
true, complete and correct in all material respects on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of such date, and the President and Treasurer of the Company
shall have certified to such effect to the Purchaser in writing.
PERFORMANCE.
The Company shall have performed and complied with all agreements
contained herein required to be performed or complied with by it prior to or on
the Closing Date, and the President and Treasurer of the Company shall have
certified to the Purchaser in writing to such effect and to the further effect
that all of the conditions set forth in this Section 4.1 have been satisfied.
SUPPORTING DOCUMENTS.
The Purchaser shall have received copies of the following documents:
(A) the Charter, certified as of a recent date by
the Secretary of State of the State of Delaware, (B) a certificate of
said Secretary, dated as of a recent date, as to the due incorporation
and good standing of the Company, the payment of all excise taxes by
the Company and listing all documents of the Company on file with said
Secretary and (C) a certificate of the Secretary of State of the State
of New York, dated as of a recent date, as to the good standing of the
Company in such state; and
a certificate of the Secretary or an Assistant
Secretary of the Company dated
<PAGE>
the Closing Date and certifying: (A) that attached thereto is a true
and complete copy of the By-laws of the Company as in effect on the
date of such certification; (B) that attached thereto is a true and
complete copy of all resolutions adopted by the Board of Directors or
the stockholders of the Company authorizing the execution, delivery and
performance of this Agreement, including the issuance, sale and
delivery of the Purchased Shares, and that all such resolutions are in
full force and effect and are all the resolutions adopted in connection
with the transactions contemplated hereby; (C) that the Charter has not
been amended since the date of the last amendment referred to in the
certificate delivered pursuant to clause (i)(B) above; and (D) to the
incumbency and specimen signature of each officer of the Company
executing this Agreement, the stock certificates representing the
Purchased Shares and any certificate or instrument furnished pursuant
hereto, and a certification by another officer of the Company as to the
incumbency and signature of the officer signing the certificate
referred to in this clause (ii).
REGISTRATION RIGHTS AGREEMENT.
The Company shall have executed and delivered to the Purchaser a
registration rights agreement substantially in the form attached hereto as
EXHIBIT A (the "Registration Rights Agreement").
CONDITION TO THE OBLIGATIONS OF THE COMPANY ON THE CLOSING
DATE.
The obligation of the Company to sell the Purchased Shares to the
Purchaser is subject to the satisfaction or waiver, on or before the Closing
Date, of the following conditions:
REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT.
The representations and warranties contained in Article III
shall be true, complete and correct in all material respects on and as
of the Closing Date with the same effect as though such representations
and warranties had been made on and as of such date, and the Purchaser
shall have certified to such effect to the Company in writing.
PERFORMANCE.
The Purchaser shall have performed and complied with all
agreements contained herein required to be performed or complied with
by it prior to or at the Closing Date, and the Purchaser shall have
certified to the Company in writing to such effect and to the further
effect that all of the conditions set forth in this Section 4.2 have
been satisfied.
LOCKUP AGREEMENT.
The Purchaser shall have executed and delivered to the Company
a lockup agreement substantially in the form attached hereto as EXHIBIT
B (the "Lockup Agreement").
<PAGE>
ARTICLE V
MISCELLANEOUS
REGISTRATION RIGHTS AGREEMENT.
On or prior to the Closing Date, the Company shall execute and deliver
to the Purchaser the Registration Rights Agreement.
LOCKUP AGREEMENT.
On or prior to the Closing Date, the Purchaser shall execute and
deliver to the Company the Lockup Agreement.
EXPENSES.
Each party hereto will pay its own expenses in connection with the
transactions contemplated hereby, whether or not such transactions shall be
consummated.
BROKERAGE.
Each party hereto will indemnify and hold harmless the other against
and in respect of any claim for brokerage or other commissions relative to this
Agreement or to the transactions contemplated hereby, based in any way on
agreements, arrangements or understandings made or claimed to have been made by
such party with any third party, other than as described in Section 2.10 of the
Disclosure Schedule.
NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be delivered in person, mailed by certified or
registered mail, return receipt requested, or sent by telecopier, addressed as
follows:
if to the Company, to it at StarMedia Network, Inc., 29 West
36th Street, 5th Floor, New York, New York 10018, Attention: President;
if to the Purchaser, to it at Reuters Holdings Switzerland SA,
5, Rue de Jargonnant, 1207 Geneva, Switzerland, Attention: Director,
with a copy to Reuters Limited, 85 Fleet Street, London EC4P 4AJ,
England, Attention: General Counsel;
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
<PAGE>
GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
ENTIRE AGREEMENT.
This Agreement, including the Schedules and Exhibits hereto,
constitutes the sole and entire agreement of the parties with respect to the
subject matter hereof. All Schedules and Exhibits hereto are hereby incorporated
herein by reference.
COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
AMENDMENTS.
This Agreement may not be amended or modified, and no provisions hereof
may be waived, without the written consent of the Company and the Purchaser.
SEVERABILITY.
If any provision of this Agreement shall be declared void or
unenforceable by any judicial or administrative authority, the validity of any
other provision and of the entire Agreement shall not be affected thereby.
TITLES AND SUBTITLES.
The titles and subtitles used in this Agreement are for convenience
only and are not to be considered in construing or interpreting any term or
provision of this Agreement.
CERTAIN DEFINED TERMS.
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"PERSON" shall mean an individual, corporation, trust, partnership,
joint venture, unincorporated organization, government or any agency or
political subdivision thereof, or other entity.
"SUBSIDIARY" shall mean, as to the Company, any corporation of which
more than 50% of the outstanding stock having ordinary voting power to elect a
majority of the Board of
<PAGE>
Directors of such corporation (irrespective of whether or not at the time stock
of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned by the Company, or by one or more of its
subsidiaries, or by the Company and one or more of its subsidiaries.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
STARMEDIA NETWORK, INC.
By:
Name:
Title:
REUTERS HOLDINGS SWITZERLAND SA
By:
Name:
Title:
<PAGE>
<PAGE>
Exhibit 10.15
EXECUTION COPY
STOCK PURCHASE AGREEMENT
between
STARMEDIA NETWORK, INC.
and
EBAY INC.
Dated as of April 30, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE PURCHASED SHARES
<TABLE>
PAGE
<S> <C> <C>
Section 1.1 Issuance, Sale and Delivery of the Purchased Shares............................................1
Section 1.2 Closing........................................................................................1
</TABLE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<TABLE>
<S> <C> <C>
Section 2.1 Organization; Corporate Power..................................................................1
Section 2.2 Authorization of Agreement.....................................................................2
Section 2.3 Validity.......................................................................................2
Section 2.4 Authorized Capital Stock.......................................................................2
Section 2.5 Financial Statements...........................................................................2
Section 2.6 Litigation; Compliance with Law................................................................2
Section 2.7 Intellectual Property..........................................................................3
Section 2.8 Taxes..........................................................................................3
Section 2.9 Governmental Approvals.........................................................................3
Section 2.10 Brokers........................................................................................3
Section 2.11 Foreign Corrupt Practices Act..................................................................3
</TABLE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
<TABLE>
<S> <C> <C>
Section 3.1 Organization; Corporate Power..................................................................4
Section 3.2 Authorization of Agreements....................................................................4
Section 3.3 Validity.......................................................................................4
Section 3.4 Accredited Investor............................................................................4
Section 3.5 Sufficient Knowledge...........................................................................4
Section 3.6 Investment.....................................................................................4
Section 3.7 No Registration................................................................................4
Section 3.8 Brokers........................................................................................5
</TABLE>
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
AND THE COMPANY
<TABLE>
<S> <C> <C>
Section 4.1 Conditions to the Obligations of the Purchaser on the Closing Date.............................5
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
(a) Representations and Warranties to be True and Correct....................................5
(b) Performance..............................................................................5
(c) Supporting Documents.....................................................................5
(d) Registration Rights Agreement............................................................6
Section 4.2 Condition to the Obligations of the Company on the Closing Date................................6
(a) Representations and Warranties to be True and Correct....................................6
(b) Performance..............................................................................6
(c) Lockup Agreement.........................................................................6
</TABLE>
ARTICLE V
MISCELLANEOUS
<TABLE>
<S> <C> <C>
Section 5.1 Registration Rights Agreement..................................................................6
Section 5.2 Lockup Agreement...............................................................................6
Section 5.3 Expenses.......................................................................................6
Section 5.4 Brokerage......................................................................................6
Section 5.5 Notices........................................................................................7
Section 5.6 Governing Law..................................................................................7
Section 5.7 Entire Agreement...............................................................................7
Section 5.8 Counterparts...................................................................................7
Section 5.9 Amendments.....................................................................................7
Section 5.10 Severability...................................................................................7
Section 5.11 Titles and Subtitles...........................................................................7
Section 5.12 Certain Defined Terms..........................................................................7
</TABLE>
ii
<PAGE>
STOCK PURCHASE AGREEMENT dated as of April 30, 1999, between StarMedia
Network, Inc., a Delaware corporation (the "Company"), and eBay Inc. (the
"Purchaser").
WHEREAS, the Company wishes to issue and sell to the Purchaser an
aggregate of 454,546 shares (the "Purchased Shares") of the authorized but
unissued common stock, $0.001 par value, of the Company (the "Common Stock");
and
WHEREAS, the Purchaser wishes to purchase the Purchased Shares on the
terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
ARTICLE I
THE PURCHASED SHARES
Section 1.1 ISSUANCE, SALE AND DELIVERY OF THE PURCHASED SHARES. The
Company agrees to issue and sell to the Purchaser, and the Purchaser hereby
agrees to purchase from the Company, the Purchased Shares in exchange for an
amount equal to $5,000,000 (the "Purchase Price").
Section 1.2 CLOSING. The closing (the "Closing") shall take place at
the offices of Winthrop, Stimson, Putnam and Roberts, One Battery Park Plaza,
New York, New York 10004 on April 30, 1999, at 10:00 a.m., New York time, or at
such other date and time as may be agreed upon between the Purchaser and the
Company (the "Closing Date").
At the Closing, the Company shall issue and deliver to the Purchaser a
stock certificate or certificates in definitive form, registered in the name of
the Purchaser representing the Purchased Shares. As payment in full for the
Purchased Shares, and against delivery of the stock certificate or certificates
therefor as aforesaid, on the Closing Date the Purchaser shall deliver to the
Company the Purchase Price, payable by (i) delivery to the Company of a
certified check payable to the order of the Company, or (ii) wire transfer of
immediately available funds to the account of the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that, except as
set forth in the Disclosure Schedule attached as SCHEDULE I:
Section 2.1 ORGANIZATION; CORPORATE POWER. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the corporate power and
authority to execute and deliver this Agreement, and perform its obligations
hereunder.
<PAGE>
Section 2.2 AUTHORIZATION OF AGREEMENT. (a) The execution and delivery
by the Company of this Agreement and the performance by the Company of its
obligations hereunder have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, the Certificate of Incorporation of the Company, as
amended (the "Charter"), or the By-laws of the Company, as amended.
(b) The Purchased Shares have been duly authorized and, when
issued and delivered in accordance with this Agreement, will be validly issued,
fully paid and nonassessable shares of Common Stock and will be free and clear
of all liens, charges, restrictions, claims and encumbrances imposed by or
through the Company.
Section 2.3 VALIDITY. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally and
(ii) as limited by general equitable principles.
Section 2.4 AUTHORIZED CAPITAL STOCK. The authorized capital stock of
the Company consists of (i) 60,000,000 shares of Preferred Stock, $0.001 par
value (the "Preferred Stock"), of which 7,330,000 shares have been designated
Series A Convertible Preferred Stock, 8,000,000 shares have been designated
Series B Convertible Preferred Stock and 16,666,667 shares have been designated
Series C Convertible Preferred Stock, and (ii) 100,000,000 shares of Common
Stock, $0.001 par value. Prior to the Closing and to any other sale of Common
Stock occurring on the Closing Date, (A) 10,427,000 shares of Common Stock will
be validly issued and outstanding, fully paid and nonassessable, (B) 7,330,000
shares of Series A Convertible Preferred Stock, 8,000,000 shares of Series B
Convertible Preferred Stock and 16,666,667 shares of Series C Convertible
Preferred Stock will be validly issued and outstanding, fully paid and
non-assessable. An aggregate of 31,996,667 shares of Common Stock has been
reserved for issuance upon conversion of the Series A Convertible Preferred
Stock, the Series B Convertible Preferred Stock and the Series C Convertible
Preferred Stock. Options to purchase 8,579,100 shares of Common Stock have been
granted and are currently outstanding. The designations, powers, preferences,
rights, qualifications, limitation and restrictions in respect of each class and
series of authorized capital stock of the Company are as set forth in the
Charter.
Section 2.5 FINANCIAL STATEMENTS. The Company has furnished to the
Purchaser (i) the audited balance sheet of the Company as of December 31, 1998
(the "Balance Sheet"), and the related audited statements of income and
stockholders' equity for the year then ended. All such financial statements have
been prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the financial position of the Company
and its results of operation for and as of the dates set forth therein. Since
the date of the Balance Sheet, there has been no material adverse change in the
assets, liabilities or financial condition of the Company from that reflected in
the Balance Sheet, except for changes in the ordinary course of business.
Section 2.6 LITIGATION; COMPLIANCE WITH LAW. There is no action, suit,
claim or proceeding pending or, to the Company's knowledge, threatened against
the Company, at law or in equity, or before or by any foreign or domestic
Federal, state, municipal or other governmental
2
<PAGE>
department, commission, board, bureau agency or instrumentality, except to the
extent that any of the foregoing, if determined adversely to the Company, would
not have a material and adverse effect on the business, financial condition,
operations or property of the Company ("Material Adverse Effect"). The Company
and each of its subsidiaries (i) has complied with all foreign and domestic
laws, rules, regulations and orders applicable to its business, operations,
properties, assets, products and services, (ii) has all necessary permits,
licenses and other authorizations required to conduct its business as conducted,
and (iii) has been operating its business pursuant to and in compliance with the
terms of all such permits, licenses and other authorizations, except to the
extent that the failure to do any of the foregoing would not have a Material
Adverse Effect.
Section 2.7 INTELLECTUAL PROPERTY. Except as set forth in the
Disclosure Schedule, no claim is pending or, to the best of the Company's
knowledge, threatened to the effect that any domestic or foreign patents, patent
rights, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names or copyrights owned or licensed by the
Company or any of its subsidiaries or which the Company or any of its
subsidiaries otherwise has the right to use, is invalid or unenforceable by the
Company or any such subsidiary, except to the extent that any of the foregoing,
if determined adversely to the Company, would not have a Material Adverse
Effect.
Section 2.8 TAXES. The Company and each of its subsidiaries has filed
all tax returns, Federal, state, foreign, county and local, required to be filed
by it, and the Company and each of its subsidiaries has paid all taxes shown to
be due by such returns as well as all other taxes, assessments and governmental
charges which have become due or payable, other than those being contested in
good faith. The Company and each of its subsidiaries has established adequate
reserves for all taxes accrued but not yet payable.
Section 2.9 GOVERNMENTAL APPROVALS. Subject to the accuracy of the
representations and warranties of the Purchaser set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
foreign or domestic Federal, state or other governmental agency or
instrumentality is or will be necessary for the valid execution, delivery and
performance by the Company of its obligations hereunder, other than filings
pursuant to Federal and state securities laws in connection with the sale of the
Purchased Shares.
Section 2.10 BROKERS. Except as set forth on the Disclosure Schedule,
the Company has no contract, arrangement or understanding with any broker,
finder or similar agent with respect to the transactions contemplated by this
Agreement.
Section 2.11 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any
of its subsidiaries has taken any action which would cause it to be in violation
of the Foreign Corrupt Practices Act of 1977, as amended, or any rules and
regulations thereunder. To the best of the Company's knowledge, there is not
now, and there has never been, any employment by the Company or any of its
subsidiaries of, or beneficial ownership in the Company or any of its
subsidiaries by, any governmental or political official in any country in the
world.
3
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company that:
Section 3.1 ORGANIZATION; CORPORATE POWER. The Purchaser is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the power and authority to execute,
deliver and perform its obligations under this Agreement.
Section 3.2 AUTHORIZATION OF AGREEMENTS. The execution and delivery by
the Purchaser of this Agreement, and the performance by the Purchaser of its
obligations hereunder have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, or the Purchaser's organizational documents.
Section 3.3 VALIDITY. This Agreement has been duly executed and
delivered by the Purchaser and constitutes the legal, valid and binding
obligation of the Purchaser, enforceable in accordance with its terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by general equitable principles.
Section 3.4 ACCREDITED INVESTOR. The Purchaser is an "accredited
investor" within the meaning of Rule 501 under the Securities Act of 1933 (the
"Securities Act") and was not organized for the specific purpose of acquiring
the Purchased Shares.
Section 3.5 SUFFICIENT KNOWLEDGE. The Purchaser has sufficient
knowledge and experience in investing in companies similar to the Company in
terms of the Company's stage of development so as to be able to evaluate the
risks and merits of its investment in the Company and it is able financially to
bear the risks thereof. The Purchaser has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management.
Section 3.6 INVESTMENT. The Purchaser is acquiring the Purchased Shares
being purchased by it hereunder for its own account, not as a nominee or agent,
for the purpose of investment and not with a view to the resale or distribution
of any part thereof, and the Purchaser does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Purchased Shares.
Section 3.7 NO REGISTRATION. The Purchaser understands that (i) the
Purchased Shares have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 506 promulgated under
the Securities Act, (ii) the Purchased Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration, (iii) the Purchased Shares will bear a legend to
such effect and (iv) the Company will make a notation on its transfer books to
such effect.
4
<PAGE>
Section 3.8 BROKERS. The Purchaser has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
AND THE COMPANY
Section 4.1 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER ON THE
CLOSING DATE. The obligation of the Purchaser to purchase the Purchased Shares
from the Company on the Closing Date is subject to the satisfaction or waiver,
on or before the Closing Date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. The
representations and warranties contained in Article II shall be true, complete
and correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, and the President and Treasurer of the Company shall have certified
to such effect to the Purchaser in writing.
(b) PERFORMANCE. The Company shall have performed and complied
with all agreements contained herein required to be performed or complied with
by it prior to or on the Closing Date, and the President and Treasurer of the
Company shall have certified to the Purchaser in writing to such effect and to
the further effect that all of the conditions set forth in this Section 4.1 have
been satisfied.
(c) SUPPORTING DOCUMENTS. The Purchaser shall have received
copies of the following documents:
(i) (A) the Charter, certified as of a recent date by the
Secretary of State of the State of Delaware, (B) a certificate of said
Secretary, dated as of a recent date, as to the due incorporation and
good standing of the Company, the payment of all excise taxes by the
Company and listing all documents of the Company on file with said
Secretary and (C) a certificate of the Secretary of State of the State
of New York, dated as of a recent date, as to the good standing of the
Company in such state; and
(ii) a certificate of the Secretary or an Assistant
Secretary of the Company dated the Closing Date and certifying: (A)
that attached thereto is a true and complete copy of the By-laws of the
Company as in effect on the date of such certification; (B) that
attached thereto is a true and complete copy of all resolutions adopted
by the Board of Directors or the stockholders of the Company
authorizing the execution, delivery and performance of this Agreement,
including the issuance, sale and delivery of the Purchased Shares, and
that all such resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated
hereby; (C) that the Charter has not been amended since the date of the
last amendment referred to in the certificate delivered pursuant to
clause (i)(B) above; and (D) to the incumbency and specimen signature
of each officer of the Company executing this Agreement, the stock
5
<PAGE>
certificates representing the Purchased Shares and any certificate or
instrument furnished pursuant hereto, and a certification by another
officer of the Company as to the incumbency and signature of the
officer signing the certificate referred to in this clause (ii).
(d) REGISTRATION RIGHTS AGREEMENT. The Company shall have
executed and delivered to the Purchaser a registration rights agreement
substantially in the form attached hereto as EXHIBIT A (the
"Registration Rights Agreement").
Section 4.2 CONDITION TO THE OBLIGATIONS OF THE COMPANY ON THE CLOSING
DATE. The obligation of the Company to sell the Purchased Shares to the
Purchaser is subject to the satisfaction or waiver, on or before the Closing
Date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. The
representations and warranties contained in Article III shall be true,
complete and correct in all material respects on and as of the Closing
Date with the same effect as though such representations and warranties
had been made on and as of such date, and the Purchaser shall have
certified to such effect to the Company in writing.
(b) PERFORMANCE.
The Purchaser shall have performed and complied with all
agreements contained herein required to be performed or complied with
by it prior to or at the Closing Date, and the Purchaser shall have
certified to the Company in writing to such effect and to the further
effect that all of the conditions set forth in this Section 4.2 have
been satisfied.
(c) LOCKUP AGREEMENT. The Purchaser shall have executed and
delivered to the Company a lockup agreement substantially in the form
attached hereto as EXHIBIT B (the "Lockup Agreement").
ARTICLE V
MISCELLANEOUS
Section 5.1 REGISTRATION RIGHTS AGREEMENT. On or prior to the Closing
Date, the Company shall execute and deliver to the Purchaser the Registration
Rights Agreement.
Section 5.2 LOCKUP AGREEMENT. On or prior to the Closing Date, the
Purchaser shall execute and deliver to the Company the Lockup Agreement.
Section 5.3 EXPENSES. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated.
Section 5.4 BROKERAGE. Each party hereto will indemnify and hold
harmless the other against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements,
6
<PAGE>
arrangements or understandings made or claimed to have been made by such party
with any third party, other than as described in Section 2.10 of the Disclosure
Schedule.
Section 5.5 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier, addressed as follows:
(a) if to the Company, to it at StarMedia Network, Inc., 29
West 36th Street, 5th Floor, New York, New York 10018, Attention:
President;
(b) if to the Purchaser, to it at eBay Inc., 2005 Hamilton
Avenue, Suite 350, San Jose, California 95125, Attention: Chief
Financial Officer and General Counsel; and
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
Section 5.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
Section 5.7 ENTIRE AGREEMENT. This Agreement, including the Schedules
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
Section 5.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 5.9 AMENDMENTS. This Agreement may not be amended or modified,
and no provisions hereof may be waived, without the written consent of the
Company and the Purchaser.
Section 5.10 SEVERABILITY. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
Section 5.11 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are for convenience only and are not to be considered in
construing or interpreting any term or provision of this Agreement.
Section 5.12 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "PERSON" shall mean an individual, corporation, trust,
partnership, joint venture, unincorporated organization, government or any
agency or political subdivision thereof, or other entity.
(b) "SUBSIDIARY" shall mean, as to the Company, any corporation
of which more than 50% of the outstanding stock having ordinary voting power to
elect a majority of the Board
7
<PAGE>
of Directors of such corporation (irrespective of whether or not at the time
stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned by the Company, or by one or more of its
subsidiaries, or by the Company and one or more of its subsidiaries.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
STARMEDIA NETWORK, INC.
By:
----------------------------------------------
Name:
Title:
EBAY INC.
By:
----------------------------------------------
Name:
Title:
9
<PAGE>
Exhibit 10.16
EXECUTION COPY
STOCK PURCHASE AGREEMENT
between
STARMEDIA NETWORK, INC.
and
EUROPORTAL HOLDING S.A.
Dated as of May 5, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
THE PURCHASED SHARES
Section 1.1 Issuance, Sale and Delivery of the Purchased Shares.........1
Section 1.2 Closing.....................................................1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 2.1 Organization; Corporate Power...............................1
Section 2.2 Authorization of Agreement..................................2
Section 2.3 Validity....................................................2
Section 2.4 Authorized Capital Stock....................................2
Section 2.5 Financial Statements........................................2
Section 2.6 Litigation; Compliance with Law.............................3
Section 2.7 Intellectual Property.......................................3
Section 2.8 Taxes.......................................................3
Section 2.9 Governmental Approvals......................................3
Section 2.10 Brokers.....................................................3
Section 2.11 Foreign Corrupt Practices Act...............................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Section 3.1 Organization; Corporate Power...............................4
Section 3.2 Authorization of Agreements.................................4
Section 3.3 Validity....................................................4
Section 3.4 Accredited Investor.........................................4
Section 3.5 Sufficient Knowledge........................................4
Section 3.6 Investment..................................................4
Section 3.7 No Registration.............................................4
Section 3.8 Brokers.....................................................5
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
AND the company
Section 4.1 Conditions to the Obligations of the Purchaser on the
Closing Date................................................5
i
<PAGE>
(a) Representations and Warranties to be True and Correct.5
(b) Performance...........................................5
(c) Supporting Documents..................................5
(d) Registration Rights Agreement.........................6
Section 4.2 Condition to the Obligations of the Company on the Closing
Date........................................................6
(a) Representations and Warranties to be True and Correct.6
(b) Performance...........................................6
(c) Lockup Agreement......................................6
ARTICLE V
MISCELLANEOUS
Section 5.1 Registration Rights Agreement...............................6
Section 5.2 Lockup Agreement............................................6
Section 5.3 Expenses....................................................6
Section 5.4 Brokerage...................................................6
Section 5.5 Notices.....................................................7
Section 5.6 Governing Law...............................................7
Section 5.7 Entire Agreement............................................7
Section 5.8 Counterparts................................................7
Section 5.9 Amendments..................................................7
Section 5.10 Severability................................................7
Section 5.11 Titles and Subtitles........................................7
Section 5.12 Certain Defined Terms.......................................7
ii
<PAGE>
STOCK PURCHASE AGREEMENT dated as of May 5, 1999, between StarMedia
Network, Inc., a Delaware corporation (the "Company"), and Europortal Holding
S.A. (the "Purchaser").
WHEREAS, the Company wishes to issue and sell to the Purchaser an
aggregate of 454,545 shares (the "Purchased Shares") of the authorized but
unissued common stock, $0.001 par value, of the Company (the "Common Stock");
and
WHEREAS, the Purchaser wishes to purchase the Purchased Shares on the
terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
ARTICLE I
THE PURCHASED SHARES
Section 1.1 ISSUANCE, SALE AND DELIVERY OF THE PURCHASED SHARES. The
Company agrees to issue and sell to the Purchaser, and the Purchaser hereby
agrees to purchase from the Company, the Purchased Shares in exchange for an
amount equal to $5,000,000 (the "Purchase Price").
Section 1.2 CLOSING. The closing (the "Closing") shall take place at
the offices of Winthrop, Stimson, Putnam and Roberts, One Battery Park Plaza,
New York, New York 10004 on May 5, 1999, at 3:00 p.m., New York time, or at such
other date and time as may be agreed upon between the Purchaser and the Company
(the "Closing Date").
At the Closing, the Company shall issue and deliver to the Purchaser a
stock certificate or certificates in definitive form, registered in the name of
the Purchaser representing the Purchased Shares. As payment in full for the
Purchased Shares, and against delivery of the stock certificate or certificates
therefor as aforesaid, on the Closing Date the Purchaser shall deliver to the
Company the Purchase Price, payable by (i) delivery to the Company of a
certified check payable to the order of the Company, or (ii) wire transfer of
immediately available funds to the account of the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that, except as
set forth in the Disclosure Schedule attached as SCHEDULE I:
Section 2.1 ORGANIZATION; CORPORATE POWER. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction in which it
<PAGE>
is incorporated and has the corporate power and authority to execute and
deliver this Agreement, and perform its obligations hereunder.
Section 2.2 AUTHORIZATION OF AGREEMENT. (a) The execution and delivery
by the Company of this Agreement and the performance by the Company of its
obligations hereunder have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, the Certificate of Incorporation of the Company, as
amended (the "Charter"), or the By-laws of the Company, as amended.
(b) The Purchased Shares have been duly authorized and, when
issued and delivered in accordance with this Agreement, will be validly issued,
fully paid and nonassessable shares of Common Stock and will be free and clear
of all liens, charges, restrictions, claims and encumbrances imposed by or
through the Company.
Section 2.3 VALIDITY. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally and
(ii) as limited by general equitable principles.
Section 2.4 AUTHORIZED CAPITAL STOCK. The authorized capital stock of
the Company consists of (i) 60,000,000 shares of Preferred Stock, $0.001 par
value (the "Preferred Stock"), of which 7,330,000 shares have been designated
Series A Convertible Preferred Stock, 8,000,000 shares have been designated
Series B Convertible Preferred Stock and 16,666,667 shares have been designated
Series C Convertible Preferred Stock, and (ii) 100,000,000 shares of Common
Stock, $0.001 par value. Prior to the Closing and to any other sale of Common
Stock occurring on the Closing Date, (A) 13,245,181 shares of Common Stock will
be validly issued and outstanding, fully paid and nonassessable, (B) 7,330,000
shares of Series A Convertible Preferred Stock, 8,000,000 shares of Series B
Convertible Preferred Stock and 16,666,667 shares of Series C Convertible
Preferred Stock will be validly issued and outstanding, fully paid and
non-assessable. An aggregate of 31,996,667 shares of Common Stock has been
reserved for issuance upon conversion of the Series A Convertible Preferred
Stock, the Series B Convertible Preferred Stock and the Series C Convertible
Preferred Stock. Options to purchase 8,579,100 shares of Common Stock have been
granted and are currently outstanding. The designations, powers, preferences,
rights, qualifications, limitation and restrictions in respect of each class and
series of authorized capital stock of the Company are as set forth in the
Charter.
Section 2.5 FINANCIAL STATEMENTS. The Company has furnished to the
Purchaser (i) the audited balance sheet of the Company as of December 31, 1998
(the "Balance Sheet"), and the related audited statements of income and
stockholders' equity for the year then ended. All such financial statements have
been prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the financial position of the Company
and its results of operation for and as of the dates set forth therein. Since
the date of the Balance Sheet, there has been no material adverse change in the
assets, liabilities or financial condition of the Company from that reflected in
the Balance Sheet, except for changes in the ordinary course of business.
2
<PAGE>
Section 2.6 LITIGATION; COMPLIANCE WITH LAW. There is no action, suit,
claim or proceeding pending or, to the Company's knowledge, threatened against
the Company or its subsidiaries, at law or in equity, or before or by any
foreign or domestic Federal, state, municipal or other governmental department,
commission, board, bureau agency or instrumentality, except to the extent that
any of the foregoing, if determined adversely to the Company or its
subsidiaries, would not have a material and adverse effect on the business,
financial condition, operations or property of the Company ("Material Adverse
Effect"). The Company and each of its subsidiaries (i) has complied with all
foreign and domestic laws, rules, regulations and orders applicable to its
business, operations, properties, assets, products and services, (ii) has all
necessary permits, licenses and other authorizations required to conduct its
business as conducted, and (iii) has been operating its business pursuant to and
in compliance with the terms of all such permits, licenses and other
authorizations, except to the extent that the failure to do any of the foregoing
would not have a Material Adverse Effect.
Section 2.7 INTELLECTUAL PROPERTY. Except as set forth in the
Disclosure Schedule, no claim is pending or, to the best of the Company's
knowledge, threatened to the effect that any domestic or foreign patents, patent
rights, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names or copyrights owned or licensed by the
Company or any of its subsidiaries or which the Company or any of its
subsidiaries otherwise has the right to use, is invalid or unenforceable by the
Company or any such subsidiary, except to the extent that any of the foregoing,
if determined adversely to the Company, would not have a Material Adverse
Effect.
Section 2.8 TAXES. The Company and each of its subsidiaries has filed
all tax returns, Federal, state, foreign, county and local, required to be filed
by it, and the Company and each of its subsidiaries has paid all taxes shown to
be due by such returns as well as all other taxes, assessments and governmental
charges which have become due or payable, other than those being contested in
good faith. The Company and each of its subsidiaries has established adequate
reserves for all taxes accrued but not yet payable.
Section 2.9 GOVERNMENTAL APPROVALS. Subject to the accuracy of the
representations and warranties of the Purchaser set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
foreign or domestic Federal, state or other governmental agency or
instrumentality is or will be necessary for the valid execution, delivery and
performance by the Company of its obligations hereunder, other than filings
pursuant to Federal and state securities laws in connection with the sale of the
Purchased Shares.
Section 2.10 BROKERS. Except as set forth on the Disclosure Schedule,
the Company has no contract, arrangement or understanding with any broker,
finder or similar agent with respect to the transactions contemplated by this
Agreement.
Section 2.11 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any
of its subsidiaries has taken any action which would cause it to be in violation
of the Foreign Corrupt Practices Act of 1977, as amended, or any rules and
regulations thereunder. To the best of the Company's knowledge, there is not
now, and there has never been, any employment by the Company or any of its
subsidiaries of, or beneficial ownership in the Company or any of its
subsidiaries by, any governmental or political official in any country in the
world.
3
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company that:
Section 3.1 ORGANIZATION; CORPORATE POWER. The Purchaser is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the power and authority to execute,
deliver and perform its obligations under this Agreement.
Section 3.2 AUTHORIZATION OF AGREEMENTS. The execution and delivery by
the Purchaser of this Agreement, and the performance by the Purchaser of its
obligations hereunder have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, or the Purchaser's organizational documents.
Section 3.3 VALIDITY. This Agreement has been duly executed and
delivered by the Purchaser and constitutes the legal, valid and binding
obligation of the Purchaser, enforceable in accordance with its terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by general equitable principles.
Section 3.4 ACCREDITED INVESTOR. The Purchaser is an "accredited
investor" within the meaning of Rule 501 under the Securities Act of 1933 (the
"Securities Act") and was not organized for the specific purpose of acquiring
the Purchased Shares.
Section 3.5 SUFFICIENT KNOWLEDGE. The Purchaser has sufficient
knowledge and experience in investing in companies similar to the Company in
terms of the Company's stage of development so as to be able to evaluate the
risks and merits of its investment in the Company and it is able financially to
bear the risks thereof. The Purchaser has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management.
Section 3.6 INVESTMENT. The Purchaser is acquiring the Purchased Shares
being purchased by it hereunder for its own account, not as a nominee or agent,
for the purpose of investment and not with a view to the resale or distribution
of any part thereof, as provided in the Lockup Agreement (as defined in Section
4.2(c), and the Purchaser does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Purchased Shares.
Section 3.7 NO REGISTRATION. The Purchaser understands that (i) the
Purchased Shares have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 506 promulgated under
the Securities Act, (ii) the Purchased Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration, (iii) the Purchased Shares will bear a legend to
such effect and (iv) the Company will make a notation on its transfer books to
such effect.
4
<PAGE>
Section 3.8 BROKERS. The Purchaser has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
AND THE COMPANY
Section 4.1 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER ON THE
CLOSING DATE. The obligation of the Purchaser to purchase the Purchased Shares
from the Company on the Closing Date is subject to the satisfaction or waiver,
on or before the Closing Date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. The
representations and warranties contained in Article II shall be true, complete
and correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, and the President of the Company shall have certified to such effect
to the Purchaser in writing.
(b) PERFORMANCE. The Company shall have performed and complied
with all agreements contained herein required to be performed or complied with
by it prior to or on the Closing Date, and the President of the Company shall
have certified to the Purchaser in writing to such effect and to the further
effect that all of the conditions set forth in this Section 4.1 have been
satisfied.
(c) SUPPORTING DOCUMENTS. The Purchaser shall have received
copies of the following documents:
(i) (A) the Charter, certified as of a recent date by
the Secretary of State of the State of Delaware, (B) a certificate of
said Secretary, dated as of a recent date, as to the due incorporation
and good standing of the Company, the payment of all excise taxes by
the Company and (C) a certificate of the Secretary of State of the
State of New York, dated as of a recent date, as to the good standing
of the Company in such state; and
(ii) a certificate of the Secretary or an Assistant
Secretary of the Company dated the Closing Date and certifying: (A)
that attached thereto is a true and complete copy of the By-laws of the
Company as in effect on the date of such certification; (B) that
attached thereto is a true and complete copy of all resolutions adopted
by the Board of Directors or the stockholders of the Company
authorizing the execution, delivery and performance of this Agreement,
including the issuance, sale and delivery of the Purchased Shares, and
that all such resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated
hereby; (C) that the Charter has not been amended since the date of the
last amendment referred to in the certificate delivered pursuant to
clause (i)(B) above; and (D) to the incumbency and specimen signature
of each officer of the Company executing this Agreement, the stock
certificates representing the Purchased Shares and any certificate or
instrument furnished
5
<PAGE>
pursuant hereto, and a certification by another officer of the Company
as to the incumbency and signature of the officer signing the
certificate referred to in this clause (ii).
(d) REGISTRATION RIGHTS AGREEMENT. The Company shall have
executed and delivered to the Purchaser a registration rights agreement
substantially in the form attached hereto as EXHIBIT A (the "Registration Rights
Agreement").
Section 4.2 CONDITION TO THE OBLIGATIONS OF THE COMPANY ON THE CLOSING
DATE. The obligation of the Company to sell the Purchased Shares to the
Purchaser is subject to the satisfaction or waiver, on or before the Closing
Date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. The
representations and warranties contained in Article III shall be true,
complete and correct in all material respects on and as of the Closing
Date with the same effect as though such representations and warranties
had been made on and as of such date, and the Purchaser shall have
certified to such effect to the Company in writing.
(b) PERFORMANCE.
The Purchaser shall have performed and complied with all
agreements contained herein required to be performed or complied with
by it prior to or at the Closing Date, and the Purchaser shall have
certified to the Company in writing to such effect and to the further
effect that all of the conditions set forth in this Section 4.2 have
been satisfied.
(c) LOCKUP AGREEMENT. The Purchaser shall have executed and
delivered to the Company a lockup agreement substantially in the form
attached hereto as EXHIBIT B (the "Lockup Agreement").
ARTICLE V
MISCELLANEOUS
Section 5.1 REGISTRATION RIGHTS AGREEMENT. On or prior to the Closing
Date, the Company shall
execute and deliver to the Purchaser the Registration Rights Agreement.
Section 5.2 LOCKUP AGREEMENT. On or prior to the Closing Date, the
Purchaser shall execute and deliver to the Company the Lockup Agreement.
Section 5.3 EXPENSES. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated.
Section 5.4 BROKERAGE. Each party hereto will indemnify and hold
harmless the other against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements,
6
<PAGE>
arrangements or understandings made or claimed to have been made by such party
with any third party, other than as described in Section 2.10 of the Disclosure
Schedule.
Section 5.5 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier, addressed as follows:
(a) if to the Company, to it at StarMedia Network, Inc., 29
West 36th Street, 5th Floor, New York, New York 10018, Attention:
President;
(b) if to the Purchaser, to it at Europortal Holding S.A., 140
Boulevard de la Petrusse, L-2330 Luxembourg, Attention: Andrea Goretti;
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
Section 5.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
Section 5.7 ENTIRE AGREEMENT. This Agreement, including the Schedules
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
Section 5.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 5.9 AMENDMENTS. This Agreement may not be amended or modified,
and no provisions hereof may be waived, without the written consent of the
Company and the Purchaser.
Section 5.10 SEVERABILITY. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
Section 5.11 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are for convenience only and are not to be considered in
construing or interpreting any term or provision of this Agreement.
Section 5.12 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "PERSON" shall mean an individual, corporation, trust,
partnership, joint venture, unincorporated organization, government or any
agency or political subdivision thereof, or other entity.
(b) "SUBSIDIARY" shall mean, as to the Company, any
corporation of which more than 50% of the outstanding stock having ordinary
voting power to elect a majority of the Board
7
<PAGE>
of Directors of such corporation (irrespective of whether or not at the time
stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned by the Company, or by one or more of its
subsidiaries, or by the Company and one or more of its subsidiaries.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
STARMEDIA NETWORK, INC.
By:
----------------------------------
Name:
Title:
EUROPORTAL HOLDING S.A.
By:
----------------------------------
Name:
Title:
9
<PAGE>
Exhibit 10.17
DRAFT
4/30/99
STOCK PURCHASE AGREEMENT
between
STARMEDIA NETWORK, INC.
and
CRITICAL PATH, INC.
Dated as of May 3, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
THE PURCHASED SHARES
<S> <C> <C>
Section 1.1 Issuance, Sale and Delivery of the Purchased Shares............................................1
Section 1.2 Closing........................................................................................1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 2.1 Organization; Corporate Power..................................................................1
Section 2.2 Authorization of Agreement.....................................................................2
Section 2.3 Validity.......................................................................................2
Section 2.4 Authorized Capital Stock.......................................................................2
Section 2.5 Financial Statements...........................................................................2
Section 2.6 Litigation; Compliance with Law................................................................3
Section 2.7 Intellectual Property..........................................................................3
Section 2.8 Taxes..........................................................................................3
Section 2.9 Governmental Approvals.........................................................................3
Section 2.10 Brokers........................................................................................3
Section 2.11 Foreign Corrupt Practices Act..................................................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 3.1 Organization; Corporate Power..................................................................4
Section 3.2 Authorization of Agreements....................................................................4
Section 3.3 Validity.......................................................................................4
Section 3.4 Accredited Investor............................................................................4
Section 3.5 Sufficient Knowledge...........................................................................4
Section 3.6 Investment.....................................................................................4
Section 3.7 No Registration................................................................................4
Section 3.8 Brokers........................................................................................5
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
AND the company
Section 4.1 Conditions to the Obligations of the Purchaser on the Closing Date.............................5
(a) Representations and Warranties to be True and Correct....................................5
(b) Performance..............................................................................5
(c) Supporting Documents.....................................................................5
(d) Registration Rights Agreement............................................................6
Section 4.2 Condition to the Obligations of the Company on the Closing Date................................6
(a) Representations and Warranties to be True and Correct....................................6
(b) Performance..............................................................................6
(c) Lockup Agreement.........................................................................6
ARTICLE V
MISCELLANEOUS
Section 5.1 Registration Rights Agreement..................................................................6
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 5.2 Lockup Agreement...............................................................................6
Section 5.3 Expenses.......................................................................................6
Section 5.4 Brokerage......................................................................................6
Section 5.5 Notices........................................................................................7
Section 5.6 Governing Law..................................................................................7
Section 5.7 Entire Agreement...............................................................................7
Section 5.8 Counterparts...................................................................................7
Section 5.9 Amendments.....................................................................................7
Section 5.10 Severability...................................................................................7
Section 5.11 Titles and Subtitles...........................................................................7
Section 5.12 Certain Defined Terms..........................................................................7
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT dated as of May 3, 1999, between StarMedia
Network, Inc., a Delaware corporation (the "Company"), and Critical Path, Inc.,
a California corporation (the "Purchaser").
WHEREAS, the Company wishes to issue and sell to the Purchaser an
aggregate of 272,727 shares (the "Purchased Shares") of the authorized but
unissued common stock, $0.001 par value, of the Company (the "Common Stock");
and
WHEREAS, the Purchaser wishes to purchase the Purchased Shares on the
terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
ARTICLE I
THE PURCHASED SHARES
Section 1.1 ISSUANCE, SALE AND DELIVERY OF THE PURCHASED SHARES. The
Company agrees to issue and sell to the Purchaser, and the Purchaser hereby
agrees to purchase from the Company, the Purchased Shares in exchange for an
amount equal to $3,000,000 (the "Purchase Price").
Section 1.2 CLOSING. The closing (the "Closing") shall take place at
the offices of Winthrop, Stimson, Putnam and Roberts, One Battery Park Plaza,
New York, New York 10004 on May 3, 1999, at 10:00 a.m., New York time, or at
such other date and time as may be agreed upon between the Purchaser and the
Company (the "Closing Date").
At the Closing, the Company shall issue and deliver to the Purchaser a
stock certificate or certificates in definitive form, registered in the name of
the Purchaser representing the Purchased Shares. As payment in full for the
Purchased Shares, and against delivery of the stock certificate or certificates
therefor as aforesaid, on the Closing Date the Purchaser shall deliver to the
Company the Purchase Price, payable by (i) delivery to the Company of a
certified check payable to the order of the Company, or (ii) wire transfer of
immediately available funds to the account of the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<PAGE>
The Company represents and warrants to the Purchaser that, except as
set forth in the Disclosure Schedule attached as SCHEDULE I:
Section 2.1 ORGANIZATION; CORPORATE POWER. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the corporate power and
authority to execute and deliver this Agreement, and perform its obligations
hereunder.
Section 2.2 AUTHORIZATION OF AGREEMENT. (a) The execution and delivery
by the Company of this Agreement and the performance by the Company of its
obligations hereunder have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, the Certificate of Incorporation of the Company, as
amended (the "Charter"), or the By-laws of the Company, as amended.
(b) The Purchased Shares have been duly authorized and, when
issued and delivered in accordance with this Agreement, will be validly issued,
fully paid and nonassessable shares of Common Stock and will be free and clear
of all liens, charges, restrictions, claims and encumbrances imposed by or
through the Company.
Section 2.3 VALIDITY. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally and
(ii) as limited by general equitable principles.
Section 2.4 AUTHORIZED CAPITAL STOCK. The authorized capital stock of
the Company consists of (i) 60,000,000 shares of Preferred Stock, $0.001 par
value (the "Preferred Stock"), of which 7,330,000 shares have been designated
Series A Convertible Preferred Stock, 8,000,000 shares have been designated
Series B Convertible Preferred Stock and 16,666,667 shares have been designated
Series C Convertible Preferred Stock, and (ii) 100,000,000 shares of Common
Stock, $0.001 par value. Prior to the Closing and to any other sale of Common
Stock occurring on the Closing Date, (A) 12,063,363 shares of Common Stock will
be validly issued and outstanding, fully paid and nonassessable, (B) 7,330,000
shares of Series A Convertible Preferred Stock, 8,000,000 shares of Series B
Convertible Preferred Stock and 16,666,667 shares of Series C Convertible
Preferred Stock will
<PAGE>
be validly issued and outstanding, fully paid and non-assessable. An aggregate
of 31,996,667 shares of Common Stock has been reserved for issuance upon
conversion of the Series A Convertible Preferred Stock, the Series B Convertible
Preferred Stock and the Series C Convertible Preferred Stock. Options to
purchase 8,579,100 shares of Common Stock have been granted and are currently
outstanding. The designations, powers, preferences, rights, qualifications,
limitation and restrictions in respect of each class and series of authorized
capital stock of the Company are as set forth in the Charter.
Section 2.5 FINANCIAL STATEMENTS. The Company has furnished to the
Purchaser (i) the audited balance sheet of the Company as of December 31, 1998
(the "Balance Sheet"), and the related audited statements of income and
stockholders' equity for the year then ended. All such financial statements have
been prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the financial position of the Company
and its results of operation for and as of the dates set forth therein. Since
the date of the Balance Sheet, there has been no material adverse change in the
assets, liabilities or financial condition of the Company from that reflected in
the Balance Sheet, except for changes in the ordinary course of business.
Section 2.6 LITIGATION; COMPLIANCE WITH LAW. There is no action, suit,
claim or proceeding pending or, to the Company's knowledge, threatened against
the Company, at law or in equity, or before or by any foreign or domestic
Federal, state, municipal or other governmental department, commission, board,
bureau agency or instrumentality, except to the extent that any of the
foregoing, if determined adversely to the Company, would not have a material and
adverse effect on the business, financial condition, operations or property of
the Company ("Material Adverse Effect"). The Company and each of its
subsidiaries (i) has complied with all foreign and domestic laws, rules,
regulations and orders applicable to its business, operations, properties,
assets, products and services, (ii) has all necessary permits, licenses and
other authorizations required to conduct its business as conducted, and (iii)
has been operating its business pursuant to and in compliance with the terms of
all such permits, licenses and other authorizations, except to the extent that
the failure to do any of the foregoing would not have a Material Adverse Effect.
Section 2.7 INTELLECTUAL PROPERTY. Except as set forth in the
Disclosure Schedule, no claim is pending or, to the best of the Company's
knowledge, threatened to the effect that any domestic or foreign patents, patent
rights, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names or copyrights owned or licensed by the
Company or any of its subsidiaries or which the Company or any of its
subsidiaries otherwise has the right to use, is invalid or unenforceable by the
Company or any such subsidiary, except to the extent that any of the foregoing,
if determined adversely to the Company, would not have a Material Adverse
Effect.
<PAGE>
Section 2.8 TAXES. The Company and each of its subsidiaries has filed
all tax returns, Federal, state, foreign, county and local, required to be filed
by it, and the Company and each of its subsidiaries has paid all taxes shown to
be due by such returns as well as all other taxes, assessments and governmental
charges which have become due or payable, other than those being contested in
good faith. The Company and each of its subsidiaries has established adequate
reserves for all taxes accrued but not yet payable.
Section 2.9 GOVERNMENTAL APPROVALS. Subject to the accuracy of the
representations and warranties of the Purchaser set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
foreign or domestic Federal, state or other governmental agency or
instrumentality is or will be necessary for the valid execution, delivery and
performance by the Company of its obligations hereunder, other than filings
pursuant to Federal and state securities laws in connection with the sale of the
Purchased Shares.
Section 2.10 BROKERS. Except as set forth on the Disclosure Schedule,
the Company has no contract, arrangement or understanding with any broker,
finder or similar agent with respect to the transactions contemplated by this
Agreement.
Section 2.11 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any
of its subsidiaries has taken any action which would cause it to be in violation
of the Foreign Corrupt Practices Act of 1977, as amended, or any rules and
regulations thereunder. To the best of the Company's knowledge, there is not
now, and there has never been, any employment by the Company or any of its
subsidiaries of, or beneficial ownership in the Company or any of its
subsidiaries by, any governmental or political official in any country in the
world.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company that:
Section 3.1 ORGANIZATION; CORPORATE POWER. The Purchaser is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the power and authority to execute,
deliver and perform its obligations under this Agreement.
<PAGE>
Section 3.2 AUTHORIZATION OF AGREEMENTS. The execution and delivery by
the Purchaser of this Agreement, and the performance by the Purchaser of its
obligations hereunder have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, or the Purchaser's organizational documents.
Section 3.3 VALIDITY. This Agreement has been duly executed and
delivered by the Purchaser and constitutes the legal, valid and binding
obligation of the Purchaser, enforceable in accordance with its terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by general equitable principles.
Section 3.4 ACCREDITED INVESTOR. The Purchaser is an "accredited
investor" within the meaning of Rule 501 under the Securities Act of 1933 (the
"Securities Act") and was not organized for the specific purpose of acquiring
the Purchased Shares.
Section 3.5 SUFFICIENT KNOWLEDGE. The Purchaser has sufficient
knowledge and experience in investing in companies similar to the Company in
terms of the Company's stage of development so as to be able to evaluate the
risks and merits of its investment in the Company and it is able financially to
bear the risks thereof. The Purchaser has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management.
Section 3.6 INVESTMENT. The Purchaser is acquiring the Purchased Shares
being purchased by it hereunder for its own account, not as a nominee or agent,
for the purpose of investment and not with a view to the resale or distribution
of any part thereof, and the Purchaser does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Purchased Shares.
Section 3.7 NO REGISTRATION. The Purchaser understands that (i) the
Purchased Shares have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 506 promulgated under
the Securities Act, (ii) the Purchased Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration, (iii) the Purchased Shares will bear a legend to
such effect and (iv) the Company will make a notation on its transfer books to
such effect.
Section 3.8 BROKERS. The Purchaser has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
<PAGE>
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
AND THE COMPANY
Section 4.1 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER ON THE
CLOSING DATE. The obligation of the Purchaser to purchase the Purchased Shares
from the Company on the Closing Date is subject to the satisfaction or waiver,
on or before the Closing Date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. The
representations and warranties contained in Article II shall be true, complete
and correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, and the President of the Company shall have certified to such effect
to the Purchaser in writing.
(b) PERFORMANCE. The Company shall have performed and complied
with all agreements contained herein required to be performed or complied with
by it prior to or on the Closing Date, and the President of the Company shall
have certified to the Purchaser in writing to such effect and to the further
effect that all of the conditions set forth in this Section 4.1 have been
satisfied.
(c) SUPPORTING DOCUMENTS. The Purchaser shall have received
copies of the following documents:
(i) (A) the Charter, certified as of a recent date by
the Secretary of State of the State of Delaware, (B) a certificate of
said Secretary, dated as of a recent date, as to the due incorporation
and good standing of the Company, the payment of all excise taxes by
the Company and listing all documents of the Company on file with said
Secretary and (C) a certificate of the Secretary of State of the State
of New York, dated as of a recent date, as to the good standing of the
Company in such state; and
(ii) a certificate of the Secretary or an Assistant
Secretary of the Company dated the Closing Date and certifying: (A)
that attached thereto is a true and complete copy of
<PAGE>
the By-laws of the Company as in effect on the date of such
certification; (B) that attached thereto is a true and complete copy of
all resolutions adopted by the Board of Directors or the stockholders
of the Company authorizing the execution, delivery and performance of
this Agreement, including the issuance, sale and delivery of the
Purchased Shares, and that all such resolutions are in full force and
effect and are all the resolutions adopted in connection with the
transactions contemplated hereby; (C) that the Charter has not been
amended since the date of the last amendment referred to in the
certificate delivered pursuant to clause (i)(B) above; and (D) to the
incumbency and specimen signature of each officer of the Company
executing this Agreement, the stock certificates representing the
Purchased Shares and any certificate or instrument furnished pursuant
hereto, and a certification by another officer of the Company as to the
incumbency and signature of the officer signing the certificate
referred to in this clause (ii).
(d) REGISTRATION RIGHTS AGREEMENT. The Company shall have
executed and delivered to the Purchaser a registration rights agreement
substantially in the form attached hereto as EXHIBIT A (the "Registration Rights
Agreement").
Section 4.2 CONDITION TO THE OBLIGATIONS OF THE COMPANY ON THE CLOSING
DATE. The obligation of the Company to sell the Purchased Shares to the
Purchaser is subject to the satisfaction or waiver, on or before the Closing
Date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. The
representations and warranties contained in Article III shall be true,
complete and correct in all material respects on and as of the Closing
Date with the same effect as though such representations and warranties
had been made on and as of such date, and the Purchaser shall have
certified to such effect to the Company in writing.
(b) PERFORMANCE. The Purchaser shall have performed and
complied with all agreements contained herein required to be performed
or complied with by it prior to or at the Closing Date, and the
Purchaser shall have certified to the Company in writing to such effect
and to the further effect that all of the conditions set forth in this
Section 4.2 have been satisfied.
(c) LOCKUP AGREEMENT. The Purchaser shall have executed and
delivered to the Company a lockup agreement substantially in the form
attached hereto as EXHIBIT B (the "Lockup Agreement").
<PAGE>
ARTICLE V
MISCELLANEOUS
Section 5.1 REGISTRATION RIGHTS AGREEMENT. On or prior to the Closing
Date, the Company shall execute and deliver to the Purchaser the Registration
Rights Agreement.
Section 5.2 LOCKUP AGREEMENT. On or prior to the Closing Date, the
Purchaser shall execute and deliver to the Company the Lockup Agreement.
Section 5.3 EXPENSES. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated.
Section 5.4 BROKERAGE. Each party hereto will indemnify and hold
harmless the other against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party, other than as
described in Section 2.10 of the Disclosure Schedule.
Section 5.5 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier, addressed as follows:
(a) if to the Company, to it at StarMedia Network, Inc., 29
West 36th Street, 5th Floor, New York, New York 10018, Attention:
President;
(b) if to the Purchaser, to it at Critical Path, Inc., 320
First Street, San Francisco, California, Attention: Doug Hickey; and
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
<PAGE>
Section 5.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
Section 5.7 ENTIRE AGREEMENT. This Agreement, including the Schedules
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
Section 5.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 5.9 AMENDMENTS. This Agreement may not be amended or modified,
and no provisions hereof may be waived, without the written consent of the
Company and the Purchaser.
Section 5.10 SEVERABILITY. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
Section 5.11 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are for convenience only and are not to be considered in
construing or interpreting any term or provision of this Agreement.
Section 5.12 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "PERSON" shall mean an individual, corporation, trust,
partnership, joint venture, unincorporated organization, government or any
agency or political subdivision thereof, or other entity.
(b) "SUBSIDIARY" shall mean, as to the Company, any
corporation of which more than 50% of the outstanding stock having ordinary
voting power to elect a majority of the Board of Directors of such corporation
(irrespective of whether or not at the time stock of any other class
<PAGE>
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time directly or indirectly owned
by the Company, or by one or more of its subsidiaries, or by the Company and one
or more of its subsidiaries.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
STARMEDIA NETWORK, INC.
By:
Name:
Title:
CRITICAL PATH, INC.
By:
Name:
Title:
<PAGE>
Exhibit 10.18
EXECUTION COPY
STOCK PURCHASE AGREEMENT
between
STARMEDIA NETWORK, INC.
and
EUROPORTAL HOLDING S.A.
Dated as of May 5, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
THE PURCHASED SHARES
<S> <C> <C>
Section 1.1 Issuance, Sale and Delivery of the Purchased Shares............................................1
Section 1.2 Closing........................................................................................1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 2.1 Organization; Corporate Power..................................................................1
Section 2.2 Authorization of Agreement.....................................................................2
Section 2.3 Validity.......................................................................................2
Section 2.4 Authorized Capital Stock.......................................................................2
Section 2.5 Financial Statements...........................................................................2
Section 2.6 Litigation; Compliance with Law................................................................3
Section 2.7 Intellectual Property..........................................................................3
Section 2.8 Taxes..........................................................................................3
Section 2.9 Governmental Approvals.........................................................................3
Section 2.10 Brokers........................................................................................3
Section 2.11 Foreign Corrupt Practices Act..................................................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 3.1 Organization; Corporate Power..................................................................4
Section 3.2 Authorization of Agreements....................................................................4
Section 3.3 Validity.......................................................................................4
Section 3.4 Accredited Investor............................................................................4
Section 3.5 Sufficient Knowledge...........................................................................4
Section 3.6 Investment.....................................................................................4
Section 3.7 No Registration................................................................................4
Section 3.8 Brokers........................................................................................5
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
AND the company
Section 4.1 Conditions to the Obligations of the Purchaser on the Closing Date.............................5
(a) Representations and Warranties to be True and Correct....................................5
(b) Performance..............................................................................5
(c) Supporting Documents.....................................................................5
(d) Registration Rights Agreement............................................................6
Section 4.2 Condition to the Obligations of the Company on the Closing Date................................6
(a) Representations and Warranties to be True and Correct....................................6
(b) Performance..............................................................................6
(c) Lockup Agreement.........................................................................6
ARTICLE V
MISCELLANEOUS
Section 5.1 Registration Rights Agreement..................................................................6
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 5.2 Lockup Agreement...............................................................................6
Section 5.3 Expenses.......................................................................................6
Section 5.4 Brokerage......................................................................................6
Section 5.5 Notices........................................................................................7
Section 5.6 Governing Law..................................................................................7
Section 5.7 Entire Agreement...............................................................................7
Section 5.8 Counterparts...................................................................................7
Section 5.9 Amendments.....................................................................................7
Section 5.10 Severability...................................................................................7
Section 5.11 Titles and Subtitles...........................................................................7
Section 5.12 Certain Defined Terms..........................................................................7
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT dated as of May 5, 1999, between StarMedia
Network, Inc., a Delaware corporation (the "Company"), and Europortal Holding
S.A. (the "Purchaser").
WHEREAS, the Company wishes to issue and sell to the Purchaser an
aggregate of 454,545 shares (the "Purchased Shares") of the authorized but
unissued common stock, $0.001 par value, of the Company (the "Common Stock");
and
WHEREAS, the Purchaser wishes to purchase the Purchased Shares on the
terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
ARTICLE I
THE PURCHASED SHARES
Section 1.1 ISSUANCE, SALE AND DELIVERY OF THE PURCHASED SHARES. The
Company agrees to issue and sell to the Purchaser, and the Purchaser hereby
agrees to purchase from the Company, the Purchased Shares in exchange for an
amount equal to $5,000,000 (the "Purchase Price").
Section 1.2 CLOSING. The closing (the "Closing") shall take place at
the offices of Winthrop, Stimson, Putnam and Roberts, One Battery Park Plaza,
New York, New York 10004 on May 5, 1999, at 3:00 p.m., New York time, or at such
other date and time as may be agreed upon between the Purchaser and the Company
(the "Closing Date").
At the Closing, the Company shall issue and deliver to the Purchaser a
stock certificate or certificates in definitive form, registered in the name of
the Purchaser representing the Purchased Shares. As payment in full for the
Purchased Shares, and against delivery of the stock certificate or certificates
therefor as aforesaid, on the Closing Date the Purchaser shall deliver to the
Company the Purchase Price, payable by (i) delivery to the Company of a
certified check payable to the order of the Company, or (ii) wire transfer of
immediately available funds to the account of the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<PAGE>
The Company represents and warrants to the Purchaser that, except as
set forth in the Disclosure Schedule attached as SCHEDULE I:
Section 2.1 ORGANIZATION; CORPORATE POWER. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the corporate power and
authority to execute and deliver this Agreement, and perform its obligations
hereunder.
Section 2.2 AUTHORIZATION OF AGREEMENT. (a) The execution and delivery
by the Company of this Agreement and the performance by the Company of its
obligations hereunder have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, the Certificate of Incorporation of the Company, as
amended (the "Charter"), or the By-laws of the Company, as amended.
(b) The Purchased Shares have been duly authorized and, when
issued and delivered in accordance with this Agreement, will be validly issued,
fully paid and nonassessable shares of Common Stock and will be free and clear
of all liens, charges, restrictions, claims and encumbrances imposed by or
through the Company.
Section 2.3 VALIDITY. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally and
(ii) as limited by general equitable principles.
Section 2.4 AUTHORIZED CAPITAL STOCK. The authorized capital stock of
the Company consists of (i) 60,000,000 shares of Preferred Stock, $0.001 par
value (the "Preferred Stock"), of which 7,330,000 shares have been designated
Series A Convertible Preferred Stock, 8,000,000 shares have been designated
Series B Convertible Preferred Stock and 16,666,667 shares have been designated
Series C Convertible Preferred Stock, and (ii) 100,000,000 shares of Common
Stock, $0.001 par value. Prior to the Closing and to any other sale of Common
Stock occurring on the Closing Date, (A) 13,245,181 shares of Common Stock will
be validly issued and outstanding, fully paid and nonassessable, (B) 7,330,000
shares of Series A Convertible Preferred Stock, 8,000,000 shares of Series B
Convertible Preferred Stock and 16,666,667 shares of Series C Convertible
Preferred Stock will
<PAGE>
be validly issued and outstanding, fully paid and non-assessable. An aggregate
of 31,996,667 shares of Common Stock has been reserved for issuance upon
conversion of the Series A Convertible Preferred Stock, the Series B Convertible
Preferred Stock and the Series C Convertible Preferred Stock. Options to
purchase 8,579,100 shares of Common Stock have been granted and are currently
outstanding. The designations, powers, preferences, rights, qualifications,
limitation and restrictions in respect of each class and series of authorized
capital stock of the Company are as set forth in the Charter.
Section 2.5 FINANCIAL STATEMENTS. The Company has furnished to the
Purchaser (i) the audited balance sheet of the Company as of December 31, 1998
(the "Balance Sheet"), and the related audited statements of income and
stockholders' equity for the year then ended. All such financial statements have
been prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the financial position of the Company
and its results of operation for and as of the dates set forth therein. Since
the date of the Balance Sheet, there has been no material adverse change in the
assets, liabilities or financial condition of the Company from that reflected in
the Balance Sheet, except for changes in the ordinary course of business.
Section 2.6 LITIGATION; COMPLIANCE WITH LAW. There is no action, suit,
claim or proceeding pending or, to the Company's knowledge, threatened against
the Company or its subsidiaries, at law or in equity, or before or by any
foreign or domestic Federal, state, municipal or other governmental department,
commission, board, bureau agency or instrumentality, except to the extent that
any of the foregoing, if determined adversely to the Company or its
subsidiaries, would not have a material and adverse effect on the business,
financial condition, operations or property of the Company ("Material Adverse
Effect"). The Company and each of its subsidiaries (i) has complied with all
foreign and domestic laws, rules, regulations and orders applicable to its
business, operations, properties, assets, products and services, (ii) has all
necessary permits, licenses and other authorizations required to conduct its
business as conducted, and (iii) has been operating its business pursuant to and
in compliance with the terms of all such permits, licenses and other
authorizations, except to the extent that the failure to do any of the foregoing
would not have a Material Adverse Effect.
Section 2.7 INTELLECTUAL PROPERTY. Except as set forth in the
Disclosure Schedule, no claim is pending or, to the best of the Company's
knowledge, threatened to the effect that any domestic or foreign patents, patent
rights, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names or copyrights owned or licensed by the
Company or any of its subsidiaries or which the Company or any of its
subsidiaries otherwise has the right to use, is invalid or unenforceable by the
Company or any such subsidiary, except to the extent that any of the foregoing,
if determined adversely to the Company, would not have a Material Adverse
Effect.
<PAGE>
Section 2.8 TAXES. The Company and each of its subsidiaries has filed
all tax returns, Federal, state, foreign, county and local, required to be filed
by it, and the Company and each of its subsidiaries has paid all taxes shown to
be due by such returns as well as all other taxes, assessments and governmental
charges which have become due or payable, other than those being contested in
good faith. The Company and each of its subsidiaries has established adequate
reserves for all taxes accrued but not yet payable.
Section 2.9 GOVERNMENTAL APPROVALS. Subject to the accuracy of the
representations and warranties of the Purchaser set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
foreign or domestic Federal, state or other governmental agency or
instrumentality is or will be necessary for the valid execution, delivery and
performance by the Company of its obligations hereunder, other than filings
pursuant to Federal and state securities laws in connection with the sale of the
Purchased Shares.
Section 2.10 BROKERS. Except as set forth on the Disclosure Schedule,
the Company has no contract, arrangement or understanding with any broker,
finder or similar agent with respect to the transactions contemplated by this
Agreement.
Section 2.11 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any
of its subsidiaries has taken any action which would cause it to be in violation
of the Foreign Corrupt Practices Act of 1977, as amended, or any rules and
regulations thereunder. To the best of the Company's knowledge, there is not
now, and there has never been, any employment by the Company or any of its
subsidiaries of, or beneficial ownership in the Company or any of its
subsidiaries by, any governmental or political official in any country in the
world.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company that:
Section 3.1 ORGANIZATION; CORPORATE POWER. The Purchaser is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the power and authority to execute,
deliver and perform its obligations under this Agreement.
<PAGE>
Section 3.2 AUTHORIZATION OF AGREEMENTS. The execution and delivery by
the Purchaser of this Agreement, and the performance by the Purchaser of its
obligations hereunder have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, or the Purchaser's organizational documents.
Section 3.3 VALIDITY. This Agreement has been duly executed and
delivered by the Purchaser and constitutes the legal, valid and binding
obligation of the Purchaser, enforceable in accordance with its terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by general equitable principles.
Section 3.4 ACCREDITED INVESTOR. The Purchaser is an "accredited
investor" within the meaning of Rule 501 under the Securities Act of 1933 (the
"Securities Act") and was not organized for the specific purpose of acquiring
the Purchased Shares.
Section 3.5 SUFFICIENT KNOWLEDGE. The Purchaser has sufficient
knowledge and experience in investing in companies similar to the Company in
terms of the Company's stage of development so as to be able to evaluate the
risks and merits of its investment in the Company and it is able financially to
bear the risks thereof. The Purchaser has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management.
Section 3.6 INVESTMENT. The Purchaser is acquiring the Purchased Shares
being purchased by it hereunder for its own account, not as a nominee or agent,
for the purpose of investment and not with a view to the resale or distribution
of any part thereof, as provided in the Lockup Agreement (as defined in Section
4.2(c), and the Purchaser does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Purchased Shares.
Section 3.7 NO REGISTRATION. The Purchaser understands that (i) the
Purchased Shares have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 506 promulgated under
the Securities Act, (ii) the Purchased Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration, (iii) the Purchased Shares will bear a legend to
such effect and (iv) the Company will make a notation on its transfer books to
such effect.
<PAGE>
Section 3.8 BROKERS. The Purchaser has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
AND THE COMPANY
Section 4.1 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER ON THE
CLOSING DATE. The obligation of the Purchaser to purchase the Purchased Shares
from the Company on the Closing Date is subject to the satisfaction or waiver,
on or before the Closing Date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. The
representations and warranties contained in Article II shall be true, complete
and correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, and the President of the Company shall have certified to such effect
to the Purchaser in writing.
(b) PERFORMANCE. The Company shall have performed and complied
with all agreements contained herein required to be performed or complied with
by it prior to or on the Closing Date, and the President of the Company shall
have certified to the Purchaser in writing to such effect and to the further
effect that all of the conditions set forth in this Section 4.1 have been
satisfied.
(c) SUPPORTING DOCUMENTS. The Purchaser shall have received
copies of the following documents:
(i) (A) the Charter, certified as of a recent date by
the Secretary of State of the State of Delaware, (B) a certificate of
said Secretary, dated as of a recent date, as to the due incorporation
and good standing of the Company, the payment of all excise taxes by
the Company and (C) a certificate of the Secretary of State of the
State of New York, dated as of a recent date, as to the good standing
of the Company in such state; and
(ii) a certificate of the Secretary or an Assistant
Secretary of the Company dated the Closing Date and certifying: (A)
that attached thereto is a true and complete copy of
<PAGE>
the By-laws of the Company as in effect on the date of such
certification; (B) that attached thereto is a true and complete copy of
all resolutions adopted by the Board of Directors or the stockholders
of the Company authorizing the execution, delivery and performance of
this Agreement, including the issuance, sale and delivery of the
Purchased Shares, and that all such resolutions are in full force and
effect and are all the resolutions adopted in connection with the
transactions contemplated hereby; (C) that the Charter has not been
amended since the date of the last amendment referred to in the
certificate delivered pursuant to clause (i)(B) above; and (D) to the
incumbency and specimen signature of each officer of the Company
executing this Agreement, the stock certificates representing the
Purchased Shares and any certificate or instrument furnished pursuant
hereto, and a certification by another officer of the Company as to the
incumbency and signature of the officer signing the certificate
referred to in this clause (ii).
(d) REGISTRATION RIGHTS AGREEMENT. The Company shall have
executed and delivered to the Purchaser a registration rights agreement
substantially in the form attached hereto as EXHIBIT A (the "Registration Rights
Agreement").
Section 4.2 CONDITION TO THE OBLIGATIONS OF THE COMPANY ON THE CLOSING
DATE. The obligation of the Company to sell the Purchased Shares to the
Purchaser is subject to the satisfaction or waiver, on or before the Closing
Date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. The
representations and warranties contained in Article III shall be true,
complete and correct in all material respects on and as of the Closing
Date with the same effect as though such representations and warranties
had been made on and as of such date, and the Purchaser shall have
certified to such effect to the Company in writing.
(b) PERFORMANCE. The Purchaser shall have performed and
complied with all agreements contained herein required to be performed
or complied with by it prior to or at the Closing Date, and the
Purchaser shall have certified to the Company in writing to such effect
and to the further effect that all of the conditions set forth in this
Section 4.2 have been satisfied.
(c) LOCKUP AGREEMENT. The Purchaser shall have executed and
delivered to the Company a lockup agreement substantially in the form
attached hereto as EXHIBIT B (the "Lockup Agreement").
<PAGE>
ARTICLE V
MISCELLANEOUS
Section 5.1 REGISTRATION RIGHTS AGREEMENT. On or prior to the Closing
Date, the Company shall execute and deliver to the Purchaser the Registration
Rights Agreement.
Section 5.2 LOCKUP AGREEMENT. On or prior to the Closing Date, the
Purchaser shall execute and deliver to the Company the Lockup Agreement.
Section 5.3 EXPENSES. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated.
Section 5.4 BROKERAGE. Each party hereto will indemnify and hold
harmless the other against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party, other than as
described in Section 2.10 of the Disclosure Schedule.
Section 5.5 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier, addressed as follows:
(a) if to the Company, to it at StarMedia Network, Inc., 29
West 36th Street, 5th Floor, New York, New York 10018, Attention:
President;
(b) if to the Purchaser, to it at Europortal Holding S.A., 140
Boulevard de la Petrusse, L-2330 Luxembourg, Attention: Andrea Goretti;
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
Section 5.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
<PAGE>
Section 5.7 ENTIRE AGREEMENT. This Agreement, including the Schedules
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
Section 5.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 5.9 AMENDMENTS. This Agreement may not be amended or modified,
and no provisions hereof may be waived, without the written consent of the
Company and the Purchaser.
Section 5.10 SEVERABILITY. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
Section 5.11 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are for convenience only and are not to be considered in
construing or interpreting any term or provision of this Agreement.
Section 5.12 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "PERSON" shall mean an individual, corporation, trust,
partnership, joint venture, unincorporated organization, government or any
agency or political subdivision thereof, or other entity.
(b) "SUBSIDIARY" shall mean, as to the Company, any
corporation of which more than 50% of the outstanding stock having ordinary
voting power to elect a majority of the Board of Directors of such corporation
(irrespective of whether or not at the time stock of any other class
<PAGE>
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time directly or indirectly owned
by the Company, or by one or more of its subsidiaries, or by the Company and one
or more of its subsidiaries.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
STARMEDIA NETWORK, INC.
By:
Name:
Title:
EUROPORTAL HOLDING S.A.
By:
Name:
Title:
<PAGE>
Exhibit 10.19
SHARE PURCHASE AGREEMENT
Dated as of May 4, 1999
by and among
STARMEDIA NETWORK, INC.,
WASS NET S.L.,
GERADONS, S.L.,
SALVADOR PORTE
and
EDUARDO KAWAS
<PAGE>
THIS SHARE PURCHASE AGREEMENT (this "AGREEMENT"), dated as of May 4,
1999, by and among STARMEDIA NETWORK, INC., a Delaware corporation (the
"BUYER"), WASS NET S.L., a company with registered office at L'Ametlla del
Valles, calle Oms, 7, Urbanizacion Can Camp, Spain, recorded at the
Commercial Registry of Barcelona under the number 163.794, and with tax
identification number B-61449773 (the "COMPANY"), GERADONS, S.L., a company
with registered office at Barcelona, Av. Diagonal, 558, 5DEG. 2(to the power
of a), recorded at the Commercial Registry of Barcelona at the volume 30.609,
sheet 137, page B-176013, inscription 1(to the power of a), and with tax
identification number B-61633517 (the "SELLER"), SALVADOR PORTE, a Spanish
citizen, residing at L'Ametlla del Valles, calle Oms, 7, Urbanizacion Can
Camp, Spain, and holding Spanish I.D. 41.082.748-X and EDUARDO KAWAS, a
Chilean citizen, residing at Santiago de Chile, calle del Arzobispo, 0739,
Comuna de Providencia, Chile, and holding Chilean I.D. 6556043-T (each a
"GUARANTOR," collectively the "GUARANTORS"). Capitalized terms used in this
Agreement are defined or otherwise referenced in Section 11.03.
WHEREAS, the Seller is the beneficial and legal owner of all of the
issued and outstanding shares of the Company (the "COMPANY SHARES");
WHEREAS, the Seller wishes to sell all of the Company Shares to the
Buyer, and the Buyer wishes to purchase all of the Company Shares from the
Seller, upon the terms and subject to the conditions of this Agreement; and
WHEREAS, the Guarantors will jointly and severally guarantee the
obligations of the Seller under this Agreement.
NOW, THEREFORE, in reliance upon the representations, warranties and
covenants made herein and in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
Section 1.01 SALE AND PURCHASE OF SHARES. At the closing provided for
in Section 2.01 (the "CLOSING") and upon the terms and subject to the conditions
of this Agreement, the Seller shall sell to the Buyer, and the Buyer shall
purchase from the Seller, all of the Company Shares in consideration of the
Consideration Shares as provided for in Section 1.02. The sale and purchase of
the Company Shares hereunder and the other transactions contemplated by the
Transaction Agreements are referred to herein collectively as the
"TRANSACTIONS."
Section 1.02 PAYMENT OF CONSIDERATION. In consideration of the sale,
conveyance and delivery of the Company Shares, the Buyer shall deliver to the
Seller, on the date the Form S-1 Registration Statement (the "REGISTRATION
STATEMENT") filed with the Securities Exchange Commission (the "COMMISSION") in
<PAGE>
connection with the initial public offering (the "IPO") of the common stock of
the Buyer, US$ 0.001 par value per share (the "BUYER STOCK") is declared
effective that number of shares of the Buyer Stock as shall have an aggregate
value of US$ 17,000,000 (the "PURCHASE PRICE") based upon the IPO offering price
per share of the Buyer Stock printed on the cover of the Registration Statement,
subject to adjustment, if any, set forth in Section 1.07 (the "CONSIDERATION
SHARES"). The Consideration Shares will not be registered under the Securities
Act of 1933, as amended (the "SECURITIES ACT") and shall be subject to the
restrictions set forth in the Registration Rights Agreement.
Section 1.03 DELIVERY OF COMPANY SHARES. At the Closing, the Seller
shall transfer to or cause to be transferred to, the Buyer all right and title
to and the ownership of the Company Shares by duly recording the transfer to the
Buyer of the Company Shares in the relevant Partners Register Book ("LIBRO
REGISTRO DE SOCIOS") in which the Seller's ownership of the Company Shares has
been recorded and, by granting a deed of purchase of the Company shares before a
Spanish notary public and by taking all other steps required by any applicable
statute, law, ordinance, rule or regulation ("APPLICABLE LAW") or otherwise
necessary to effect such transfer of the Company Shares.
Section 1.04 TRANSACTION AGREEMENTS. At the Closing, in addition to
this Agreement, the Seller, the Guarantors and the Buyer shall execute and
deliver, or cause to be executed and delivered, the following agreements, which
agreements are referred to herein collectively as the "TRANSACTION AGREEMENTS."
(a) (i) Each Guarantor shall execute and deliver or cause to
be executed and delivered a non-competition agreement (the "NON-COMPETITION
AGREEMENT"), dated as of the Closing Date, substantially in the form of EXHIBIT
A attached hereto; (ii) Salvador Porte shall execute and deliver an employment
agreement (the "EMPLOYMENT AGREEMENT"), dated as of the Closing Date,
substantially in the form of EXHIBIT B attached hereto, and (iii) the Seller
shall execute and deliver a registration rights agreement (the "REGISTRATION
RIGHTS AGREEMENT"), dated as of the Closing Date, substantially in the form of
EXHIBIT C attached hereto.
(b) The Buyer shall execute and deliver or cause to be
executed and delivered: (i) each Non-Competition Agreement; (ii) the Employment
Agreement; and (iii) the Registration Agreement.
Section 1.05 TRANSFER OF CERTAIN ASSETS AND RIGHTS. At or before the
Closing, at no cost to the Buyer, except as provided in Section 10.03, the
Seller and the Guarantors shall transfer, convey and assign or cause to be
transferred, conveyed and assigned to the Company, right and title to, and the
benefit of, all assets (tangible or intangible), all Intellectual Property
rights, all agreements or contracts (written or oral) or Permits that are used
by or necessary to the operation of business of the Company, the right or
<PAGE>
title to or benefit of which is not vested in the Company; PROVIDED, HOWEVER,
that to the extent the Consent of any Person to such transfer, conveyance and
assignment, or notice to a third party, is required pursuant to the terms of
such contract, agreement or Permit or Applicable Law, no transfer, conveyance or
assignment or attempted transfer, conveyance or assignment will be deemed to
have been affected by the provisions of this Agreement without such Consent or
notice. To the extent that Applicable Law does not permit the Seller or the
Guarantors to transfer, convey or assign any such agreement, contract or Permit,
the Seller or the Guarantors shall to the maximum extent reasonably possible (i)
provide to the Buyer, at the request of the Buyer, the benefits of any such
agreement, contract or Permit, and (ii) enforce and perform, at the request and
reasonable expense of the Buyer, for the account of the Buyer, any rights or
obligations of the Seller or the Guarantors arising from any such agreement or
contract against or in respect of any third party, including the right to elect
to terminate any agreement or contract in accordance with the terms thereof upon
the advice of the Buyer, or otherwise enter into with the Buyer such other
arrangements sufficient to provide equivalent benefits to the Buyer.
Section 1.06 FURTHER ASSURANCES. At the Closing and from time to time
after the Closing, at the request of the Buyer and without further
consideration, the Seller or the Guarantors shall promptly execute and deliver
to the Buyer such agreements, certificates and other instruments of sale,
conveyance, assignment and transfer, and take such other action, as may be
reasonably requested by the Buyer (i) to more effectively sell, convey, assign
and transfer to and vest in the Buyer and the Company (or to put the Buyer or
the Company in possession of) any agreement, contract, Permit or Intellectual
Property that is used by or necessary to the operations of the business of the
Company, the right and title to which are held by the Seller, the Guarantors or
another Person. In addition, at the Closing and from time to time after the
Closing, at the reasonable request of the Buyer and without further
consideration, the Seller or the Guarantors shall take, or cause to be taken,
all actions, and do, or cause to be done, and assist and cooperate with the
Buyer in doing, all things necessary, proper or advisable in connection with the
preparation and filing with the appropriate Governmental Entities of all
documents required to be prepared and filed in connection with the transfer to
the Company or the Buyer, of any agreement, contract, Permit or Intellectual
Property that is used by or necessary to the operations of the business of the
Company, but the right and title to which are held by the Seller, the Guarantors
or another Person.
Section 1.07 CONSIDERATION ADJUSTMENT. (a) The Seller shall provide to
the Buyer no later than May 19, 1999, true and correct copies of all web server
logs for all the Company domain names set forth on SCHEDULE 3.14 for the period
commencing on April 19, 1999 and ending on May 18, 1999 (the "ADJUSTMENT
PERIOD").
(b) The Buyer, as soon as reasonably possible after May 19, 1999 (but
in any event no later than thirty (30) days thereafter), shall, using the
WebTrends Log Analyzer 4.5, analyze the web server logs to determine the number
of users sessions during the Adjustment Period and shall provide the Seller with
a true and accurate copy of the results of such analysis. At the option of the
Seller, the Seller or a designated representative of the Seller may be present
at the final analysis of the user sessions by the Buyer.
<PAGE>
(c) In the event that the number of user sessions, as determined in
accordance with Section 1.07(b), are less than 5,200,000, the number of
Consideration Shares delivered in accordance with Section 1.02 shall be reduced
by that percent of shares that is equal to the percent by which the user
sessions are less than 5,200,000; PROVIDED, HOWEVER, the Consideration Shares
shall only be reduced by an amount that exceeds that number of shares equal to
US$350,000 divided by the IPO price per share.
(d) In the event that the number of Consideration Shares is reduced as
provided in Section 1.07(c), the Seller shall immediately surrender to the Buyer
the Stock Certificate evidencing the Consideration Shares in exchange for a
Stock Certificate evidencing the Consideration Shares less that amount by which
such shares are to be reduced in accordance with this Section 1.07.
(e) Notwithstanding the foregoing, in the event, the Seller is
unable to provide the web server log for any one day during the Adjustment
Period due to a technical error or other event that is beyond the Seller's
control, the Seller may summit the log for the day immediately preceding or
immediately succeeding such day in lieu thereof.]
ARTICLE II
CLOSING
Section 2.01 CLOSING DATE. The Closing of the sale and purchase of the
Business and Transferred Assets contemplated hereby shall take place at the
offices of Garrigues & Andersen Abogados y Asesores Tributarios, Avingunda
Diagonal, 654 08034 Barcelona, Spain at 6:00 p.m. local time, on the date the
Registration Statement is declared effective, or such other place, time or date
as the Buyer and Seller may agree to in writing. The time and date upon which
the Closing occurs is herein called the "CLOSING DATE."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE COMPANY
The Seller, each of the Guarantors and the Company represents and
warrants, jointly and severally, to the Buyer as follows:
Section 3.01 ORGANIZATION, STANDING AND POWER. Each of the Company and
the Seller is duly organized, validly existing and in good
<PAGE>
standing under the laws of Spain and has not made any resolution with respect to
its transformation, dissolution, merger or spin-off. Each of the Company and the
Seller has full corporate power and authority and possesses or will possess at
the Closing all governmental franchises, licenses, permits, authorizations and
approvals necessary to enable it to own, lease or otherwise hold its properties
and assets and to conduct its businesses as currently conducted, other than such
franchises, licenses, permits, authorizations and approvals the lack of which,
individually or in the aggregate, has not had and could not reasonably be
expected to have a Material Adverse Effect on the Company or the Seller. The
Company is duly qualified to do business in each jurisdiction where the nature
of its business or the ownership or leasing of its properties make such
qualification necessary and the failure to so qualify could reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company. The Seller have delivered to the Buyer true and complete copies of
the Company's corporation public deed and the Company by-laws, as amended to the
date of this Agreement (as so amended, the "COMPANY BY-LAWS"). The Seller has
delivered to the Buyer true and complete copies of all the trading books kept by
the Company.
Section 3.02 COMPANY SUBSIDIARIES; EQUITY INTERESTS. The Company has no
Subsidiaries and does not own, directly or indirectly, any capital stock,
membership interest, partnership interest, joint venture interest or other
ownership interest in any Person.
Section 3.03 CAPITAL STRUCTURE. (a) The authorized capital of the
Company consists of 7,000 shares at 1,000 points each all of which are issued,
outstanding and owned by the Seller.
(b) Except as set forth above, no shares or other voting
securities or interests of the Company have been issued, are reserved for
issuance or are outstanding. The Seller is the legal, beneficial and record
owner of all outstanding shares of the Company Shares. All outstanding shares of
the Company Shares are duly authorized, validly issued, fully paid and
nonassessable and not subject to or issued in violation of any preemptive right,
subscription right or any similar right under any provision of any Applicable
Law, the Company By-laws or any contract to which the Seller, any Guarantor or
the Company is a party or otherwise bound. There are not any bonds, debentures,
notes or other indebtedness of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which the stockholders of the Company may vote ("VOTING COMPANY
DEBT"). There are not any options, warrants, rights, convertible or exchangeable
securities, stock appreciation rights, stock-based performance units,
commitments, contracts, arrangements or undertakings of any kind to which the
Company is a party or by which it is bound (i) obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other equity interests in, or any security convertible or
exercisable for or exchangeable into any capital stock of or other equity
interest in, the Company, (ii) obligating the Company to issue, grant, extend or
enter into any such option, warrant, call right, security, commitment, contract,
arrangement or undertaking or (iii) that give any Person the right to receive
any economic benefit
<PAGE>
or right similar to or derived from the economic benefits and rights accruing to
holders of any Company Shares. There are not any outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any shares
of capital stock of the Company.
(c) The Seller represent and warrant that it has good and
valid title to the Company Shares free and clear of all pledges, liens, charges,
mortgages, encumbrances and security interests of any kind whatsoever
(collectively, "LIENS"). The Seller further represents and warrants that no
shares of the Company Shares are subject to any Lien or voting trust agreement
or other contract, agreement, arrangement, commitment or understanding,
including any such agreement, arrangement, commitment or understanding
restricting or otherwise relating to the voting, dividend rights or disposition
of such shares. Upon delivery of the Company Shares in the manner contemplated
under this Agreement, the Buyer will acquire the beneficial and legal, valid and
indefeasible title to the Company Shares, free and clear of any Liens.
(d) The Company has the relevant Partners Register Book
("LIBRO REGISTRO DE SOCIOS") in which the Seller's ownership of the Company
Shares has been recorded. This book has been authenticated at the Commercial
Registry of Barcelona.
(e) All of the rights and obligations of the shareholder of
the Company in its capacity as such are set out in the Company By-laws or
Applicable Law and there are no rights, obligations or undertakings of any kind
which are not contemplated in these articles that could affect the Company, the
Seller or the Buyer in any way. None of the Company, the Guarantors or the
Seller are party to any contracts or agreements which could imply the
participation of the Seller, the Guarantors or a third party in the profit of
the Company.
(f) The Company does not hold shares of its own as its
property or as security, it has not furnished financial assistance for the
acquisition of its own shares, neither has it created crossed shareholdings,
directly or through a nominee.
Section 3.04 AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY. (a)
Each of the Company and the Seller has all requisite corporate power and
authority to execute this Agreement and each of the Transaction Agreements to
which it is a party and to consummate the Transactions. The execution and
delivery by the Company and the Seller of each Transaction Agreement to which it
is a party and the consummation by the Company and the Seller of the
Transactions has been duly authorized by all necessary corporate action on the
part of the Company or the Seller. Each of the Company and the Seller has duly
executed and delivered this Agreement and each Transaction Agreement to which it
is a party, and this Agreement and each Transaction Agreement to which it is a
party constitutes its legal, valid and binding obligation, enforceable against
it in accordance with its terms.
(b) Each Guarantor represents and warrants that he has the
requisite capacity to enter into this Agreement and each Transaction Agreement
to which he is a party and to consummate the transactions contemplated by this
Agreement and each Transaction Agreement to which he is a party and this
Agreement and each Transaction Agreement to which such Seller is a party has
been duly executed and delivered by him and constitutes a valid and binding
<PAGE>
obligation of such Seller, enforceable against him in accordance with its terms.
Section 3.05 NO CONFLICTS; CONSENTS. (a) The execution and delivery by
the Seller and the Company of this Agreement and each Transaction Agreement to
which such party is a party do not, and the consummation of the Transactions and
compliance with the terms hereof and thereof will not, conflict with, or result
in any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or to
increased, additional, accelerated or guaranteed rights or entitlements of any
Person under, or result in the creation of any Lien upon any of the properties
or assets of the Company under, any provision of (i) the Company By-laws, (ii)
any contract, lease, license, indenture, note, bond, agreement, permit,
concession, franchise or other instrument to which the Company is a party or by
which any of its properties or assets are bound or (iii) subject to the filings
and other matters referred to in the following sentence, any judgment, order or
decree ("JUDGMENT") or any Applicable Law applicable to the Company or its
properties or assets, other than, in the case of clause (ii) above, any such
items that, individually or in the aggregate, have not had and could not
reasonably be expected to have a Material Adverse Effect on the Company. No
consent, approval, license, permit, order or authorization ("CONSENT") of, or
registration, declaration or filing with, any Federal, state, local or foreign
government or any court of competent jurisdiction, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign (a "GOVERNMENTAL ENTITY") is required to be obtained or made by or with
respect to the Company in connection with the execution, delivery and
performance of this Agreement or any Transaction Agreement to which it is a
party or the consummation of the Transactions, other than (i) the prior
clearance of the Spanish Foreign Exchange Authorities, if required, (ii) the
later communication to the Spanish Foreign Exchange Authorities (iii) the
granting of a public deed to communicate to the Commercial Registry the new
Company's condition of one-single-shareholder company.
(b) The execution and delivery by the Seller, the Guarantors or the
Company of this Agreement and each Transaction Agreement to which the Seller,
the Guarantors and/or the Company are a party do not, and the consummation of
the Transactions and compliance with the terms hereof and thereof will not,
oblige the Company to cease rendering the services included in its corporate
purpose and will not disturb the development of its commercial activity as
services have been rendered and the commercial activity has been developed until
now.
Section 3.06 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. (a)
SCHEDULE 3.06 sets forth (i) the unaudited balance sheet of the Company as of
December 31, 1998 (the "BALANCE SHEET"), and the unaudited statement of income
and cash flows of the Company for the period ended December 31, 1998, (the
"FINANCIAL STATEMENTS"). The Financial Statements have been prepared in
accordance with accounting principles and policies generally accepted in Spain
and consistent with those applied by the Company in previous fiscal years. On
that basis, the Financial Statements fairly present the financial condition and
results of operations of the Company as of the respective dates thereof and for
the respective periods
<PAGE>
indicated.
(b) The Company does not have any liabilities or obligations
of any nature (whether accrued, absolute or contingent, or to the knowledge of
the Company, unasserted or otherwise) except (i) as disclosed, reflected or
reserved against in the Balance Sheet and the notes thereto, (ii) for items set
forth in SCHEDULE 3.06, (iii) for liabilities and obligations incurred in the
ordinary course of business consistent with past practice since the date of the
Balance Sheet and not in violation of this Agreement and (iv) for Taxes.
Section 3.07 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in SCHEDULE 3.07, from the date of the Balance Sheet, the Company has conducted
its business only in the ordinary course, substantially in the same manner as
previously conducted, and during such period there has not been any:
(a) event, change, effect or development that, individually or
in the aggregate, has had or could reasonably be expected to have a Material
Adverse Effect on the Company;
(b) declaration, setting aside or payment or resolution to pay
of any dividend or other distribution (whether in cash, stock or property) with
respect to any shares of the Company Shares or any repurchase for value by the
Company of any shares of the Company Shares;
(c) split, combination or reclassification of the Company
Shares or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of the
Company Shares;
(d) (i) granting, or agreement to grant, by the Company to any
employee, director or executive officer of the Company, of any increase in
compensation, except as was required under employment agreements in effect as of
the date of the Balance Sheet and delivered to the Buyer, or (ii) any granting
by the Company or to any such employee, director or executive officer of any
increase in severance or termination pay, except as was required under any
employment, severance or termination agreements in effect as of the date of the
Balance Sheet and delivered to the Buyer;
(e) change in accounting methods, principles or practices by
the Company materially affecting the combined consolidated assets, liabilities
or results of operations of the Company, taken as a whole, except insofar as may
have been required by a change in the accounting principles and policies stated
by the INSTITUTO DE CONTABILIDAD Y AUDITORIA DE CUENTAS ("I.C.A.C.");
(f) incurrence of Indebtedness;
(g) waiver of any right under any Contract or any Permit;
<PAGE>
(h) sale, lease, license or other disposition of or subjecting
to any Lien any properties or assets of the Company, except sales of
excess or obsolete assets in the ordinary course of business consistent
with past practice;
(i) acquisition or agreement to acquire any assets for use in
connection with the Company that is material, individually or in the
aggregate, to the Company, except purchases of assets in the ordinary
course of business consistent with past practice;
(j) (i) waiver of any claims or rights related to the Company
or (ii) waiver of any benefits of, or agreement to modify in any
manner, any confidentiality, standstill or similar agreement to which
the Company, any Guarantor or the Seller is a party and relating to the
Company; or
(k) termination or failure to renew any Contract, or
termination or failure to renew, or receipt of any written threat (that
was not subsequently withdrawn) to terminate or failure to renew, any
Permit.
Section 3.08 TAXES. (a) For purposes of this Agreement, (i) "TAX" or
"TAXES" shall mean all national, municipal, autonomous community government and
foreign taxes, fees, duties, assessments, withholdings, social security
contributions, governmental charges or similar assessments, including all
interest, penalties and additions imposed with respect to such amounts; (ii)
"PRE-CLOSING TAX PERIOD" shall mean all taxable periods ending on or before the
Closing Date and the portion ending on the Closing Date of any taxable period
that includes (but does not end on) the Closing Date and (iii) "RETURNS" shall
mean returns, reports or forms, including information returns.
(b) Except as disclosed on SCHEDULE 3.08, the Company has
filed or caused to be filed in a timely manner (within any applicable extension
periods) all Returns required to be filed and each such Return is true, complete
and correct.
(c) Except as disclosed on SCHEDULE 3.08, the Company has
timely paid or adequately accrued, or has caused to be timely paid or adequately
accrued, all Taxes, whether or not shown to be due on any such Return described
in Section 3.08(b).
(d) All Taxes that the Company is required to withhold or
collect have been duly withheld or collected and timely paid to the appropriate
Governmental Entity to the extent due and payable.
(e) The provisions made for Taxes in the Financial Statements
are adequate up to the date of the Financial Statements.
<PAGE>
(f) Except as set forth in SCHEDULE 3.08, no deficiencies for
any Taxes have been proposed, threatened, asserted or assessed against the
Company, and no requests for waivers of the time to assess any Taxes exist on
any of the Company's assets.
(g) Except as disclosed in SCHEDULE 3.08, there is no action,
suit, proceeding, investigation, audit or claim currently pending or threatened
regarding any Taxes of the Company or any group of which the Company is a
member.
(h) Except as disclosed on SCHEDULE 3.08, there are no
outstanding agreements or waivers extending the statutory period of limitations
applicable to any Returns required to be filed by or on behalf of the Company,
and the Company has not requested any extension of time within which to file any
Return, which Return has not yet been filed.
(i) Except as disclosed in SCHEDULE 3.08, the Company is not a
party to any agreement with respect to Taxes.
(j) The basis and amount of tax for which the Company has been
or is liable has always been determined in a regular manner in compliance with
the tax regime in force and they are not able to be adjusted or reassessed so
that it may result in a loss to the Company.
(k) The Company holds all the documents necessary to support
the information contained in the declarations or documents presented to all
national, municipal, autonomous community government or foreign tax authority,
as well as all the documents required by the tax and customs regulations. The
Company has satisfied its legal and regulatory obligations regarding the period
during which it must maintain the accounting documents and books, for inspection
purposes.
(l) The Company has not entered into any agreement or carried
out any transaction, which might be reassessed, rejected or re-qualified for the
reason that the Company has attempted to evade, circumvent or diminish their tax
obligations.
(m) The Company has not obtained any tax or social benefit,
which could be withdrawn, lost, or brought into question. The Company conforms
to all provisions of all social and tax benefits, all agreements or subsidies
that it has received. All tax-credits (including any tax concessions) have been
used in accordance with the applicable tax regulations.
(n) The Company is and has always been exclusively resident
for tax purposes in Spain, which is the country of its incorporation.
(o) None of the concessions, subsidies, reductions or
exemptions of taxes granted to the Company by Spanish authorities may be
revoked, cancelled or withdrawn as a result of the execution of this
transaction.
<PAGE>
Section 3.09 COMPANY BENEFIT PLANS. (a) Except as disclosed in SCHEDULE
3.09, from the date of the Balance Sheet, there has not been any adoption or
amendment in any material respect by the Company of any collective bargaining
agreement or any employment bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding (whether or
not legally binding) providing benefits to any current or former employee,
officer or director of the Company (collectively, "COMPANY BENEFIT PLANS").
Except as set forth in SCHEDULE 3.09, there are not any employment, consulting,
indemnification severance or termination agreements or arrangements between the
Company and any current or former employee, executive officer or director of the
Company. The Company has made available to the Buyer true, complete and correct
copies of the Company Benefit Plans.
(b) The Company Benefit Plans are in material compliance with
Applicable Law and have been administered in material compliance with their
terms and the terms of all applicable collective bargaining agreements. There
are no pending claims, suits or investigations related to any Company Benefit
Plan.
(c) Each Company Benefit Plan that is an employee welfare
benefit plan may be amended or terminated without material liability to the
Company, taken as a whole, on or at any time after the Closing Date, so long as
such amendment or termination is in compliance with Applicable Law.
(d) Except as disclosed in SCHEDULE 3.09, there has not been
any actual or threatened claims of past or present employees of the Company for
compensation for any injury, disability or illness arising out of their
employment.
(e) Except as disclosed in SCHEDULE 3.09, there has not been
any actual or threatened strike, work stoppage, or other similar labor activity
by employees of the Company or by any trade union, involving the employees of
the Company.
(f) Except as disclosed on SCHEDULE 3.09 the Company does not
have any employees.
Section 3.10 LITIGATION. Except as set forth in SCHEDULE 3.10, there is
no suit, action or proceeding pending or, to the knowledge of the Company,
threatened against or directly affecting the Company (and neither the Seller,
nor the Guarantors nor the Company are aware of any basis for any such suit,
action or proceeding), its administrators in their capacity as such or the
Seller because of the shares of the Company, that, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect on the Company, nor is there any Judgment outstanding against the Company
that has had or could reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect on the Company, nor is there any threat that
any such procedure could occur in future.
<PAGE>
Section 3.11 COMPLIANCE WITH APPLICABLE LAWS. Except as set forth in
SCHEDULE 3.11, the Company is in compliance in all material respects with all
Applicable Laws, including those relating to occupational health and safety,
except for instances of noncompliance that, individually or in the aggregate,
have not had and could not reasonably be expected to have a Material Adverse
Effect on the Company. Except as set forth in SCHEDULE 3.11, the Company has not
received any written communication from any Governmental Entity that alleges
that the Company is not in compliance in any material respect with any
Applicable Law.
Section 3.12 ENVIRONMENTAL MATTERS. (a) Except as set forth in SCHEDULE
3.12, (i) to the knowledge of the Company, the Company holds, and is in
compliance in all material respects with, all permits, licenses and governmental
authorizations required for the Company to conduct its businesses under
Environmental Laws (as defined herein); (ii) the Company has not received any
notice of a pending or threatened action, demand, investigation or inquiry by
any Governmental Entity or other person relating to any actual or alleged
violations of Environmental Laws or any actual or potential obligation to
investigate, pay for removal or remediation or take any other action relative to
a Release (as defined herein) or threatened Release of any Hazardous Materials
(as defined herein) and to the knowledge of the Company is in compliance in all
material respects with all Environmental Laws; (iii) the Company has not entered
into or agreed to any court decree or order or is subject to any judgment,
decree or order relating to compliance with any Environmental Law or to the
investigation or cleanup of Hazardous Materials; (iv) Hazardous Materials have
not been generated, transported, treated, stored, disposed of, arranged to be
disposed of, Released or threatened to be Released at, on, from or under, any of
the properties or facilities currently or formerly owned, leased or otherwise
operated by the Company, in violation of, or so as would reasonably be expected
to result in liability under, any Environmental Laws; (v) the Company has not
assumed by contract or by operation of law any liabilities or obligations
arising under Environmental Laws in connection with currently or formerly owned,
leased or operated properties or facilities or in connection with any formerly
owned divisions, subsidiaries, companies or other entities; (vi) no employee of
the Company in the course of his or her employment has been exposed to any
Hazardous Materials or other substance, generated, produced or used by the
Company that could give rise to any claim against the Company; (vii) there are
not now and never have been any underground storage tanks ("USTS"), equipment
using or containing PCBS or asbestos located at, on or under any property
currently owned or operated by the Company, and any existing USTs meet the
requirements under Environmental Laws. As used in this Agreement, the term
"ENVIRONMENTAL LAWS" means all legislation (even of international nature) which
is or has been in force in Spain. As used in this Agreement, the term "HAZARDOUS
MATERIALS" means any pollutant, contaminant or waste, or any toxic, radioactive
or hazardous substance, chemical, material, constituent petroleum or petroleum
products or waste regulated under any Environmental Law. As used in this
Agreement, the term "RELEASE" means any release, spill, emission, discharge,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration to or through air, water, land or groundwater.
<PAGE>
(b) Except as set forth in SCHEDULE 3.12, to the knowledge of
the Company no Environmental Law imposes any obligation upon the Company arising
out of or as a condition to any transaction contemplated by this Agreement,
including, without limitation, any requirement to modify or to transfer any
permit or license, any requirement to file any notice or other submission with
any Governmental Entity, the placement of any notice, acknowledgment or covenant
in any land records, or the modification of or provision of notice under any
agreement, consent order or consent decree. No Lien has been placed upon any of
the Company's properties under any Environmental Law.
Section 3.13 REAL PROPERTY. (a) SCHEDULE 3.13 sets forth each and every
parcel of real property or interest in real estate owned, held under a lease or
used by, or necessary for the conduct of the business of, the Company (the "REAL
PROPERTY"). The Seller and the Guarantors have heretofore delivered to the Buyer
complete and correct copies of each and every of the following, if any, in the
possession of the Seller, the Guarantors or the Company: (i) title reports,
title binders, survey documents and data affording information or opinions with
respect to, certifying to, or evidencing the extent, current title, title
history, title marketability, use, possession, restriction or regulation, if any
(governmental or otherwise), and compliance with Applicable Law, of the Real
Property; (ii) deed or titleholding or trust agreements, if any, under which any
of the Real Property may have been conveyed to the Company or under which the
same may be held for the benefit of the Company; and (iii) leases and all
documents relating thereto, including any amendments thereto and any assignment
thereof.
(b) Except as set forth in SCHEDULE 3.13, the Company:
(i) owns and has good and marketable title in fee simple
to the Real Property designated as "owned property" in SCHEDULE 3.13,
free and clear of any Liens;
(ii) with respect to the Real Property designated as
"leased property" in SCHEDULE 3.13, is in peaceful and undisturbed
possession of the space and/or estate under each lease under which it
is a tenant, and there are no defaults by it as tenant thereunder; and
(iii) has good and valid rights of ingress and egress to
and from all the Real Property from and to the public street systems
for all usual street, road and utility purposes and other purposes
necessary or incidental to the business of the Company.
(c) Neither the Seller, nor any Guarantor nor the Company has
received any notice of any appropriation, condemnation or like proceeding, or of
any violation of any applicable zoning law, regulation or other law, order,
regulation or requirement relating to or affecting the Real Property, and to the
best knowledge of the Company, no such proceeding has been threatened or
commenced.
(d) Except as set forth in SCHEDULE 3.13, all of the
buildings, structures,
<PAGE>
improvements and fixtures used by or useful in the business of the Company,
owned or leased by the Company, are in a good state of repair, maintenance and
operating condition and, except as so disclosed and, except for normal wear and
tear, there are no defects with respect thereto which would impair the
day-to-day use of any such buildings, structures, improvements or fixtures or
which would subject the Company to liability under Applicable Law.
(e) Neither the Seller, nor any Guarantor nor the Company has
received any notice of any termination of any lease agreement. Neither the
Seller nor the Company knows of any cause that gives the respective lessors the
right to terminate the lease agreements before their contractual term.
(f) The buildings and other improvements of each parcel
included in the Real Property do not encroach on any easements or on any land
not included within the boundary lines of such Real Property and there are no
neighboring improvements encroaching on such Real Property, except for such of
the foregoing as do not and will not individually or in the aggregate interfere
with the current and proposed use(s) of such Real Property in the business.
(g) The current use of any parcel included in the leased Real
Property does not violate or conflict with (i) any covenants, conditions or
restrictions applicable thereto, or (ii) the terms and provisions of any
contractual obligations relating thereto.
Section 3.14 INTELLECTUAL PROPERTY. (a) SCHEDULE 3.14 sets forth a true
and complete list of all domestic and foreign patents, trademarks, trade names,
service marks and copyrights (registered or unregistered), and applications
therefor and other material intellectual property and proprietary rights,
including, without limitation, Internet domain names, whether or not subject to
statutory registration or protection (collectively, "INTELLECTUAL PROPERTY"),
owned, used, filed by or licensed to the Company. With respect to registered
trademarks, domain names and Internet web sites, SCHEDULE 3.14 sets forth a list
of all jurisdictions in which such trademarks, domain names and Internet web
sites are registered or applied for and all registration and application
numbers. All the registered patents, trademarks, service marks, Internet domain
names and copyrights set forth on SCHEDULE 3.14 are valid and in full force and
effect and the consummation of the Transactions will not in any way impair any
such rights. Except as set forth in SCHEDULE 3.14, the Company owns, or will own
at the Closing, and the Company has, or will have at the Closing, the right to
use, execute, reproduce, display, perform, modify, enhance, distribute, prepare
derivative works of and sublicense, without payment to any other Person, all
Intellectual Property and the consummation of the transactions contemplated
hereby will not conflict with, alter or impair any such rights. The Company has
all rights to Intellectual Property as are necessary in connection with the
business of the Company as currently conducted and as contemplated to be
conducted.
(b) All of the Intellectual Property are duly entered in the
Company's favor at the respective registries. The Company is up to date in
payment of the fees required for such registrations. Such registrations have not
been opposed for infringing other registrations or modes of intellectual
property and copyright held by third parties. The Company does not
<PAGE>
infringe any registration or modes of intellectual property and copyright held
by third parties.
(c) The Company has not granted any options, licenses or
agreements of any kind relating to Intellectual Property or the marketing or
distribution thereof. The Company is not bound by or a party to any options,
licenses or agreements of any kind relating to the Intellectual Property of any
other Person, except as set forth in SCHEDULE 3.14 and except for agreements
relating to computer software licensed to the Company in the ordinary course of
business. Subject to the rights of third parties set forth in SCHEDULE 3.14, all
Intellectual Property is free and clear of the claims of others and of all
Liens. The conduct of the business of the Company as currently conducted, and as
contemplated to be conducted does not and will not violate, conflict with or
infringe the Intellectual Property of any other Person. Except as set forth in
SCHEDULE 3.14, (i) no claims are pending or, to the knowledge of the Company,
threatened, against the Company by any Person with respect to the ownership,
validity, enforceability, effectiveness or use of any Intellectual Property and
(ii) the Company has not received any communications alleging that the Company
has violated any rights relating to Intellectual Property of any Person.
(d) The Intellectual Property has been maintained in
confidence in accordance with protection procedures customarily used in the
industries of the Company to protect rights of like importance. All former and
current Personnel either (i) have been party to a "WORK-FOR-HIRE" arrangement or
agreement with the Company, in accordance with applicable United States Federal
and state law or similar applicable foreign law, that has accorded the Company
full, effective, exclusive and original ownership of all tangible and intangible
property thereby arising or (ii) have executed appropriate instruments of
assignment in favor of the Company as assignee that have conveyed to the Company
full, effective and exclusive ownership of all tangible and intangible property
including Intellectual Property, thereby arising. No former or current Personnel
have any claim against the Company in connection with such Person's involvement
in the conception and development of any Intellectual Property and no such claim
has been asserted or is threatened. None of the current officers, independent
contractors and employees of the Company have any patents issued or applications
pending for any device, process, design or invention of any kind now used or
needed by the Company in the furtherance of its business operations, which
patents or applications have not been assigned to the Company, with such
assignment duly recorded in the United States Patent Office or with any foreign
governmental entity with jurisdiction over patents.
Section 3.15 CONTRACTS. Except as set forth in SCHEDULE 3.15, the
Company is not a party to or bound by any:
(a) employment agreement or employment contract that has an
aggregate future liability in excess of $25,000 and is not terminable by the
Company by notice of not more than sixty (60) days for a cost of less than
$25,000;
(b) employee collective bargaining agreement or other contract
with any labor union;
<PAGE>
(c) covenant of the Company not to compete (other than
pursuant to any radius restriction contained in any lease, reciprocal easement
or development, construction, operating or similar agreement) or other covenant
of the Company restricting the development, manufacture, marketing or
distribution of the products and services of the Company that materially impairs
the operation of the business of the Company, as currently conducted;
(d) agreement, contract or other arrangement with (i) any
shareholder and/or members of their families or any Affiliate or any entity
controlled, directly or indirectly, by any shareholder and/or members of their
families or (ii) any officer, director or employee of the Company, or any
Affiliate or any entity controlled, directly or indirectly, by any shareholder
and/or members of their families (other than employment agreements covered by
clause (a) above);
(e) lease, sublease or similar agreement with any Person under
which the Company is a lessor or sublessor of, or makes available for use to any
Person (i) any property owned, leased or used by the Company or (ii) any portion
of any premises otherwise occupied by the Company;
(f) lease or similar agreement with any Person under which (i)
the Company is lessee of, or holds or uses, any machinery, equipment, vehicle or
other tangible personal property owned by any Person or (ii) the Company is a
lessor or sublessor of, or makes available for use by any Person, any tangible
personal property owned, leased or used by the Company, in any such case which
has an aggregate future liability or receivable, as the case may be, in excess
of $10,000 and is not terminable by the Company by notice of not more than sixty
(60) days for a cost of less than $10,000;
(g) (i) continuing contract for the future purchase of
materials, supplies or equipment (other than purchase contracts and orders for
inventory in the ordinary course of business consistent with past practice),
(ii) management, service, consulting or other similar type of contract or (iii)
advertising agreement or arrangement, in any such case which has an aggregate
future liability to any Person in excess of $10,000 and is not terminable by the
Company by notice of not more than sixty (60) days for a cost of less than
$10,000;
(h) agreement, contract or other instrument under which the
Company has borrowed any money from, or issued any note, bond, debenture or
other evidence of indebtedness to, any Person or any other note, bond, debenture
or other evidence of indebtedness issued to any Person in any such case which,
individually, is in excess of $10,000;
(i) agreement, contract or other instrument (including
so-called take-or-pay or keepwell agreements) under which (i) any Person
(including the Company) has directly or indirectly guaranteed indebtedness,
liabilities or obligations of the Company or (ii) the Company has directly or
indirectly guaranteed indebtedness, liabilities or obligations of any Person (in
each case other than endorsements for the purpose of collection in the ordinary
course of business), in any such case which, individually, is in excess of
$10,000;
<PAGE>
(j) agreement, contract or other instrument under which the
Company has, directly or indirectly, made any advance, loan, extension of credit
or capital contribution to, or other investment in, any Person, in any such case
which, individually, is in excess of $10,000;
(k) mortgage, pledge, security agreement, deed of trust or
other instrument granting a Lien upon any property of the Company, which Lien is
set forth in SCHEDULE 3.15;
(l) agreement or instrument providing for indemnification of
any Person with respect to material liabilities relating to any current or
former business of the Company or any predecessor Person; or
(m) other agreement, contract, lease, license, commitment or
instrument to which the Company is a party or by or to which it or any of its
assets or business is bound or subject, which has an aggregate future liability
to any Person in excess of $10,000 and is not terminable by the Company by
notice of not more than sixty (60) days for a cost of less than $10,000.
Except as set forth in SCHEDULE 3.15, all agreements,
contracts, leases, licenses, commitments or instruments of the Company listed in
the Schedules hereto (collectively, the "CONTRACTS") are valid, binding and in
full force and effect and are enforceable by the Company in accordance with its
terms subject to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws affecting creditors' rights generally,
general principles of equity and the discretion of courts in granting equitable
remedies. Except as set forth in SCHEDULE 3.15, the Company has performed all
material obligations required to be performed by it to date under the Contracts
and it is not (with or without the lapse of time or the giving of notice, or
both) in breach or default in any material respect thereunder and, to the
knowledge of the Company, no other party to any of the Contracts is (with or
without the lapse of time or the giving of notice, or both) in breach or default
in any material respect thereunder.
The Company is not party to any contracts or agreements which
could be cancelled or terminated by the other party or under which rights in
favour of third persons would arise, as the result of entering into this
Agreement and implementing the transactions contemplated herein. Neither the
Seller, nor the Guarantor nor the Company have received any notice pursuant to
which any of the customers of, or suppliers or lenders to the Company have
disclosed its intention to cease or substantially reduce its commercial
relationship with the Company for any reason whatsoever including, without
limitation, unsatisfactory level of service or the transfer of the shares of the
Company to the Buyer.
Section 3.16 INSURANCE. (a) The Company maintains policies of fire and
casualty, liability and other forms of insurance in such amounts, with such
deductibles and against such risks and losses as are, in the Company's judgment,
reasonable for the business and assets of the Company. The insurance policies
maintained with respect to the Company and its assets and properties are listed
in SCHEDULE 3.16. All such policies are in full force and effect, all premiums
due and payable thereon have been paid, and no notice of cancellation or
termination has been received with
<PAGE>
respect to any such policy that has not been replaced on substantially similar
terms prior to the date of such cancellation.
(b) There is no material default by the Company or to the
knowledge of the Company, any other Person, with respect to any provision
contained in any such policy or binder listed on SCHEDULE 3.16, nor has there
been any material failure by the Company to give notice or to present any claim
under any such policy or binder in a timely fashion or in the manner or detail
required by the policy or binder. SCHEDULE 3.16 also contains a true, accurate
and complete description of all outstanding bonds and other surety arrangements
involving more than $[10,000] issued or entered into in connection with the
business and operations of the Company. No event has occurred that would be
reasonably likely to form the basis of a claim that would be covered by a policy
of insurance held by or on behalf of the Company that (i) has not been asserted,
(ii) if asserted, would result in a material diminution of the remaining
available coverage under such policy and (iii) individually or in the aggregate,
would have a Material Adverse Effect on the Company.
Section 3.17 EMPLOYEE AND LABOR MATTERS. (a) Except as set forth in
SCHEDULE 3.17, (i) there is no labor strike, dispute, work stoppage or lockout
pending, or, to the knowledge of the Company, threatened, against or affecting
the Company; (ii) to the knowledge of the Company, no union organizational
campaign is in progress with respect to the employees of the Company and no
question concerning representation exists respecting such employees; (iii) the
Company is not engaged in any unfair labor practice; (iv) there is no unfair
labor practice charge or complaint against the Company pending, or, to the
knowledge of the Company, threatened, before the Spanish labor authorities; (v)
there are no pending, or, to the knowledge of the Company, threatened, union
grievances against the Company as to which there is a reasonable possibility of
adverse determination and that, if so determined, individually or in the
aggregate, would have a Material Adverse Effect on the Company; (vi) there are
no pending, or, to the knowledge of the Company, threatened, charges against the
Company or any current or former employee of the Company before the Spanish
labor authorities; (vii) the Company has not received written notice of the
intent of any Governmental Entity responsible for the enforcement of labor or
employment laws to conduct an investigation of or affecting the Company and, to
the knowledge of the Company, no such investigation is in progress; and (viii)
the Company is in material compliance with all national, municipal or autonomous
community governments labor laws and regulations.
(b) The Company has not established or agreed to establish any
pension scheme or assumed any undertaking whatsoever, including any type of
"GOLDEN-PARACHUTE" clauses, in cash or in kind for the event of dismissal,
resignation or retirement in connection with their executives, administrators,
or any other persons, including personnel engaged under service contracts.
(c) The Company has not assumed any undertaking to compensate
in cash or in kind, the administrators or to indemnify them for the event of
their removal or resignation.
<PAGE>
(d) The Company has no knowledge that because of the lapsing
of time or by application of any other legal cause there is any temporary
personnel or personnel outside the Company's work force who could claim to be
considered permanent personnel.
Section 3.18 CUSTOMER ACCOUNTS RECEIVABLE; INVENTORIES. (a) All
customer accounts receivable of the Company, whether reflected on the Balance
Sheet or subsequently created, have arisen from bona fide transactions in the
ordinary course of business. To the knowledge of the Company, all such customer
accounts receivable are good and collectible at the aggregate recorded amounts
thereof, net of any applicable reserves for doubtful accounts reflected on the
Balance Sheet. The Company has good and marketable title to its accounts
receivable, free and clear of all Liens, except as set forth in SCHEDULE 3.18.
Since the date of the Balance Sheet, there have not been any write-offs as
uncollectible of any notes or accounts receivable of the Company, except for
write-offs in the ordinary course of business and consistent with past practice
which have not had, either individually or in the aggregate, a Material Adverse
Effect on the Company.
(b) The Company does not have any inventories.
Section 3.19 LICENSES; PERMITS. (a) SCHEDULE 3.19 sets forth a true and
complete list of all material licenses, permits and authorizations issued or
granted to the Company by national, municipal or autonomous community
governments which are necessary or desirable for the conduct of the business of
the Company ("PERMITS"). Except as set forth in SCHEDULE 3.19, all such Permits
are validly held by the Company, and the Company has complied in all material
respects with all terms and conditions thereof, and the same will not be subject
to suspension, modification, revocation or nonrenewal as a result of the
execution and delivery of this Agreement, the other Transaction Agreements or
the consummation of the Transactions. All such licenses, permits and
authorizations that are held in the name of any employee, officer, director,
stockholder, agent or otherwise on behalf of the Company shall be deemed
included under this warranty.
(b) The properties and facilities of the Company, its products
and the activities it conducts do not violate any legal or administrative
provision on matters relating to planning, the defense of competition, consumer
protection, health and safety at work or of any other kind.
(c) There is not any administration inspection open, in
progress or pending settlement.
Section 3.20 ACCOUNTS; SAFE DEPOSIT BOXES; POWERS OF ATTORNEY; OFFICERS
AND DIRECTORS. SCHEDULE 3.20 sets forth (i) a true and correct list of all bank
and savings accounts, certificates of deposit and safe deposit boxes of the
Company and those Persons authorized to sign thereon, (ii) true and correct
copies of all corporate borrowing, depository and transfer resolutions and those
Persons entitled to act thereunder, (iii) a true and correct list of all powers
<PAGE>
of attorney granted by the Company and those Persons authorized to act
thereunder and (iv) a true and correct list of all officers and directors of the
Company.
Section 3.21 TRANSACTIONS WITH AFFILIATES. Except as set forth in
SCHEDULE 3.21, none of the agreements, contracts or other arrangements set forth
in SCHEDULE 3.15 between the Company, on the one hand, and any stockholder or
any Affiliate of the Company, on the other hand, will continue in effect
subsequent to the Closing. Other than the Transaction Agreements and except as
set forth in SCHEDULE 3.21, after the Closing no stockholder or Affiliate will
have any interest in any property (real or personal, tangible or intangible) or
contract used in or pertaining to the business of the Company. No stockholder or
Affiliate of the Company has any direct or indirect ownership interest in any
Person in which the Company has any direct or indirect ownership interest or
with which the Company competes or has a business relationship. Except as set
forth in SCHEDULE 3.21, other than the Seller no stockholder or Affiliate of the
Company provides any material services to the Company.
Section 3.22 CORPORATE NAME. Except as set forth in SCHEDULE 3.22, the
Company (i) has the exclusive right to use its name as the name of a corporation
in any jurisdiction in which the Company does business and (ii) has not received
any notice of conflict with respect to the rights of others regarding the
corporate name of the Company. Except as set forth in SCHEDULE 3.22, no Person
is currently authorized by the Company to use the name of the Company. The
Company has previously delivered to the Buyer copies of any documents in the
possession of the Company granting any authorizations of the type referred to in
the previous sentence.
Section 3.23 SUPPLIERS. (a) Except as set forth in SCHEDULE 3.23,
between the date of the Balance Sheet and the date of this Agreement, the
Company has not entered into or made any contract or commitment for the purchase
of merchandise other than in the ordinary course of business consistent with
past practice. Except for the suppliers named in SCHEDULE 3.23, the Company does
not have any supplier from which it purchased more than five percent (5%) of the
merchandise which it purchased during its most recent full fiscal year. Except
as set forth in SCHEDULE 3.23, since the date of the Balance Sheet, there has
not been (i) any material adverse change in the business relationship of the
Company with any supplier of merchandise named in SCHEDULE 3.23 or (ii) any
change in any material term (including credit terms) of the supply agreements or
related arrangements with any such supplier.
(b) The Company's agreements with each of its suppliers
contain price and other terms that are competitive with those offered by other
vendors of the items supplied and have been negotiated in arm's-length
transactions. The Company's agreements with its suppliers do not, individually
or in the aggregate, require purchases of items in excess of its reasonably
predicted requirements.
<PAGE>
Section 3.24 CUSTOMERS. Except for the customers named in SCHEDULE
3.24, the Company does not have any customer to which it made more than five
percent (5%) of its sales during its most recent full fiscal year and the period
ended on the date of this Agreement. Except as set forth in SCHEDULE 3.24, since
the date of the Balance Sheet, there has not been (i) any material adverse
change in the business relationship of the Company with any customer named in
SCHEDULE 3.24 or (ii) any change in any material term (including credit terms)
of the sales agreements or related agreements with any such customer. The
Company has not received any customer complaints concerning its products and
services, nor has it had any of its products returned by a purchaser thereof,
other than complaints and returns in the ordinary course of business which have
not, and are not likely to have, individually or in the aggregate, a Material
Adverse Effect.
Section 3.25 DISTRIBUTORS. SCHEDULE 3.25 sets forth a list of all
agreements, arrangements, other commitments, either written or oral, between or
among the Company and all Internet service providers and/or distributors of the
Company products via the Internet or otherwise (the "DISTRIBUTOR AGREEMENTS")
together, in the case of any oral agreements, arrangements or other commitments,
with a description of the material terms thereof, which have an aggregate
potential future liability in excess of $10,000 and are not terminable by the
Company by notice of thirty (30) days or less for a cost of less than $10,000.
All Distributor Agreements are valid and binding obligations of the Company and,
to the knowledge of the Company, of each other party thereto and are in full
force and effect and enforceable by the Company in accordance with their terms.
There are no existing defaults (or circumstances or events that, with the giving
of notice or lapse of time or both would become defaults) of the Company or (to
the knowledge of the Company, any other party to any Distributor Agreement)
under any Distributor Agreement, except for such defaults that individually or
in the aggregate would not have a Material Adverse Effect on the Company. There
have been no oral or written modifications, amendments or waivers or other
commitments with respect to of any of the material terms of any Distributor
Agreement. No distributor has informed the Company that it intends to change its
current relationship with the Company because of the transactions contemplated
hereby in a manner which, individually, or in the aggregate with all other
changed relationships with distributors, would have a Material Adverse Effect on
the Company.
Section 3.26 PERSONAL PROPERTY. (a) SCHEDULE 3.26 sets forth (i) the
tangible physical assets of the Company that do not constitute Real Property
(including machinery, equipment, tools, dies, furniture, furnishings, leasehold
improvements, vehicles, buildings and fixtures) and that have a value in excess
of $5,000 per item or per category of items and the location of such items; (ii)
individual refundable deposits, prepaid expenses, deferred charges and "other
assets" in excess of $5,000 or $10,000 in the aggregate; and (iii) all loans or
advances made by the Company to any Person in excess of $5,000.
<PAGE>
(b) Except as disclosed in SCHEDULE 3.26, the Company has good
title to all of the tangible physical assets of the Company that do not
constitute Real Property, free and clear of all Liens. Except as disclosed in
SCHEDULE 3.26, the Company has valid contractual rights pursuant to contracts
disclosed in SCHEDULE 3.15 or not required to be disclosed therein due to the
dollar thresholds set forth in Section 3.15, to use, all of the assets, tangible
and intangible, used by, or necessary for the conduct of the businesses of the
Company as now being conducted.
(c) The machinery, tools, equipment and other tangible
physical assets of the Company (other than items of inventory), taken as a
whole, are in good working order, normal wear and tear excepted, are being used
or are useful in the business of the Company at its present level of activity
and constitute all of the assets necessary to conduct the business of the
Company as now being conducted.
Section 3.27 BROKERS; SCHEDULE OF FEES AND EXPENSES. Except as set
forth ON SCHEDULE 3.27 attached hereto, broker, investment banker, financial
advisor or other Person, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the Transactions
based upon arrangements made by or on behalf of the Company or the Seller.
Section 3.28 ENTIRE BUSINESS. Except as set forth on SCHEDULE 3.28
attached hereto, neither the Seller, nor the Guarantors, nor any stockholder or
Affiliate of the Company owns any assets (tangible or intangible) that are used
by the Company, or that are necessary for the conduct of the Company's
businesses as conducted on the date of this Agreement.
Section 3.29 SECURITIES ACT. The Seller are acquiring the Consideration
Shares for investment only and not with a view to any public distribution of all
or any portion thereof. The Seller will not offer to sell or otherwise dispose
of all or any portion of the Consideration Shares in violation of any of the
registration requirements of the Securities Act. The Seller acknowledges that it
has had, prior to the execution and delivery of this Agreement, the opportunity
to conduct a due diligence investigation of the business and affairs of the
Buyer and has had the opportunity to ask questions and receive answers from
representatives of the Buyer concerning the business and affairs of the Buyer.
The Seller further acknowledges that it has read the Form S-1 Registration
Statement that the Buyer filed with the Securities and Exchange Commission on
March 18, 1999. The Seller is not a resident of the United States or any state
or jurisdiction in the United States.
Section 3.30 YEAR 2000 COMPLIANCE. Except as disclosed in SCHEDULE
3.30, the software and systems, including all equipment used by the Company, are
Year 2000 Compliant. Year 2000 Compliant means that neither the performance nor
functionality of the software and systems, including all equipment of the
<PAGE>
Company, will be adversely affected by dates prior to, during or after the year
2000. Without limiting the generality of the foregoing, the software and
systems, including all equipment, used by the Company are capable of providing
the following functions without any additional processing with the same degree
of timeliness, efficiency and accuracy as on or before December 31, 1999, and
all software and systems have been tested to verify that they are Year 2000
Compliant:
(a) effectively process date information before, on and after
January 1, 2000;
(b) function accurately and without interruption before, on
and after January 1, 2000, without any change in operation associated with the
advent of the year 2000, the new century or the leap year in the year 2000;
(c) respond to two-digit year input in a way that resolves the
ambiguity as to the century in a disclosed, defined and predetermined manner;
(d) process two-digit year information in ways that are
similarly unambiguous as to century; and
(e) store and provide output of date information in ways that
are similarly unambiguous as to century.
Section 3.31 WEB SITE INFORMATION. The Seller has provided the Buyer
with authentic, true and accurate copies of the Company's books, logs and files
recording (i) traffic on the Company's web sites, (ii) the number of page views
per month on the Company's web sites and (iii) the number of users who have
registered in the Company's email service, which number shall be equal to not
less than 750,000 users.
Section 3.32 PERSONAL DATA. The Company has, or will have at the
Closing, declared all personal data included in its files and electronic bases
to the Spanish Data Protection Agency ("AGENCIA DE PROTECCION DE DATOS"). The
Company has been using and filing all personal data according to the regulations
stated by the Applicable Law and, specially, according to the terms and
obligations stated by the Spanish law for the automatic treatment of the
personal data (LEY ORGANICA 5/1992, DE REGULACION DEL TRATAMIENTO AUTOMATIZADO
DE LOS DATOS DE CARACTER PERSONAL (LORTAD)).
Section 3.33 POWERS OF ATTORNEY. All powers of attorney conferred by
the Company to any employee, director, shareholder or third party, both as
permanent or special powers, and which are currently in force, can be revoked at
any moment, according to the law and the Company By-laws, without any cost to
the Company other than the formalization of the resolutions
<PAGE>
Section 3.34 DISCLOSURE. (a) No representations or warranties by the
Seller, the Guarantors or the Company in this Agreement, including the
Schedules, and no statement contained in any document furnished or to be
furnished by the Seller, the Guarantors or the Company to the Buyer or any of
its representatives pursuant to the provisions hereof or in connection with the
transactions contemplated hereby (including, without limitation, the Financial
Statements, certificates, or other writings), contains or will contain any
untrue statement of material fact or omits or will omit to state any material
fact necessary, in light of the circumstances under which it was made, in order
to make the statements herein or therein not misleading. There is no fact known
to the Seller nor to the Guarantors which has or could have a Material Adverse
Effect on the Company considered as a whole, which has not been set forth in
this Agreement, including any schedule, the Financial Statements (including the
footnotes thereto), exhibit, or certificate delivered in accordance with the
terms hereof or any document or statement in writing which has been supplied by
or on behalf of the Seller, the Guarantors, the Company or by any director or
officer of the Company in connection with the transactions contemplated by this
Agreement.
(b) The Seller has furnished or caused to be furnished to the
Buyer complete and correct copies of all agreements, instruments and documents
set forth on any Schedule or underlying a disclosure set forth on any Schedule.
Each of the Schedules is complete and correct.
Section 3.35 KNOWLEDGE. The term "KNOWLEDGE OF THE COMPANY" shall mean
the knowledge of the Seller, the Guarantors, managers, directors and /or
officers of the Company, after due inquiry.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows
Section 4.01 ORGANIZATION, STANDING AND POWER. The Buyer is duly
organized, validly existing and in good standing under the laws of the state of
Delaware and has full corporate power and authority to conduct its businesses as
currently conducted.
Section 4.02 AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY. The
Buyer has all requisite corporate power and authority to execute this Agreement
and each Transaction Agreement to which it is a party and to consummate the
Transactions. The execution and delivery by the Buyer of this Agreement and each
Transaction Agreement to which it is a party and the consummation by it of the
Transactions have been duly authorized by all necessary corporate action on the
Buyer. The Buyer has duly executed and delivered this Agreement and each
Transaction Agreement to which it is a party, and each
<PAGE>
Transaction Agreement to which it is a party constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
Section 4.03 CONSENTS. No Consent of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or made by or
with respect to the Buyer in connection with the execution, delivery and
performance of this Agreement or any Transaction Agreement to which the Buyer is
a party or the consummation of the Transactions, other (i) the prior clearance
of the Spanish Foreign Exchange Authorities, if required, (ii) the later
communication to the Spanish Foreign Exchange Authorities Spanish (iii) the
granting of a public deed to communicate to the Commercial Registry the new
Company's condition of one-single-shareholder company, (iv) such immaterial
Consents as may be required under the laws of any jurisdiction in which the
Company is qualified to do business and (v) those that may be required solely by
reason of the Company (as opposed to any third party's) participation in the
transactions contemplated hereby.
Section 4.04 CONSIDERATION SHARES. Upon delivery in the manner
contemplated by this Agreement, the Consideration Shares will be duly
authorized, validly issued, fully paid and nonassessable and not subject to or
issued in violation of any preemptive right, subscription right or any similar
right under any provision of any Applicable Law, the certificate of
incorporation of the Buyer, the by-laws of the Buyer or any contract to which
the Buyer is a party or otherwise bound. Upon delivery of the Consideration
Shares in the manner contemplated under this Agreement, the Seller will acquire
the beneficial and legal, valid and indefeasible title to the Consideration
Shares, free and clear of any Liens other than restrictions under the Securities
Act and other state securities laws.
Section 4.05 SECURITIES ACT. The Buyer shall deliver or cause to be
delivered to the Seller a copy of the Registration Statement, subject to
amendment, that the Buyer will file with the Commission in connection with the
IPO. Subject to any amendment filed with the Commission, the Registration
Statement will not contain any untrue statement of material fact nor will it
omit to state any material fact necessary, in light of the circumstances under
which it was made, in order to make the statements therein not misleading.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.01 CONDUCT OF BUSINESS BY THE COMPANY. Except for matters set
forth in SCHEDULE 5.01, or otherwise expressly permitted by this Agreement, from
the date of this Agreement to the Closing Date, the Seller shall cause the
Company to, and the Company shall, conduct its business in the usual, regular
and ordinary course in substantially the same manner as previously conducted and
use all reasonable efforts to
<PAGE>
preserve intact its current business organization, keep available the services
of its current officers and employees and keep its relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them to the end that its goodwill and ongoing business shall be
unimpaired at the Closing Date. In addition, and without limiting the generality
of the foregoing, except for matters set forth in SCHEDULE 5.01 or otherwise
expressly permitted by this Agreement, from the date of this Agreement to the
Closing Date, the Company shall not do any of the following without the prior
written consent of Buyer:
(a) (i) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its shares, (ii) split, combine or
reclassify any of its shares or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for it shares or (iii)
purchase, redeem or otherwise acquire any shares of the Company or any other
securities thereof or any rights, warrants or options to acquire any such shares
or other securities;
(b) issue, deliver, sell or grant (i) any of its shares, (ii)
any Voting Company Debt or other voting securities, (iii) any securities
convertible into or exchangeable for, or any options, warrants or rights to
acquire, any such shares, Voting Company Debt or voting securities or
convertible or exchangeable securities or (iv) any stock appreciation rights or
stock-based performance units;
(c) amend the Company By-laws;
(d) acquire or agree to acquire (i) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof or (ii)
any assets that are material, individually or in the aggregate, to the Company,
except purchases of inventory in the ordinary course of business consistent with
past practice;
(e) (i) grant to any employee, independent contractor, officer
or director of the Company any increase in compensation, except to the extent
required under employment agreements in effect as of the date of the Balance
Sheet, (ii) grant to any employee, officer or director of the Company any
increase in severance or termination pay, except to the extent required under
any agreement in effect as of the date of the Balance Sheet, (iii) enter into
any employment, consulting, indemnification, severance or termination agreement
with any such employee, officer or director, (iv) establish, adopt, enter into
or amend in any material respect any collective bargaining agreement or Company
Benefit Plan or (v) take any action to accelerate any rights or benefits, or
make any material determinations not in the ordinary course of business
consistent with prior practice, under any collective bargaining agreement or
Company Benefit Plan;
(f) make any change in accounting methods, principles or
practices materially affecting the reported combined consolidated assets,
liabilities or results of operations of the Company, except insofar as may have
been required by a change in the accounting principles and policies stated by
the I.C.A.C.;
(g) sell, lease, license or otherwise dispose of or subject to
any Lien any
<PAGE>
properties or assets that are material, individually or in the aggregate, to the
Company, except sales of inventory and excess or obsolete assets in the ordinary
course of business consistent with past practice;
(h) (i) incur any Indebtedness (except for short-term
borrowings incurred in the ordinary course of business consistent with past
practice), issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company, guarantee any Indebtedness of
another Person, enter into any keepwell or other agreement to maintain any
financial statement condition of another Person or enter into any arrangement
having the economic effect of any of the foregoing, or (ii) make any loans,
advances or capital contributions to, or investments in, any other Person;
(i) make or agree to make any new capital expenditure or
expenditures that, individually, is in excess of $10,000 or, in the aggregate,
are in excess of $25,000;
(j) make any Tax election or settle or compromise any material
Tax liability or refund;
(k) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
Balance Sheet (or the notes thereto), (ii) cancel any material Indebtedness
(individually or in the aggregate) or waive any claims or rights of substantial
value or (iii) waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which the Company is a
party; or
(l) authorize any of, or commit or agree to take any of, the
foregoing actions.
Section 5.02 OTHER ACTIONS. The parties hereto shall not take any
action that would, or that could reasonably be expected to, result in (i) any of
the representations and warranties of such party set forth in this Agreement or
any Transaction Agreement to which it is a party that are qualified as to
materiality becoming untrue, or (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect.
Section 5.03 ADVICE OF CHANGES. The Seller and the Guarantors on one
side and the Buyer on the other side (each a "party") shall notify the other
party orally and in writing of (i) any representation or warranty made by them
contained in this Agreement that is qualified as to materiality becoming untrue
or inaccurate in any respect or any such representation or warranty that is not
so qualified becoming untrue or inaccurate in any material respect or (ii) any
change or event or impending occurrence of any change or event of which either
of them has knowledge and which has resulted, or which, insofar as can
reasonably be foreseen, could result, in any of the conditions to the Closing
set
<PAGE>
forth in Article VII not being satisfied. No such notification given pursuant to
this Section 5.03 shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01 ACCESS TO INFORMATION; CONFIDENTIALITY. The Seller shall
cause the Company to afford to the Buyer and to the officers, employees,
accountants, counsel, financial advisors and other representatives of the Buyer,
reasonable access during normal business hours during the period prior to the
Closing Date, to all the properties, books, contracts, commitments, personnel
and records of the Company and, during such period, shall furnish promptly to
the Buyer (i) a copy of each report, schedule and other document filed by it
during such period with any Governmental Entity and (ii) all other information
concerning its business, properties and personnel as the Buyer may reasonably
request. No investigation by the Buyer shall affect the representations and
warranties of any party hereto. Except as required by law, the Seller shall
hold, and shall cause its respective officers, employees, accountants, counsel,
financial advisors and other representatives and Affiliates to hold, any
nonpublic information in confidence until such time as such information becomes
publicly available (otherwise than through the wrongful act of any such Person)
and shall use its best efforts to ensure that such Persons do not disclose such
information to others without the prior written consent of the Buyer.
Section 6.02 BEST EFFORTS; NOTIFICATION. Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties shall use its
best efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Transactions, including (i) the obtaining of
all necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities, if any) and the taking of all
reasonable steps as may be necessary to obtain an approval or waiver from, or to
avoid an action or proceeding by, any Governmental Entity, (ii) the obtaining of
all necessary consents, approvals or waivers from third parties, (iii) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or any other Transaction Agreement or
the consummation of the Transactions, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (iv) the execution and delivery of any additional
instruments necessary to consummate the Transactions and to fully carry out the
purposes of the Transaction Agreements.
<PAGE>
Section 6.03 FEES AND EXPENSES. All fees and expenses incurred in
connection with the Transactions shall be paid by the party incurring such fees
or expenses, whether or not the Transactions are consummated.
Section 6.04 PUBLIC ANNOUNCEMENTS. The Buyer, on the one hand, and the
Company and the Seller, on the other hand, shall consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release or other public statements with respect to the Transactions and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by Applicable Law.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO CONSUMMATE THE
TRANSACTIONS. The respective obligation of each party to consummate the
Transactions is subject to the satisfaction or waiver, on or prior to the
Closing Date, of the following conditions:
(a) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation shall be in effect; PROVIDED, HOWEVER, that, subject to Section
6.02, each of the parties shall have used its best efforts to prevent the entry
of any such injunction or other order and to appeal as promptly as possible any
such injunction or other order that may be entered.
(b) TRANSACTION AGREEMENTS. All the Transaction Agreements
shall have been executed and delivered by the respective parties to such
agreements and be in full force and effect.
(c) IPO. The IPO shall have been consummated.
Section 7.02 CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of
the Buyer to consummate the Transactions are further subject to the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in Article III shall be true and
<PAGE>
correct as of the date of this Agreement and as of the Closing Date as though
made on the Closing Date. The Buyer shall have received from each of the Seller,
the Guarantors and the Company, a certificate dated as of the Closing Date and
respectively signed by the Seller and by an appropriate officer of the Company,
to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE OBLIGATIONS OF THE
SELLER, THE GUARANTORS AND THE COMPANY. Each of the Seller, the Guarantors and
the Company shall have performed all obligations required to be performed by it
under this Agreement at or prior to the Closing Date. The Buyer shall have
received from each of the Seller, the Guarantors and the Company, a certificate
dated as of the Closing Date and respectively signed by the Seller and by an
appropriate officer of the Company, to such effect.
(c) ABSENCE OF MATERIAL ADVERSE EFFECT. Except as disclosed in
SCHEDULE 3.07, since the date of this Agreement there shall not have been any
event, change, effect or development that, individually or in the aggregate, has
had or could reasonably be expected to have a Material Adverse Effect on the
Company.
(d) NO LITIGATION. There shall not be pending or threatened
any suit, action or proceeding by any Governmental Entity or any other Person,
in each case that has a reasonable likelihood of success, (i) challenging the
acquisition by the Buyer of the Company Shares, seeking to restrain or prohibit
the consummation of the Transactions or seeking to obtain from any of the
parties hereto any damages that are material in relation to the Company, (ii)
seeking to prohibit or limit the ownership or operation by the Company or the
Buyer of any material portion of the business or assets of the Company or the
Buyer, or to compel the Company or the Buyer to dispose of or hold separate any
material portion of the business or assets of the Company or the Buyer, as a
result of the Transactions, (iii) seeking to impose limitations on the ability
of the Buyer to acquire or hold, or exercise full rights of ownership of, the
Company Shares, including the right to vote the Company Shares on all matters
properly presented to the stockholders of the Company, (iv) seeking to prohibit
the Buyer from effectively controlling in any material respect the business or
operations of the Company or (v) which otherwise is reasonably likely to have a
Material Adverse Effect on the Company.
(e) CONSENTS. All consents of third parties necessary on the
part of the Buyer, the Seller, the Guarantors or the Company, to the execution
and delivery of this Agreement and the consummation of the Transactions and to
permit the continued operation of the respective businesses of the Buyer and the
Company in substantially the same manner after the Closing Date as theretofore
conducted, other than routine post-closing notifications or filings, shall have
been obtained or effected. Specifically, all clearances necessary from the
Spanish exchange control authorities shall have been obtained
<PAGE>
(f) RESIGNATIONS. The resignations of each director and
officer of the Company that have been previously requested by the Buyers shall
have been delivered to the Buyer.
(g) OPINIONS OF COUNSEL. The Buyer shall have received an
opinion dated the Closing Date of Jordi Cortada Pasola counsel to the Seller and
the Company, substantially in the form of EXHIBIT D and with respect to such
other matters as the Buyer shall reasonably request. (H) DOMAIN NAMES. The
Company and/or Salvador Porte shall or shall cause administrative control of
each of the Company's domain names that are set forth in Schedule 3.14 to be
transferred to the Buyer.
(h) DOMAIN NAMES. The Company and/or Salvador Porte shall
or shall cause administrative control of each of the Company's domain names
that are set forth in Schedule 3.14 to be transferred to the Buyer.
(i) INLANDER COMMUNICATIONS, S.L. The Company shall cause
the agreement between Inlander Communications, S.L. ("INLANDER") and the
Company, dated February 25, 1999, pursuant to which Inlander assigns to the
Company a license for 2,500 users of Eshare Technologies Inc. chat software,
be amended so as to establish a term of not less than ten (10) years.
(j) CERTIFICATES. The Seller shall provide the Buyer with
certificates from the relevant commercial registry, the tax authorities and
the social security authorities evidencing that the Seller is in corporate
good standing and is up to date in respect of its Tax and social security
obligations, respectively.
Section 7.03 CONDITIONS TO OBLIGATION OF THE SELLER AND GUARANTORS. The
obligation of the Seller and Guarantors to consummate the Transactions is
further subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Buyer set forth in this Agreement that are qualified as to
materiality shall be true and correct (determined without regard for any
qualification as to materiality or Material Adverse Effect), and the
representations and warranties of the Buyer set forth in this Agreement that are
not so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and on the Closing Date as though made on
the Closing Date. The Seller shall have received a certificate signed on behalf
of the Buyer by an appropriate officer of the Buyer to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE BUYER. The Buyer shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and the Seller shall
have received a certificate signed on behalf of the Buyer by an appropriate
officer of the Buyer to such
<PAGE>
effect.
(c) ABSENCE OF MATERIAL ADVERSE EFFECT. Except as disclosed in
SCHEDULE 7.03, since the date of this Agreement there shall not have been any
event, change, effect or development that, individually or in the aggregate, has
had or could reasonably be expected to have a Material Adverse Effect on the
Buyer.
(d) NO LITIGATION. There shall not be pending or threatened
any suit, action or proceeding by any Governmental Entity or any other Person,
in each case that has a reasonable likelihood of success, (i) challenging the
acquisition by the Seller of the Consideration Shares, seeking to restrain or
prohibit the consummation of the Transactions or seeking to obtain from any of
the parties hereto any damages that are material in relation to the Buyer, (ii)
seeking to prohibit or limit the ownership or operation by the Buyer of any
material portion of the business or assets of the Buyer, or to compel the Buyer
to dispose of or hold separate any material portion of the business or assets of
the Buyer, as a result of the Transactions, (iii) seeking to impose limitations
on the ability of the Seller to acquire or hold, or exercise full rights of
ownership of, the Consideration Shares, including the right to vote the
Consideration Shares on all matters properly presented to the stockholders of
the Buyer or (iv) which otherwise is reasonably likely to have a Material
Adverse Effect on the Buyer.
(e) CONSENTS. All consents of third parties necessary on the
part of the Buyer to the execution and delivery of this Agreement and the
consummation of the Transactions and to permit the continued operation of the
businesses of the Buyer in substantially the same manner after the Closing Date
as theretofore conducted, other than routine post-closing notifications or
filings, shall have been obtained or effected. Specifically, all clearances
necessary from the Spanish exchange control authorities shall have been obtained
(f) OPINIONS OF COUNSEL. The Buyer shall have received an
opinion dated the Closing Date of the in house counsel of the Buyer,
substantially in the form of EXHIBIT E and with respect to such other matters as
the Seller shall reasonably request.
<PAGE>
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual written consent of the Buyer and the Seller;
(b) by either the Buyer or the Seller:
(i) if the Registration Statement has not been declared
effective and Transactions are not consummated on or before July 1,
1999 (the "OUTSIDE DATE"), unless the failure to consummate the
Transactions is the result of a material breach of this Agreement by
the party seeking to terminate this Agreement; or
(ii) if any Governmental Entity issues an order, decree
or ruling or takes any other action permanently enjoining, restraining
or otherwise prohibiting the Transactions and such order, decree,
ruling or other action shall have become final and nonappealable.
(c) by the Buyer, if any condition to the obligation of the
Buyer to consummate the Transactions set forth in Section 7.02 becomes incapable
of satisfaction prior to the Outside Date and shall not have been waived by the
Buyer, or
(d) by the Seller, if any condition to the obligation of the
Seller to consummate the Transactions set forth in Section 7.03 becomes
incapable of satisfaction prior to the Outside Date and shall not have been
waived by the Seller.
Section 8.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Buyer or the Seller as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of any party hereto other than the last sentence of
Section 6.01, Section 6.04, this Section 8.02 and Article IX and except to the
extent that such termination results from the material breach by a party of any
representation, warranty or covenant set forth in this Agreement.
Section 8.03 AMENDMENT. This Agreement may be amended by the parties at
any time. This Agreement may not be amended except by an instrument in writing
signed on behalf of the Seller, the Guarantors and the Buyer.
Section 8.04 EXTENSION; WAIVER. At any time prior to the Closing Date,
the parties may (i) extend the time for the performance of any of the
obligations or other acts of the other parties, (ii) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (iii) waive compliance with any
of the agreements or conditions contained in this Agreement. Any agreement on
the part of a party to
<PAGE>
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
ARTICLE IX
INDEMNIFICATION
Section 9.01 TAX INDEMNIFICATION. (a) The Seller and the Guarantors
shall be jointly and severally liable for and shall jointly and severally
indemnify the Buyer and its Affiliates (including the Company) and each of their
respective officers, directors, employees, stockholders, agents and
representatives (the "BUYER INDEMNITEES") and hold them harmless from and
against (i) all liability for Taxes of the Company for the Pre-Closing Tax
Period, (ii) any liability for Taxes attributable to a breach by the Company or
the Seller of their respective obligations under this Agreement and (iii) all
liability for reasonable legal fees and expenses for any item attributable to
any item in clause (i) or (ii) above. Notwithstanding the foregoing, the Seller
and the Guarantors shall not indemnify and hold harmless the Buyer Indemnitees
from any liability for Taxes attributable to any action taken after the Closing
by the Buyer or any of its Affiliates (including the Company) (a "BUYER TAX
ACT").
(b) The Buyer shall indemnify the Seller and hold it harmless
from (i) all liability for Taxes of the Company for any period beginning after
the Closing Date, (ii) all liability for Taxes attributable to a Buyer Tax Act
and (iii) all liability for reasonable legal fees and expenses for any item
attributable to any item in clause or above.
(c) In the case of any taxable period that includes (but does
not end on) the Closing Date (a "STRADDLE PERIOD"):
(i) real, personal and intangible property Taxes and any
other Taxes not measured in whole or in part by reference to income or
revenues of the Company ("PROPERTY TAXES") allocable to the Pre-Closing
Tax Period shall be equal to the amount of such Property Taxes for the
entire Straddle Period multiplied by a fraction, the numerator of which
is the number of days during the Straddle Period that are in the
Pre-Closing Tax Period and the denominator of which is the number of
days in the Straddle Period; and
(ii) the Taxes of the Company other than Property Taxes
allocable to the Pre-Closing Tax Period shall be computed as if such
taxable period ended as of the close of business on the Closing Date.
(iii) the Seller and the Guarantors' indemnity obligation
in respect of Taxes for a Straddle Period shall initially be fulfilled
by the payment by the Seller or any of the Guarantors to the Buyer of
the excess of (A) such Taxes for the Pre-Closing Tax Period
<PAGE>
over (B) the amount of such Taxes for the Pre-Closing Tax Period paid
by the Seller, the Guarantors or any of their Affiliates (other than
the Company) at any time plus the amount of such Taxes for the
Pre-Closing Tax Period paid by the Company on or prior to the Closing
Date. The Seller or any of the Guarantors shall initially pay such
excess amounts to the Buyer within thirty (30) days after the Return
with respect to the liability for such Taxes is required to be filed
(or, if later, is actually filed). If the amount of such Taxes paid by
the Seller, the Guarantors or any of their Affiliates (other than the
Company) at any time exceeds the amount payable by the Seller pursuant
to the preceding sentence, the Buyer shall pay to the Seller or the
Guarantors the amount of such excess within thirty (30) days after the
Return with respect to the liability for such Taxes is required to be
filed.
Section 9.02 OTHER INDEMNIFICATION BY THE SELLER. Except as relates to
Taxes, for which the sole indemnification is provided in Section 9.01, the
Seller and the Guarantors shall jointly and severally indemnify the Buyer
Indemnitees against and hold them harmless from any loss, liability, claim,
damage or expense (including reasonable legal fees and expenses) suffered or
incurred by any such indemnified party, caused by, resulting from, arising out
of or relating to:
(i) any breach of any representation or warranty of the
Seller, the Guarantors and/or the Company contained in this Agreement, the
Transaction Agreements or in any certificate delivered pursuant hereto;
(ii) any breach of any covenant of the Seller and/or the
Company contained in this Agreement or the Transaction Agreements; or
(iii) any fine or penalty against the Company resulting from
the Company's failure to comply with any Applicable Law or its failure to obtain
any authorizations necessary in connection with the operations of the Company.
Section 9.03 OTHER INDEMNIFICATION BY THE BUYER. Except as relates to
Taxes, for which the sole indemnification is provided in Section 9.01, the Buyer
shall indemnify the Seller against and hold him harmless from any loss,
liability, claim, damage or expense (including reasonable legal fees and
expenses) suffered or incurred by any such indemnified party to the extent
arising from (i) any breach of any representation or warranty of the Buyer
contained in this Agreement or in any certificate delivered pursuant hereto, or
(ii) any breach of any covenant of the Buyer contained in this Agreement.
Section 9.04 TERMINATION OF INDEMNIFICATION. The obligations to
indemnify and hold harmless a party hereto (i) pursuant to Section 9.01, shall
terminate thirty (30) days after the time the applicable statutes of limitations
with respect to the Tax liabilities in question expire (giving effect to any
extension thereof), (ii) pursuant to Sections 9.02 and 9.03, shall terminate
when the applicable representation or
<PAGE>
warranty terminates pursuant to Section 11.01 and (iii) pursuant to the other
clauses of Sections 9.02 and 9.03 shall not terminate; PROVIDED, HOWEVER, that
as to clauses (i) and (ii) above such obligations to indemnify and hold harmless
shall not terminate with respect to any item as to which the Person to be
indemnified or the related party thereto shall have, before the expiration of
the applicable period, previously made a claim by delivering a notice of such
claim (stating in reasonable detail the basis of such claim) to the indemnifying
party.
Section 9.05 PROCEDURES RELATING TO INDEMNIFICATION FOR THIRD PARTY
CLAIMS (OTHER THAN TAX CLAIMS). (a) In order for a party (the "INDEMNIFIED
PARTY") to be entitled to any indemnification provided for under this Agreement
(other than indemnification for a Tax Claim under Section 9.01 which shall be
governed by Section 9.07) in respect of, arising out of or involving a claim or
demand made by any Person against the indemnified party (a "THIRD PARTY CLAIM"),
such indemnified party must notify the indemnifying party in writing, and in
reasonable detail, of the Third Party Claim within ten (10) business days after
receipt by such indemnified party of written notice of the Third Party Claim;
PROVIDED, however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the indemnifying party
shall have been actually prejudiced as a result of such failure. Thereafter, the
indemnified party shall deliver to the indemnifying party, promptly after the
indemnified party's receipt thereof, copies of all notices and documents
(including court papers) received by the indemnified party relating to the Third
Party Claim.
(b) If a Third Party Claim is made against an indemnified
party, the indemnifying party shall be entitled to participate in the defense
thereof and, if it so chooses and acknowledges its obligation to indemnify the
indemnified party therefor, to assume the defense thereof with counsel selected
by the indemnifying party; PROVIDED THAT such counsel is not reasonably objected
to by the indemnified party. Should the indemnifying party so elect to assume
the defense of a Third Party Claim, the indemnifying party shall not be liable
to the indemnified party for legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof. If the indemnifying
party assumes such defense, the indemnified party shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the indemnifying party, it being
understood that the indemnifying party shall control such defense. The
indemnifying party shall be liable for the fees and expenses of counsel employed
by the indemnified party for any period during which the indemnifying party has
failed to assume the defense thereof.
(c) If the indemnifying party so elects to assume the defense
of any Third Party Claim, all of the indemnified parties shall cooperate with
the indemnifying party in the defense or prosecution thereof. Such cooperation
shall include the retention and (upon the indemnifying party's request) the
provision to the indemnifying party of records and information which are
reasonably relevant to such Third Party Claim, and making employees available on
a mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Whether or not the indemnifying party shall
have assumed the defense of a Third Party Claim, the indemnified party shall not
admit any liability with respect to, or settle,
<PAGE>
compromise or discharge, such Third Party Claim without the indemnifying party's
prior written consent (which consent shall not be unreasonably withheld).
Section 9.06 PROCEDURES RELATED TO INDEMNIFICATION FOR OTHER CLAIMS
(OTHER THAN TAX CLAIMS UNDER SECTION 9.01). In the event any indemnified party
should have a claim against any indemnifying party under Section 9.02 or 9.03
that does not involve a Third Party Claim being asserted against or sought to be
collected from such indemnified party, the indemnified party shall deliver
notice of such claim with reasonable promptness to the indemnifying party. The
failure by any indemnified party so to notify the indemnifying party shall not
relieve the indemnifying party from any liability which it may have to such
indemnified party under Section 9.02 or 9.03, except to the extent that the
indemnifying party demonstrates that it has been materially prejudiced by such
failure.
Section 9.07 PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS. (a)
If a claim shall be made to an indemnified party by any taxing authority, which,
if successful, might result in an indemnity payment pursuant to Section 9.01 (a
"TAX CLAIM") by any indemnifying party, the indemnified party shall promptly
notify the indemnifying party in writing of such Tax Claim. Failure to give
notice of a Tax Claim shall not affect the rights of the indemnified party, any
of its Affiliates or any of its respective officers, directors, employees,
stockholders, agents or representatives, to indemnification unless the
indemnifying party's position is materially prejudiced as a result thereof.
(b) With respect to any Tax Claim relating to a Pre-Closing
Tax Period (other than a Tax Claim relating solely to Taxes of the Company for a
Straddle Period), the Seller shall control all audits or proceedings taken in
connection with such Tax Claim; PROVIDED, HOWEVER, that the Buyer shall have the
right to participate in any such audit or proceeding to the extent that any such
audit or proceeding may affect the Tax liability of the Buyer, any of its
Affiliates or the Company for any period ending after the Closing Date and to
employ counsel of its choice at its own expense for purposes of such
participation. Notwithstanding anything to the contrary contained or implied in
this Agreement, without the prior written approval of the Buyer, neither the
Seller nor any Affiliate of the Seller shall agree or consent to compromise or
settle, either administratively or after the commencement of litigation, any
issue or claim arising in any such audit or proceeding, or otherwise agree or
consent to any Tax liability, to the extent that any such compromise,
settlement, consent or agreement may affect the Tax liability of the Buyer, any
of its Affiliates, or the Company for any period ending after the Closing Date.
If during and because of the audits or proceedings taken in connection with such
Tax Claim it proves necessary to file a bank guarantee, Seller shall bear the
costs relating to this bank guarantee.
Section 9.08 LIMITATION OF LIABILITY. None of the parties shall assert
any claim for indemnification under Sections 9.02 or 9.03 unless the aggregate
amount of all claims of such party against the other party under this Agreement,
on a cumulative basis, exceeds twenty thousand US Dollars (US$ 20,000);
provided,
<PAGE>
however, that once claims exceeds such twenty thousand US Dollars (US$ 20,000)
threshold, the indemnifying party shall be liable for all valid claims
,including the initial claims aggregating twenty thousand US Dollars (US$
20,000).
ARTICLE X
TAX MATTERS
Section 10.01 RESPONSIBILITY FOR PREPARATION AND FILING OF RETURNS AND
AMENDMENTS.
(a) For any Straddle Period, the Buyer shall timely prepare
and file or cause to be timely prepared and filed with the appropriate
authorities all Returns required to be filed by the Company and shall pay, or
cause to be paid, all Taxes shown to be due on such Returns; PROVIDED, THAT, the
Seller and the Guarantors shall reimburse the Buyer (in accordance with the
procedures set forth in Section 9.01) for any amount owed by the Seller pursuant
to Section 9.01 with respect to the taxable periods covered by such Returns.
(b) For any taxable period of the Company that ends on or
before the Closing Date, the Seller shall timely prepare and file, or cause to
be timely prepared and filed, with the appropriate authorities all Returns
required to be filed by the Company, and shall pay or cause to be paid, all
Taxes shown to be due on such Returns. To the extent that they relate to the
Company, all such Returns shall be prepared on a basis consistent with the past
practice of the Company and in a manner that does not distort taxable income
(E.G., by deferring income or accelerating deductions). The Buyer, the Seller
and the Guarantors agree to cause the Company to file all Returns for the period
including the Closing Date on the basis that the relevant taxable period ended
as of the close of business on the Closing Date, unless the relevant taxing
authority will not accept a Return filed on that basis.
Section 10.02 COOPERATION. After the Closing Date, the Buyer and the
Seller shall provide each other, and the Buyer shall cause the Company to
provide the Seller, with such cooperation and information relating to the
Company as either party reasonably may request in (i) filing any Return, amended
return or claim for refund, (ii) determining any Tax liability or a right to
refund of Taxes, (iii) conducting or defending any audit or other proceeding in
respect of Taxes or (iv) effectuating the terms of this Agreement. The parties
shall retain, and the Buyer shall cause the Company to retain, all Returns,
schedules and work papers, and all material records and other documents relating
thereto, until the expiration of the statute of limitation (and, to the extent
notified by any party, any extensions thereof) of the taxable years to which
such returns and other documents relate and, unless such Returns and other
documents are offered and delivered to the Seller or the Buyer, as applicable,
until the final determination of any Tax in respect of such years. Any
information obtained under this Section 10.02 shall be kept confidential, except
as may be otherwise necessary in connection with filing any Return, amended
return, or claim for refund, determining any Tax liability or right to refund of
Taxes, or in conducting or defending any audit or other proceeding in respect of
Taxes. Notwithstanding the foregoing, neither the Seller nor
<PAGE>
the Buyer, nor any of their Affiliates, shall be required unreasonably to
prepare any document, or determine any information not then in its possession,
in response to a request under this Section 10.02.
Section 10.03 TRANSFER TAXES. All transfer, documentary, sales, use,
value added, registration and other such Taxes (including all applicable real
estate transfer or gains Taxes) and related fees (including any penalties,
interest and additions to Tax) incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the [Buyer], and the
Seller and the Buyer shall cooperate in timely making all filings, returns,
reports and forms as may be required to comply with the provisions of such Tax
laws.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in this Agreement or in any other document
delivered in connection herewith shall survive the Closing solely for purposes
of Section 9.01 and 9.02 of this Agreement and shall terminate at the close of
business on the date that is three (3) years after the Closing Date except for
(i) Section 3.08 and Section 3.19 which shall survive the Closing until thirty
(30) days after the expirations of the applicable statute of limitations (giving
effect to any extension thereof) (ii) representations and warranties in Section
3.30 which shall survive until January 1, 2001; and (iv) the representations and
warranties set forth in Section 3.01, 3.03, 3.04, 3.27 and 4.01 though and
including 4.04, which shall not terminate. This Section 11.01 shall not limit
any covenant or agreement of the parties which by its terms contemplates
performance after the Closing Date.
Section 11.02 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing, shall be delivered by
hand or sent by telefax or sent postage prepaid, by registered, certified or
express mail or a reputable overnight courier service and shall be deemed given
when so delivered by hand or telefax or if by mail, three (3) days after mailing
(one (1) business day in the case of express mail or overnight courier service)
by the parties at the following addresses or telefax (or at such other address
or telefax for a party as shall be specified by like notice):
(a) if to the Buyer, to
StarMedia Network, Inc.
29 West 36th Street
New York, NY 10018
Telefax: (212) 631-9100
<PAGE>
Attention: Justin K. Macedonia, Esq.
with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004
Telefax: (212) 858-1500
Attention: Stephen R. Rusmisel, Esq.
(b) if to the Seller, to
GERADONS, S.L.
Avda. Diagonal 558, 5-2
08021 - Barcelona
Telefax: 93 200.41.57
Attention: Nuria Garrido or Jordi Cortada
with a copy to:
Cortada Advocats
Avda. Diagonal 558, 5-2
Telefax: 93 200.41.57
Attention: Nuria Garrido or Jordi Cortada
(c) if to the Company, to
WASS NET, S.L.
Carrer Om 7
08480 - L'Ametlla del Valles (Barcelona)
Telefax: 93 200.41.57
Attention: Nuria Garrido or Jordi Cortada
(d) if to Salvador Porte, to
Carrer Om 7
08480 - L'Ametlla del Valles (Barcelona)
Telefax: 93 843.59.66
Attention: Salvador Porte
with a copy to:
Cortada Advocats
Avda. Diagonal 558, 5-2
Telefax: 93 200.41.57
<PAGE>
Attention: Nuria Garrido or Jordi Cortada
(e) if to Eduardo Kawas, to
Cortada Advocats
Avda. Diagonal 558, 5-2
Telefax: 93 200.41.57
Attention: Nuria Garrido or Jordi Cortada
Section 11.03 DEFINITIONS. (a) With respect to the defined terms used
in this Agreement, the singular shall include the plural and the masculine
gender shall include the feminine and the neuter, and vice versa, as the context
requires.
For purposes of this Agreement:
"AFFILIATE" of any Person means (i) another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person (ii) that Person's spouse,
estate, personal representative as lineal descendants or any trust for the
benefit of such Person or such Person's spouse or such Person's lineal
descendants or any entities controlled by such Person.
"BUYERS'GROUP" means all the companies related to Buyer, with the
meaning of Article 4 of the Spanish Law on Stock and Bonds Market ("Ley del
Mercado de Valores").
"INDEBTEDNESS" means, with respect to any Person, without duplication,
(i) all obligations of such Person for borrowed money, or with respect to
deposits or advances of any kind, (ii) all obligations of such Person evidenced
by bonds, debentures, notes or similar instruments, (iii) all obligations of
such Person upon which interest charges are customarily paid (other than trade
payables incurred in the ordinary course of business), (iv) all obligations of
such Person under conditional sale or other title retention agreements relating
to property purchased by such Person, (v) all obligations of such Person issued
or assumed as the deferred purchase price of property or services (excluding
obligations of such Person to creditors for raw materials, inventory, services
and supplies incurred in the ordinary course of such Person's business), (vi)
all lease obligations of such Person, capitalized on the books and records of
such Person, (vii) all obligations of others secured by a Lien on property or
assets owned or acquired by such Person, whether or not the obligations secured
thereby have been assumed, (viii) all obligations of such Person under interest
rate or currency hedging transactions (valued at the termination value thereof)
(other than forward or spot foreign currency exchange contracts entered into in
the ordinary course of business consistent with past practice), (ix) all letters
of credit issued for the account of such Person (excluding letters of credit
issued for the benefit of suppliers to support accounts payable to suppliers
incurred in the ordinary course of business) and (x) all guarantees and
arrangements
<PAGE>
having the economic effect of a guarantee of such Person of any Indebtedness of
any other Person.
"MATERIAL ADVERSE EFFECT" means (i) for any party, a material adverse
effect on the business, assets, condition (financial or otherwise), prospects,
or results of operations of such party and its subsidiaries, taken as a whole,
and (ii) in the case of the Company, also means a material adverse effect on the
ability of the Company to perform its obligations under the Transaction
Agreements to which it is a party or on the ability of the Company to consummate
the Transactions.
"PERSON" means any individual, firm, corporation, partnership, company,
limited liability company, trust, joint venture, association, Governmental
Entity or other entity.
"SUBSIDIARY" of any Person means another Person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, fifty (50%)
percent or more of the equity interests of which) is owned directly or
indirectly by such first Person.
(b) The following terms have the meanings set forth in the
Sections set forth below:
Term Section
---- -------
Affiliate 11.03(a)
Agreement Preamble
Applicable Law 1.03
Balance Sheet 3.06(a)
Benefit Plans 1.02(c)(iv)
Business Preamble
Buyer Preamble
Buyer Indemnitees 9.01(a)
Buyer Stock 1.02
Buyer's Group 11.03(a)
Buyer Tax Act 9.01(a)
Closing 1.01
Closing Date 2.01
Commission 1.02
Company Preamble
Company Benefit Plans 3.09(a)
Company By-laws 3.01
Company Shares Preamble
Consent 3.05(a)
Consideration Shares 1.02
Contracts 3.15
Distributor Agreements 3.25
Employment Agreement 1.04(a)
<PAGE>
Environmental Laws 3.12(a)
Financial Statements 3.06(a)
Governmental Entity 3.05(a)
Hazardous Materials 3.12(a)
ICAC 3.07(e)
Indebtedness 11.03(a)
Indemnified Party 9.05(a)
Intellectual Property 3.14(a)
IPO 1.02
Judgment 3.05(a)
Knowledge of the Company 3.33
Liens 3.03(c)
Material Adverse Effect 11.03(a)
Non-Competition Agreement 1.04(a)
Outside Date 8.01(b)(i)
Permits 3.19
Person 11.03(a)
Personnel 3.14(c)
Pre-Closing Tax Period 3.08(a)(ii)
Property Taxes 9.01(c)(I)
Purchase Price 1.02
Real Property 3.13(a)
Registration Rights Agreement 1.04(a)
Registration Statement 1.02
Release 3.12(a)
Returns 3.08(a)(iii)
Subsidiary 11.03(a)
Securities Act 1.02
Seller Preamble
Straddle Period 9.01(c)
Subsidiary 10.03(a)
Taxes 3.08(a)(i)
Tax Claim 9.07
Third Party Claim 9.05(a)
Transactions 1.01
Transaction Agreements 1.04
USTs 3.12(a)(vii)
Voting Company Debt 3.03(b)
Year 2000 Compliant 3.30
Section 11.04 INTERPRETATION. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. When a reference is made in this Agreement to a
Schedule, such reference shall be to a Schedule hereto. The table of contents
and
<PAGE>
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Unless
the context requires otherwise, the singular shall include the plural and vice
versa. Whenever the words "INCLUDE", "INCLUDES" or "INCLUDING" are used in this
Agreement, they shall be deemed to be followed by the words "WITHOUT
LIMITATION". Any matter disclosed in any Schedule shall be deemed disclosed only
for the purposes of the specific Sections of this Agreement to which such
section relates.
Section 11.05 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
Section 11.06 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
Section 11.07 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement and the other Transaction Agreements, taken together, (i) constitute
the entire agreement, and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the Transactions and
(ii) except for the provisions of this Agreement and the other Transaction
Agreements are not intended to confer upon any Person other than the parties any
rights or remedies.
Section 11.08 GOVERNING LAW AND JURISDICTION. (a) This Agreement shall
be governed by, and construed in accordance with the laws of the Kingdom of
Spain.
(b)Any controversy, claim or dispute arising among the parties as a
result of this Agreement, shall be submitted to the Courts of Barcelona (Spain).
Section 11.09 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Any purported assignment without such
consent shall be void. Subject to the preceding sentences, this Agreement will
be binding
<PAGE>
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns. Nevertheless, the Buyer may assign all or
part of the rights or obligations assumed by it under this Agreement to any
other member or members of the Buyer's Group, merely by serving notice of the
assignment to the Seller.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, all as of the date first written above.
STARMEDIA NETWORK, INC.
By
Name: Sergio Sanchez
Title: Attorney-in-fact
WASS NET S.L.
By
Name: Salvador Porte Llinas
Title: Administrator
GERADONS, S.L.
By
Name: Salvador Porte Llinas
Title: Administrator
SALVADOR PORTE
EDUARDO KAWAS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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ARTICLE I
SALE AND PURCHASE OF SHARES
<S> <C>
Section 1.01 Sale and Purchase of Shares....................................................................1
Section 1.02 Payment of Consideration.......................................................................1
Section 1.03 Delivery of Company Shares.....................................................................2
Section 1.04 Transaction Agreements.........................................................................2
Section 1.05 Transfer of Certain Assets and Rights..........................................................2
Section 1.06 Further Assurances.............................................................................3
Section 1.07 Post Closing Adjustment to Consideration.......................................................3
ARTICLE II
CLOSING
Section 2.01 Closing Date...................................................................................4
ARTICLE III
Representations and Warranties of THE Seller AND the Company
Section 3.01 Organization, Standing and Power...............................................................4
Section 3.02 Company Subsidiaries; Equity Interests.........................................................4
Section 3.03 Capital Structure..............................................................................5
Section 3.04 Authority; Execution and Delivery; Enforceability..............................................6
Section 3.05 No Conflicts; Consents.........................................................................6
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 3.06 Financial Statements; Undisclosed Liabilities. (a).............................................7
Section 3.07 Absence of Certain Changes or Events...........................................................7
Section 3.08 Taxes..........................................................................................8
Section 3.09 Company Benefit Plans.........................................................................10
Section 3.10 Litigation....................................................................................10
Section 3.11 Compliance with Applicable Laws...............................................................10
Section 3.12 Environmental Matters.........................................................................11
Section 3.13 Real Property.................................................................................12
Section 3.14 Intellectual Property.........................................................................13
Section 3.15 Contracts.....................................................................................14
Section 3.16 Insurance.....................................................................................16
Section 3.17 Employee and Labor Matters....................................................................16
Section 3.18 Customer Accounts Receivable; Inventories.....................................................17
Section 3.19 Licenses; Permits.............................................................................17
Section 3.20 Accounts; Safe Deposit Boxes; Powers of Attorney; Officers and Directors......................18
Section 3.21 Transactions with Affiliates..................................................................18
Section 3.22 Corporate Name................................................................................18
Section 3.23 Suppliers.....................................................................................18
Section 3.24 Customers.....................................................................................19
Section 3.25 Distributors..................................................................................19
Section 3.26 Personal Property.............................................................................19
Section 3.27 Brokers; Schedule of Fees and Expenses........................................................20
Section 3.28 Entire Business...............................................................................20
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 3.29 Securities Act................................................................................20
Section 3.30 Year 2000 Compliance..........................................................................20
Section 3.31 Web Site Information..........................................................................21
Section 3.32 Personal Data.................................................................................21
Section 3.33 Powers of Attorney............................................................................21
Section 3.34 Disclosure....................................................................................21
Section 3.35 Knowledge.....................................................................................22
ARTICLE IV
Representations and Warranties of THE BUYER
Section 4.01 Organization, Standing and Power..............................................................22
Section 4.02 Authority; Execution and Delivery; Enforceability.............................................22
Section 4.03 Consents......................................................................................22
Section 4.04 Consideration Shares..........................................................................22
Section 4.05 Securities Act................................................................................23
ARTICLE V
Covenants Relating to Conduct of Business
Section 5.01 Conduct of Business by the Company............................................................23
Section 5.02 Other Actions.................................................................................25
Section 5.03 Advice of Changes.............................................................................25
ARTICLE VI
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Additional Agreements
Section 6.01 Access to Information; Confidentiality........................................................25
Section 6.02 Best Efforts; Notification....................................................................25
Section 6.03 Fees and Expenses.............................................................................26
Section 6.04 Public Announcements..........................................................................26
ARTICLE VII
Conditions Precedent
Section 7.01 Conditions to Each Party's Obligation to Consummate the Transactions..........................26
Section 7.02 Conditions to Obligations of the Buyer........................................................26
Section 7.03 Conditions to Obligation of the Seller........................................................28
ARTICLE VIII
Termination, Amendment and Waiver
Section 8.01 Termination...................................................................................29
Section 8.02 Effect of Termination.........................................................................30
Section 8.03 Amendment.....................................................................................30
Section 8.04 Extension; Waiver.............................................................................30
ARTICLE IX
Indemnification
Section 9.01 Tax Indemnification...........................................................................30
Section 9.02 Other Indemnification by the Seller...........................................................31
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 9.03 Other Indemnification by the Buyer............................................................32
Section 9.04 Termination of Indemnification................................................................32
Section 9.05 Procedures Relating to Indemnification for Third Party Claims (other than Tax Claims).........32
Section 9.06 Procedures Related to Indemnification for Other Claims (Other than Tax Claims under
Section 9.01)...............................................................................33
Section 9.07 Procedures Relating to Indemnification of Tax Claims..........................................33
[Section 9.08 Limitation of Liability.......................................................................34
ARTICLE X
Tax Matters
Section 10.01 Responsibility for Preparation and Filing of Returns and Amendments...........................34
Section 10.02 Cooperation...................................................................................34
Section 10.03 Transfer Taxes................................................................................35
ARTICLE XI
General Provisions
Section 11.01 Survival of Representations and Warranties....................................................35
Section 11.02 Notices.......................................................................................35
Section 11.03 Definitions...................................................................................37
Section 11.04 Interpretation................................................................................39
Section 11.05 Severability..................................................................................39
Section 11.06 Counterparts..................................................................................40
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 11.07 Entire Agreement; No Third-Party Beneficiaries................................................40
Section 11.08 Governing Law and Jurisdiction................................................................40
Section 11.09 Assignment....................................................................................40
</TABLE>
<PAGE>
Exhibit 10.20
EXECUTION COPY
STOCK PURCHASE AGREEMENT
between
STARMEDIA NETWORK, INC.
and
NATIONAL BROADCASTING COMPANY, INC.
Dated as of May 4, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
THE PURCHASED SHARES
Section 1.1 Issuance, Sale and Delivery of the Purchased Shares 1
Section 1.2 Closing 1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 2.1 Organization; Corporate Power 1
Section 2.2 Authorization of Agreement 2
Section 2.3 Validity 2
Section 2.4 Authorized Capital Stock 2
Section 2.5 Financial Statements 2
Section 2.6 Litigation; Compliance with Law 3
Section 2.7 Intellectual Property 3
Section 2.8 Taxes 3
Section 2.9 Governmental Approvals 3
Section 2.10 Brokers 4
Section 2.11 Foreign Corrupt Practices Act 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
<PAGE>
Section 3.1 Organization Corporate Power 4
Section 3.2 Authorization of Agreements 4
Section 3.3 Validity 5
Section 3.4 Accredited Investor 5
Section 3.5 Sufficient Knowledge 5
Section 3.6 Investment 5
Section 3.7 No Registration 5
Section 3.8 Brokers 5
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
AND THE COMPANY
Section 4.1 Conditions to the Obligations of the Purchaser on the
Closing Date 5
(a) Representations and Warranties to be True and Correct 6
(b) Performance 6
(c) Supporting Documents 6
(d) Registration Rights Agreement 6
Section 4.2 Condition to the Obligations of the Company on the
Closing Date 7
(a) Representations and Warranties to be True and Correct 7
(b) Performance 7
(c) Lockup Agreement 7
ARTICLE V
MISCELLANEOUS
Section 5.1 Registration Rights Agreement 7
<PAGE>
Section 5.2 Lockup Agreement 7
Section 5.3 Expenses 7
Section 5.4 Brokerage 7
Section 5.5 Notices 7
Section 5.6 Governing Law 8
Section 5.7 Entire Agreement 8
Section 5.8 Counterparts 8
Section 5.9 Amendments 8
Section 5.10 Severability 8
Section 5.11 Titles and Subtitles 8
Section 5.12 Certain Defined Terms 8
<PAGE>
STOCK PURCHASE AGREEMENT dated as of May 4, 1999, between StarMedia
Network, Inc., a Delaware corporation (the "Company"), and National
Broadcasting Company, Inc. (the "Purchaser").
WHEREAS, the Company wishes to issue and sell to the Purchaser an
aggregate of 454,545 shares (the "Purchased Shares") of the authorized but
unissued common stock, $0.001 par value, of the Company (the "Common Stock");
and
WHEREAS, the Purchaser wishes to purchase the Purchased Shares on the
terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties agree as follows:
THE PURCHASED SHARES
ISSUANCE, SALE AND DELIVERY OF THE PURCHASED SHARES.
The Company agrees to issue and sell to the Purchaser, and the Purchaser
hereby agrees to purchase from the Company, the Purchased Shares in exchange
for an amount equal to $5,000,000 (the "Purchase Price").
CLOSING.
The closing (the "Closing") shall take place at the offices of Winthrop,
Stimson, Putnam and Roberts, One Battery Park Plaza, New York, New York 10004
on May 5, 1999, at 10:00 a.m., New York time, or at such other date and time
as may be agreed upon between the Purchaser and the Company (the "Closing
Date").
At the Closing, the Company shall issue and deliver to the Purchaser a
stock certificate or certificates in definitive form, registered in the name
of the Purchaser representing the Purchased Shares. As payment in full for
the Purchased Shares, and against delivery of the stock certificate or
certificates therefor as aforesaid, on the Closing Date the Purchaser shall
deliver to the Company the Purchase Price, payable by (i) delivery to the
Company of a certified check payable to the order of the Company, or (ii)
wire transfer of immediately available funds to the account of the Company.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<PAGE>
The Company represents and warrants to the Purchaser that, except as set
forth in the Disclosure Schedule attached as SCHEDULE I:
ORGANIZATION; CORPORATE POWER.
The Company and each of its subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the corporate power and
authority to execute and deliver this Agreement, and perform its obligations
hereunder.
AUTHORIZATION OF AGREEMENT.
The execution and delivery by the Company of this Agreement and the
performance by the Company of its obligations hereunder have been duly
authorized by all requisite corporate action and will not violate any
provision of law, any order of any court or other agency of government, any
agreement, instrument, judgement, decree, statute, regulation, rule (except
to the extent that any violation of the foregoing would not have a Material
Adverse Effect (as defined in Section 2.6)), the Certificate of Incorporation
of the Company, as amended (the "Charter"), or the By-laws of the Company, as
amended.
The Purchased Shares have been duly authorized and, when issued and
delivered in accordance with this Agreement, will be validly issued, fully
paid and nonassessable shares of Common Stock and will be free and clear of
all liens, charges, restrictions, claims and encumbrances imposed by or
through the Company.
VALIDITY.
This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii) as
limited by general equitable principles.
AUTHORIZED CAPITAL STOCK.
The authorized capital stock of the Company consists of (i) 60,000,000
shares of Preferred Stock, $0.001 par value (the "Preferred Stock"), of which
7,330,000 shares have been designated Series A Convertible Preferred Stock,
8,000,000 shares have been designated Series B Convertible Preferred Stock
and 16,666,667 shares have been designated Series C Convertible Preferred
Stock, and (ii) 100,000,000 shares of Common Stock, $0.001 par value. Prior
to the Closing and to any other sale of Common Stock occurring on the Closing
Date, (A) 13,245,181 shares of Common Stock will be validly issued and
outstanding, fully paid and nonassessable,
<PAGE>
(B) 7,330,000 shares of Series A Convertible Preferred Stock, 8,000,000 shares
of Series B Convertible Preferred Stock and 16,666,667 shares of Series C
Convertible Preferred Stock will be validly issued and outstanding, fully paid
and non-assessable, all of which were issued in compliance with all applicable
Federal and state securities laws. An aggregate of 31,996,667 shares of Common
Stock has been reserved for issuance upon conversion of the Series C Convertible
Preferred Stock, the Series B convertible Preferred Stock and the Series A
Convertible Preferred Stock. Options to purchase 8,579,100 shares of Common
Stock have been granted and are currently outstanding. The designations, powers,
preferences, rights, qualifications, limitation and restrictions in respect of
each class and series of authorized capital stock of the Company are as set
forth in the Charter. Subject to the accuracy of the representations and
warranties of the Purchaser set forth in Article III, all of the Purchased
Shares are being issued in compliance with all applicable Federal and state
securities laws.
FINANCIAL STATEMENTS.
The Company has furnished to the Purchaser (i) the audited balance sheet of
the Company as of December 31, 1998 (the "Balance Sheet"), and the related
audited statements of income and stockholders' equity for the year then ended,
and (ii) the unaudited balance sheet of the Company as of March 30, 1999 and the
related unaudited statements of income and stockholders' equity for the three
months then ended (the "Unaudited Balance Sheet"). All such financial statements
have been prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the financial position and results of
operation of the Company and its subsidiaries, on a consolidated basis, for and
as of the dates set forth therein. Since the date of the Unaudited Balance
Sheet, there has been no material adverse change in the assets, liabilities or
financial condition of the Company and its subsidiaries, on a consolidated
basis, from that reflected in the Unaudited Balance Sheet, except for changes in
the ordinary course of business.
LITIGATION; COMPLIANCE WITH LAW.
There is no action, suit, claim or proceeding pending or, to the Company's
knowledge, threatened against the Company or any of its subsidiaries, at law or
in equity, or before or by any foreign or domestic Federal, state, municipal or
other governmental department, commission, board, bureau agency or
instrumentality, except to the extent that any of the foregoing, if determined
adversely to the Company or its subsidiaries, would not have a material and
adverse effect on the business, financial condition, operations or property of
the Company ("Material Adverse Effect"). The Company and each of its
subsidiaries (i) has complied with all foreign and domestic laws, rules,
regulations and orders applicable to its business, operations, properties,
assets, products and services, (ii) has all necessary permits, licenses and
other authorizations required to conduct its business as conducted, and (iii)
has been operating its business pursuant to and in compliance with the terms of
all such permits, licenses and other authorizations, except to the extent that
the failure to do any of the foregoing would not have a Material Adverse Effect.
INTELLECTUAL PROPERTY.
Except as set forth in the Disclosure Schedule, no claim is pending or, to
the best of the
<PAGE>
Company's knowledge, threatened to the effect that any domestic or foreign
patents, patent rights, patent applications, trademarks, trademark applications,
service marks, service mark applications, trade names or copyrights owned or
licensed by the Company or any of its subsidiaries or which the Company or any
of its subsidiaries otherwise has the right to use, is invalid or unenforceable
by the Company or any such subsidiary, except to the extent that any of the
foregoing, if determined adversely to the Company, would not have a Material
Adverse Effect.
TAXES.
The Company and each of its subsidiaries has filed all tax returns,
Federal, state, foreign, county and local, required to be filed by it, and the
Company and each of its subsidiaries has paid all taxes shown to be due by such
returns as well as all other taxes, assessments and governmental charges which
have become due or payable, other than those being contested in good faith. The
Company and each of its subsidiaries has established adequate reserves for all
taxes accrued but not yet payable.
GOVERNMENTAL APPROVALS.
Subject to the accuracy of the representations and warranties of the
Purchaser set forth in Article III, no registration or filing with, or consent
or approval of or other action by, any foreign or domestic Federal, state or
other governmental agency or instrumentality is or will be necessary for the
valid execution, delivery and performance by the Company of its obligations
hereunder, other than filings pursuant to Federal and state securities laws in
connection with the sale of the Purchased Shares which will be made in
accordance with applicable Federal and state securities laws.
BROKERS.
Except as set forth on the Disclosure Schedule, the Company has no
contract, arrangement or understanding with any broker, finder or similar agent
with respect to the transactions contemplated by this Agreement.
FOREIGN CORRUPT PRACTICES ACT.
Neither the Company nor any of its subsidiaries has taken any action which
would cause it to be in violation of the Foreign Corrupt Practices Act of 1977,
as amended, or any rules and regulations thereunder. To the best of the
Company's knowledge, there is not now, and there has never been, any employment
by the Company or any of its subsidiaries of, or beneficial ownership in the
Company or any of its subsidiaries by, any governmental or political official in
any country in the world.
ADDITIONAL PURCHASERS.
Within the fifteen (15)-day period ending on the Closing Date, the Company
has issued to those investors set forth on Section 2.12 of the Disclosure
Schedule, in the aggregate, 3,272,726
<PAGE>
shares of Common Stock at a purchase price per share of $11.00, on terms and
conditions substantially similar to those set forth in the drafts dated May 3,
1999 of this Agreement, the Registration Rights Agreement (as defined herein),
and the Lockup Agreement (as defined herein).
REGISTRATION STATEMENT. The Company has filed with the U.S. Securities and
Exchange Commission (the "SEC") a Registration Statement on Form S-1,
Registration No. 333-746659 (as amended by all amendments thereto filed with the
SEC through the date hereof, the "Registration Statement") in connection with
the proposed initial public offering of the Common Stock of the Company. The
information contained in the Registration Statement is true, complete and
correct and such information does not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, except with respect to
those items specified in Section 2.13 of the Disclosure Schedule and except with
respect to changes made by amendment to the Registration Statement filed with
the SEC after the date hereof to comply with disclosure obligations of the
Securities Act of 1993 in response to comments of the SEC to the Registration
Statement, and changes relating to the pricing of the Common Stock in such
initial public offering.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company that:
ORGANIZATION; CORPORATE POWER.
The Purchaser is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has the corporate
power and authority to execute, deliver and perform its obligations under this
Agreement.
AUTHORIZATION OF AGREEMENTS.
The execution and delivery by the Purchaser of this Agreement, and the
performance by the Purchaser of its obligations hereunder have been duly
authorized by all requisite corporate action and will not violate any provision
of law, any order of any court or other agency of government, or the Purchaser's
articles of incorporation or by-laws.
VALIDITY.
This Agreement has been duly executed and delivered by the Purchaser and
constitutes the legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by general equitable principles.
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ACCREDITED INVESTOR.
The Purchaser is an "accredited investor" within the meaning of Rule 501
under the Securities Act of 1993 (the "Securities Act") and was not organized
for the specific purpose of acquiring the Purchased Shares.
SUFFICIENT KNOWLEDGE.
The Purchaser has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of development
so as to be able to evaluate the risks and merits of its investment in the
Company and it is able financially to bear the risks thereof. The Purchaser has
had an opportunity to discuss the Company's business, management and financial
affairs with the Company's management.
INVESTMENT. Except with respect to any transfer of the Purchased Shares to
an affiliate of the Purchaser, the Purchaser is acquiring the Purchased Shares
being purchased by it hereunder for its own account, not as a nominee or agent,
for the purpose of investment and not with a view to the resale or distribution
of any part thereof, and the Purchaser does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Purchased Shares.
NO REGISTRATION.
The Purchaser understands that (i) the Purchased Shares have not been
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act, (ii) except
with respect to any transfer of the Purchased Shares to an affiliate of the
Purchaser, the Purchased Shares must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
such registration, (iii) the Purchased Shares will bear a legend to such effect
and (iv) the Company will make a notation on its transfer books to such effect.
BROKERS.
The Purchaser has no contract, arrangement or understanding with any
broker, finder or similar agent with respect to the transactions contemplated by
this Agreement.
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
AND THE COMPANY
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER ON THE CLOSING DATE.
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The obligation of the Purchaser to purchase the Purchased Shares from the
Company on the Closing Date is subject to the satisfaction or waiver, on or
before the Closing Date, of the following conditions:
REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT.
The representations and warranties contained in Article II shall be true,
complete and correct in all material respects on and as of the Closing Date with
the same effect as though such representations and warranties had been made on
and as of such date, and the President of the Company shall have certified to
such effect to the Purchaser in writing.
PERFORMANCE.
The Company shall have performed and complied with all agreements contained
herein required to be performed or complied with by it prior to or on the
Closing Date, and the President of the Company shall have certified to the
Purchaser in writing to such effect and to the further effect that all of the
conditions set forth in this Section 4.1 have been satisfied.
SUPPORTING DOCUMENTS.
The Purchaser shall have received copies of the following documents:
(A) the Charter, certified as of a recent date by the Secretary of State of
the State of Delaware, (B) a certificate of said Secretary, dated as of a recent
date, as to the due incorporation and good standing to of the Company, the
payment of all excise taxes by the Company and listing all documents of the
Company on file with said Secretary and (C) a certificate of the Secretary of
State of the State of New York, dated as of a recent date, as to the good
standing of the Company in such state; and
a certificate of the Secretary or an Assistant Secretary of the Company
dated the Closing Date and certifying: (A) that attached thereto is a true and
complete copy of the By-laws of the Company as in effect on the date of such
certification; (B) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors or the stockholders of the Company
authorizing the execution, delivery and performance of this Agreement, including
the issuance, sale and delivery of the Purchased Shares, and that all such
resolutions are in full force and effect and are all the resolutions adopted in
connection with the transactions contemplated hereby; (C) that the Charter has
not been amended since the date of the last amendment referred to in the
certificate delivered pursuant to clause (i)(B) above; and (D) to the incumbency
and specimen signature of each officer of the Company executing this Agreement,
the stock certificates representing the Purchased Shares and any certificate or
instrument furnished
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pursuant hereto, and a certification by another officer of the Company as to the
incumbency and signature of the officer signing the certificate referred to in
this clause (ii).
REGISTRATION RIGHTS AGREEMENT.
The Company shall have executed and delivered to the Purchaser a
registration rights agreement substantially in the form attached hereto as
EXHIBIT A (the "Registration Rights Agreement").
CONDITION TO THE OBLIGATIONS OF THE COMPANY ON THE CLOSING DATE.
The obligation of the Company to sell the Purchased Shares to the Purchaser
is subject to the satisfaction or waiver, on or before the Closing Date, of the
following conditions:
REPRESENTATION AND WARRANTIES TO BE TRUE AND CORRECT.
The representations and warranties contained in Article III shall be true,
complete and correct in all material respects on and as of the Closing Date with
the same effect as though such representations and warranties had been made on
and as of such date, and the Purchaser shall have certified to such effect to
the Company in writing.
PERFORMANCE.
The Purchaser shall have performed and complied with all agreements
contained herein required to be performed or complied with by it prior to or at
the Closing Date, and the Purchaser shall have certified to the Company in
writing to such effect and to the further effect that all of the conditions set
forth in this Section 4.2 have been satisfied.
LOCKUP AGREEMENT.
The Purchaser shall have executed and delivered to the Company a lockup
agreement substantially in the form attached hereto as EXHIBIT B (the "Lockup
Agreement").
MISCELLANEOUS.
REGISTRATION RIGHTS AGREEMENT.
On or prior to the Closing Date, the Company shall execute and deliver to
the Purchaser the Registration Rights Agreement.
LOCKUP AGREEMENT.
On or prior to the Closing Date, the Purchaser shall execute and deliver to
the Company
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the Lockup Agreement.
EXPENSES.
Each party hereto will pay its own expenses in connection with the
transactions contemplated hereby, whether or not such transactions shall be
consummated.
BROKERAGE.
Each party hereto will indemnify and hold harmless the other against and
in respect of any claim for brokerage or other commissions relative to this
Agreement or to the transactions contemplated hereby, based in any way on
agreements, arrangements or understandings made or claimed to have been made
by such party with any third party, other than as described in Section 2.10
of the Disclosure Schedule.
NOTICES.
All notices, requests, consents and other communications hereunder shall be
in writing and shall be delivered in person, mailed by certified or registered
mail, return receipt requested, or sent by telecopier, addressed as follows:
if to the Company, to it at StarMedia Network, Inc., 29 West 36th
Street, 5th Floor, New York, New York 10018, Attention: President;
if to the Purchaser, to it at National Broadcasting Company, Inc., 30
Rockefeller Plaza, New York, New York 10112, Attention: Kenneth Krushel;
and
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
ENTIRE AGREEMENT.
This Agreement, including the Schedules and Exhibits hereto, constitutes
the sole and entire agreement of the parties with respect to the subject matter
hereof. All Schedules and Exhibits hereto are hereby incorporated herein by
reference.
COUNTERPARTS.
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This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
AMENDMENTS.
This Agreement may not be amended or modified, and no provisions hereof may
be waived, without the written consent of the Company and Purchaser.
SEVERABILITY.
If any provision of this Agreement shall be declared void or unenforceable
by any judicial or administrative authority, the validity of any other
provisions and of the entire Agreement shall not be affected thereby.
TITLES AND SUBTITLES,
The titles and subtitles used in this Agreement are for convenience only
and are not to be considered in construing or interpreting any term or provision
of this Agreement.
CERTAIN DEFINED TERMS.
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"PERSON" shall mean an individual, corporation, trust, partnership,
joint venture, unincorporated organization, government or any agency or
political subdivision thereof, or other entity.
"SUBSIDIARY" shall mean, as to the Company, any corporation of which more
than 50% of the outstanding stock having ordinary voting power to elect a
majority of the Board of Directors of such corporation (irrespective of whether
or not at the time stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any contingency)
is at the time directly or indirectly owned by the Company, or by one or more of
its subsidiaries, or by the Company and one or more of its subsidiaries.
WAVIER OF JURY TRIAL.
Each party hereto hereby waives its rights to a jury trial of any claim or
cause of action (including, without limitation, contract claims, tort claims,
breach of duty claims, and all other common law claims and statutory claims)
based upon or arising out of this Agreement, the Registration Rights Agreement,
the Lockup Agreement, the Purchased Shares or the subject matter hereof or
thereof.
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AMENDMENT TO REGISTRATION STATEMENT.
The Company shall provide, during normal business hours, to the
Purchaser a true and complete copy of, and an opportunity to comment on, any
amendment to the Registration Statement which first discloses, or reflects a
revision to the disclosure of, the sale of the Purchased Shares or any other
disclosure regarding the Purchaser, SNAP! LLC, or any entity the name of
which incorporates "NBC," "General Electric" or "GE," not less than two (2)
hours prior to the filing of such amendment with the SEC.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
STARMEDIA NETWORK, INC.
By:
Name:
Title:
NATIONAL BROADCASTING COMPANY, INC.
By:
Name:
Title:
<PAGE>
Exhibit 10.21
REGISTRATION RIGHTS AGREEMENT dated as of April 30, 1999, between
STARMEDIA NETWORK, INC., a Delaware corporation (the "Company"), and HEARST
COMMUNICATIONS, INC., a Delaware corporation (the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a
Stock Purchase Agreement dated as of April 30, 1999 (the "STOCK PURCHASE
AGREEMENT") pursuant to which, subject to the terms and conditions set forth
therein, the Purchaser has agreed to acquire, and the Company has agreed to
sell, certain shares of Common Stock (as defined herein);
WHEREAS, it is a condition to the Purchaser's obligations to purchase
such shares of Common Stock under the Stock Purchase Agreement that the Company
enter into this Agreement to provide certain registration rights;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and subject to and
on the terms and conditions herein set forth, the parties hereto agree as
follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have
the following respective meanings:
"COMMON STOCK" shall mean the Common Stock, par value $0.001 per share,
of the Company.
"COMMISSION" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"PUBLIC SALE" shall mean any sale of Common Stock to the public
pursuant to an offering registered under the Securities Act or pursuant to the
provisions of Rule 144 (or any successor or similar rule) adopted under the
Securities Act.
"PURCHASED SHARES" shall mean those shares of Common Stock purchased by
the Purchaser pursuant to the Stock Purchase Agreement.
"REGISTRATION EXPENSES" shall mean the expenses so described in Section
6 hereof.
"RESTRICTED STOCK" shall mean the Purchased Shares, the certificates
for which are required to bear the legend set forth in Section 2 hereof,
excluding Purchased Shares which have been (i) registered under the Securities
Act pursuant to an effective registration statement filed
<PAGE>
thereunder and disposed of in accordance with the registration statement
covering them or (ii) publicly sold pursuant to Rule 144 under the Securities
Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean the expenses so described in Section 6
hereof.
2. RESTRICTIVE LEGEND. Each certificate representing one or more shares
of Restricted Stock, and each certificate issued upon exchange or transfer
thereof, other than in a Public Sale or as otherwise permitted by clause (ii) of
Section 3, shall be stamped or otherwise imprinted with a legend substantially
in the following form:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY
AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
3. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of any
share of Restricted Stock (other than under the circumstances described in
Section 4 hereof), the Purchaser shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner of
the proposed transfer and, if requested by the Company, shall be accompanied by
an opinion of counsel reasonably satisfactory to the Company to the effect that
the proposed transfer of the Restricted Stock may be effected without
registration under the Securities Act, whereupon the holder of such Restricted
Stock may transfer such Restricted Stock in accordance with the terms of its
notice; PROVIDED, HOWEVER, that no such opinion or other documentation shall be
required if such notice shall cover a distribution by a partnership to its
partners or by a limited liability company to its members. Each certificate of
Restricted Stock transferred as above provided shall bear the legend set forth
in Section 2, unless (i) such transfer is to the public in accordance with the
provisions of Rule 144 (or any other rule permitting Public Sale without
registration under the Securities Act) or (ii) the opinion of counsel referred
to above is to the further effect that the transferee and any subsequent
transferee (other than an affiliate of the Company) would be entitled to
transfer such securities in a Public Sale without registration under the
Securities Act. The restrictions provided for in this Section shall not apply to
securities that are not required to bear the legend prescribed by Section 2 in
accordance with the provisions of that Section.
4. REGISTRATION. If the Company at any time during the period
commencing on the first anniversary of the date hereof and ending on the third
anniversary of the date hereof proposes to register any of its Common Stock
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with
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<PAGE>
respect to registration statements on Forms S-4 or S-8, any successors thereto
or any other form not available for registering the Restricted Stock for sale to
the public or a Form S-1 covering solely an employee benefit plan), it will give
written notice at such time to the Purchaser of its intention to do so. Upon the
written request of the Purchaser, given within twenty (20) days after receipt of
any such notice by the Company, to register any of its Restricted Stock (which
request shall state the intended method of disposition thereof), the Company
will use reasonable commercial efforts to cause the Restricted Stock as to which
registration shall have been so requested, to be included in the securities to
be covered by the registration statement proposed to be filed by the Company,
all to the extent requisite to permit the sale or other disposition by the
Purchaser (in accordance with its written request) of such Restricted Stock to
be so registered; PROVIDED that nothing herein shall prevent the Company from
abandoning or delaying any such registration at any time. In the event that any
registration pursuant to this Section 4 shall be, in whole or in part, an
underwritten public offering of Common Stock, any request by the Purchaser
pursuant to this Section 4 to register Restricted Stock shall specify that
either (i) such Restricted Stock is to be included in the underwriting on the
same terms and conditions as the shares of Common Stock otherwise being sold
through underwriters under such registration or (ii) such Restricted Stock is to
be sold in the open market without any underwriting, on terms and conditions
comparable to those normally applicable to offerings of common stock in
reasonably similar circumstances. The number of shares of Restricted Stock to be
included in such registration may be reduced, if and to the extent that the
managing underwriter shall be of the opinion that such inclusion would adversely
affect the marketing of the securities to be sold by the Company in such
underwriting.
5. REGISTRATION PROCEDURES. Subject to the Company's right to abandon
or delay any such registration at any time and for any reason, if and whenever
the Company is required by the provisions of Section 4 hereof to use reasonable
commercial efforts to effect the registration of any of the Restricted Stock
under the Securities Act, the Company will:
(a) prepare and file with the Commission a registration
statement with respect to such securities and use reasonable commercial
efforts to cause such registration statement to become and remain
effective for the period of the distribution contemplated thereby
(determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period specified in paragraph (a) above and
to comply with the provisions of the Securities Act with respect to the
disposition of all Restricted Stock covered by such registration
statement in accordance with the Purchaser's intended method of
disposition set forth in such registration statement for such period;
(c) furnish to the Purchaser such number of copies of the
registration statement and the prospectus included therein (including
each preliminary prospectus) as the Purchaser may reasonably request in
order to facilitate the Public Sale or other disposition of the
Restricted Stock covered by such registration statement;
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<PAGE>
(d) use reasonable commercial efforts to register or qualify
the Restricted Stock covered by such registration statement under the
securities or blue sky laws of such jurisdictions as the Purchaser
shall reasonably request, provided that the Company will not be
required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
paragraph (d), (ii) subject itself to taxation in any such jurisdiction
or (iii) consent to general service of process in any jurisdiction;
(e) use reasonable commercial efforts to list the Restricted
Stock covered by such registration statement with any securities
exchange on which any Common Stock of the Company is then listed;
(f) immediately notify the Purchaser at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing.
For purposes of paragraphs (a) and (b) above and of Section 4(c) hereof, the
period of distribution of Restricted Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the period of
distribution of Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Restricted Stock covered thereby or
three months after the effective date thereof.
In connection with each registration hereunder, the Purchaser will
furnish to the Company in writing such information with respect to itself and
the proposed distribution by them as shall be reasonably necessary in order to
assure compliance with federal and applicable state securities laws.
6. EXPENSES. All expenses incurred by the Company in complying with
Section 4 hereof, including without limitation all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars and costs
of insurance, but excluding any Selling Expenses, are herein called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Restricted Stock are herein called "Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to Section 4 hereof. All Selling Expenses
in connection with any registration statement filed pursuant to Section 4 hereof
shall be borne by the Purchaser, or by such persons other than the Company as
may agree.
7. INDEMNIFICATION. (a) In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant to Section 4, the Company
will indemnify and hold harmless the Purchaser and each officer, director and
each other person, if any, who controls the Purchaser
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<PAGE>
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Purchaser or such controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Restricted Stock was registered under the Securities Act pursuant to Section 4,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Purchaser and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by the Purchaser or such
controlling person in writing to be included in such registration statement or
prospectus.
(b) In the event of a registration of any of the Restricted
Stock under the Securities Act pursuant to Section 4, the Purchaser will
indemnify and hold harmless the Company and each officer, director and each
other person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer or director or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Section 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Company and each
such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Purchaser will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
the Purchaser, furnished in writing to the Company by the Purchaser specifically
for use in such registration statement or prospectus; PROVIDED, FURTHER,
HOWEVER, that the Purchaser shall not be liable to and does not indemnify any
underwriter in the offering or sale of Restricted Stock, or any person who,
within the meaning of the Securities Act, controls any underwriter, in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such person's failure to
send or give a copy of the final prospectus, as the same may be supplemented or
amended, to the person asserting an untrue statement or omission or alleged
untrue statement or omission at or prior to the written confirmation of the sale
of Restricted Stock to such person, if such statement or omission was corrected
in such final prospectus.
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(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to any indemnified party other than under this Section 7. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 7 for any
legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected; PROVIDED, HOWEVER, that, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional to
those available to the indemnifying party, or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
Notwithstanding the foregoing, any indemnified party shall have the
right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party shall have failed to retain counsel for the
indemnified person as aforesaid or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such counsel.
It is understood that the indemnifying party shall not, in connection with any
action or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in paragraphs (a) and
(b) of this Section 7 is unavailable or insufficient to hold harmless an
indemnified party under such paragraphs in respect of any losses, claims,
damages or liabilities or actions in respect thereof referred to therein, then
each indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of the Company, on the one hand, and
the Purchaser, on the other, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or actions as well
as any other relevant equitable considerations, including the failure to give
any notice under paragraph (c) of this Section 7. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by the
Company, on the one hand, or the Purchaser, on the other hand, and
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<PAGE>
to the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Purchaser agree that it would not be just and equitable if contributions
pursuant to this paragraph were determined by PRO RATA allocation or by any
other method of allocation which did not take account of the equitable
considerations referred to above in this paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or action in respect thereof, referred to above in this paragraph, shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7(d), Purchaser shall
not be required to contribute to any amount in excess of the amount of the total
proceeds to Purchaser from the sales of its Purchased Shares pursuant to such
registration statement. No person guilty of fraudulent misrepresentations
(within the meaning of Section 11(f) of the Securities Act), shall be entitled
to contribution from any person who is not guilty of such fraudulent
misrepresentation.
The indemnification of underwriters provided for in this Section 7
shall be on such other terms and conditions as are at the time customary and
reasonably required by such underwriters.
8. CHANGES IN RESTRICTED STOCK. If, and as often as, there are any
changes in the Common Stock by way of stock split, stock dividend, combination
or reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Common Stock as so changed and
shall apply to any securities received in any such transaction.
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Purchaser as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or By-laws of the Company, or any
provision of any indenture, agreement or other instrument to which it or any of
its properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to general equity principles
and to applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws from time to time in effect affecting the
enforcement of creditors' rights generally (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
7
<PAGE>
10. RULE 144 REPORTING. The Company agrees as follows:
(a) The Company shall make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times from and after the date it is first required to do so.
(b) The Company shall file with the Commission in a timely manner
all reports and other documents as the Commission may prescribe under Section
13(a) or 15(d) of the Exchange Act at any time after the Company has become
subject to such reporting requirements of the Exchange Act.
(c) The Company shall furnish to the Purchaser promptly upon request
(i) a written statement by the Company as to its compliance with the reporting
requirements of Rule 144 (at any time from and after the date it first becomes
subject to such reporting requirements), and of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents so filed as the Purchaser
may reasonably request to avail itself of any rule or regulation of the
Commission allowing it to sell any Restricted Stock without registration.
11. MISCELLANEOUS. (a) Neither party may assign this Agreement without
the prior written consent of the other, and any attempt to do so shall be null
and void.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier,
addressed as follows:
To the Company:
StarMedia Network, Inc.
29 West 36th Street
New York, New York 10018
Attention: President
Fax Number: 212-631-9100
To the Purchaser:
959 Eighth Avenue
New York, NY 10019
Attention:
-----------------
Fax Number:
----------------
with a copy to:
Rogers & Wells LLP
200 Park Avenue
New York, NY 10166
Attention: Steven A. Hobbs
Fax Number: 212-878-8375
8
<PAGE>
or at such other address or fax number or to the attention of such other person
as the party to whom such information pertains may hereafter specify.
(c) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
(d) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and may not be modified or amended
except in writing executed by the Company and the Purchaser.
(e) This Agreement may be executed in two or more counterparts, by
original or facsimile signature, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
(f) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
STARMEDIA NETWORK, INC.
By:
---------------------------------------
Name:
Title:
HEARST COMMUNICATIONS, INC.
By:
---------------------------------------
Name:
Title:
10
<PAGE>
<PAGE>
Exhibit 10.22
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT dated as of April 30, 1999, between
STARMEDIA NETWORK, INC., a Delaware corporation (the "Company"), and REUTERS
HOLDINGS SWITZERLAND SA, a corporation organized and existing under the laws of
Switzerland (the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a
Stock Purchase Agreement dated as of April 30, 1999 (the "STOCK PURCHASE
AGREEMENT") pursuant to which, subject to the terms and conditions set forth
therein, the Purchaser has agreed to acquire, and the Company has agreed to
sell, certain shares of Common Stock (as defined herein);
WHEREAS, it is a condition to the Purchaser's obligations to purchase
such shares of Common Stock under the Stock Purchase Agreement that the Company
enter into this Agreement to provide certain registration rights;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and subject to and
on the terms and conditions herein set forth, the parties hereto agree as
follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have
the following respective meanings:
"COMMON STOCK" shall mean the Common Stock, par value $0.001 per share,
of the Company.
"COMMISSION" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"PUBLIC SALE" shall mean any sale of Common Stock to the public
pursuant to an offering registered under the Securities Act or pursuant to the
provisions of Rule 144 (or any successor or similar rule) adopted under the
Securities Act.
"PURCHASED SHARES" shall mean those shares of Common Stock purchased by
the Purchaser pursuant to the Stock Purchase Agreement.
"REGISTRATION EXPENSES" shall mean the expenses so described in
Section 6 hereof.
"RESTRICTED STOCK" shall mean the Purchased Shares, the certificates
for which are required to bear the legend set forth in Section 2 hereof,
excluding Purchased Shares which have been (i) registered under the Securities
Act pursuant to an effective registration statement filed
<PAGE>
thereunder and disposed of in accordance with the registration statement
covering them or (ii) publicly sold pursuant to Rule 144 under the Securities
Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean the expenses so described in Section 6
hereof.
2. RESTRICTIVE LEGEND. Each certificate representing one or more shares
of Restricted Stock, and each certificate issued upon exchange or transfer
thereof, other than in a Public Sale or as otherwise permitted by clause (ii) of
Section 3, shall be stamped or otherwise imprinted with a legend substantially
in the following form:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED."
3. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of any
share of Restricted Stock (other than under the circumstances described in
Section 4 hereof), the Purchaser shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner of
the proposed transfer and, if requested by the Company, shall be accompanied by
an opinion of counsel reasonably satisfactory to the Company to the effect that
the proposed transfer of the Restricted Stock may be effected without
registration under the Securities Act, whereupon the holder of such Restricted
Stock may transfer such Restricted Stock in accordance with the terms of its
notice; PROVIDED, HOWEVER, that no such opinion or other documentation shall be
required if such notice shall cover a distribution by a partnership to its
partners or by a limited liability company to its members. Each certificate of
Restricted Stock transferred as above provided shall bear the legend set forth
in Section 2, unless (i) such transfer is to the public in accordance with the
provisions of Rule 144 (or any other rule permitting Public Sale without
registration under the Securities Act) or (ii) the opinion of counsel referred
to above is to the further effect that the transferee and any subsequent
transferee (other than an affiliate of the Company) would be entitled to
transfer such securities in a Public Sale without registration under the
Securities Act. The restrictions provided for in this Section shall not apply to
securities that are not required to bear the legend prescribed by Section 2 in
accordance with the provisions of that Section.
4. REGISTRATION. If the Company at any time during the period
commencing on the first anniversary of the date hereof and ending on the third
anniversary of the date hereof proposes to register any of its Common Stock
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with
2
<PAGE>
respect to registration statements on Forms S-4 or S-8, any successors thereto
or any other form not available for registering the Restricted Stock for sale to
the public or a Form S-1 covering solely an employee benefit plan), it will give
written notice at such time to the Purchaser of its intention to do so. Upon the
written request of the Purchaser, given within twenty (20) days after receipt of
any such notice by the Company, to register any of its Restricted Stock (which
request shall state the intended method of disposition thereof), the Company
will use reasonable commercial efforts to cause the Restricted Stock as to which
registration shall have been so requested, to be included in the securities to
be covered by the registration statement proposed to be filed by the Company,
all to the extent requisite to permit the sale or other disposition by the
Purchaser (in accordance with its written request) of such Restricted Stock to
be so registered; PROVIDED that nothing herein shall prevent the Company from
abandoning or delaying any such registration at any time. In the event that any
registration pursuant to this Section 4 shall be, in whole or in part, an
underwritten public offering of Common Stock, any request by the Purchaser
pursuant to this Section 4 to register Restricted Stock shall specify that
either (i) such Restricted Stock is to be included in the underwriting on the
same terms and conditions as the shares of Common Stock otherwise being sold
through underwriters under such registration or (ii) such Restricted Stock is to
be sold in the open market without any underwriting, on terms and conditions
comparable to those normally applicable to offerings of common stock in
reasonably similar circumstances. The number of shares of Restricted Stock to be
included in such registration may be reduced, if and to the extent that the
managing underwriter shall be of the opinion that such inclusion would adversely
affect the marketing of the securities to be sold by the Company in such
underwriting.
5. REGISTRATION PROCEDURES. Subject to the Company's right to abandon
or delay any such registration at any time and for any reason, if and whenever
the Company is required by the provisions of Section 4 hereof to use reasonable
commercial efforts to effect the registration of any of the Restricted Stock
under the Securities Act, the Company will:
(a) prepare and file with the Commission a
registration statement with respect to such securities and use
reasonable commercial efforts to cause such registration statement to
become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective for the period specified in
paragraph (a) above and to comply with the provisions of the Securities
Act with respect to the disposition of all Restricted Stock covered by
such registration statement in accordance with the Purchaser's intended
method of disposition set forth in such registration statement for such
period;
(c) furnish to the Purchaser such number of copies of
the registration statement and the prospectus included therein
(including each preliminary prospectus) as the Purchaser may reasonably
request in order to facilitate the Public Sale or other disposition of
the Restricted Stock covered by such registration statement;
3
<PAGE>
(d) use reasonable commercial efforts to register or
qualify the Restricted Stock covered by such registration statement
under the securities or blue sky laws of such jurisdictions as the
Purchaser shall reasonably request, provided that the Company will not
be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
paragraph (d), (ii) subject itself to taxation in any such jurisdiction
or (iii) consent to general service of process in any jurisdiction;
(e) use reasonable commercial efforts to list the
Restricted Stock covered by such registration statement with any
securities exchange on which any Common Stock of the Company is then
listed;
(f) immediately notify the Purchaser at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing.
For purposes of paragraphs (a) and (b) above and of Section 4(c) hereof, the
period of distribution of Restricted Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the period of
distribution of Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Restricted Stock covered thereby or
three months after the effective date thereof.
In connection with each registration hereunder, the Purchaser will
furnish to the Company in writing such information with respect to itself and
the proposed distribution by them as shall be reasonably necessary in order to
assure compliance with federal and applicable state securities laws.
6. EXPENSES. All expenses incurred by the Company in complying with
Section 4 hereof, including without limitation all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars and costs
of insurance, but excluding any Selling Expenses, are herein called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Restricted Stock are herein called "Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to Section 4 hereof. All Selling Expenses
in connection with any registration statement filed pursuant to Section 4 hereof
shall be borne by the Purchaser, or by such persons other than the Company as
may agree.
7. INDEMNIFICATION. (a) In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant to Section 4, the Company
will indemnify and hold harmless the Purchaser and each officer, director and
each other person, if any, who controls the Purchaser
4
<PAGE>
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Purchaser or such controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Restricted Stock was registered under the Securities Act pursuant to Section 4,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Purchaser and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by the Purchaser or such
controlling person in writing.
(b) In the event of a registration of any of the Restricted
Stock under the Securities Act pursuant to Section 4, the Purchaser will
indemnify and hold harmless the Company and each officer, director and each
other person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer or director or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Section 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Company and each
such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Purchaser will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
the Purchaser, furnished in writing to the Company by the Purchaser specifically
for use in such registration statement or prospectus; PROVIDED, FURTHER,
HOWEVER, that the Purchaser shall not be liable to and does not indemnify any
underwriter in the offering or sale of Restricted Stock, or any person who,
within the meaning of the Securities Act, controls any underwriter, in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such person's failure to
send or give a copy of the final prospectus, as the same may be supplemented or
amended, to the person asserting an untrue statement or omission or alleged
untrue statement or omission at or prior to the written confirmation of the sale
of Restricted Stock to such person, if such statement or omission was corrected
in such final prospectus.
5
<PAGE>
(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to any indemnified party other than under this Section 7. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 7 for any
legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected; PROVIDED, HOWEVER, that, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional to
those available to the indemnifying party, or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
Notwithstanding the foregoing, any indemnified party shall have the
right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party shall have failed to retain counsel for the
indemnified person as aforesaid or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such counsel.
It is understood that the indemnifying party shall not, in connection with any
action or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in paragraphs (a) and
(b) of this Section 7 is unavailable or insufficient to hold harmless an
indemnified party under such paragraphs in respect of any losses, claims,
damages or liabilities or actions in respect thereof referred to therein, then
each indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of the Company, on the one hand, and
the Purchaser, on the other, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or actions as well
as any other relevant equitable considerations, including the failure to give
any notice under paragraph (c) of this Section 7. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by the
Company, on the one hand, or the Purchaser, on the other hand, and
6
<PAGE>
to the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Purchaser agree that it would not be just and equitable if contributions
pursuant to this paragraph were determined by PRO RATA allocation or by any
other method of allocation which did not take account of the equitable
considerations referred to above in this paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or action in respect thereof, referred to above in this paragraph, shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. No person guilty of fraudulent misrepresentations (within the meaning
of Section 11(f) of the Securities Act), shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation.
The indemnification of underwriters provided for in this Section 7
shall be on such other terms and conditions as are at the time customary and
reasonably required by such underwriters.
8. CHANGES IN RESTRICTED STOCK. If, and as often as, there are any
changes in the Common Stock by way of stock split, stock dividend, combination
or reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Common Stock as so changed and
shall apply to any securities received in any such transaction.
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Purchaser as follows:
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or By-laws of the Company, or any
provision of any indenture, agreement or other instrument to which it or any of
its properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to general equity principles
and to applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws from time to time in effect affecting the
enforcement of creditors' rights generally (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
10. RULE 144 REPORTING. The Company agrees as follows:
(a) The Company shall make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after the date it is first required to do
so.
7
<PAGE>
(b) The Company shall file with the Commission in a timely
manner all reports and other documents as the Commission may prescribe under
Section 13(a) or 15(d) of the Exchange Act at any time after the Company has
become subject to such reporting requirements of the Exchange Act.
(c) The Company shall furnish to the Purchaser promptly upon
request (i) a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time from and after the date it first
becomes subject to such reporting requirements), and of the Securities Act and
the Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents so filed as the Purchaser
may reasonably request to avail itself of any rule or regulation of the
Commission allowing it to sell any Restricted Stock without registration.
11. MISCELLANEOUS. (a) Neither party may assign this Agreement without
the prior written consent of the other, and any attempt to do so shall be null
and void.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by first class registered
mail, postage prepaid, addressed as follows:
if to the Company, to it at 29 West 36th Street, New York, New
York 10018, Attn: President;
if to the Purchaser, to it at Reuters Holdings Switzerland
SA, 5, Rue de Jargonnant, 1207 Geneva, Switzerland, Attention: Director,
with a copy to Reuters Limited, 85 Fleet Street, London EC4P 4AJ, England,
Attention: General Counsel;
or, in either case, at such other address or addresses as shall have been
furnished in writing to the other party.
(c) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(d) This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and may not be modified or
amended except in writing executed by the Company and the Purchaser.
(e) This Agreement may be executed in two or more
counterparts, by original or facsimile signature, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
(f) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision
8
<PAGE>
of this Agreement, and this Agreement shall be carried out as if any such
illegal, invalid or unenforceable provision were not contained herein.
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
STARMEDIA NETWORK, INC.
By:
-----------------------------
Name:
Title:
REUTERS HOLDINGS SWITZERLAND SA
By:
-----------------------------
Name:
Title:
10
<PAGE>
Exhibit 10.23
REGISTRATION RIGHTS AGREEMENT dated as of April 30, 1999, between
STARMEDIA NETWORK, INC., a Delaware corporation (the "Company"), and EBAY INC.,
a _________ corporation (the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a
Stock Purchase Agreement dated as of April 30, 1999 (the "STOCK PURCHASE
AGREEMENT") pursuant to which, subject to the terms and conditions set forth
therein, the Purchaser has agreed to acquire, and the Company has agreed to
sell, certain shares of Common Stock (as defined herein);
WHEREAS, it is a condition to the Purchaser's obligations to purchase
such shares of Common Stock under the Stock Purchase Agreement that the Company
enter into this Agreement to provide certain registration rights;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and subject to and
on the terms and conditions herein set forth, the parties hereto agree as
follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have
the following respective meanings:
"COMMON STOCK" shall mean the Common Stock, par value $0.001 per share,
of the Company.
"COMMISSION" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"PUBLIC SALE" shall mean any sale of Common Stock to the public
pursuant to an offering registered under the Securities Act or pursuant to the
provisions of Rule 144 (or any successor or similar rule) adopted under the
Securities Act.
"PURCHASED SHARES" shall mean those shares of Common Stock purchased by
the Purchaser pursuant to the Stock Purchase Agreement.
"REGISTRATION EXPENSES" shall mean the expenses so described in Section
6 hereof.
"RESTRICTED STOCK" shall mean the Purchased Shares, the certificates
for which are required to bear the legend set forth in Section 2 hereof,
excluding Purchased Shares which have been (i) registered under the Securities
Act pursuant to an effective registration statement filed
<PAGE>
thereunder and disposed of in accordance with the registration statement
covering them or (ii) publicly sold pursuant to Rule 144 under the Securities
Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean the expenses so described in Section 6
hereof.
2. RESTRICTIVE LEGEND. Each certificate representing one or more shares
of Restricted Stock, and each certificate issued upon exchange or transfer
thereof, other than in a Public Sale or as otherwise permitted by clause (ii) of
Section 3, shall be stamped or otherwise imprinted with a legend substantially
in the following form:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED."
3. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of any
share of Restricted Stock (other than under the circumstances described in
Section 4 hereof), the Purchaser shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner of
the proposed transfer and, if requested by the Company, shall be accompanied by
an opinion of counsel reasonably satisfactory to the Company to the effect that
the proposed transfer of the Restricted Stock may be effected without
registration under the Securities Act, whereupon the holder of such Restricted
Stock may transfer such Restricted Stock in accordance with the terms of its
notice; PROVIDED, HOWEVER, that no such opinion or other documentation shall be
required if such notice shall cover a distribution by a partnership to its
partners or by a limited liability company to its members. Each certificate of
Restricted Stock transferred as above provided shall bear the legend set forth
in Section 2, unless (i) such transfer is to the public in accordance with the
provisions of Rule 144 (or any other rule permitting Public Sale without
registration under the Securities Act) or (ii) the opinion of counsel referred
to above is to the further effect that the transferee and any subsequent
transferee (other than an affiliate of the Company) would be entitled to
transfer such securities in a Public Sale without registration under the
Securities Act. The restrictions provided for in this Section shall not apply to
securities that are not required to bear the legend prescribed by Section 2 in
accordance with the provisions of that Section.
4. REGISTRATION. If the Company at any time during the period
commencing on the first anniversary of the date hereof and ending on the third
anniversary of the date hereof proposes to register any of its Common Stock
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with
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<PAGE>
respect to registration statements on Forms S-4 or S-8, any successors thereto
or any other form not available for registering the Restricted Stock for sale to
the public or a Form S-1 covering solely an employee benefit plan), it will give
written notice at such time to the Purchaser of its intention to do so. Upon the
written request of the Purchaser, given within twenty (20) days after receipt of
any such notice by the Company, to register any of its Restricted Stock (which
request shall state the intended method of disposition thereof), the Company
will use reasonable commercial efforts to cause the Restricted Stock as to which
registration shall have been so requested, to be included in the securities to
be covered by the registration statement proposed to be filed by the Company,
all to the extent requisite to permit the sale or other disposition by the
Purchaser (in accordance with its written request) of such Restricted Stock to
be so registered; PROVIDED that nothing herein shall prevent the Company from
abandoning or delaying any such registration at any time. In the event that any
registration pursuant to this Section 4 shall be, in whole or in part, an
underwritten public offering of Common Stock, any request by the Purchaser
pursuant to this Section 4 to register Restricted Stock shall specify that
either (i) such Restricted Stock is to be included in the underwriting on the
same terms and conditions as the shares of Common Stock otherwise being sold
through underwriters under such registration or (ii) such Restricted Stock is to
be sold in the open market without any underwriting, on terms and conditions
comparable to those normally applicable to offerings of common stock in
reasonably similar circumstances. The number of shares of Restricted Stock to be
included in such registration may be reduced, if and to the extent that the
managing underwriter shall be of the opinion that such inclusion would adversely
affect the marketing of the securities to be sold by the Company in such
underwriting.
5. REGISTRATION PROCEDURES. Subject to the Company's right to abandon
or delay any such registration at any time and for any reason, if and whenever
the Company is required by the provisions of Section 4 hereof to use reasonable
commercial efforts to effect the registration of any of the Restricted Stock
under the Securities Act, the Company will:
(a) prepare and file with the Commission a
registration statement with respect to such securities and use
reasonable commercial efforts to cause such registration statement to
become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective for the period specified in
paragraph (a) above and to comply with the provisions of the Securities
Act with respect to the disposition of all Restricted Stock covered by
such registration statement in accordance with the Purchaser's intended
method of disposition set forth in such registration statement for such
period;
(c) furnish to the Purchaser such number of copies of
the registration statement and the prospectus included therein
(including each preliminary prospectus) as the Purchaser may reasonably
request in order to facilitate the Public Sale or other disposition of
the Restricted Stock covered by such registration statement;
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<PAGE>
(d) use reasonable commercial efforts to register or
qualify the Restricted Stock covered by such registration statement
under the securities or blue sky laws of such jurisdictions as the
Purchaser shall reasonably request, provided that the Company will not
be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
paragraph (d), (ii) subject itself to taxation in any such jurisdiction
or (iii) consent to general service of process in any jurisdiction;
(e) use reasonable commercial efforts to list the
Restricted Stock covered by such registration statement with any
securities exchange on which any Common Stock of the Company is then
listed;
(f) immediately notify the Purchaser at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing.
For purposes of paragraphs (a) and (b) above and of Section 4(c) hereof, the
period of distribution of Restricted Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the period of
distribution of Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Restricted Stock covered thereby or
three months after the effective date thereof.
In connection with each registration hereunder, the Purchaser will
furnish to the Company in writing such information with respect to itself and
the proposed distribution by them as shall be reasonably necessary in order to
assure compliance with federal and applicable state securities laws.
6. EXPENSES. All expenses incurred by the Company in complying with
Section 4 hereof, including without limitation all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars and costs
of insurance, but excluding any Selling Expenses, are herein called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Restricted Stock are herein called "Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to Section 4 hereof. All Selling Expenses
in connection with any registration statement filed pursuant to Section 4 hereof
shall be borne by the Purchaser, or by such persons other than the Company as
may agree.
7. INDEMNIFICATION. (a) In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant to Section 4, the Company
will indemnify and hold harmless the Purchaser and each officer, director and
each other person, if any, who controls the Purchaser
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<PAGE>
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Purchaser or such controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Restricted Stock was registered under the Securities Act pursuant to Section 4,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Purchaser and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by the Purchaser or such
controlling person in writing.
(b) In the event of a registration of any of the Restricted
Stock under the Securities Act pursuant to Section 4, the Purchaser will
indemnify and hold harmless the Company and each officer, director and each
other person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer or director or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Section 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Company and each
such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Purchaser will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
the Purchaser, furnished in writing to the Company by the Purchaser specifically
for use in such registration statement or prospectus; PROVIDED, FURTHER,
HOWEVER, that the Purchaser shall not be liable to and does not indemnify any
underwriter in the offering or sale of Restricted Stock, or any person who,
within the meaning of the Securities Act, controls any underwriter, in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such person's failure to
send or give a copy of the final prospectus, as the same may be supplemented or
amended, to the person asserting an untrue statement or omission or alleged
untrue statement or omission at or prior to the written confirmation of the sale
of Restricted Stock to such person, if such statement or omission was corrected
in such final prospectus.
5
<PAGE>
(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to any indemnified party other than under this Section 7. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 7 for any
legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected; PROVIDED, HOWEVER, that, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional to
those available to the indemnifying party, or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
Notwithstanding the foregoing, any indemnified party shall have the
right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party shall have failed to retain counsel for the
indemnified person as aforesaid or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such counsel.
It is understood that the indemnifying party shall not, in connection with any
action or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in paragraphs (a) and
(b) of this Section 7 is unavailable or insufficient to hold harmless an
indemnified party under such paragraphs in respect of any losses, claims,
damages or liabilities or actions in respect thereof referred to therein, then
each indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of the Company, on the one hand, and
the Purchaser, on the other, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or actions as well
as any other relevant equitable considerations, including the failure to give
any notice under paragraph (c) of this Section 7. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by the
Company, on the one hand, or the Purchaser, on the other hand, and
6
<PAGE>
to the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Purchaser agree that it would not be just and equitable if contributions
pursuant to this paragraph were determined by PRO RATA allocation or by any
other method of allocation which did not take account of the equitable
considerations referred to above in this paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or action in respect thereof, referred to above in this paragraph, shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. No person guilty of fraudulent misrepresentations (within the meaning
of Section 11(f) of the Securities Act), shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation.
The indemnification of underwriters provided for in this Section 7
shall be on such other terms and conditions as are at the time customary and
reasonably required by such underwriters.
8. CHANGES IN RESTRICTED STOCK. If, and as often as, there are any
changes in the Common Stock by way of stock split, stock dividend, combination
or reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Common Stock as so changed and
shall apply to any securities received in any such transaction.
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Purchaser as follows:
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or By-laws of the Company, or any
provision of any indenture, agreement or other instrument to which it or any of
its properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to general equity principles
and to applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws from time to time in effect affecting the
enforcement of creditors' rights generally (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
10. RULE 144 REPORTING. The Company agrees as follows:
(a) The Company shall make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after the date it is first required to do
so.
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<PAGE>
(b) The Company shall file with the Commission in a timely
manner all reports and other documents as the Commission may prescribe under
Section 13(a) or 15(d) of the Exchange Act at any time after the Company has
become subject to such reporting requirements of the Exchange Act.
(c) The Company shall furnish to the Purchaser promptly upon
request (i) a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time from and after the date it first
becomes subject to such reporting requirements), and of the Securities Act and
the Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents so filed as the Purchaser
may reasonably request to avail itself of any rule or regulation of the
Commission allowing it to sell any Restricted Stock without registration.
11. MISCELLANEOUS. (a) Neither party may assign this Agreement without
the prior written consent of the other, and any attempt to do so shall be null
and void.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by first class registered
mail, postage prepaid, addressed as follows:
if to the Company, to it at 29 West 36th Street, New York, New
York 10018, Attn: President;
if to the Purchaser, to it at 959 Eighth Avenue, New York, NY
10019, Attn: ___________;
or, in either case, at such other address or addresses as shall have been
furnished in writing to the other party.
(c) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(d) This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and may not be modified or
amended except in writing executed by the Company and the Purchaser.
(e) This Agreement may be executed in two or more
counterparts, by original or facsimile signature, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
(f) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
STARMEDIA NETWORK, INC.
By:
-----------------------------------
Name:
Title:
EBAY INC.
By:
-----------------------------------
Name:
Title:
9
<PAGE>
Exhibit 10.24
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT dated as of May 3, 1999, between
STARMEDIA NETWORK, INC., a Delaware corporation (the "Company"), and Europortal
Holding S.A., a corporation organized and existing under the laws of Luxembourg
(the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a
Stock Purchase Agreement dated as of April 30, 1999 (the "STOCK PURCHASE
AGREEMENT") pursuant to which, subject to the terms and conditions set forth
therein, the Purchaser has agreed to acquire, and the Company has agreed to
sell, certain shares of Common Stock (as defined herein);
WHEREAS, it is a condition to the Purchaser's obligations to purchase
such shares of Common Stock under the Stock Purchase Agreement that the Company
enter into this Agreement to provide certain registration rights;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and subject to and
on the terms and conditions herein set forth, the parties hereto agree as
follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have
the following respective meanings:
"COMMON STOCK" shall mean the Common Stock, par value $0.001 per share,
of the Company.
"COMMISSION" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"PUBLIC SALE" shall mean any sale of Common Stock to the public
pursuant to an offering registered under the Securities Act or pursuant to the
provisions of Rule 144 (or any successor or similar rule) adopted under the
Securities Act.
"PURCHASED SHARES" shall mean those shares of Common Stock purchased by
the Purchaser pursuant to the Stock Purchase Agreement.
"REGISTRATION EXPENSES" shall mean the expenses so described in Section
6 hereof.
"RESTRICTED STOCK" shall mean the Purchased Shares, the certificates
for which are required to bear the legend set forth in Section 2 hereof,
excluding Purchased Shares which have been (i) registered under the Securities
Act pursuant to an effective registration statement filed
<PAGE>
thereunder and disposed of in accordance with the registration statement
covering them or (ii) publicly sold pursuant to Rule 144 under the Securities
Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean the expenses so described in Section 6
hereof.
2. RESTRICTIVE LEGEND. Each certificate representing one or more shares
of Restricted Stock, and each certificate issued upon exchange or transfer
thereof, other than in a Public Sale or as otherwise permitted by clause (ii) of
Section 3, shall be stamped or otherwise imprinted with a legend substantially
in the following form:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH
ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER
EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED."
3. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of any
share of Restricted Stock (other than under the circumstances described in
Section 4 hereof), the Purchaser shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner of
the proposed transfer and, if requested by the Company, shall be accompanied by
an opinion of counsel reasonably satisfactory to the Company to the effect that
the proposed transfer of the Restricted Stock may be effected without
registration under the Securities Act, whereupon the holder of such Restricted
Stock may transfer such Restricted Stock in accordance with the terms of its
notice; PROVIDED, HOWEVER, that no such opinion or other documentation shall be
required if such notice shall cover a distribution by a partnership to its
partners or by a limited liability company to its members. Each certificate of
Restricted Stock transferred as above provided shall bear the legend set forth
in Section 2, unless (i) such transfer is to the public in accordance with the
provisions of Rule 144 (or any other rule permitting Public Sale without
registration under the Securities Act) or (ii) the opinion of counsel referred
to above is to the further effect that the transferee and any subsequent
transferee (other than an affiliate of the Company) would be entitled to
transfer such securities in a Public Sale without registration under the
Securities Act. The restrictions provided for in this Section shall not apply to
securities that are not required to bear the legend prescribed by Section 2 in
accordance with the provisions of that Section.
4. REGISTRATION. If the Company at any time during the period
commencing on the first anniversary of the date hereof and ending on the third
anniversary of the date hereof proposes to register any of its Common Stock
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with
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<PAGE>
respect to registration statements on Forms S-4 or S-8, any successors thereto
or any other form not available for registering the Restricted Stock for sale to
the public or a Form S-1 covering solely an employee benefit plan), it will give
written notice at such time to the Purchaser of its intention to do so. Upon the
written request of the Purchaser, given within twenty (20) days after receipt of
any such notice by the Company, to register any of its Restricted Stock (which
request shall state the intended method of disposition thereof), the Company
will use reasonable commercial efforts to cause the Restricted Stock as to which
registration shall have been so requested, to be included in the securities to
be covered by the registration statement proposed to be filed by the Company,
all to the extent requisite to permit the sale or other disposition by the
Purchaser (in accordance with its written request) of such Restricted Stock to
be so registered; PROVIDED that nothing herein shall prevent the Company from
abandoning or delaying any such registration at any time. In the event that any
registration pursuant to this Section 4 shall be, in whole or in part, an
underwritten public offering of Common Stock, any request by the Purchaser
pursuant to this Section 4 to register Restricted Stock shall specify that
either (i) such Restricted Stock is to be included in the underwriting on the
same terms and conditions as the shares of Common Stock otherwise being sold
through underwriters under such registration or (ii) such Restricted Stock is to
be sold in the open market without any underwriting, on terms and conditions
comparable to those normally applicable to offerings of common stock in
reasonably similar circumstances. The number of shares of Restricted Stock to be
included in such registration may be reduced, if and to the extent that the
managing underwriter shall be of the opinion that such inclusion would adversely
affect the marketing of the securities to be sold by the Company in such
underwriting.
5. REGISTRATION PROCEDURES. Subject to the Company's right to abandon
or delay any such registration at any time and for any reason, if and whenever
the Company is required by the provisions of Section 4 hereof to use reasonable
commercial efforts to effect the registration of any of the Restricted Stock
under the Securities Act, the Company will:
(a) prepare and file with the Commission a
registration statement with respect to such securities and use
reasonable commercial efforts to cause such registration statement to
become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective for the period specified in
paragraph (a) above and to comply with the provisions of the Securities
Act with respect to the disposition of all Restricted Stock covered by
such registration statement in accordance with the Purchaser's intended
method of disposition set forth in such registration statement for such
period;
(c) furnish to the Purchaser such number of copies of
the registration statement and the prospectus included therein
(including each preliminary prospectus) as the Purchaser may reasonably
request in order to facilitate the Public Sale or other disposition of
the Restricted Stock covered by such registration statement;
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(d) use reasonable commercial efforts to register or
qualify the Restricted Stock covered by such registration statement
under the securities or blue sky laws of such jurisdictions as the
Purchaser shall reasonably request, provided that the Company will not
be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
paragraph (d), (ii) subject itself to taxation in any such jurisdiction
or (iii) consent to general service of process in any jurisdiction;
(e) use reasonable commercial efforts to list the
Restricted Stock covered by such registration statement with any
securities exchange on which any Common Stock of the Company is then
listed;
(f) immediately notify the Purchaser at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing.
For purposes of paragraphs (a) and (b) above and of Section 4(c) hereof, the
period of distribution of Restricted Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the period of
distribution of Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Restricted Stock covered thereby or
three months after the effective date thereof.
In connection with each registration hereunder, the Purchaser will
furnish to the Company in writing such information with respect to itself and
the proposed distribution by them as shall be reasonably necessary in order to
assure compliance with federal and applicable state securities laws.
6. EXPENSES. All expenses incurred by the Company in complying with
Section 4 hereof, including without limitation all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars and costs
of insurance, but excluding any Selling Expenses, are herein called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Restricted Stock are herein called "Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to Section 4 hereof. All Selling Expenses
in connection with any registration statement filed pursuant to Section 4 hereof
shall be borne by the Purchaser, or by such persons other than the Company as
may agree.
7. INDEMNIFICATION. (a) In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant to Section 4, the Company
will indemnify and hold harmless the Purchaser and each officer, director and
each other person, if any, who controls the Purchaser
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<PAGE>
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Purchaser or such controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Restricted Stock was registered under the Securities Act pursuant to Section 4,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Purchaser and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by the Purchaser or such
controlling person in writing.
(b) In the event of a registration of any of the Restricted
Stock under the Securities Act pursuant to Section 4, the Purchaser will
indemnify and hold harmless the Company and each officer, director and each
other person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer or director or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Section 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Company and each
such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Purchaser will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
the Purchaser, furnished in writing to the Company by the Purchaser specifically
for use in such registration statement or prospectus; PROVIDED, FURTHER,
HOWEVER, that the Purchaser shall not be liable to and does not indemnify any
underwriter in the offering or sale of Restricted Stock, or any person who,
within the meaning of the Securities Act, controls any underwriter, in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such person's failure to
send or give a copy of the final prospectus, as the same may be supplemented or
amended, to the person asserting an untrue statement or omission or alleged
untrue statement or omission at or prior to the written confirmation of the sale
of Restricted Stock to such person, if such statement or omission was corrected
in such final prospectus.
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(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to any indemnified party other than under this Section 7. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 7 for any
legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected; PROVIDED, HOWEVER, that, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional to
those available to the indemnifying party, or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
Notwithstanding the foregoing, any indemnified party shall have the
right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party shall have failed to retain counsel for the
indemnified person as aforesaid or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such counsel.
It is understood that the indemnifying party shall not, in connection with any
action or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in paragraphs (a) and
(b) of this Section 7 is unavailable or insufficient to hold harmless an
indemnified party under such paragraphs in respect of any losses, claims,
damages or liabilities or actions in respect thereof referred to therein, then
each indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of the Company, on the one hand, and
the Purchaser, on the other, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or actions as well
as any other relevant equitable considerations, including the failure to give
any notice under paragraph (c) of this Section 7. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by the
Company, on the one hand, or the Purchaser, on the other hand, and
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<PAGE>
to the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Purchaser agree that it would not be just and equitable if contributions
pursuant to this paragraph were determined by PRO RATA allocation or by any
other method of allocation which did not take account of the equitable
considerations referred to above in this paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or action in respect thereof, referred to above in this paragraph, shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. No person guilty of fraudulent misrepresentations (within the meaning
of Section 11(f) of the Securities Act), shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation.
The indemnification of underwriters provided for in this Section 7
shall be on such other terms and conditions as are at the time customary and
reasonably required by such underwriters.
8. CHANGES IN RESTRICTED STOCK. If, and as often as, there are any
changes in the Common Stock by way of stock split, stock dividend, combination
or reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Common Stock as so changed and
shall apply to any securities received in any such transaction.
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Purchaser as follows:
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or By-laws of the Company, or any
provision of any indenture, agreement or other instrument to which it or any of
its properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to general equity principles
and to applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws from time to time in effect affecting the
enforcement of creditors' rights generally (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
10. RULE 144 REPORTING. The Company agrees as follows:
(a) The Company shall make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after the date it is first required to do
so.
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<PAGE>
(b) The Company shall file with the Commission in a timely
manner all reports and other documents as the Commission may prescribe under
Section 13(a) or 15(d) of the Exchange Act at any time after the Company has
become subject to such reporting requirements of the Exchange Act.
(c) The Company shall furnish to the Purchaser promptly upon
request (i) a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time from and after the date it first
becomes subject to such reporting requirements), and of the Securities Act and
the Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents so filed as the Purchaser
may reasonably request to avail itself of any rule or regulation of the
Commission allowing it to sell any Restricted Stock without registration.
11. MISCELLANEOUS. (a) Neither party may assign this Agreement without
the prior written consent of the other, and any attempt to do so shall be null
and void.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by first class registered
mail, postage prepaid, addressed as follows:
if to the Company, to it at 29 West 36th Street, New York, New
York 10018, Attn: President;
if to the Purchaser, to it at
____________________________________, Attn: ___________;
or, in either case, at such other address or addresses as shall have been
furnished in writing to the other party.
(c) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(d) This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and may not be modified or
amended except in writing executed by the Company and the Purchaser.
(e) This Agreement may be executed in two or more
counterparts, by original or facsimile signature, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
(f) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
STARMEDIA NETWORK, INC.
By:
-----------------------------------
Name:
Title:
EUROPORTAL HOLDING S.A.
By:
-----------------------------------
Name:
Title:
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Exhibit 10.25
REGISTRATION RIGHTS AGREEMENT dated as of May 3, 1999, between
STARMEDIA NETWORK, INC., a Delaware corporation (the "Company"), and CRITICAL
PATH, INC., a Delaware (the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a
Stock Purchase Agreement dated as of May 3, 1999 (the "STOCK PURCHASE
AGREEMENT") pursuant to which, subject to the terms and conditions set forth
therein, the Purchaser has agreed to acquire, and the Company has agreed to
sell, certain shares of Common Stock (as defined herein);
WHEREAS, it is a condition to the Purchaser's obligations to purchase
such shares of Common Stock under the Stock Purchase Agreement that the Company
enter into this Agreement to provide certain registration rights;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and subject to and
on the terms and conditions herein set forth, the parties hereto agree as
follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have
the following respective meanings:
"COMMON STOCK" shall mean the Common Stock, par value $0.001 per share,
of the Company.
"COMMISSION" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"PUBLIC SALE" shall mean any sale of Common Stock to the public
pursuant to an offering registered under the Securities Act or pursuant to the
provisions of Rule 144 (or any successor or similar rule) adopted under the
Securities Act.
"PURCHASED SHARES" shall mean those shares of Common Stock purchased by
the Purchaser pursuant to the Stock Purchase Agreement.
"REGISTRATION EXPENSES" shall mean the expenses so described in Section
6 hereof.
"RESTRICTED STOCK" shall mean the Purchased Shares, the certificates
for which are required to bear the legend set forth in Section 2 hereof,
excluding Purchased Shares which have been (i) registered under the Securities
Act pursuant to an effective registration statement filed
<PAGE>
thereunder and disposed of in accordance with the registration statement
covering them or (ii) publicly sold pursuant to Rule 144 under the Securities
Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean the expenses so described in Section 6
hereof.
2. RESTRICTIVE LEGEND. Each certificate representing one or more shares
of Restricted Stock, and each certificate issued upon exchange or transfer
thereof, other than in a Public Sale or as otherwise permitted by clause (ii) of
Section 3, shall be stamped or otherwise imprinted with a legend substantially
in the following form:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED."
3. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of any
share of Restricted Stock (other than under the circumstances described in
Section 4 hereof), the Purchaser shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner of
the proposed transfer and, if requested by the Company, shall be accompanied by
an opinion of counsel reasonably satisfactory to the Company to the effect that
the proposed transfer of the Restricted Stock may be effected without
registration under the Securities Act, whereupon the holder of such Restricted
Stock may transfer such Restricted Stock in accordance with the terms of its
notice; PROVIDED, HOWEVER, that no such opinion or other documentation shall be
required if such notice shall cover a distribution by a partnership to its
partners or by a limited liability company to its members. Each certificate of
Restricted Stock transferred as above provided shall bear the legend set forth
in Section 2, unless (i) such transfer is to the public in accordance with the
provisions of Rule 144 (or any other rule permitting Public Sale without
registration under the Securities Act) or (ii) the opinion of counsel referred
to above is to the further effect that the transferee and any subsequent
transferee (other than an affiliate of the Company) would be entitled to
transfer such securities in a Public Sale without registration under the
Securities Act. The restrictions provided for in this Section shall not apply to
securities that are not required to bear the legend prescribed by Section 2 in
accordance with the provisions of that Section.
4. REGISTRATION. If the Company at any time during the period
commencing on the first anniversary of the date hereof and ending on the third
anniversary of the date hereof proposes to register any of its Common Stock
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with
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<PAGE>
respect to registration statements on Forms S-4 or S-8, any successors thereto
or any other form not available for registering the Restricted Stock for sale to
the public or a Form S-1 covering solely an employee benefit plan), it will give
written notice at such time to the Purchaser of its intention to do so. Upon the
written request of the Purchaser, given within twenty (20) days after receipt of
any such notice by the Company, to register any of its Restricted Stock (which
request shall state the intended method of disposition thereof), the Company
will use reasonable commercial efforts to cause the Restricted Stock as to which
registration shall have been so requested, to be included in the securities to
be covered by the registration statement proposed to be filed by the Company,
all to the extent requisite to permit the sale or other disposition by the
Purchaser (in accordance with its written request) of such Restricted Stock to
be so registered; PROVIDED that nothing herein shall prevent the Company from
abandoning or delaying any such registration at any time. In the event that any
registration pursuant to this Section 4 shall be, in whole or in part, an
underwritten public offering of Common Stock, any request by the Purchaser
pursuant to this Section 4 to register Restricted Stock shall specify that
either (i) such Restricted Stock is to be included in the underwriting on the
same terms and conditions as the shares of Common Stock otherwise being sold
through underwriters under such registration or (ii) such Restricted Stock is to
be sold in the open market without any underwriting, on terms and conditions
comparable to those normally applicable to offerings of common stock in
reasonably similar circumstances. The number of shares of Restricted Stock to be
included in such registration may be reduced, if and to the extent that the
managing underwriter shall be of the opinion that such inclusion would adversely
affect the marketing of the securities to be sold by the Company in such
underwriting.
5. REGISTRATION PROCEDURES. Subject to the Company's right to abandon
or delay any such registration at any time and for any reason, if and whenever
the Company is required by the provisions of Section 4 hereof to use reasonable
commercial efforts to effect the registration of any of the Restricted Stock
under the Securities Act, the Company will:
(a) prepare and file with the Commission a
registration statement with respect to such securities and use
reasonable commercial efforts to cause such registration statement to
become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective for the period specified in
paragraph (a) above and to comply with the provisions of the Securities
Act with respect to the disposition of all Restricted Stock covered by
such registration statement in accordance with the Purchaser's intended
method of disposition set forth in such registration statement for such
period;
(c) furnish to the Purchaser such number of copies of
the registration statement and the prospectus included therein
(including each preliminary prospectus) as the Purchaser may reasonably
request in order to facilitate the Public Sale or other disposition of
the Restricted Stock covered by such registration statement;
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<PAGE>
(d) use reasonable commercial efforts to register or
qualify the Restricted Stock covered by such registration statement
under the securities or blue sky laws of such jurisdictions as the
Purchaser shall reasonably request, provided that the Company will not
be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
paragraph (d), (ii) subject itself to taxation in any such jurisdiction
or (iii) consent to general service of process in any jurisdiction;
(e) use reasonable commercial efforts to list the
Restricted Stock covered by such registration statement with any
securities exchange on which any Common Stock of the Company is then
listed;
(f) immediately notify the Purchaser at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing.
For purposes of paragraphs (a) and (b) above and of Section 4(c) hereof, the
period of distribution of Restricted Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the period of
distribution of Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Restricted Stock covered thereby or
three months after the effective date thereof.
In connection with each registration hereunder, the Purchaser will
furnish to the Company in writing such information with respect to itself and
the proposed distribution by them as shall be reasonably necessary in order to
assure compliance with federal and applicable state securities laws.
6. EXPENSES. All expenses incurred by the Company in complying with
Section 4 hereof, including without limitation all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars and costs
of insurance, but excluding any Selling Expenses, are herein called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Restricted Stock are herein called "Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to Section 4 hereof. All Selling Expenses
in connection with any registration statement filed pursuant to Section 4 hereof
shall be borne by the Purchaser, or by such persons other than the Company as
may so agree with the Purchaser.
7. INDEMNIFICATION. (a) In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant to Section 4, the Company
will indemnify and hold harmless the Purchaser and each officer, director and
each other person, if any, who controls the Purchaser
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<PAGE>
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Purchaser or such controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Restricted Stock was registered under the Securities Act pursuant to Section 4,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Purchaser and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by the Purchaser or such
controlling person in writing.
(b) In the event of a registration of any of the Restricted
Stock under the Securities Act pursuant to Section 4, the Purchaser will
indemnify and hold harmless the Company and each officer, director and each
other person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer or director or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Section 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Company and each
such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Purchaser will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
the Purchaser, furnished in writing to the Company by the Purchaser; PROVIDED,
FURTHER, HOWEVER, that the Purchaser shall not be liable to and does not
indemnify any underwriter in the offering or sale of Restricted Stock, or any
person who, within the meaning of the Securities Act, controls any underwriter,
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of such person's
failure to send or give a copy of the final prospectus, as the same may be
supplemented or amended, to the person asserting an untrue statement or omission
or alleged untrue statement or omission at or prior to the written confirmation
of the sale of Restricted Stock to such person, if such statement or omission
was corrected in such final prospectus.
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(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to any indemnified party other than under this Section 7. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 7 for any
legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected; PROVIDED, HOWEVER, that, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional to
those available to the indemnifying party, or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
Notwithstanding the foregoing, any indemnified party shall have the
right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party shall have failed to retain counsel for the
indemnified person as aforesaid or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such counsel.
It is understood that the indemnifying party shall not, in connection with any
action or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in paragraphs (a) and
(b) of this Section 7 is unavailable or insufficient to hold harmless an
indemnified party under such paragraphs in respect of any losses, claims,
damages or liabilities or actions in respect thereof referred to therein, then
each indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of the Company, on the one hand, and
the Purchaser, on the other, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or actions as well
as any other relevant equitable considerations, including the failure to give
any notice under paragraph (c) of this Section 7. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by the
Company, on the one hand, or the Purchaser, on the other hand, and
6
<PAGE>
to the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Purchaser agree that it would not be just and equitable if contributions
pursuant to this paragraph were determined by PRO RATA allocation or by any
other method of allocation which did not take account of the equitable
considerations referred to above in this paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or action in respect thereof, referred to above in this paragraph, shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. No person guilty of fraudulent misrepresentations (within the meaning
of Section 11(f) of the Securities Act), shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation.
The indemnification of underwriters provided for in this Section 7
shall be on such other terms and conditions as are at the time customary and
reasonably required by such underwriters.
8. CHANGES IN RESTRICTED STOCK. If, and as often as, there are any
changes in the Common Stock by way of stock split, stock dividend, combination
or reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Common Stock as so changed and
shall apply to any securities received in any such transaction.
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Purchaser as follows:
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or By-laws of the Company, or any
provision of any indenture, agreement or other instrument to which it or any of
its properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to general equity principles
and to applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws from time to time in effect affecting the
enforcement of creditors' rights generally (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
10. RULE 144 REPORTING. The Company agrees as follows:
(a) The Company shall make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after the date it is first required to do
so.
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<PAGE>
(b) The Company shall file with the Commission in a timely
manner all reports and other documents as the Commission may prescribe under
Section 13(a) or 15(d) of the Exchange Act at any time after the Company has
become subject to such reporting requirements of the Exchange Act.
(c) The Company shall furnish to the Purchaser promptly upon
request (i) a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time from and after the date it first
becomes subject to such reporting requirements), and of the Securities Act and
the Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents so filed as the Purchaser
may reasonably request to avail itself of any rule or regulation of the
Commission allowing it to sell any Restricted Stock without registration.
11. MISCELLANEOUS. (a) Neither party may assign this Agreement without
the prior written consent of the other, and any attempt to do so shall be null
and void.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by first class registered
mail, postage prepaid, addressed as follows:
if to the Company, to it at 29 West 36th Street, New York, New
York 10018, Attn: President;
if to the Purchaser, to it at Critical Path, Inc., 320 First
Street, San Francisco, California, Attention: Doug Hickey;
or, in either case, at such other address or addresses as shall have been
furnished in writing to the other party.
(c) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(d) This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and may not be modified or
amended except in writing executed by the Company and the Purchaser.
(e) This Agreement may be executed in two or more
counterparts, by original or facsimile signature, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
(f) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
STARMEDIA NETWORK, INC.
By:
------------------------
Name:
Title:
CRITICAL PATH, INC.
By:
------------------------
Name:
Title:
9
<PAGE>
Exhibit 10.26
REGISTRATION RIGHTS AGREEMENT dated as of May 3, 1999, between
STARMEDIA NETWORK, INC., a Delaware corporation (the "Company"), and
Europortal Holding, S.A., a corporation organized and existing under the laws
of Luxembourg (the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a Stock
Purchase Agreement dated as of May 5, 1999 (the "STOCK PURCHASE AGREEMENT")
pursuant to which, subject to the terms and conditions set forth therein, the
Purchaser has agreed to acquire, and the Company has agreed to sell, certain
shares of Common Stock (as defined herein);
WHEREAS, it is a condition to the Purchaser's obligations to purchase
such shares of Common Stock under the Stock Purchase Agreement that the Company
enter into this Agreement to provide certain registration rights;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and subject to and
on the terms and conditions herein set forth, the parties hereto agree as
follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have
the following respective meanings:
"COMMON STOCK" shall mean the Common Stock, par value $0.001 per share,
of the Company.
"COMMISSION" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"PUBLIC SALE" shall mean any sale of Common Stock to the public
pursuant to an offering registered under the Securities Act or pursuant to the
provisions of Rule 144 (or any successor or similar rule) adopted under the
Securities Act.
"PURCHASED SHARES" shall mean those shares of Common Stock purchased by
the Purchaser pursuant to the Stock Purchase Agreement.
"REGISTRATION EXPENSES" shall mean the expenses so described in Section
6 hereof.
"RESTRICTED STOCK" shall mean the Purchased Shares, the certificates
for which are required to bear the legend set forth in Section 2 hereof,
excluding Purchased Shares which have been (i) registered under the Securities
Act pursuant to an effective registration statement filed
<PAGE>
thereunder and disposed of in accordance with the registration statement
covering them or (ii) publicly sold pursuant to Rule 144 under the Securities
Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean the expenses so described in Section 6
hereof.
2. RESTRICTIVE LEGEND. Each certificate representing one or more shares
of Restricted Stock, and each certificate issued upon exchange or transfer
thereof, other than in a Public Sale or as otherwise permitted by clause (ii) of
Section 3, shall be stamped or otherwise imprinted with a legend substantially
in the following form:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED."
3. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of any
share of Restricted Stock (other than under the circumstances described in
Section 4 hereof), the Purchaser shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner of
the proposed transfer and, if requested by the Company, shall be accompanied by
an opinion of counsel reasonably satisfactory to the Company to the effect that
the proposed transfer of the Restricted Stock may be effected without
registration under the Securities Act, whereupon the holder of such Restricted
Stock may transfer such Restricted Stock in accordance with the terms of its
notice; PROVIDED, HOWEVER, that no such opinion or other documentation shall be
required if such notice shall cover a distribution by a partnership to its
partners or by a limited liability company to its members. Each certificate of
Restricted Stock transferred as above provided shall bear the legend set forth
in Section 2, unless (i) such transfer is to the public in accordance with the
provisions of Rule 144 (or any other rule permitting Public Sale without
registration under the Securities Act) or (ii) the opinion of counsel referred
to above is to the further effect that the transferee and any subsequent
transferee (other than an affiliate of the Company) would be entitled to
transfer such securities in a Public Sale without registration under the
Securities Act. The restrictions provided for in this Section shall not apply to
securities that are not required to bear the legend prescribed by Section 2 in
accordance with the provisions of that Section.
4. REGISTRATION. If the Company at any time during the period
commencing on the first anniversary of the date hereof and ending on the third
anniversary of the date hereof proposes to register any of its Common Stock
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with
2
<PAGE>
respect to registration statements on Forms S-4 or S-8, any successors thereto
or any other form not available for registering the Restricted Stock for sale to
the public or a Form S-1 covering solely an employee benefit plan), it will give
written notice at such time to the Purchaser of its intention to do so. Upon the
written request of the Purchaser, given within twenty (20) days after receipt of
any such notice by the Company, to register any of its Restricted Stock (which
request shall state the intended method of disposition thereof), the Company
will use reasonable commercial efforts to cause the Restricted Stock as to which
registration shall have been so requested, to be included in the securities to
be covered by the registration statement proposed to be filed by the Company,
all to the extent requisite to permit the sale or other disposition by the
Purchaser (in accordance with its written request) of such Restricted Stock to
be so registered; PROVIDED that nothing herein shall prevent the Company from
abandoning or delaying any such registration at any time. In the event that any
registration pursuant to this Section 4 shall be, in whole or in part, an
underwritten public offering of Common Stock, any request by the Purchaser
pursuant to this Section 4 to register Restricted Stock shall specify that
either (i) such Restricted Stock is to be included in the underwriting on the
same terms and conditions as the shares of Common Stock otherwise being sold
through underwriters under such registration or (ii) such Restricted Stock is to
be sold in the open market without any underwriting, on terms and conditions
comparable to those normally applicable to offerings of common stock in
reasonably similar circumstances. The number of shares of Restricted Stock to be
included in such registration may be reduced, if and to the extent that the
managing underwriter shall be of the opinion that such inclusion would adversely
affect the marketing of the securities to be sold by the Company in such
underwriting.
5. REGISTRATION PROCEDURES. Subject to the Company's right to abandon
or delay any such registration at any time and for any reason, if and whenever
the Company is required by the provisions of Section 4 hereof to use reasonable
commercial efforts to effect the registration of any of the Restricted Stock
under the Securities Act, the Company will:
(a) prepare and file with the Commission a
registration statement with respect to such securities and use
reasonable commercial efforts to cause such registration statement to
become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective for the period specified in
paragraph (a) above and to comply with the provisions of the Securities
Act with respect to the disposition of all Restricted Stock covered by
such registration statement in accordance with the Purchaser's intended
method of disposition set forth in such registration statement for such
period;
(c) furnish to the Purchaser such number of copies of
the registration statement and the prospectus included therein
(including each preliminary prospectus) as the Purchaser may reasonably
request in order to facilitate the Public Sale or other disposition of
the Restricted Stock covered by such registration statement;
3
<PAGE>
(d) use reasonable commercial efforts to register or
qualify the Restricted Stock covered by such registration statement
under the securities or blue sky laws of such jurisdictions as the
Purchaser shall reasonably request, provided that the Company will not
be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
paragraph (d), (ii) subject itself to taxation in any such jurisdiction
or (iii) consent to general service of process in any jurisdiction;
(e) use reasonable commercial efforts to list the
Restricted Stock covered by such registration statement with any
securities exchange on which any Common Stock of the Company is then
listed;
(f) immediately notify the Purchaser at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing.
For purposes of paragraphs (a) and (b) above and of Section 4(c) hereof, the
period of distribution of Restricted Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the period of
distribution of Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Restricted Stock covered thereby or
three months after the effective date thereof.
In connection with each registration hereunder, the Purchaser will
furnish to the Company in writing such information with respect to itself and
the proposed distribution by them as shall be reasonably necessary in order to
assure compliance with federal and applicable state securities laws.
6. EXPENSES. All expenses incurred by the Company in complying with
Section 4 hereof, including without limitation all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars and costs
of insurance, but excluding any Selling Expenses, are herein called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Restricted Stock are herein called "Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to Section 4 hereof. All Selling Expenses
in connection with any registration statement filed pursuant to Section 4 hereof
shall be borne by the Purchaser, or by such persons other than the Company as
may so agree with the Purchaser.
7. INDEMNIFICATION. (a) In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant to Section 4, the Company
will indemnify and hold harmless the Purchaser and each officer, director and
each other person, if any, who controls the Purchaser
4
<PAGE>
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Purchaser or such controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Restricted Stock was registered under the Securities Act pursuant to Section 4,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Purchaser and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by the Purchaser or such
controlling person in writing.
(b) In the event of a registration of any of the Restricted
Stock under the Securities Act pursuant to Section 4, the Purchaser will
indemnify and hold harmless the Company and each officer, director and each
other person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer or director or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Section 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Company and each
such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Purchaser will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
the Purchaser, furnished in writing to the Company by the Purchaser; PROVIDED,
FURTHER, HOWEVER, that the Purchaser shall not be liable to and does not
indemnify any underwriter in the offering or sale of Restricted Stock, or any
person who, within the meaning of the Securities Act, controls any underwriter,
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of such person's
failure to send or give a copy of the final prospectus, as the same may be
supplemented or amended, to the person asserting an untrue statement or omission
or alleged untrue statement or omission at or prior to the written confirmation
of the sale of Restricted Stock to such person, if such statement or omission
was corrected in such final prospectus.
5
<PAGE>
(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to any indemnified party other than under this Section 7. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 7 for any
legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected; PROVIDED, HOWEVER, that, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional to
those available to the indemnifying party, or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
Notwithstanding the foregoing, any indemnified party shall have the
right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party shall have failed to retain counsel for the
indemnified person as aforesaid or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such counsel.
It is understood that the indemnifying party shall not, in connection with any
action or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in paragraphs (a) and
(b) of this Section 7 is unavailable or insufficient to hold harmless an
indemnified party under such paragraphs in respect of any losses, claims,
damages or liabilities or actions in respect thereof referred to therein, then
each indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of the Company, on the one hand, and
the Purchaser, on the other, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or actions as well
as any other relevant equitable considerations, including the failure to give
any notice under paragraph (c) of this Section 7. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by the
Company, on the one hand, or the Purchaser, on the other hand, and
6
<PAGE>
to the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Purchaser agree that it would not be just and equitable if contributions
pursuant to this paragraph were determined by PRO RATA allocation or by any
other method of allocation which did not take account of the equitable
considerations referred to above in this paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or action in respect thereof, referred to above in this paragraph, shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. No person guilty of fraudulent misrepresentations (within the meaning
of Section 11(f) of the Securities Act), shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation.
The indemnification of underwriters provided for in this Section 7
shall be on such other terms and conditions as are at the time customary and
reasonably required by such underwriters.
8. CHANGES IN RESTRICTED STOCK. If, and as often as, there are any
changes in the Common Stock by way of stock split, stock dividend, combination
or reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Common Stock as so changed and
shall apply to any securities received in any such transaction.
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Purchaser as follows:
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or By-laws of the Company, or any
provision of any indenture, agreement or other instrument to which it or any of
its properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to general equity principles
and to applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws from time to time in effect affecting the
enforcement of creditors' rights generally (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
10. RULE 144 REPORTING. The Company agrees as follows:
(a) The Company shall make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after the date it is first required to do
so.
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<PAGE>
(b) The Company shall file with the Commission in a timely
manner all reports and other documents as the Commission may prescribe under
Section 13(a) or 15(d) of the Exchange Act at any time after the Company has
become subject to such reporting requirements of the Exchange Act.
(c) The Company shall furnish to the Purchaser promptly upon
request (i) a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time from and after the date it first
becomes subject to such reporting requirements), and of the Securities Act and
the Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents so filed as the Purchaser
may reasonably request to avail itself of any rule or regulation of the
Commission allowing it to sell any Restricted Stock without registration.
11. MISCELLANEOUS. (a) Neither party may assign this Agreement without
the prior written consent of the other, and any attempt to do so shall be null
and void.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by first class registered
mail, postage prepaid, addressed as follows:
if to the Company, to it at 29 West 36th Street, New York, New
York 10018, Attn: President;
if to the Purchaser, at 140 Boulevard de la Petrusse,
L-2330 Luxembourg, Attn: Andrea Goretti;
or, in either case, at such other address or addresses as shall have been
furnished in writing to the other party.
(c) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(d) This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and may not be modified or
amended except in writing executed by the Company and the Purchaser.
(e) This Agreement may be executed in two or more
counterparts, by original or facsimile signature, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
(f) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
STARMEDIA NETWORK, INC.
By:
Name:
Title:
EUROPORTAL HOLDING S.A.
By:
Name:
Title:
9
<PAGE>
<PAGE>
Exhibit 10.27
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of May 4, 1999, between
STARMEDIA NETWORK, INC., a Delaware corporation (the "COMPANY"), and
GERADONS, S.L., a company with registered office at Barcelona, Av. Diagonal,
558, 2(to the power of a), recorded at the Commercial Registry of
Barcelona at the volume 30.609, sheet 137, page B-176013, inscription 1(to
the power of a), and with tax identification number B-61633517 (the
"STOCKHOLDER").
WHEREAS, the Company, the Stockholder and SALVADOR PORTE, a
Spanish citizen, residing at L'Ametlla del Valles, calle Oms, 7, Urbanizacion
Can Camp, Spain, and holding Spanish I.D. 41.082.748-X and EDUARDO KAWAS, a
Chilean citizen, residing at Santiago de Chile, calle del Arzobispo, 0739,
Comuna de Providencia, Chile, and holding Chilean I.D. 6556043-T, have entered
into a Stock Purchase Agreement dated as of May 4, 1999 (the "PURCHASE
AGREEMENT") pursuant to which, subject to the terms and conditions set forth
therein, the Stockholder has agreed to acquire, and the Company has agreed to
sell, the Purchased Shares (as defined herein);
WHEREAS, it is a condition to the Stockholder's acquisition of the
Purchased Shares under the Purchase Agreement that the parties hereto enter into
an agreement substantially in the form of this Agreement to place certain
restrictions on the Purchased Shares and to provide to the Stockholder certain
registration rights;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and subject to and
on the terms and conditions herein set forth, the parties hereto agree as
follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have
the following respective meanings:
"COMMON STOCK" shall mean the common stock, par value $0.001 per share,
of the Company.
"COMMISSION" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"ISSUANCE DATE" shall mean the date on which the Purchased Shares are
delivered to the Stockholder under the Purchase Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the
<PAGE>
same shall be in effect at the time.
"PUBLIC SALE" shall mean any sale of Common Stock to the public
pursuant to an offering registered under the Securities Act or pursuant to the
provisions of Rule 144 (or any successor or similar rule) adopted under the
Securities Act.
"PURCHASED SHARES" shall mean those shares of Common Stock acquired by
the Stockholder pursuant to the Purchase Agreement.
"REGISTRATION EXPENSES" shall mean the expenses so described in Section
6 hereof.
"RESTRICTED STOCK" shall mean the Purchased Shares, the certificates
for which are required to bear the legend set forth in Section 2 hereof,
excluding Purchased Shares which have been (i) registered under the Securities
Act pursuant to an effective registration statement filed thereunder and
disposed of in accordance with the registration statement covering them or (ii)
publicly sold pursuant to Rule 144 under the Securities Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean the expenses so described in Section 6
hereof.
"TRANSFER" shall mean to sell, transfer, pledge, hypothecate or
otherwise dispose of or encumber the Purchased Shares, except that the pledge of
not more than fifty percent (50%) of the Purchased Shares to a commercial bank
approved by the Buyer, which approval shall not be unreasonably withheld, to
secure a loan shall not be considered a transfer for the purpose of this
Agreement.
2. RESTRICTIVE LEGEND. Each certificate representing one or more shares
of Restricted Stock, and each certificate issued upon exchange or transfer
thereof, other than in a Public Sale or as otherwise permitted by Section 3,
shall be stamped or otherwise imprinted with a legend substantially in the
following form:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED (EXCEPT AS PERMITTED BY THE
REGISTRATION RIGHTS AGREEMENT DATED MAY ___, 1999 BY AND
BETWEEN STARMEDIA NETWORK, INC. AND GERADONS, S.L.) OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT, OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER
EVIDENCE, SATISFACTORY TO THE COMPANY
<PAGE>
AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
3. TRANSFER OF PURCHASED SHARES. (a) RESTRICTIONS ON TRANSFER. The
Stockholder shall not Transfer the Purchased Shares or any portion thereof prior
to the first anniversary of the Issuance Date. Following the first anniversary
of the Issuance Date, the Stockholder may Transfer the Purchased Shares or any
portion thereof only as provided in Section 3(b) of this Agreement.
(b) NOTICE OF TRANSFER. Prior to any proposed Transfer of any share of
Restricted Stock (other than under the circumstances described in Section 4
hereof), the Stockholder shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner of
the proposed Transfer and, if reasonably requested by the Company, shall be
accompanied by an opinion of counsel reasonably satisfactory to the Company to
the effect that the proposed transfer of the Restricted Stock may be effected
without registration under the Securities Act, whereupon the holder of such
Restricted Stock may transfer such Restricted Stock in accordance with the terms
of its notice. Each certificate of Restricted Stock transferred as above
provided shall bear the legend set forth in Section 2, unless (i) such transfer
is to the public in accordance with the provisions of Rule 144 (or any other
rule permitting Public Sale without registration under the Securities Act) or
(ii) the opinion of counsel referred to above is to the further effect that the
transferee and any subsequent transferee (other than an affiliate of the
Company) would be entitled to transfer such securities in a Public Sale without
registration under the Securities Act. The restrictions provided for in this
Section shall not apply to securities that are not required to bear the legend
prescribed by Section 2 in accordance with the provisions of that Section.
4. REGISTRATION. If the Company at any time during the period
commencing on the first anniversary of the Issuance Date and ending on the third
anniversary of the Issuance Date proposes to register any of its Common Stock
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with respect to
registration statements on Form S-8, any successors thereto or any other form
not available for registering the Restricted Stock for sale to the public or a
Form S-1 covering solely an employee benefit plan), it will give written notice
at such time to the Stockholder of its intention to do so. Upon the written
request of the Stockholder, given within twenty (20) days after receipt of any
such notice by the Company, to register any of its Restricted Stock (which
request shall state the intended method of disposition thereof), the Company
will use reasonable commercial efforts to cause the Restricted Stock as to which
registration shall have been so requested, to be included in the securities to
be covered by the registration statement proposed to be filed by the Company,
all to the extent requisite to permit the sale or other disposition by the
Stockholder (in accordance with its written request) of such Restricted Stock to
be so registered; PROVIDED that nothing herein shall prevent the Company from
abandoning or delaying any such registration at any time. In the event that any
registration pursuant to this Section 4 shall be, in whole or in part, an
underwritten
<PAGE>
public offering of Common Stock, any request by the Stockholder pursuant to this
Section 4 to register Restricted Stock shall specify that either (i) such
Restricted Stock is to be included in the underwriting on the same terms and
conditions as the shares of Common Stock otherwise being sold through
underwriters under such registration or (ii) such Restricted Stock is to be sold
in the open market without any underwriting, on terms and conditions comparable
to those normally applicable to offerings of common stock in reasonably similar
circumstances. The number of shares of Restricted Stock to be included in such
registration may be reduced, if and to the extent that the managing underwriter
shall be of the opinion that such inclusion would adversely affect the marketing
of the securities to be sold by the Company in such underwriting.
5. REGISTRATION PROCEDURES. Subject to the Company's right to abandon
or delay any such registration at any time and for any reason, if and whenever
the Company is required by the provisions of Section 4 hereof to use reasonable
commercial efforts to effect the registration of any of the Restricted Stock
under the Securities Act, the Company will:
(a) prepare and file with the Commission a
registration statement with respect to such securities and use
reasonable commercial efforts to cause such registration statement to
become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective for the period specified in
paragraph (a) above and to comply with the provisions of the Securities
Act with respect to the disposition of all Restricted Stock covered by
such registration statement in accordance with the Stockholder's
intended method of disposition set forth in such registration statement
for such period;
(c) furnish to the Stockholder such number of copies
of the registration statement and the prospectus included therein
(including each preliminary prospectus) as the Stockholder may
reasonably request in order to facilitate the Public Sale or other
disposition of the Restricted Stock covered by such registration
statement;
(d) use reasonable commercial efforts to register or
qualify the Restricted Stock covered by such registration statement
under the securities or blue sky laws of such jurisdictions as the
Stockholder shall reasonably request, provided that the Company will
<PAGE>
not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but
for this paragraph (d), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any
jurisdiction;
(e) use reasonable commercial efforts to list the
Restricted Stock covered by such registration statement with any
securities exchange on which any Common Stock of the Company is then
listed;
(f) immediately notify the Stockholder at any time
when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which
the prospectus contained in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing.
For purposes of paragraphs (a) and (b) above, the period of distribution of
Restricted Stock in a firm commitment underwritten public offering shall be
deemed to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Restricted Stock
in any other registration shall be deemed to extend until the earlier of the
sale of all Restricted Stock covered thereby or three months after the effective
date thereof.
In connection with each registration hereunder, the Stockholder will
furnish to the Company in writing such information with respect to itself and
the proposed distribution by them as shall be reasonably necessary in order to
assure compliance with federal and applicable state securities laws.
6. EXPENSES. (a) All expenses incurred by the Company in complying with
Section 4 hereof, including without limitation all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars and costs
of insurance, but excluding any Selling Expenses, are herein called
"REGISTRATION EXPENSES". All underwriting discounts and selling commissions
applicable to the sale of Restricted Stock are herein called "SELLING EXPENSES".
(b) The Company will pay all Registration Expenses in connection with
each registration statement filed pursuant to Section 4 hereof. All Selling
Expenses in connection with any registration statement filed pursuant to Section
4 hereof shall be borne by the Stockholder, or by such persons other than the
Company as may agree.
<PAGE>
7. INDEMNIFICATION. (a) In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant to Section 4, the Company
will indemnify and hold harmless the Stockholder, against any losses, claims,
damages or liabilities, to which the Stockholder may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Restricted Stock was registered
under the Securities Act pursuant to Section 4, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Stockholder for any
legal or other expenses reasonably incurred by him in connection with
investigating or defending any such loss, claim, damage, liability or action;
PROVIDED, HOWEVER, that the Company will not be liable in any such case if and
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by the
Stockholder.
(b) In the event of a registration of any of the Restricted
Stock under the Securities Act pursuant to Section 4, the Stockholder will
indemnify and hold harmless the Company and each officer, director and each
other person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer or director or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Section 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Company and each
such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Stockholder will be liable hereunder in any such case if and only to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with information
pertaining to the Stockholder, furnished in writing to the Company
<PAGE>
by the Stockholder specifically for use in such registration statement or
prospectus; PROVIDED, FURTHER, HOWEVER, that the Stockholder shall not be liable
to and does not indemnify any underwriter in the offering or sale of Restricted
Stock, or any person who, within the meaning of the Securities Act, controls any
underwriter, in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
such person's failure to send or give a copy of the final prospectus, as the
same may be supplemented or amended, to the person asserting an untrue statement
or omission or alleged untrue statement or omission at or prior to the written
confirmation of the sale of Restricted Stock to such person, if such statement
or omission was corrected in such final prospectus.
(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to any indemnified party other than under this Section 7. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 7 for any
legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected; PROVIDED, HOWEVER, that, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional to
those available to the indemnifying party, or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) Notwithstanding the foregoing, any indemnified party shall
have the right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party shall have failed to retain counsel for the
indemnified person as aforesaid or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such counsel.
It is understood that the indemnifying party shall not, in connection with any
action or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with
<PAGE>
such consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.
(e) If the indemnification provided for in paragraphs (a) and
(b) of this Section 7 is unavailable or insufficient to hold harmless an
indemnified party under such paragraphs in respect of any losses, claims,
damages or liabilities or actions in respect thereof referred to therein, then
each indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of the Company, on the one hand, and
the Stockholder, on the other, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or actions as well
as any other relevant equitable considerations, including the failure to give
any notice under paragraph (c) of this Section 7. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by the
Company, on the one hand, or the Stockholder, on the other hand, and to the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Stockholder
agree that it would not be just and equitable if contributions pursuant to this
paragraph were determined by PRO RATA allocation or by any other method of
allocation which did not take account of the equitable considerations referred
to above in this paragraph. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, liabilities or action in respect
thereof, referred to above in this paragraph, shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of
the Securities Act), shall be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation.
The indemnification of underwriters provided for in this Section 7
shall be on such other terms and conditions as are at the time customary and
reasonably required by such underwriters.
8. CHANGES IN RESTRICTED STOCK. If, and as often as, there are any
changes in the Common Stock by way of stock split, stock dividend, combination
or reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Purchased Shares as so changed
and shall apply to any securities received in any such transaction.
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Stockholder as follows:
<PAGE>
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or By-laws of the Company, or any
provision of any indenture, agreement or other instrument to which it or any of
its properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to general equity principles
and to applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws from time to time in effect affecting the
enforcement of creditors' rights generally (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
10. RULE 144 REPORTING. The Company agrees as follows:
(a) The Company shall make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after the date it is first required to do
so.
(b) The Company shall file with the Commission in a timely
manner all reports and other documents as the Commission may prescribe under
Section 13(a) or 15(d) of the Exchange Act at any time after the Company has
become subject to such reporting requirements of the Exchange Act.
(c) The Company shall furnish to the Stockholder promptly (i)
upon request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time from and after the date it first
becomes subject to such reporting requirements), and of the Securities Act and
the Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents so filed as the Stockholder
may reasonably request to avail itself of any rule or regulation of the
Commission allowing it to sell any Restricted Stock
<PAGE>
without registration.
11. MISCELLANEOUS. (a) Neither party may assign this Agreement without
the prior written consent of the other, and any attempt to do so shall be null
and void.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by first class registered
mail, postage prepaid, addressed as follows:
(i) if to the Company, to it at 29 West 36th Street, New York,
New York 10018, Attn: Justin F. Macedonia, Esq.;
(ii) if to the Stockholder, to Cortada Advocats at Av.
Diagonal, 558, 5DEG. 2(to the power of a). Attn: Jordi Cortada.
or, in either case, at such other address or addresses as shall have been
furnished in writing to the other party.
(c) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CHOICE
OF LAW RULES OF THE STATE OF NEW YORK.
(d) Any dispute, controversy or claim arising out of or
relating to this Agreement that is not resolved between Buyer and Seller through
good faith negotiations shall be resolved only by an action, suit or proceeding
brought in the courts of the State of New York, located in the County of New
York. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York, located in the County of
New York for the purposes of any suit, action or other proceeding arising out of
this Agreement or any transaction contemplated hereby. Each of the parties
hereto agrees to commence any action, suit or proceeding relating hereto in the
courts of the State of New York, located in the County of New York. Each of the
parties hereto further agrees that service of any process, summons, notice or
document by U.S. registered mail to such party's respective address set forth in
Section 7(b) hereof shall be effective service of process for any action, suit
or proceeding in New York with respect to any matters to which it has submitted
to jurisdiction in this Section 7(d). Each of the parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in the courts of the State of New York, located in the County of New
York, and hereby further irrevocably and
<PAGE>
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
(e) As among the parties hereto, each of the Company and the
Stockholder hereby waives to the fullest extent permitted by applicable law, any
right it may have to a trial by jury in respect of any litigation directly or
indirectly arising out of, under or in connection with, this Agreement. Each
party hereto (i) certifies that no representative, agent or attorney or any
other party has represented, expressly or otherwise, that such other party would
not, in the event of litigation, seek to enforce that foregoing waiver and (ii)
acknowledges that it and the other parties hereto have been induced to enter
into this Agreement by, among other things, the mutual waivers and
certifications in this Section 7(e).
(f) The Stockholder shall appoint an agent for service of
process and other documents in any proceeding in New York or any other
proceedings in connection with or arising out of this Agreement.
(g) This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and may not be modified or
amended except in writing executed by the Company and the Stockholder.
(h) This Agreement may be executed in two or more
counterparts, by original or facsimile signature, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
(i) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
STARMEDIA NETWORK, INC.
By:
Name: Sergio Sanchez Sole
Title: Attorney
GERADONS, S.L.
By:
Name: Salvador Porte Llinas
Title: Sole Administrator
<PAGE>
Exhibit 10.28
REGISTRATION RIGHTS AGREEMENT dated as of May 4, 1999, between
STARMEDIA NETWORK, INC., a Delaware corporation (the "Company"), and NATIONAL
BROADCASTING COMPANY, INC. (the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a Stock
Purchase Agreement dated as of May 4, 1999 (the "STOCK PURCHASE AGREEMENT")
pursuant to which, subject to the terms and conditions set forth therein, the
Purchaser has agreed to acquire, and the Company has agreed to sell, certain
shares of Common Stock (as defined herein);
WHEREAS, it is a condition to the Purchaser's obligations to purchase
such shares of Common Stock under the Stock Purchase Agreement that the Company
enter into this Agreement to provide certain registration rights;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and subject to and
on the terms and conditions herein set forth, the parties hereto agree as
follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms shall
have the following respective meanings:
"COMMON STOCK" shall mean the Common Stock, par value $0.001 per share,
of the Company.
"COMMISSION" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"PUBLIC SALE" shall mean any sale of Common Stock to the public
pursuant to an offering registered under the Securities Act or pursuant to the
provisions of Rule 144 (or any successor or similar rule) adopted under the
Securities Act.
"PURCHASED SHARES" shall mean those shares of Common Stock purchased by
the Purchaser pursuant to the Stock Purchase Agreement.
"REGISTRATION EXPENSES" shall mean the expenses so described in
Section 6 hereof.
"RESTRICTED STOCK" shall mean the Purchased Shares, the certificates
for which are required to bear the legend set forth in Section 2 hereof,
excluding Purchased Shares which have
<PAGE>
been (i) registered under the Securities Act pursuant to an effective
registration statement filed thereunder and disposed of in accordance with the
registration statement covering them or (ii) publicly sold pursuant to Rule 144
under the Securities Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean the expenses so described in Section 6
hereof.
2. RESTRICTIVE LEGEND. Each certificate representing one or more
shares of Restricted Stock, and each certificate issued upon exchange or
transfer thereof, other than in a Public Sale or as otherwise permitted by
clause (ii) of Section 3, shall be stamped or otherwise imprinted with a
legend substantially in the following form:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED."
3. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of
any share of Restricted Stock (other than under the circumstances described
in Section 4 hereof), the Purchaser shall give written notice to the Company
of its intention to effect such transfer. Each such notice shall describe the
manner of the proposed transfer and, if requested by the Company, shall be
accompanied by an opinion of counsel reasonably satisfactory to the Company
to the effect that the proposed transfer of the Restricted Stock may be
effected without registration under the Securities Act, whereupon the holder
of such Restricted Stock may transfer such Restricted Stock in accordance
with the terms of its notice; PROVIDED, HOWEVER, that no such opinion or
other documentation shall be required if such notice shall cover a
distribution by a partnership to its partners or by a limited liability
company to its members. Each certificate of Restricted Stock transferred as
above provided shall bear the legend set forth in Section 2, unless (i) such
transfer is to the public in accordance with the provisions of Rule 144 (or
any other rule permitting Public Sale without registration under the
Securities Act) or (ii) the opinion of counsel referred to above is to the
further effect that the transferee and any subsequent transferee (other than
an affiliate of the Company) would be entitled to transfer such securities in
a Public Sale without registration under the Securities Act. The restrictions
provided for in this Section shall not apply to securities that are not
required to
<PAGE>
bear the legend prescribed by Section 2 in accordance with the provisions of
that Section.
4. REGISTRATION. If the Company at any time during the period
commencing on the first anniversary of the date hereof and ending on the
third anniversary of the date hereof proposes to register any of its Common
Stock under the Securities Act for sale to the public, whether for its own
account or for the account of other security holders or both (except with
respect to registration statements on Forms S-4 or S-8, any successors
thereto or any other form not available for registering the Restricted Stock
for sale to the public or a Form S-1 covering solely an employee benefit
plan), it will give written notice at such time to the Purchaser of its
intention to do so. Upon the written request of the Purchaser, given within
twenty (20) days after receipt of any such notice by the Company, to register
any of its Restricted Stock (which request shall state the intended method of
disposition thereof), the Company will use reasonable efforts to cause the
Restricted Stock as to which registration shall have been so requested, to be
included in the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent requisite to permit
the sale or other disposition by the Purchaser (in accordance with its
written request) of such Restricted Stock to be so registered; PROVIDED that
nothing herein shall prevent the Company from abandoning or delaying any such
registration at any time. In the event that any registration pursuant to this
Section 4 shall be, in whole or in part, an underwritten public offering of
Common Stock, any request by the Purchaser pursuant to this Section 4 to
register Restricted Stock shall specify that either (i) such Restricted Stock
is to be included in the underwriting on the same terms and conditions as the
shares of Common Stock otherwise being sold through underwriters under such
registration or (ii) such Restricted Stock is to be sold in the open market
without any underwriting, on terms and conditions comparable to those
normally applicable to offerings of common stock in reasonably similar
circumstances. The number of shares of Restricted Stock to be included in
such registration may be reduced, if and to the extent that the managing
underwriter shall be of the opinion that such inclusion would adversely
affect the marketing of the securities to be sold by the Company in such
underwriting; PROVIDED, HOWEVER, that the percentage of such shares of
Restricted Stock so reduced shall be no greater than the greatest percentage
of shares of Common Stock proposed to be included in such registration by any
entity specified in Section 2.12 of the Disclosure Schedule to the Stock
Purchase Agreement similarly reduced in such registration.
5. REGISTRATION PROCEDURES. Subject to the Company's right to
abandon or delay any such registration at any time and for any reason, if and
whenever the Company is required by the provisions of Section 4 hereof to use
reasonable efforts to effect the registration of any of the Restricted Stock
under the Securities Act, the Company will:
(a) prepare and file with the Commission a registration
statement with respect to such securities and use reasonable efforts to
cause such registration statement to become and remain effective for
the period of the distribution contemplated thereby
<PAGE>
(determined as hereinafter provided);
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective for the period specified in paragraph (a) above and
to comply with the provisions of the Securities Act with respect to the
disposition of all Restricted Stock covered by such registration
statement in accordance with the Purchaser's intended method of
disposition set forth in such registration statement for such period;
(c) furnish to the Purchaser such number of copies of the
registration statement and the prospectus included therein (including
each preliminary prospectus) as the Purchaser may reasonably request in
order to facilitate the Public Sale or other disposition of the
Restricted Stock covered by such registration statement;
(d) use reasonable efforts to register or qualify the
Restricted Stock covered by such registration statement under the
securities or blue sky laws of such jurisdictions as the Purchaser
shall reasonably request, provided that the Company will not be
required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
paragraph (d), (ii) subject itself to taxation in any such jurisdiction
or (iii) consent to general service of process in any jurisdiction;
(e) use reasonable efforts to list the Restricted Stock
covered by such registration statement with any securities exchange on
which any Common Stock of the Company is then listed;
(f) immediately notify the Purchaser at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing.
For purposes of paragraphs (a) and (b) above and of Section 4(c) hereof, the
period of distribution of Restricted Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities
<PAGE>
purchased by it, and the period of distribution of Restricted Stock in any other
registration shall be deemed to extend until the earlier of the sale of all
Restricted Stock covered thereby or three months after the effective date
thereof.
In connection with each registration hereunder, the Purchaser will
furnish to the Company in writing such information with respect to itself and
the proposed distribution by them as shall be reasonably necessary in order to
assure compliance with federal and applicable state securities laws.
6. EXPENSES. All expenses incurred by the Company in complying with
Section 4 and 5 hereof, including without limitation all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees of the National
Association of Securities Dealers, Inc., transfer taxes, fees of transfer
agents and registrars and costs of insurance, but excluding any Selling
Expenses, are herein called "Registration Expenses". All underwriting
discounts and selling commissions applicable to the sale of Restricted Stock
are herein called "Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to Section 4 hereof. All Selling Expenses
in connection with any registration statement filed pursuant to Section 4 hereof
shall be borne by the Purchaser, or by such persons other than the Company as
may so agree with the Purchaser.
7. INDEMNIFICATION. (a) In the event of a registration of any of
the Restricted Stock under the Securities Act pursuant to Section 4, the
Company will indemnify and hold harmless the Purchaser and each officer,
director and each other person, if any, who controls the Purchaser within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Purchaser or such controlling
person may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such Restricted Stock was registered under the Securities Act pursuant
to Section 4, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Purchaser and each such controlling person
for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the Company will not be liable in any such
case if and to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by the Purchaser or such controlling person in writing
for inclusion
<PAGE>
therein.
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Section 4, the Purchaser will indemnify and
hold harmless the Company and each officer, director and each other person, if
any, who controls the Company within the meaning of the Securities Act, each
officer of the Company who signs the registration statement, each director of
the Company, each underwriter and each person who controls any underwriter
within the meaning of the Securities Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer or director
or underwriter or controlling person may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the registration
statement under which such Restricted Stock was registered under the Securities
Act pursuant to Section 4, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; PROVIDED, HOWEVER, that the Purchaser will
be liable hereunder in any such case if and only to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with information pertaining to the Purchaser,
furnished in writing to the Company by the Purchaser for inclusion in such
registration statement; PROVIDED, FURTHER, HOWEVER, that the Purchaser shall not
be liable to and does not indemnify any underwriter in the offering or sale of
Restricted Stock, or any person who, within the meaning of the Securities Act,
controls any underwriter, in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of such person's failure to send or give a copy of the final
prospectus, as the same may be supplemented or amended, to the person asserting
an untrue statement or omission or alleged untrue statement or omission at or
prior to the written confirmation of the sale of Restricted Stock to such
person, if such statement or omission was corrected in such final prospectus.
Notwithstanding the foregoing, the Purchaser shall not be obligated under this
Section 7(b) to pay more than the proceeds realized by it upon its sale of
Restricted Stock included in such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party other than under this Section 7. In case any such action
shall be brought against any indemnified party and it shall notify the
indemnifying party of the
<PAGE>
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 7 for any legal expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation and of liaison with counsel so selected;
PROVIDED, HOWEVER, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party, or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified party
shall have the right to select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
Notwithstanding the foregoing, any indemnified party shall have the
right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party shall have failed to retain counsel for the
indemnified person as aforesaid or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such counsel.
It is understood that the indemnifying party shall not, in connection with any
action or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
No indemnifying party will consent to entry of any judgment or enter into any
settlement (i) without the consent of the indemnified party, which consent shall
not be unreasonably withheld or (ii) which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability with respect to such claim or litigation.
(d) If the indemnification provided for in paragraphs (a) and (b)
of this Section 7 is unavailable or insufficient to hold harmless an
indemnified party under such paragraphs in respect of any losses, claims,
damages or liabilities or actions in respect thereof referred to therein,
then each indemnifying party shall in lieu of indemnifying such indemnified
party contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or actions in such
proportion as appropriate to reflect the relative fault of the Company, on
the one hand, and the Purchaser, on the other, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or actions as well as any other relevant equitable
considerations, including the failure to give any notice under paragraph (c)
of this Section 7. The relative fault shall be determined by reference to,
among
<PAGE>
other things, whether the untrue or alleged untrue statement of a material fact
relates to information supplied by the Company, on the one hand, or the
Purchaser, on the other hand, and to the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Purchaser agree that it would not be just and
equitable if contributions pursuant to this paragraph were determined by PRO
RATA allocation or by any other method of allocation which did not take account
of the equitable considerations referred to above in this paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or action in respect thereof, referred to above in this
paragraph, shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentations
(within the meaning of Section 11(f) of the Securities Act), shall be entitled
to contribution from any person who is not guilty of such fraudulent
misrepresentation.
The indemnification of underwriters provided for in this Section 7 shall be
on such other terms and conditions as are at the time customary and reasonably
required by such underwriters.
8. CHANGES IN RESTRICTED STOCK. If, and as often as, there are any
changes in the Common Stock by way of stock split, stock dividend,
combination or reclassification, or through merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions hereof, as may be required, so
that the rights and privileges granted hereby shall continue with respect to
the Common Stock as so changed and shall apply to any securities received in
any such transaction.
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Purchaser as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or By-laws of the Company, or any
provision of any indenture, agreement or other instrument to which it or any of
its properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to general equity principles
and to applicable bankruptcy, insolvency,
<PAGE>
fraudulent transfer, reorganization, moratorium and similar laws from time to
time in effect affecting the enforcement of creditors' rights generally
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
10. RULE 144 REPORTING. The Company agrees as follows:
(a) The Company shall make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times from and after the date it is first required to do so.
(b) The Company shall file with the Commission in a timely manner all
reports and other documents as the Commission may prescribe under Section 13(a)
or 15(d) of the Exchange Act at any time after the Company has become subject to
such reporting requirements of the Exchange Act.
(c) The Company shall furnish to the Purchaser promptly upon request
(i) a written statement by the Company as to its compliance with the reporting
requirements of Rule 144 (at any time from and after the date it first becomes
subject to such reporting requirements), and of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents so filed as the Purchaser
may reasonably request to avail itself of any rule or regulation of the
Commission allowing it to sell any Restricted Stock without registration.
11. MISCELLANEOUS. Neither party may assign this Agreement to any
person other than an affiliate thereof without the prior written consent of
the other, and any attempt to do so shall be null and void.
(c) All notices, requests, consents and other communications hereunder
shall be in writing and shall be mailed by first class registered mail, postage
prepaid, addressed as follows:
if to the Company, to it at 29 West 36th Street, New York, New
York 10018, Attn: President;
<PAGE>
if to the Purchaser, to it at National Broadcasting Company, Inc.,
30 Rockefeller Plaza, New York, New York 10112, Attention: Kenneth Krushel;
or, in either case, at such other address or addresses as shall have been
furnished in writing to the other party.
(c) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
(d) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and may not be modified or amended
except in writing executed by the Company and the Purchaser.
(e) This Agreement may be executed in two or more counterparts, by
original or facsimile signature, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
(f) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability
shall attach only to such provision and shall not in any manner affect or
render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
STARMEDIA NETWORK, INC.
By:
------------------------------
Name:
Title:
NATIONAL BROADCASTING COMPANY, INC.
By:
------------------------------
Name:
Title:
<PAGE>
Exhibit 10.29
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of April
29, 1999, by and between StarMedia Network, Inc., a Delaware corporation (the
"Company"), and Jack C. Chen (the "Employee").
RECITALS:
In entering into this Agreement, the Company desires to provide the
Employee with substantial incentives to serve the Company without distraction or
concern over minimum compensation, benefits or tenure, to develop and implement
the Company's business plan and thereafter manage the Company's future growth
and development and maximize the returns to the Company's stockholders.
NOW, THEREFORE, in consideration of the foregoing and the mutual
provisions contained herein, and for other good and valuable consideration, the
parties hereto agree with each other as follows:
1. CERTAIN DEFINITIONS
A. Certain Definitions. As used herein, the following terms have the
meanings assigned to them below:
"Active Status" means the Employee's Employment status from the
Effective Date to the Termination Date.
"Affiliate" has the meaning ascribed to that term in Exchange
Act Rule 12b-2.
"Associate" means, with reference to any Person,
(a) any corporation, firm, partnership, association,
unincorporated organization or other entity (other than the
Company or a subsidiary of the Company) of which that Person is
an officer or general partner (or officer or general partner of
a general partner) or is, directly or indirectly, the Beneficial
Owner of 10% or more of any class of its equity securities,
(b) any trust or other estate in which that Person has a
substantial beneficial interest or for or of which that Person
serves as trustee or in a similar fiduciary capacity and
(c) any relative or spouse of that Person, or any
relative of that spouse, who has the same home as that Person.
"Base Salary" means the guaranteed minimum annual salary payable
by the
<PAGE>
Company to the Employee pursuant to Section 4.A.
"Beneficial Owner" A specified Person is deemed the "Beneficial
Owner" of, and is deemed to "beneficially own," any securities:
(a) of which that Person or any of that Person's
Affiliates or Associates, directly or indirectly, is the
"beneficial owner" (as determined pursuant to Exchange Act Rule
13d-3) or otherwise has the right to vote or dispose of,
including pursuant to any agreement, arrangement or
understanding (whether or not in writing); provided, however,
that a Person shall not be deemed the "Beneficial Owner" of, or
to "beneficially own," any security under this subparagraph (a)
as a result of an agreement, arrangement or understanding to
vote that security if that agreement, arrangement or
understanding: (1) arises solely from a revocable proxy or
consent given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable provisions of the Exchange Act; and (2) is not then
reportable by such Person on Exchange Act Schedule 13D (or any
comparable or successor report);
(b) which that Person or any of that Person's Affiliates
or Associates, directly or indirectly, has the right or
obligation to acquire (whether that right or obligation is
exercisable or effective immediately or only after the passage
of time or the occurrence of an event) pursuant to any
agreement, arrangement or understanding (whether or not in
writing) or on the exercise of conversion rights, exchange
rights, other rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," securities
tendered pursuant to a tender or exchange offer made by that
Person or any of that Person's Affiliates or Associates until
those tendered securities are accepted for purchase or exchange;
or
(c) which are beneficially owned, directly or
indirectly, by (1) any other Person (or any Affiliate or
Associate thereof) with which the specified Person or any of the
specified Person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except pursuant to a
revocable proxy or consent as described in the proviso to
subparagraph (a) of this definition) or disposing of any voting
securities of the Company or (2) any group (as that term is used
in Exchange Act Rule 13d-5(b)) of which that specified Person is
a member; provided, however, that nothing in this definition
shall cause a Person engaged in business as an underwriter of
securities to be the "Beneficial Owner" of, or to "beneficially
own," any securities acquired through such a Person's
participation in good faith in a firm commitment underwriting
until the
2
<PAGE>
expiration of forty (40) days after the date of that
acquisition. For purposes of this Agreement, " voting" a
security shall include voting, granting a proxy, acting by
consent, making a request or demand relating to corporate action
(including, calling a stockholder meeting) or otherwise giving
an authorization (within the meaning of Section 14(a) of the
Exchange Act) in respect of such security.
"Board" means herein the entire Board of Directors of the
Company, except when less than the entire Board is specified herein.
"Business Reason" for the Company's termination of the
Employee's Employment means any reason other than Cause or Disability.
"Business Reason Termination Payment" means an amount equal to
200% of the Base Salary and Minimum Bonus applicable to the calendar
year in which such termination for Business Reason takes place.
"Cause" for the Company's termination of the Employee's
Employment means:
(a) the Employee's final conviction of a felony.
(b) the Employee's continuing to engage in conduct which
has caused or is reasonably likely to cause, demonstrable and
serious injury to the Company after having been given written
notice of such determination by the Required Board Majority and
a reasonable opportunity to cure, which curative period shall
not be less than thirty (30) days;
(c) the Employee's continuing failure to substantially
perform the lawful directives of the Board (consistent with the
provisions of this Agreement) or his duties and responsibilities
in accordance with the provisions of this Agreement (except by
reason of the Employee's incapacity due to physical or mental
illness or injury) after having been given written notice of
such determination by the Required Board Majority and a
reasonable opportunity to cure, which curative period shall not
be less than thirty (30) days, which written notice specifically
identifies the provision of this Agreement which the Required
Board Majority contends that Employee has continually failed to
substantially perform or the directive that the Employee has not
followed, the bases for the Required Board Majority's
determination as set forth in the notice and the specific nature
of the corrective action that the Required Board Majority
proposes that the Employee take; provided, that for purposes of
this clause (c), the Company shall not have Cause to give
3
<PAGE>
such notice or thereafter terminate the Employee's Employment if
such act or omission was taken or omitted to be taken by an
officer or employee of the Company other than Employee or the
act or omission was taken or omitted by Employee with the
concurrence of a majority of the Board or the act or omission
was taken or omitted by the Employee in good faith with a
reasonable belief that the act or omission was authorized by a
majority of the Board or otherwise in the interest of the
Company;
(d) violation of the terms of the covenants set forth in
Sections 7A, 7B or 7C, and, in the event of a violation of the
terms of the covenants set forth in Section 7B, after having
been given written notice of such determination by the Required
Board Majority and a reasonable opportunity to cure, which
curative period shall not be less than thirty (30) days.
"Code" means the Internal Revenue Code of 1986.
"Company" means StarMedia Network, Inc., a Delaware corporation,
and any successor thereto, including, any Person that assumes the
obligations of the "Company" hereunder, by operation of law, pursuant to
Section 7(I) or otherwise.
"Compensation Plan" means any compensation arrangement, plan,
policy, practice or program established, maintained or sponsored by the
Company or any subsidiary of the Company, or to which the Company or any
subsidiary of the Company contributes, on behalf of any Executive
Officer or any member of the family of any Executive Officer,
(a) including:
(i) any "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) or other "employee
benefit plan" (as defined in Section 3(3) of ERISA),
(ii) any other retirement and savings plan,
including any supplemental benefit arrangement relating
to any plan intended to be qualified under Section
401(a) of the Code or whose benefits are limited by the
Code or ERISA,
(iii) any "employee welfare plan" (as defined in
Section 3(l) of ERISA),
(iv) any arrangement, plan, policy, practice or
program providing for severance pay, deferred
compensation or insurance benefit,
4
<PAGE>
(v) any Incentive Plan, and
(vi) any arrangement, plan, policy, practice or
program:
(A) authorizing and providing for the payment or reimbursement of
expenses attributable to transportation and hotel occupancy while on business
travel or
(B) providing for the payment of business luncheon, long-distance
charges, mobile phone monthly air time or other recurring monthly charges or any
other fringe benefit, allowance or accommodation of employment but, excluding
any compensation arrangement, plan, policy, practice or program to the extent it
provides for annual Base Salary.
"Disability" of the Employee means the Employee has been determined to
be disabled (which determination shall be final and binding on all Persons,
absent manifest error), as a result of a physical or mental illness or personal
injury he has incurred, by the insurance carrier providing the disability
insurance referred to in Section 5(C).
"Effective Date" means April 29, 1999.
"Employment" means the employment of the Employee by the Company or a
subsidiary of the Company hereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Exchange Act" means the Securities Exchange Act of 1934.
"Executive Officer" means any of the chairman of the board, the chief
executive officer, the chief operating officer, the chief financial officer, the
president, any executive or senior vice president or the general counsel of the
Company.
"Extension Date" means (i) July 31, 2000, if not less than 120 days
prior thereto the Company or the Employee has given the other notice of its or
his election not to continue the Employment (a "Notice of Non-Extension"), or
(ii) if no Notice of Non-Extension has been given as provided in clause (i), any
July 31 thereafter where not less than 120 days prior thereto the Company or the
Employee has given the other a Notice of Non-Extension.
"Good Reason" for the Employee's termination of his Employment means any
of the following that occurs before the Employee gives a Notice of Termination
for Good Reason and which has not been cured by the Company reasonably promptly
after receipt of a notice from the Employee stating that Employee believes that
Good Reason exists and setting forth in reasonable detail the basis therefor;
provided that any such cure that occurs after thirty (30) days of such notice
shall not be considered reasonably prompt and provided further that if such cure
occurs, Employee shall not be required to give a subsequent notice if the same
or a substantially similar Good Reason again occurs:
(a) any violation or breach by the Company, in any material
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respect, of the provisions of Section 4 of this Agreement; provided,
however, that in the event that the fact or circumstance constituting
Good Reason is the Company's violation or breach of the provisions of
Section 4 and the Company is insolvent at the time of such violation or
breach, the Company will have no obligation to pay to the Employee the
Good Reason Termination Payment;
(b) the assignment to the Employee of duties inconsistent in any
material respect with the Employee's role as a senior executive officer
of the Company (including titles, authority, duties or responsibilities
inconsistent in any material respect with such role) or the taking of
any action that is the equivalent of a constructive discharge;
(c) relocation of the Employee outside of the New York
metropolitan area without relocation of the principal executive offices
of the Company and at least 80% of the other employees of the Company
then located in the principal executive offices of the Company; or
(d) a change in the Employee's reporting relationships; or
(e) a change of control, which shall mean:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more
of either (A) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (i), the
following acquisitions shall not constitute a Change of Control:
(w) any acquisition directly from the Company, (x) any
acquisition by the Company, (y) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (z) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (A), (B) and (C) of subsection (iii) of
this Section (e); or
(ii) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
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hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns all of
the common stock of the Company or all or substantially all of
the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding any
corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities
of such corporation except to the extent that such ownership
existed prior to the Business Combination and (C) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing
for such Business Combination;
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or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
"Good Reason Termination Payment" means an amount equal to 200% of the
Base Salary and Minimum Bonus Amount applicable to the calendar year in which
such termination for Good Reason takes place.
"Incentive Plan" means any compensation arrangement, plan, policy,
practice or program established, maintained or sponsored by the Company or any
subsidiary of the Company, or to which the Company or any subsidiary of the
Company contributes, on behalf of any Executive Officer and which provides for
awards of securities or the phantom equivalent of securities, including any
stock option, stock appreciation right and restricted stock plan, but excluding
any plan intended to qualify as a plan under any one or more of Sections 401(a),
401(k) or 423 of the Code.
"Minimum Bonus Amount" means the guaranteed minimum annual bonus payable
to the Employee as determined pursuant to Section 4(B).
"Notice of Termination" to or from the Employee means a written notice
that:
(a) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination
of the Employee's Employment, and
(b) if the Termination Date is other than the date of receipt of
the notice, sets forth that Termination Date.
"Person" means any natural person, sole proprietorship, corporation,
partnership of any kind having a separate legal status, limited liability
company, business trust, unincorporated organization or association, mutual
company, joint stock company, joint venture, estate, trust, union or employee
organization or governmental authority.
"Publicly Traded" with respect to shares of stock of a company means
traded on a national securities exchange or listed for quotation on NASDAQ.
"Required Board Majority" means at any time at least a majority of the
members of the Board, other than the Employee, voting at that time.
"Securities Act" means the Securities Act of 1933.
"Term" shall have the meaning set forth in Section 3.
"Termination Date" means the earlier of the Extension Date and:
(a) if the Employee's Employment is terminated by reason of
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the Employee's death, the date of that death;
(b) if the Employee's Employment is terminated by reason of the
Employee's Disability, the date of the receipt by the Company or the
Employee, as the case may be, of the Notice of Termination;
(c) if the Employee's Employment is terminated by Employee for
Good Reason, the date specified in the Notice of Termination, which
shall be not less than ten (10) business days nor more than thirty (30)
business days following the receipt by the Company of such Notice of
Termination;
(c) if the Employee's Employment is terminated by Employee for
any other reason, the date specified in the Notice of Termination, which
shall be not less than thirty (30) business days nor more than sixty
(60) business days following the receipt by the Company of such Notice
of Termination;
(d) if the Employee's Employment is terminated by the Company
for Cause, the date specified in the Notice of Termination, which shall
be not less than three (3) business days nor more than sixty (60)
business days following the receipt by the Employee of such Notice of
Termination; and
(e) if the Employee's Employment is terminated by the Company
for any Business Reason, the date specified in the Notice of
Termination, which shall be not less than thirty (30) business days nor
more than sixty (60) business days following the receipt by the Employee
of such Notice of Termination.
"Voting Shares" means:
(a) in the case of any corporation, stock of that corporation of
the class or classes having general voting power under ordinary
circumstances to elect a majority of that corporation's board of
directors; and
(b) in the case of any other entity, equity interests of the
class or classes having general voting power under ordinary
circumstances equivalent to the Voting Shares of a corporation.
B. Other Definitional Provisions.
(i) Except as otherwise specified herein, all references herein to any
statute defined or referred to herein, including the Code, ERISA, the Securities
Act and the Exchange Act, shall be deemed references to that statute or any
successor statute, as the same
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<PAGE>
may have been or may be amended or supplemented from time to time, and any rules
or regulations promulgated thereunder.
(ii) When used in this Agreement, the words "herein," "hereof" and
"hereunder" and words of similar import shall refer to this Agreement as a whole
and not to any provision of this Agreement, and the word "Section" refers to a
Section of this Agreement unless otherwise specified.
(iii) Whenever the context so requires, the singular number includes the
plural and vice versa, and a reference to one gender includes each other gender
and the neuter.
(iv) The word "including" (and, with correlative meaning, the word
"include") means including, without limiting the generality of any description
preceding such word, and the words "shall" and "will" are used interchangeably
and have the same meaning.
2. EMPLOYMENT
A. On the terms and subject to the conditions hereinafter set forth,
beginning as of the Effective Date, the Company shall employ the Employee as
President of the Company and the Employee will serve in the Company's employ in
that position. The Employee shall perform such duties, and have such powers,
authority, functions, duties and responsibilities for the Company and
corporations Affiliated with the Company as are commensurate and consistent with
the employment as President of the Company. The Employee also shall have such
additional powers, authority, functions, duties and responsibilities as may be
assigned to him by the Board.
B. The Employee shall not, at any time during the Employment, engage in
any other business activities unless these activities do not interfere
materially with the Employee's duties and responsibilities for the Company at
that time, except that the Employee shall be entitled, subject to the provisions
of Section 7.A.:
(a) to continue with such activities as the Employee has carried
on prior to the Effective Date, including making and managing his
personal investments and participating in other business, church or
civic activities, provided that such activities do not include a
Beneficial Ownership interest in a competitor, supplier or customer of
the Company other than an investment in a Publicly Traded company of
which Employee is not an employee, officer, director or partner that
does not exceed 5% of the outstanding Voting Shares of such company;
(b) to serve on civic boards, non-profit boards, charitable
boards or committees and trade associations or similar boards or
committees.
(c) to serve on for-profit business boards of directors if the
Company's consent shall have been obtained, which consent shall not
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unreasonably be withheld or delayed.
3. TERM OF EMPLOYMENT
Subject to the provisions of Section 5, the term of the Employee's
Employment shall be for the period commencing on the Effective Date and ending
on the Termination Date (the "Term").
4. COMPENSATION
A. Base Salary. The Base Salary shall be payable to the Employee by the
Company as a guaranteed minimum annual amount hereunder for the period from the
Effective Date to the Termination Date. The Base Salary shall be payable in the
intervals consistent with the Company's normal payroll schedules (but in no
event less frequently than monthly), and shall be payable initially at the
annual rate of $150,000.00 and shall be increased, effective as of each January
1, by an amount equal to 10% of the immediately preceding Base Salary, and from
time to time by such additional amount, if any, that the Compensation Committee
of the Board shall determine.
B. Annual Bonus. The Minimum Bonus Amount shall be payable to the
Employee in January of each year from the Effective Date to the Termination
Date. The Minimum Bonus Amount shall be payable initially in the amount of
$100,000 and shall be increased, by an amount equal to 10% of the immediately
preceding Minimum Bonus Amount, and from time to time by such greater amount as
the Compensation Committee of the Board shall, in its sole discretion,
determine.
C. Other Compensation. To the extent authorized by the Compensation
Committee of the Board the Employee shall also be entitled to participate in any
additional Compensation Plans from time to time in effect during the term of
this Agreement.
D. Tax Indemnity. Should any of the payments of Base Salary, Business
Reason Termination Payment, Good Reason Termination Payment, other incentive or
supplemental compensation, benefits, allowances, awards, payments,
reimbursements or other perquisites, or any other payment in the nature of
compensation, singly, in any combination or in the aggregate, that are provided
for hereunder to be paid to or for the benefit of the Employee be determined or
alleged to be subject to an excise or similar purpose tax pursuant to Section
4999 of the Code, or any successor or other comparable Federal, state or local
tax law by reason of being a "parachute payment" (within the meaning of Section
28OG of the Code), the Company shall pay to the Employee such additional
compensation as is necessary (after taking into account all Federal, state and
local taxes payable by the Employee as a result of the receipt of such
additional compensation) to place the Employee in the same after tax position
(including Federal, state and local taxes) he would have been in had no such
excise or similar purpose tax (or interest or penalties thereon) been paid or
incurred. The Company hereby agrees to pay such additional compensation within
the earlier to occur of:
(i) five (5) business days after the Employee notifies the Company that
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the Employee intends to file a tax return taking the position that such excise
or similar purpose tax is due and payable in reliance on a written opinion of
the Employee's tax counsel (such tax counsel to be chosen by the Employee and
reasonably acceptable to the Company) that it is more likely than not that such
excise tax is due and payable or
(ii) twenty-four (24) hours of any notice of or action by the Company
that it intends to take the position that such excise or similar purpose tax is
due and payable or
(iii) five (5) business days after the Employee notifies the Company
that the IRS has taken the position that such excise or similar purpose tax is
due and payable. The costs of obtaining the tax counsel opinion referred to in
clause (i) of the preceding sentence shall be borne by the Employee, and as long
as such tax counsel was chosen by the Employee in good faith and reasonably
acceptable to the Company, the conclusions reached in such opinion shall not be
challenged or disputed by the Company. If the Employee intends to make any
payment with respect to any such excise or similar purpose tax as a result of an
adjustment to the Employee's tax liability by any federal, state or local tax
authority, the Company will pay such additional compensation by delivering its
cashier's check payable in such amount to the Employee within five (5) business
days after the Employee notifies the Company of his intention to make such
payment. Without limiting the obligation of the Company hereunder, the Employee
agrees, in the event the Employee makes any payment pursuant to the preceding
sentence, to negotiate with the Company in good faith with respect to procedures
reasonably requested by the Company which would afford the Company the ability
to contest the imposition of such excise or similar purpose tax.
5. TERMINATION, DISABILITY AND DEATH
A. Termination of Employment by the Company.
(i) The Company shall be entitled, if acting at the direction of the
Required Board Majority, to terminate the Employee's Employment at any time for
Cause or for any Business Reason.
(ii) If the Company terminates the Employee's Employment for Cause, the
Company promptly after the Termination Date, and in any event within five (5)
business days thereafter, shall pay to the Employee, without right of set off or
counterclaim, his Base Salary to and including the Termination Date , any
accrued but unpaid vacation pay and the amount of all compensation previously
deferred by the Employee (together with any accrued interest or earnings
thereon), in each case to the extent not theretofore paid, and, when that
payment is made, the Company shall have no further or other obligations
hereunder to the Employee.
(iii) If the Company terminates the Employee's Employment for a Business
Reason, the Company shall (a) promptly after the Termination Date, and in any
event within five (5) business days thereafter, pay to the Employee, without
right of set off or counterclaim, in each case to the extent not theretofore
paid, his Base Salary to and including the Termination Date, any accrued but
unpaid vacation pay and the amount of all compensation previously deferred by
the Employee, if any (together with any accrued interest or earnings thereon),
(b)
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within thirty (30) days following the Termination Date, pay to the Employee,
without right of set off or counterclaim, the Business Reason Termination
Payment and (c) continue the Employee's Company sponsored health and disability
benefits for twenty-four (24) months following the Termination Date, and, when
all such payments are made and obligations fulfilled, the Company shall have no
further or other obligations hereunder to the Employee.
B. Termination of Employment by the Employee.
(i) The Employee shall be entitled to terminate the Employment:
(a) For Good Reason. The Employee shall be entitled to terminate his
Employment for a Good Reason at any time within sixty (60) days after the facts
or circumstances constituting that Good Reason (without regard to the date of
the required notice of Good Reason by the Employee to the Company) first exist
and are known to the Employee, provided that at the time of any Notice of
Termination therefor Good Reason continues to exist. Such termination for Good
Reason shall be effective on the applicable Termination Date. In the event that
the Employee terminates his Employment for Good Reason, the Company shall (a)
promptly after the Termination Date, and in any event within five (5) business
days thereafter, pay to the Employee, without right of set off or counterclaim,
his Base Salary to and including the Termination Date, any accrued but unpaid
vacation pay and the amount of all compensation previously deferred by the
Employee, if any (together with any accrued interest or earnings thereon), (b)
within thirty (30) days following the Termination Date, pay to the Employee,
without right of set off or counterclaim, the Good Reason Termination Payment,
in each case to the extent not theretofore paid and (c) continue the Employee's
Company sponsored health and disability benefits for twenty-four (24) months
following the Termination Date, and, when all such payments are made and
obligations fulfilled, the Company shall have no further or other obligations
hereunder to the Employee.
(b) Without Good Reason. The Employee's termination of his Employment
without Good Reason and other than for Disability will be effective on the
applicable Termination Date. If the Employee terminates his Employment without
Good Reason and other than for Disability, the Company shall pay to the
Employee, promptly after the Termination Date, and in any event within five (5)
business days thereafter, an amount equal to the sum of: (i) the portion of the
Base Salary to and including the Termination Date which has not yet been paid,
(ii) all compensation previously deferred by the Employee, if any (together with
any accrued interest and earnings thereon) which has not yet been paid, and
(iii) any accrued but unpaid vacation pay, and, when all such payments are made,
the Company shall have no further or other obligations hereunder to the
Employee.
C. Termination by Reason of Disability. During the Term, the Company
shall maintain, at its expense, the individual, long-term non-cancelable
guaranteed renewal individual disability plan more particularly described in
Exhibit B. If the Employee incurs any Disability during the Term, either the
Employee or the Company may terminate the Employee's Employment during such
Disability, and the Company shall pay to the Employee, promptly after the
Termination Date, and in any event within five (5) business days thereafter, an
amount equal
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to the sum of: (i) the portion of the Base Salary to and including the
Termination Date which has not yet been paid, (ii) all compensation previously
deferred by the Employee, if any (together with any accrued interest and
earnings thereon) which has not yet been paid, and (iii) any accrued but unpaid
vacation pay, and, when all such payments are made, the Company shall have no
further or other obligations hereunder to the Employee.
D. Termination of Employment by Death. Upon the death of the Employee,
the Employment will be terminated on the applicable Termination Date. If the
Employee's Employment is terminated by reason of the Employee's death, the
Company shall pay to the Person the Employee has designated in a written notice
delivered to the Company as his beneficiary entitled to such payment, if any, or
to the Employee's estate, as applicable, promptly after the Termination Date,
and in any event within thirty (30) days thereafter, an amount equal to the sum
of: (i) the portion of the Base Salary through the end of the month in which the
Termination Date occurs which has not yet been paid, (ii) all compensation
previously deferred by the Employee, if any (together with any accrued interest
or earnings thereon) which has not yet been paid, and (iii) any accrued but
unpaid vacation pay.
E. Return of Property. On termination of the Employee's Employment,
however brought about, the Employee (or his representatives) shall promptly
deliver and return to the Company all the Company's property that is in the
possession or under the control of the Employee.
F. Stock Options. Notwithstanding any provision of this Agreement to the
contrary:
(i) except in the case of a termination of the Employee's Employment for
Cause or pursuant to Section 5(B)(i)(b), all stock options previously granted to
the Employee under Incentive Plans that have not been exercised and are
outstanding as of the time immediately prior to the Termination Date shall,
notwithstanding any contrary provision of any applicable Incentive Plan, remain
outstanding (and continue to become exercisable pursuant to their respective
terms) until exercised or the expiration of their term, whichever is earlier;
and
(ii) in the case of a termination of the Employee's Employment for Cause
or pursuant to Section 5(B)(i)(b), all stock options previously granted to
Employee under Incentive Plans that have not yet vested and are outstanding as
of the time immediately prior to the Termination Date shall, notwithstanding any
contrary provision of any applicable Incentive Plan, terminate and be of no
further force or effect as of the Termination Date.
6. OTHER EMPLOYEE RIGHTS
A. Paid Vacation; Holidays. The Employee shall be entitled to not less
than four (4) weeks of annual vacation and all legal holidays, during which
times his applicable compensation shall be paid in full.
B. Fringe Benefits. During the term of this agreement, the Employee is
entitled to participate in the same level of fringe benefits that may be
provided by the Company
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for its key executive employees in accordance with the provisions of any such
plans, as the same may be in effect on and after the date hereof.
C. Business Expenses. The Employee is authorized to incur, and will be
entitled to receive prompt reimbursement for, all reasonable expenses incurred
by the Employee in performing his duties and carrying out his responsibilities
hereunder, including business meal, entertainment, first class air fare on
international flights and first class on domestic flights and hotels, and other
travel expenses, provided that the Employee complies in all material respects
with all reasonable policies, practices and procedures of the Company relating
to the submission of expense reports, receipts or similar documentation of those
expenses. The Company shall either pay directly or promptly reimburse the
Employee for such expenses not more than twenty (20) days after the submission
to the Company by the Employee from time to time of an itemized accounting of
such expenditures for which direct payment or reimbursement is sought. All such
direct payments and reimbursements remaining unpaid after such 20-day period
shall accrue interest in accordance with Section 7(P).
D. Support. During the Employment, the Employee shall be provided by the
Company with office space, furnishings, and facilities, administrative
assistance, supplies and other support equipment (including a computer,
facsimile machine and photocopier).
7. GENERAL PROVISIONS
A. Confidentiality. Reference is made to the Non-Disclosure and
Developments Agreement between the Employee and the Company dated as of July 25,
1997 (the "NDDA Agreement"). The provisions of Sections 1, 2, 3(a), (b) and (d)
and 4 of the NDDA Agreement are hereby incorporated herein in full by reference.
B. Non-Competition. The Employee agrees that, except as otherwise
provided herein, during the Employment and for (x) a period of two (2) years
after any Termination Date applicable to any termination of the Employment under
Section 5(A)(ii) or Section 5(B)(i)(b), and (y) a period of one (1) year after
any Termination Date applicable to any termination of the Employment under
Section 5(A)(iii), Employee will not directly or indirectly, whether or not for
compensation and whether or not as an employee, be engaged in or have any
impermissible financial interest in any business that is in fact competing with
the Company (a "competing business"). For purposes of this Agreement, the
Employee shall be deemed to be engaged in a competing business if the business
is a pan-regional, community based, consumer oriented, internet service focused
on Latin America, and Employee is an employee, officer, director, partner or
consultant of such competing business or has an impermissible financial interest
therein. For purposes of this Agreement, the Employee shall only be deemed to
have an impermissible financial interest in a competing business if Employee is
a partner or shareholder therein, except as provided hereafter. Employee shall
be deemed to have an impermissible financial interest in any competing Publicly
Traded business if Employee (i) during the Employment, beneficially or directly
owns more than one percent (1%), and (ii) following any Termination Date,
directly owns more than three percent (3%) or beneficially owns more than five
percent (5%), in each case of any class of securities of such Publicly Traded
company,
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whether or not Employee is an officer, director, partner, employee or consultant
thereto.
C. Non-Solicitation. The Employee agrees that during the Employment and
for a period of one (1) year after any Termination Date applicable to any
termination of the Employment under Section 5(A)(ii), Employee shall not employ,
or advise or recommend to any person that they employ, any person who is
employed by the Company or any of its controlled Affiliates during the
Employment or on the Termination Date, as the case may be, or induce such person
to accept employment other than with the Company or its Affiliates, provided
that the Employee shall be permitted to respond to requests for references from
prospective employers with respect to any such employers.
D. Injunctive Relief. The Employee recognizes that a breach of his
obligations under paragraphs (A) through (C) above would cause irreparable harm
to the Company and, provided that as a precondition the Company has previously
tendered all sums that are due and payable to the Employee under the terms of
this Agreement, the Company shall be entitled to preliminary and permanent
injunctions enjoining violations thereof as a non-exclusive remedy.
E. Severability. If any one or more of the provisions of this Agreement
shall, for any reason, be held or found by final judgment of a court of
competent jurisdiction to be invalid, illegal or unenforceable in any respect,
(i) such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement,
(ii) this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein (except that this clause
(ii) shall not prohibit any modification allowed under Section 7(J)),
(iii) if the effect of a holding or finding that any such provision is
invalid, illegal or unenforceable is to modify to the Employee's detriment,
reduce or eliminate any compensation, reimbursement, payment, allowance or other
benefit to the Employee intended by the Company and Employee in entering into
this Agreement, the Company shall, within thirty (30) days after the date of
such finding or holding, negotiate and expeditiously enter into an agreement
with the Employee which contains alternative provisions (reasonably acceptable
to the Employee and the Company) that will restore to the Employee (to the
extent lawfully permissible) substantially the same economic, substantive and
income tax benefits and legal rights the Employee would have enjoyed had such
provision been upheld as legal, valid and enforceable, and
(iv) if any provision of this Agreement or portion hereof is so broad,
in scope or duration, as to be unenforceable, such provision or portions thereof
shall be interpreted to be only so broad as to be legal, valid and enforceable.
F. Non-exclusivity of Rights. Nothing herein shall prevent the
Employee's continuing or future participation in any Compensation Plan or,
subject to Section 5.F., limit or
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otherwise affect such rights as the Employee may have under any other contract
or agreement with the Company. Vested benefits and other amounts to which the
Employee is or becomes entitled to receive under any Compensation Plan on or
after the Termination Date shall be payable in accordance with that Compensation
Plan, except as expressly modified hereby.
G. Full Settlement. The Company's obligations to make the payments
provided for, and otherwise to perform its undertakings, in this Agreement shall
not be affected by any right of set-off, counterclaim, recoupment, defense or
other action, claim or right the Company may have against the Employee or
others. In no event shall the Employee be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Employee under any provision hereof, and those amounts shall not be reduced,
regardless of whether the Employee obtains other employment or becomes
self-employed.
H. Survival. The obligations of the parties hereto under Sections 4, 5,
6(C), 7, 8 and 9 shall survive the Termination Date.
I. Successors.
(i) This Agreement is personal to the Employee and, without the prior
written consent of the other party, is not assignable or delegable by the
Employee (otherwise than by transfer of rights by will or the laws of descent
and distribution) or by the Company.
(ii) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and permitted assigns and this Agreement shall
inure to the benefit of and be enforceable by the Employee's legal
representatives acting in their capacities as such pursuant to applicable law.
(iii) The Company shall require any successor (direct or indirect and
whether by purchase, merger, consolidation, share exchange or otherwise) to the
business, properties and assets of the Company substantially as an entirety
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent the Company would have been required to perform it had no
such succession taken place.
J. Amendments; Waivers. This Agreement may not be amended or modified
except by a written agreement executed and delivered by the parties hereto or
their respective successors or legal representatives acting in their capacities
as such pursuant to applicable law.
K. Notices. All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery or by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
appropriate Person at the address of such Person set forth below (or at such
other address as such Person may designate by written notice to each other party
in accordance herewith):
(i) if to the Employee, addressed as follows:
Jack C. Chen
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18 Montgomery Lane
Greenwich, CT 06830
and
(ii) if to the Company, addressed as follows:
StarMedia Network, Inc.
29 West 36th Street
5th Floor
New York, NY 100018
In the case of any Notice of Termination for Good Reason, with copies to
each member of the Board.
L. No Waiver. The failure of the Company or the Employee to insist on
strict compliance with any provision of, or to assert any right under, this
Agreement shall not be deemed a waiver of that provision or of any other
provision of or right under this Agreement.
M. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without reference to any
principles of conflicts of laws.
N. Jurisdiction and Venue. The Company and the Employee irrevocably
consent with respect to any action, suit or other legal proceeding pertaining
directly to this Agreement or to the interpretation or enforcement of any of the
Company's or the Employee's right hereunder to service of process in the State
of New York and hereby waives any right to contest or oppose receipt of such
service of process in New York, provided such Person actually received such
process by mail or electronic communication. The Company and the Employee
irrevocably
(i) agree that any such action, suit or other legal proceeding may be
brought in New York, New York; and
(ii) consent to the jurisdiction of any appropriate court in such city
in any such action, suit or other legal proceeding; and
(iii) waive any objection it may have to the laying of venue of any such
action, suit or other legal proceeding in any of such courts.
O. Headings. The headings of Sections and subsections hereof are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
P. Interest. If any amounts required to be paid or reimbursed to the
Employee hereunder are not so paid or reimbursed at the times provided herein,
those amounts
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shall accrue interest compounded daily at the annual percentage rate which is
three percentage points (3%) above the interest rate announced by Citibank, N.A.
(or its successor) from time to time, as its prime lending rate for commercial
loans in New York City, from the date those amounts were required to have been
paid or reimbursed to the Employee until those amounts are finally and fully
paid or reimbursed; provided, however, that in no event shall the amount of
interest contracted for, charged or received hereunder exceed the maximum
non-usurious amount of interest allowed by applicable law.
Q. Publicity. The Company agrees with the Employee that, except to the
extent required by law or legal process (including reporting and public
disclosure contemplated under the Exchange Act and the Securities Act) and any
other law giving any Person a private right of action or suit, neither the
Company nor the Employee will make or publish, without the prior written consent
of the other, any written or oral statement concerning the terms of the
Employee's employment relationship with the Company and will not, if a Notice of
Termination is given by either the Company or the Employee for any reason,
publish or cause to be published any statement concerning the Company's
relationship with the Employee or the Employee's relationship with the Company,
including Employee's work-related performance or the reasons or basis for the
giving of that Notice of Termination.
R. Tax Withholding. Notwithstanding any other provision hereof, the
Company may withhold from amounts payable hereunder all Federal, state, local
and foreign taxes that are required to be withheld by applicable laws or
regulations.
S. Entire Agreement. The Company and the Employee agree that this
Agreement supersedes all prior written and oral agreements between them with
respect to the employment of the Employee by the Company (including the
Employment Agreement dated as of July 25, 1997), but, except as provided in
Section 5(F), has no effect on any Compensation Plan in which the Employee was
participating in prior to the Effective Date. =======
8. LITIGATION COSTS
In the event of litigation over the terms or breach of this Agreement,
the prevailing party shall be entitled to recover litigation costs and attorneys
fees from the non-prevailing party.
9. INDEMNIFICATION
The Employee shall be indemnified by the Company for all liabilities
relating to or arising from his status as an officer or a director of the
Company, and any actions committed or omitted by the Employee in such capacity,
to the maximum extent permitted by the law of Delaware, the state of the
Company's incorporation, and the law of the state of incorporation of any
subsidiary of the Company of which the Employee is a director or an officer or
employee, as the same may be in effect from time to time.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year indicated above.
STARMEDIA NETWORK, INC.
Name:
Title:
JACK C. CHEN
<PAGE>
Exhibit 10.30
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of April
29, 1999, by and between StarMedia Network, Inc., a Delaware corporation (the
"Company"), and Fernando J. Espuelas (the "Employee").
RECITALS:
In entering into this Agreement, the Company desires to provide the
Employee with substantial incentives to serve the Company without distraction or
concern over minimum compensation, benefits or tenure, to develop and implement
the Company's business plan and thereafter manage the Company's future growth
and development and maximize the returns to the Company's stockholders.
NOW, THEREFORE, in consideration of the foregoing and the mutual
provisions contained herein, and for other good and valuable consideration, the
parties hereto agree with each other as follows:
1. CERTAIN DEFINITIONS
A. Certain Definitions. As used herein, the following terms have the
meanings assigned to them below:
"Active Status" means the Employee's Employment status from the
Effective Date to the Termination Date.
"Affiliate" has the meaning ascribed to that term in Exchange
Act Rule 12b-2.
"Associate" means, with reference to any Person,
(a) any corporation, firm, partnership, association,
unincorporated organization or other entity (other than the
Company or a subsidiary of the Company) of which that Person is
an officer or general partner (or officer or general partner of
a general partner) or is, directly or indirectly, the Beneficial
Owner of 10% or more of any class of its equity securities,
(b) any trust or other estate in which that Person has a
substantial beneficial interest or for or of which that Person
serves as trustee or in a similar fiduciary capacity and
(c) any relative or spouse of that Person, or any
relative of that spouse, who has the same home as that Person.
"Base Salary" means the guaranteed minimum annual salary payable
by the
<PAGE>
Company to the Employee pursuant to Section 4.A.
"Beneficial Owner" A specified Person is deemed the "Beneficial
Owner" of, and is deemed to "beneficially own," any securities:
(a) of which that Person or any of that Person's
Affiliates or Associates, directly or indirectly, is the
"beneficial owner" (as determined pursuant to Exchange Act Rule
13d-3) or otherwise has the right to vote or dispose of,
including pursuant to any agreement, arrangement or
understanding (whether or not in writing); provided, however,
that a Person shall not be deemed the "Beneficial Owner" of, or
to "beneficially own," any security under this subparagraph (a)
as a result of an agreement, arrangement or understanding to
vote that security if that agreement, arrangement or
understanding: (1) arises solely from a revocable proxy or
consent given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable provisions of the Exchange Act; and (2) is not then
reportable by such Person on Exchange Act Schedule 13D (or any
comparable or successor report);
(b) which that Person or any of that Person's Affiliates
or Associates, directly or indirectly, has the right or
obligation to acquire (whether that right or obligation is
exercisable or effective immediately or only after the passage
of time or the occurrence of an event) pursuant to any
agreement, arrangement or understanding (whether or not in
writing) or on the exercise of conversion rights, exchange
rights, other rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," securities
tendered pursuant to a tender or exchange offer made by that
Person or any of that Person's Affiliates or Associates until
those tendered securities are accepted for purchase or exchange;
or
(c) which are beneficially owned, directly or
indirectly, by (1) any other Person (or any Affiliate or
Associate thereof) with which the specified Person or any of the
specified Person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except pursuant to a
revocable proxy or consent as described in the proviso to
subparagraph (a) of this definition) or disposing of any voting
securities of the Company or (2) any group (as that term is used
in Exchange Act Rule 13d-5(b)) of which that specified Person is
a member; provided, however, that nothing in this definition
shall cause a Person engaged in business as an underwriter of
securities to be the "Beneficial Owner" of, or to "beneficially
own," any securities acquired through such a Person's
participation in good faith in a firm commitment underwriting
until the
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<PAGE>
expiration of forty (40) days after the date of that
acquisition. For purposes of this Agreement, " voting" a
security shall include voting, granting a proxy, acting by
consent, making a request or demand relating to corporate action
(including, calling a stockholder meeting) or otherwise giving
an authorization (within the meaning of Section 14(a) of the
Exchange Act) in respect of such security.
"Board" means herein the entire Board of Directors of the
Company, except when less than the entire Board is specified herein.
"Business Reason" for the Company's termination of the
Employee's Employment means any reason other than Cause or Disability.
"Business Reason Termination Payment" means an amount equal to
200% of the Base Salary and Minimum Bonus applicable to the calendar
year in which such termination for Business Reason takes place.
"Cause" for the Company's termination of the Employee's
Employment means:
(a) the Employee's final conviction of a felony.
(b) the Employee's continuing to engage in conduct which
has caused or is reasonably likely to cause, demonstrable and
serious injury to the Company after having been given written
notice of such determination by the Required Board Majority and
a reasonable opportunity to cure, which curative period shall
not be less than thirty (30) days;
(c) the Employee's continuing failure to substantially
perform the lawful directives of the Board (consistent with the
provisions of this Agreement) or his duties and responsibilities
in accordance with the provisions of this Agreement (except by
reason of the Employee's incapacity due to physical or mental
illness or injury) after having been given written notice of
such determination by the Required Board Majority and a
reasonable opportunity to cure, which curative period shall not
be less than thirty (30) days, which written notice specifically
identifies the provision of this Agreement which the Required
Board Majority contends that Employee has continually failed to
substantially perform or the directive that the Employee has not
followed, the bases for the Required Board Majority's
determination as set forth in the notice and the specific nature
of the corrective action that the Required Board Majority
proposes that the Employee take; provided, that for purposes of
this clause (c), the Company shall not have Cause to give
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<PAGE>
such notice or thereafter terminate the Employee's Employment if
such act or omission was taken or omitted to be taken by an
officer or employee of the Company other than Employee or the
act or omission was taken or omitted by Employee with the
concurrence of a majority of the Board or the act or omission
was taken or omitted by the Employee in good faith with a
reasonable belief that the act or omission was authorized by a
majority of the Board or otherwise in the interest of the
Company;
(d) violation of the terms of the covenants set forth in
Sections 7A, 7B or 7C, and, in the event of a violation of the
terms of the covenants set forth in Section 7B, after having
been given written notice of such determination by the Required
Board Majority and a reasonable opportunity to cure, which
curative period shall not be less than thirty (30) days.
"Code" means the Internal Revenue Code of 1986.
"Company" means StarMedia Network, Inc., a Delaware corporation,
and any successor thereto, including, any Person that assumes the
obligations of the "Company" hereunder, by operation of law, pursuant to
Section 7(I) or otherwise.
"Compensation Plan" means any compensation arrangement, plan,
policy, practice or program established, maintained or sponsored by the
Company or any subsidiary of the Company, or to which the Company or any
subsidiary of the Company contributes, on behalf of any Executive
Officer or any member of the family of any Executive Officer,
(a) including:
(i) any "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) or other "employee
benefit plan" (as defined in Section 3(3) of ERISA),
(ii) any other retirement and savings plan,
including any supplemental benefit arrangement relating
to any plan intended to be qualified under Section
401(a) of the Code or whose benefits are limited by the
Code or ERISA,
(iii) any "employee welfare plan" (as defined in
Section 3(l) of ERISA),
(iv) any arrangement, plan, policy, practice or
program providing for severance pay, deferred
compensation or insurance benefit,
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<PAGE>
(v) any Incentive Plan, and
(vi) any arrangement, plan, policy, practice or
program:
(A) authorizing and providing for the payment or reimbursement of
expenses attributable to transportation and hotel occupancy while on business
travel or
(B) providing for the payment of business luncheon, long-distance
charges, mobile phone monthly air time or other recurring monthly charges or any
other fringe benefit, allowance or accommodation of employment but, excluding
any compensation arrangement, plan, policy, practice or program to the extent it
provides for annual Base Salary.
"Disability" of the Employee means the Employee has been determined to
be disabled (which determination shall be final and binding on all Persons,
absent manifest error), as a result of a physical or mental illness or personal
injury he has incurred, by the insurance carrier providing the disability
insurance referred to in Section 5(C).
"Effective Date" means April 29, 1999.
"Employment" means the employment of the Employee by the Company or a
subsidiary of the Company hereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Exchange Act" means the Securities Exchange Act of 1934.
"Executive Officer" means any of the chairman of the board, the chief
executive officer, the chief operating officer, the chief financial officer, the
president, any executive or senior vice president or the general counsel of the
Company.
"Extension Date" means (i) July 31, 2000, if not less than 120 days
prior thereto the Company or the Employee has given the other notice of its or
his election not to continue the Employment (a "Notice of Non-Extension"), or
(ii) if no Notice of Non-Extension has been given as provided in clause (i), any
July 31 thereafter where not less than 120 days prior thereto the Company or the
Employee has given the other a Notice of Non-Extension.
"Good Reason" for the Employee's termination of his Employment means any
of the following that occurs before the Employee gives a Notice of Termination
for Good Reason and which has not been cured by the Company reasonably promptly
after receipt of a notice from the Employee stating that Employee believes that
Good Reason exists and setting forth in reasonable detail the basis therefor;
provided that any such cure that occurs after thirty (30) days of such notice
shall not be considered reasonably prompt and provided further that if such cure
occurs, Employee shall not be required to give a subsequent notice if the same
or a substantially similar Good Reason again occurs:
(a) any violation or breach by the Company, in any material
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<PAGE>
respect, of the provisions of Section 4 of this Agreement; provided,
however, that in the event that the fact or circumstance constituting
Good Reason is the Company's violation or breach of the provisions of
Section 4 and the Company is insolvent at the time of such violation or
breach, the Company will have no obligation to pay to the Employee the
Good Reason Termination Payment;
(b) the assignment to the Employee of duties inconsistent in any
material respect with the Employee's role as a senior executive officer
of the Company (including titles, authority, duties or responsibilities
inconsistent in any material respect with such role) or the taking of
any action that is the equivalent of a constructive discharge;
(c) relocation of the Employee outside of the New York
metropolitan area without relocation of the principal executive offices
of the Company and at least 80% of the other employees of the Company
then located in the principal executive offices of the Company; or
(d) a change in the Employee's reporting relationships; or
(e) a change of control, which shall mean:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more
of either (A) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (i), the
following acquisitions shall not constitute a Change of Control:
(w) any acquisition directly from the Company, (x) any
acquisition by the Company, (y) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (z) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (A), (B) and (C) of subsection (iii) of
this Section (e); or
(ii) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
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<PAGE>
hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns all of
the common stock of the Company or all or substantially all of
the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding any
corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities
of such corporation except to the extent that such ownership
existed prior to the Business Combination and (C) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing
for such Business Combination;
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<PAGE>
or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
"Good Reason Termination Payment" means an amount equal to 200% of the
Base Salary and Minimum Bonus Amount applicable to the calendar year in which
such termination for Good Reason takes place.
"Incentive Plan" means any compensation arrangement, plan, policy,
practice or program established, maintained or sponsored by the Company or any
subsidiary of the Company, or to which the Company or any subsidiary of the
Company contributes, on behalf of any Executive Officer and which provides for
awards of securities or the phantom equivalent of securities, including any
stock option, stock appreciation right and restricted stock plan, but excluding
any plan intended to qualify as a plan under any one or more of Sections 401(a),
401(k) or 423 of the Code.
"Minimum Bonus Amount" means the guaranteed minimum annual bonus payable
to the Employee as determined pursuant to Section 4(B).
"Notice of Termination" to or from the Employee means a written notice
that:
(a) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination
of the Employee's Employment, and
(b) if the Termination Date is other than the date of receipt of
the notice, sets forth that Termination Date.
"Person" means any natural person, sole proprietorship, corporation,
partnership of any kind having a separate legal status, limited liability
company, business trust, unincorporated organization or association, mutual
company, joint stock company, joint venture, estate, trust, union or employee
organization or governmental authority.
"Publicly Traded" with respect to shares of stock of a company means
traded on a national securities exchange or listed for quotation on NASDAQ.
"Required Board Majority" means at any time at least a majority of the
members of the Board, other than the Employee, voting at that time.
"Securities Act" means the Securities Act of 1933.
"Term" shall have the meaning set forth in Section 3.
"Termination Date" means the earlier of the Extension Date and:
(a) if the Employee's Employment is terminated by reason of
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<PAGE>
the Employee's death, the date of that death;
(b) if the Employee's Employment is terminated by reason of the
Employee's Disability, the date of the receipt by the Company or the
Employee, as the case may be, of the Notice of Termination;
(c) if the Employee's Employment is terminated by Employee for
Good Reason, the date specified in the Notice of Termination, which
shall be not less than ten (10) business days nor more than thirty (30)
business days following the receipt by the Company of such Notice of
Termination;
(c) if the Employee's Employment is terminated by Employee for
any other reason, the date specified in the Notice of Termination, which
shall be not less than thirty (30) business days nor more than sixty
(60) business days following the receipt by the Company of such Notice
of Termination;
(d) if the Employee's Employment is terminated by the Company
for Cause, the date specified in the Notice of Termination, which shall
be not less than three (3) business days nor more than sixty (60)
business days following the receipt by the Employee of such Notice of
Termination; and
(e) if the Employee's Employment is terminated by the Company
for any Business Reason, the date specified in the Notice of
Termination, which shall be not less than thirty (30) business days nor
more than sixty (60) business days following the receipt by the Employee
of such Notice of Termination.
"Voting Shares" means:
(a) in the case of any corporation, stock of that corporation of
the class or classes having general voting power under ordinary
circumstances to elect a majority of that corporation's board of
directors; and
(b) in the case of any other entity, equity interests of the
class or classes having general voting power under ordinary
circumstances equivalent to the Voting Shares of a corporation.
B. Other Definitional Provisions.
(i) Except as otherwise specified herein, all references herein to any
statute defined or referred to herein, including the Code, ERISA, the Securities
Act and the Exchange Act, shall be deemed references to that statute or any
successor statute, as the same
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<PAGE>
may have been or may be amended or supplemented from time to time, and any rules
or regulations promulgated thereunder.
(ii) When used in this Agreement, the words "herein," "hereof" and
"hereunder" and words of similar import shall refer to this Agreement as a whole
and not to any provision of this Agreement, and the word "Section" refers to a
Section of this Agreement unless otherwise specified.
(iii) Whenever the context so requires, the singular number includes the
plural and vice versa, and a reference to one gender includes each other gender
and the neuter.
(iv) The word "including" (and, with correlative meaning, the word
"include") means including, without limiting the generality of any description
preceding such word, and the words "shall" and "will" are used interchangeably
and have the same meaning.
2. EMPLOYMENT
A. On the terms and subject to the conditions hereinafter set forth,
beginning as of the Effective Date, the Company shall employ the Employee as
Chief Executive Officer of the Company and the Employee will serve in the
Company's employ in that position. The Employee shall perform such duties,
and have such powers, authority, functions, duties and responsibilities for
the Company and corporations Affiliated with the Company as are commensurate
and consistent with the employment as Chief Executive Officer of the Company.
The Employee also shall have such additional powers, authority, functions,
duties and responsibilities as may be assigned to him by the Board.
B. The Employee shall not, at any time during the Employment, engage in
any other business activities unless these activities do not interfere
materially with the Employee's duties and responsibilities for the Company at
that time, except that the Employee shall be entitled, subject to the provisions
of Section 7.A.:
(a) to continue with such activities as the Employee has carried
on prior to the Effective Date, including making and managing his
personal investments and participating in other business, church or
civic activities, provided that such activities do not include a
Beneficial Ownership interest in a competitor, supplier or customer of
the Company other than an investment in a Publicly Traded company of
which Employee is not an employee, officer, director or partner that
does not exceed 5% of the outstanding Voting Shares of such company;
(b) to serve on civic boards, non-profit boards, charitable
boards or committees and trade associations or similar boards or
committees.
(c) to serve on for-profit business boards of directors if the
Company's consent shall have been obtained, which consent shall not
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unreasonably be withheld or delayed.
3. TERM OF EMPLOYMENT
Subject to the provisions of Section 5, the term of the Employee's
Employment shall be for the period commencing on the Effective Date and ending
on the Termination Date (the "Term").
4. COMPENSATION
A. Base Salary. The Base Salary shall be payable to the Employee by the
Company as a guaranteed minimum annual amount hereunder for the period from the
Effective Date to the Termination Date. The Base Salary shall be payable in the
intervals consistent with the Company's normal payroll schedules (but in no
event less frequently than monthly), and shall be payable initially at the
annual rate of $150,000.00 and shall be increased, effective as of each January
1, by an amount equal to 10% of the immediately preceding Base Salary, and from
time to time by such additional amount, if any, that the Compensation Committee
of the Board shall determine.
B. Annual Bonus. The Minimum Bonus Amount shall be payable to the
Employee in January of each year from the Effective Date to the Termination
Date. The Minimum Bonus Amount shall be payable initially in the amount of
$100,000 and shall be increased, by an amount equal to 10% of the immediately
preceding Minimum Bonus Amount, and from time to time by such greater amount as
the Compensation Committee of the Board shall, in its sole discretion,
determine.
C. Other Compensation. To the extent authorized by the Compensation
Committee of the Board the Employee shall also be entitled to participate in any
additional Compensation Plans from time to time in effect during the term of
this Agreement.
D. Tax Indemnity. Should any of the payments of Base Salary, Business
Reason Termination Payment, Good Reason Termination Payment, other incentive or
supplemental compensation, benefits, allowances, awards, payments,
reimbursements or other perquisites, or any other payment in the nature of
compensation, singly, in any combination or in the aggregate, that are provided
for hereunder to be paid to or for the benefit of the Employee be determined or
alleged to be subject to an excise or similar purpose tax pursuant to Section
4999 of the Code, or any successor or other comparable Federal, state or local
tax law by reason of being a "parachute payment" (within the meaning of Section
28OG of the Code), the Company shall pay to the Employee such additional
compensation as is necessary (after taking into account all Federal, state and
local taxes payable by the Employee as a result of the receipt of such
additional compensation) to place the Employee in the same after tax position
(including Federal, state and local taxes) he would have been in had no such
excise or similar purpose tax (or interest or penalties thereon) been paid or
incurred. The Company hereby agrees to pay such additional compensation within
the earlier to occur of:
(i) five (5) business days after the Employee notifies the Company that
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the Employee intends to file a tax return taking the position that such excise
or similar purpose tax is due and payable in reliance on a written opinion of
the Employee's tax counsel (such tax counsel to be chosen by the Employee and
reasonably acceptable to the Company) that it is more likely than not that such
excise tax is due and payable or
(ii) twenty-four (24) hours of any notice of or action by the Company
that it intends to take the position that such excise or similar purpose tax is
due and payable or
(iii) five (5) business days after the Employee notifies the Company
that the IRS has taken the position that such excise or similar purpose tax is
due and payable. The costs of obtaining the tax counsel opinion referred to in
clause (i) of the preceding sentence shall be borne by the Employee, and as long
as such tax counsel was chosen by the Employee in good faith and reasonably
acceptable to the Company, the conclusions reached in such opinion shall not be
challenged or disputed by the Company. If the Employee intends to make any
payment with respect to any such excise or similar purpose tax as a result of an
adjustment to the Employee's tax liability by any federal, state or local tax
authority, the Company will pay such additional compensation by delivering its
cashier's check payable in such amount to the Employee within five (5) business
days after the Employee notifies the Company of his intention to make such
payment. Without limiting the obligation of the Company hereunder, the Employee
agrees, in the event the Employee makes any payment pursuant to the preceding
sentence, to negotiate with the Company in good faith with respect to procedures
reasonably requested by the Company which would afford the Company the ability
to contest the imposition of such excise or similar purpose tax.
5. TERMINATION, DISABILITY AND DEATH
A. Termination of Employment by the Company.
(i) The Company shall be entitled, if acting at the direction of the
Required Board Majority, to terminate the Employee's Employment at any time for
Cause or for any Business Reason.
(ii) If the Company terminates the Employee's Employment for Cause, the
Company promptly after the Termination Date, and in any event within five (5)
business days thereafter, shall pay to the Employee, without right of set off or
counterclaim, his Base Salary to and including the Termination Date , any
accrued but unpaid vacation pay and the amount of all compensation previously
deferred by the Employee (together with any accrued interest or earnings
thereon), in each case to the extent not theretofore paid, and, when that
payment is made, the Company shall have no further or other obligations
hereunder to the Employee.
(iii) If the Company terminates the Employee's Employment for a Business
Reason, the Company shall (a) promptly after the Termination Date, and in any
event within five (5) business days thereafter, pay to the Employee, without
right of set off or counterclaim, in each case to the extent not theretofore
paid, his Base Salary to and including the Termination Date, any accrued but
unpaid vacation pay and the amount of all compensation previously deferred by
the Employee, if any (together with any accrued interest or earnings thereon),
(b)
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within thirty (30) days following the Termination Date, pay to the Employee,
without right of set off or counterclaim, the Business Reason Termination
Payment and (c) continue the Employee's Company sponsored health and disability
benefits for twenty-four (24) months following the Termination Date, and, when
all such payments are made and obligations fulfilled, the Company shall have no
further or other obligations hereunder to the Employee.
B. Termination of Employment by the Employee.
(i) The Employee shall be entitled to terminate the Employment:
(a) For Good Reason. The Employee shall be entitled to terminate his
Employment for a Good Reason at any time within sixty (60) days after the facts
or circumstances constituting that Good Reason (without regard to the date of
the required notice of Good Reason by the Employee to the Company) first exist
and are known to the Employee, provided that at the time of any Notice of
Termination therefor Good Reason continues to exist. Such termination for Good
Reason shall be effective on the applicable Termination Date. In the event that
the Employee terminates his Employment for Good Reason, the Company shall (a)
promptly after the Termination Date, and in any event within five (5) business
days thereafter, pay to the Employee, without right of set off or counterclaim,
his Base Salary to and including the Termination Date, any accrued but unpaid
vacation pay and the amount of all compensation previously deferred by the
Employee, if any (together with any accrued interest or earnings thereon), (b)
within thirty (30) days following the Termination Date, pay to the Employee,
without right of set off or counterclaim, the Good Reason Termination Payment,
in each case to the extent not theretofore paid and (c) continue the Employee's
Company sponsored health and disability benefits for twenty-four (24) months
following the Termination Date, and, when all such payments are made and
obligations fulfilled, the Company shall have no further or other obligations
hereunder to the Employee.
(b) Without Good Reason. The Employee's termination of his Employment
without Good Reason and other than for Disability will be effective on the
applicable Termination Date. If the Employee terminates his Employment without
Good Reason and other than for Disability, the Company shall pay to the
Employee, promptly after the Termination Date, and in any event within five (5)
business days thereafter, an amount equal to the sum of: (i) the portion of the
Base Salary to and including the Termination Date which has not yet been paid,
(ii) all compensation previously deferred by the Employee, if any (together with
any accrued interest and earnings thereon) which has not yet been paid, and
(iii) any accrued but unpaid vacation pay, and, when all such payments are made,
the Company shall have no further or other obligations hereunder to the
Employee.
C. Termination by Reason of Disability. During the Term, the Company
shall maintain, at its expense, the individual, long-term non-cancelable
guaranteed renewal individual disability plan more particularly described in
Exhibit B. If the Employee incurs any Disability during the Term, either the
Employee or the Company may terminate the Employee's Employment during such
Disability, and the Company shall pay to the Employee, promptly after the
Termination Date, and in any event within five (5) business days thereafter, an
amount equal
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to the sum of: (i) the portion of the Base Salary to and including the
Termination Date which has not yet been paid, (ii) all compensation previously
deferred by the Employee, if any (together with any accrued interest and
earnings thereon) which has not yet been paid, and (iii) any accrued but unpaid
vacation pay, and, when all such payments are made, the Company shall have no
further or other obligations hereunder to the Employee.
D. Termination of Employment by Death. Upon the death of the Employee,
the Employment will be terminated on the applicable Termination Date. If the
Employee's Employment is terminated by reason of the Employee's death, the
Company shall pay to the Person the Employee has designated in a written notice
delivered to the Company as his beneficiary entitled to such payment, if any, or
to the Employee's estate, as applicable, promptly after the Termination Date,
and in any event within thirty (30) days thereafter, an amount equal to the sum
of: (i) the portion of the Base Salary through the end of the month in which the
Termination Date occurs which has not yet been paid, (ii) all compensation
previously deferred by the Employee, if any (together with any accrued interest
or earnings thereon) which has not yet been paid, and (iii) any accrued but
unpaid vacation pay.
E. Return of Property. On termination of the Employee's Employment,
however brought about, the Employee (or his representatives) shall promptly
deliver and return to the Company all the Company's property that is in the
possession or under the control of the Employee.
F. Stock Options. Notwithstanding any provision of this Agreement to the
contrary:
(i) except in the case of a termination of the Employee's Employment for
Cause or pursuant to Section 5(B)(i)(b), all stock options previously granted to
the Employee under Incentive Plans that have not been exercised and are
outstanding as of the time immediately prior to the Termination Date shall,
notwithstanding any contrary provision of any applicable Incentive Plan, remain
outstanding (and continue to become exercisable pursuant to their respective
terms) until exercised or the expiration of their term, whichever is earlier;
and
(ii) in the case of a termination of the Employee's Employment for Cause
or pursuant to Section 5(B)(i)(b), all stock options previously granted to
Employee under Incentive Plans that have not yet vested and are outstanding as
of the time immediately prior to the Termination Date shall, notwithstanding any
contrary provision of any applicable Incentive Plan, terminate and be of no
further force or effect as of the Termination Date.
6. OTHER EMPLOYEE RIGHTS
A. Paid Vacation; Holidays. The Employee shall be entitled to not less
than four (4) weeks of annual vacation and all legal holidays, during which
times his applicable compensation shall be paid in full.
B. Fringe Benefits. During the term of this agreement, the Employee is
entitled to participate in the same level of fringe benefits that may be
provided by the Company
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for its key executive employees in accordance with the provisions of any such
plans, as the same may be in effect on and after the date hereof.
C. Business Expenses. The Employee is authorized to incur, and will be
entitled to receive prompt reimbursement for, all reasonable expenses incurred
by the Employee in performing his duties and carrying out his responsibilities
hereunder, including business meal, entertainment, first class air fare on
international flights and first class on domestic flights and hotels, and other
travel expenses, provided that the Employee complies in all material respects
with all reasonable policies, practices and procedures of the Company relating
to the submission of expense reports, receipts or similar documentation of those
expenses. The Company shall either pay directly or promptly reimburse the
Employee for such expenses not more than twenty (20) days after the submission
to the Company by the Employee from time to time of an itemized accounting of
such expenditures for which direct payment or reimbursement is sought. All such
direct payments and reimbursements remaining unpaid after such 20-day period
shall accrue interest in accordance with Section 7(P).
D. Support. During the Employment, the Employee shall be provided by the
Company with office space, furnishings, and facilities, administrative
assistance, supplies and other support equipment (including a computer,
facsimile machine and photocopier).
7. GENERAL PROVISIONS
A. Confidentiality. Reference is made to the Non-Disclosure and
Developments Agreement between the Employee and the Company dated as of July 25,
1997 (the "NDDA Agreement"). The provisions of Sections 1, 2, 3(a), (b) and (d)
and 4 of the NDDA Agreement are hereby incorporated herein in full by reference.
B. Non-Competition. The Employee agrees that, except as otherwise
provided herein, during the Employment and for (x) a period of two (2) years
after any Termination Date applicable to any termination of the Employment under
Section 5(A)(ii) or Section 5(B)(i)(b), and (y) a period of one (1) year after
any Termination Date applicable to any termination of the Employment under
Section 5(A)(iii), Employee will not directly or indirectly, whether or not for
compensation and whether or not as an employee, be engaged in or have any
impermissible financial interest in any business that is in fact competing with
the Company (a "competing business"). For purposes of this Agreement, the
Employee shall be deemed to be engaged in a competing business if the business
is a pan-regional, community based, consumer oriented, internet service focused
on Latin America, and Employee is an employee, officer, director, partner or
consultant of such competing business or has an impermissible financial interest
therein. For purposes of this Agreement, the Employee shall only be deemed to
have an impermissible financial interest in a competing business if Employee is
a partner or shareholder therein, except as provided hereafter. Employee shall
be deemed to have an impermissible financial interest in any competing Publicly
Traded business if Employee (i) during the Employment, beneficially or directly
owns more than one percent (1%), and (ii) following any Termination Date,
directly owns more than three percent (3%) or beneficially owns more than five
percent (5%), in each case of any class of securities of such Publicly Traded
company,
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whether or not Employee is an officer, director, partner, employee or consultant
thereto.
C. Non-Solicitation. The Employee agrees that during the Employment and
for a period of one (1) year after any Termination Date applicable to any
termination of the Employment under Section 5(A)(ii), Employee shall not employ,
or advise or recommend to any person that they employ, any person who is
employed by the Company or any of its controlled Affiliates during the
Employment or on the Termination Date, as the case may be, or induce such person
to accept employment other than with the Company or its Affiliates, provided
that the Employee shall be permitted to respond to requests for references from
prospective employers with respect to any such employers.
D. Injunctive Relief. The Employee recognizes that a breach of his
obligations under paragraphs (A) through (C) above would cause irreparable harm
to the Company and, provided that as a precondition the Company has previously
tendered all sums that are due and payable to the Employee under the terms of
this Agreement, the Company shall be entitled to preliminary and permanent
injunctions enjoining violations thereof as a non-exclusive remedy.
E. Severability. If any one or more of the provisions of this Agreement
shall, for any reason, be held or found by final judgment of a court of
competent jurisdiction to be invalid, illegal or unenforceable in any respect,
(i) such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement,
(ii) this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein (except that this clause
(ii) shall not prohibit any modification allowed under Section 7(J)),
(iii) if the effect of a holding or finding that any such provision is
invalid, illegal or unenforceable is to modify to the Employee's detriment,
reduce or eliminate any compensation, reimbursement, payment, allowance or other
benefit to the Employee intended by the Company and Employee in entering into
this Agreement, the Company shall, within thirty (30) days after the date of
such finding or holding, negotiate and expeditiously enter into an agreement
with the Employee which contains alternative provisions (reasonably acceptable
to the Employee and the Company) that will restore to the Employee (to the
extent lawfully permissible) substantially the same economic, substantive and
income tax benefits and legal rights the Employee would have enjoyed had such
provision been upheld as legal, valid and enforceable, and
(iv) if any provision of this Agreement or portion hereof is so broad,
in scope or duration, as to be unenforceable, such provision or portions thereof
shall be interpreted to be only so broad as to be legal, valid and enforceable.
F. Non-exclusivity of Rights. Nothing herein shall prevent the
Employee's continuing or future participation in any Compensation Plan or,
subject to Section 5.F., limit or
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otherwise affect such rights as the Employee may have under any other contract
or agreement with the Company. Vested benefits and other amounts to which the
Employee is or becomes entitled to receive under any Compensation Plan on or
after the Termination Date shall be payable in accordance with that Compensation
Plan, except as expressly modified hereby.
G. Full Settlement. The Company's obligations to make the payments
provided for, and otherwise to perform its undertakings, in this Agreement shall
not be affected by any right of set-off, counterclaim, recoupment, defense or
other action, claim or right the Company may have against the Employee or
others. In no event shall the Employee be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Employee under any provision hereof, and those amounts shall not be reduced,
regardless of whether the Employee obtains other employment or becomes
self-employed.
H. Survival. The obligations of the parties hereto under Sections 4, 5,
6(C), 7, 8 and 9 shall survive the Termination Date.
I. Successors.
(i) This Agreement is personal to the Employee and, without the prior
written consent of the other party, is not assignable or delegable by the
Employee (otherwise than by transfer of rights by will or the laws of descent
and distribution) or by the Company.
(ii) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and permitted assigns and this Agreement shall
inure to the benefit of and be enforceable by the Employee's legal
representatives acting in their capacities as such pursuant to applicable law.
(iii) The Company shall require any successor (direct or indirect and
whether by purchase, merger, consolidation, share exchange or otherwise) to the
business, properties and assets of the Company substantially as an entirety
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent the Company would have been required to perform it had no
such succession taken place.
J. Amendments; Waivers. This Agreement may not be amended or modified
except by a written agreement executed and delivered by the parties hereto or
their respective successors or legal representatives acting in their capacities
as such pursuant to applicable law.
K. Notices. All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery or by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
appropriate Person at the address of such Person set forth below (or at such
other address as such Person may designate by written notice to each other party
in accordance herewith):
(i) if to the Employee, addressed as follows:
Fernando J. Espuelas
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156 Everett Road
Easton, CT 06612
and
(ii) if to the Company, addressed as follows:
StarMedia Network, Inc.
29 West 36th Street
5th Floor
New York, NY 100018
In the case of any Notice of Termination for Good Reason, with copies to
each member of the Board.
L. No Waiver. The failure of the Company or the Employee to insist on
strict compliance with any provision of, or to assert any right under, this
Agreement shall not be deemed a waiver of that provision or of any other
provision of or right under this Agreement.
M. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without reference to any
principles of conflicts of laws.
N. Jurisdiction and Venue. The Company and the Employee irrevocably
consent with respect to any action, suit or other legal proceeding pertaining
directly to this Agreement or to the interpretation or enforcement of any of the
Company's or the Employee's right hereunder to service of process in the State
of New York and hereby waives any right to contest or oppose receipt of such
service of process in New York, provided such Person actually received such
process by mail or electronic communication. The Company and the Employee
irrevocably
(i) agree that any such action, suit or other legal proceeding may be
brought in New York, New York; and
(ii) consent to the jurisdiction of any appropriate court in such city
in any such action, suit or other legal proceeding; and
(iii) waive any objection it may have to the laying of venue of any such
action, suit or other legal proceeding in any of such courts.
O. Headings. The headings of Sections and subsections hereof are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
P. Interest. If any amounts required to be paid or reimbursed to the
Employee hereunder are not so paid or reimbursed at the times provided herein,
those amounts
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shall accrue interest compounded daily at the annual percentage rate which is
three percentage points (3%) above the interest rate announced by Citibank, N.A.
(or its successor) from time to time, as its prime lending rate for commercial
loans in New York City, from the date those amounts were required to have been
paid or reimbursed to the Employee until those amounts are finally and fully
paid or reimbursed; provided, however, that in no event shall the amount of
interest contracted for, charged or received hereunder exceed the maximum
non-usurious amount of interest allowed by applicable law.
Q. Publicity. The Company agrees with the Employee that, except to the
extent required by law or legal process (including reporting and public
disclosure contemplated under the Exchange Act and the Securities Act) and any
other law giving any Person a private right of action or suit, neither the
Company nor the Employee will make or publish, without the prior written consent
of the other, any written or oral statement concerning the terms of the
Employee's employment relationship with the Company and will not, if a Notice of
Termination is given by either the Company or the Employee for any reason,
publish or cause to be published any statement concerning the Company's
relationship with the Employee or the Employee's relationship with the Company,
including Employee's work-related performance or the reasons or basis for the
giving of that Notice of Termination.
R. Tax Withholding. Notwithstanding any other provision hereof, the
Company may withhold from amounts payable hereunder all Federal, state, local
and foreign taxes that are required to be withheld by applicable laws or
regulations.
S. Entire Agreement. The Company and the Employee agree that this
Agreement supersedes all prior written and oral agreements between them with
respect to the employment of the Employee by the Company (including the
Employment Agreement dated as of July 25, 1997), but, except as provided in
Section 5(F), has no effect on any Compensation Plan in which the Employee was
participating in prior to the Effective Date.
8. LITIGATION COSTS
In the event of litigation over the terms or breach of this Agreement,
the prevailing party shall be entitled to recover litigation costs and attorneys
fees from the non-prevailing party.
9. INDEMNIFICATION
The Employee shall be indemnified by the Company for all liabilities
relating to or arising from his status as an officer or a director of the
Company, and any actions committed or omitted by the Employee in such capacity,
to the maximum extent permitted by the law of Delaware, the state of the
Company's incorporation, and the law of the state of incorporation of any
subsidiary of the Company of which the Employee is a director or an officer or
employee, as the same may be in effect from time to time.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year indicated above.
STARMEDIA NETWORK, INC.
Name:
Title:
FERNANDO J. ESPUELAS
<PAGE>
EXHIBIT-21.1
StarMedia Network, Inc.
List of Subsidiaries
StarMedia Argentina Sociedad de
Responsabilidad Limitada (SRL)
Buenos Aires, Argentina
StarMedia do Brazil LTDA.
Sao Paulo, Brazil
StarMedia Colombia Ltda., Sociedad de
Responsabilidad Limitada
Bogota, Colombia
StarMedia Chile Limitada
Santiago, Chile
SMN de Mexico, Sociedad de
Responsabilidad Limitada (S. de R.L.)
Mexico City, Mexico
<PAGE>
Servicios Star Mexico, Sociedad de
Responsabilidad Limitada de Capital
Variable (S. de R.L. de C.V.)
Mexico City, Mexico
StarMedia Network, S.L. (Sociedad de
Responsabilidad Limitada)
Madrid, Spain
StarMedia Network Americas, Sociedad
Anonima (S.A.)
Montevideo, Uruguay
StarMedia (SRL)
Caracas, Venezuela
KD Sistemas de Informacao Ltda.
Rio de Janeiro, Brazil
Achei Internet Promotion Ltda.
Sao Paulo, Brazil
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated March 5, 1999 (except Notes 12 and 13, as to which the
date is March 14, 1999) in Amendment No. 2 to the Registration Statement (Form
S-1 No. 333-74659) and the related Prospectus of StarMedia Network, Inc. for the
registration of its common stock.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
New York, New York
May 7, 1999
