<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1999.
REGISTRATION NO. 333-74201
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
quepasa.com, inc.
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
NEVADA 7379 86-0879433
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
ONE ARIZONA CENTER
400 EAST VAN BUREN, FOURTH FLOOR
PHOENIX, ARIZONA 85004
(602) 716-0106
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
JEFFREY S. PETERSON, CHIEF EXECUTIVE OFFICER
quepasa.com, inc.
ONE ARIZONA CENTER
400 EAST VAN BUREN, FOURTH FLOOR
PHOENIX, ARIZONA 85004
(602) 716-0106
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
Copies of all communications to:
<TABLE>
<S> <C>
JEFFREY M. KNETSCH JOSEPH P. RICHARDSON
BROWNSTEIN HYATT & FARBER, P.C. BRYAN CAVE LLP
410 SEVENTEENTH STREET TWO NORTH CENTRAL AVE., #22000
DENVER, CO 80202 PHOENIX, AZ 85004
(303) 534-6335 (602) 364-7000
(303) 623-1956 (FAX) (602) 364-7070 (FAX)
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO 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,
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,
check the following box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS AMOUNT PROPOSED PROPOSED MAXIMUM AMOUNT
OF SECURITIES TO BE MAXIMUM PRICE AGGREGATE OF
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value.... 4,600,000 shares(2) $12.00 $55,200,000 $16,284
- ---------------------------------------------------------------------------------------------------------------------------------
Representative's Warrants........ 400,000 warrants -- $100 --
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock underlying the
Representative's Warrants(3)... 400,000 shares $14.40 $ 5,760,000 $ 1,699
- ---------------------------------------------------------------------------------------------------------------------------------
Total................... $17,983(4)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for computing the amount of the registration fee pursuant
to Rule 457(a) under the Securities Act.
(2) Includes the overallotment option granted to the representative of 600,000
shares.
(3) Pursuant to Rule 416 of the Securities Act of 1933, as amended, the number
of shares of common stock issuable upon exercise of the representative's
warrants is subject to adjustment in accordance with the anti-dilution
provisions of such warrants.
(4) Previously paid.
THE REGISTRANT HEREBY AMENDS THE 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> 2
SUBJECT TO COMPLETION DATED , 1999
4,000,000 SHARES OF COMMON STOCK
[QUEPASA.COM LOGO]
Quepasa.com, inc. operates an Internet portal and search engine that
provides users with information and interactive content centered around the
Spanish language. The quepasa.com portal includes a search engine, free e-mail,
Spanish-language news feeds, chat rooms and message boards.
We are offering 4,000,000 shares of common stock at between $10.00 and
$12.00 per share.
We have applied to list our common stock on the Nasdaq National Market
under the symbol "PASA."
SEE "RISK FACTORS" BEGINNING ON PAGE 5 TO READ ABOUT FACTORS YOU SHOULD
CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- --------
<S> <C> <C>
Public offering price:...................................... $ $
-------- --------
Underwriting discounts and commissions:..................... $ $
-------- --------
Proceeds to quepasa.com, inc.:.............................. $ $
-------- --------
</TABLE>
We have granted the underwriters an option for 45 days to purchase up to an
additional 600,000 shares at the same price indicated above solely to cover
overallotments.
LOGO
The date of this prospectus is , 1999.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE> 3
[INSIDE FRONT COVER PAGE: SCREENSHOT OF QUEPASA.COM HOMEPAGE]
YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN
THIS PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR SALE OF COMMON
STOCK MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE
DATE OF THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION
OF AN OFFER TO BUY THESE SHARES OF COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH
THE OFFER OR SOLICITATION IS UNLAWFUL.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 2
Risk Factors................................................ 5
Use of Proceeds............................................. 9
Dividend Policy............................................. 9
Dilution.................................................... 10
Capitalization.............................................. 11
Selected Financial Data..................................... 12
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 13
Our Business................................................ 16
Our Management.............................................. 26
Principal Stockholders...................................... 31
Related Party and Other Material Transactions............... 31
Description of Securities................................... 33
Underwriting................................................ 35
Legal Matters............................................... 36
Experts..................................................... 37
Change of Accountants....................................... 37
Additional Information...................................... 37
Financial Statements........................................ F-1
</TABLE>
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE THESE SHARES OF COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 4
PROSPECTUS SUMMARY
The following summary includes all material items relating to the offering
and should be read with the more detailed information and financial statements
and notes thereto appearing elsewhere in this prospectus.
OUR BUSINESS
Quepasa.com is a Spanish-language Internet portal and search engine focused
initially on the U.S. Hispanic market. Search engines are located on "portal"
Internet sites and provide Internet users with guides to online World Wide Web
information and content. In addition to offering search engines, portals draw
viewers to their Web sites by providing a one-stop destination for identifying,
selecting and accessing resources, services, content and information on the Web.
We provide users with information and interactive content centered around the
Spanish language. Because the language preference of many acculturated U.S.
Hispanics is English, we also offer our users the ability to access information
and services in the English language. Our portal includes a search engine, free
e-mail, Spanish-language news feeds, chat rooms and message boards. We are a
development stage company having launched the quepasa.com Web site in November
1998 and have not yet generated significant revenue. We anticipate that our
principal source of revenue will be fees for advertising products and services
on our Web site.
OUR MARKET OPPORTUNITY
Our objective is to establish quepasa.com as a leading worldwide
Spanish-language portal and search engine, offering our services to
Spanish-speaking Internet users residing in the United States, Latin America,
Europe and other regions of the world. We believe that the Spanish-language
Internet market is presently underserved. Our initial focus is the U.S. Hispanic
market where we believe there will continue to be dramatic growth among Internet
users. With respect to the Spanish-language Internet market:
- The U.S. Hispanic population totals 29.6 million people or 11% of the
U.S. population and is expected to grow to 41.1 million or 14% of the
total U.S. population by 2010.
- Total U.S. Hispanic purchasing power is projected to be $383.0 billion in
1999, representing an increase of approximately 84% since 1990;
- Between 1994 and 1998, the percentage of U.S. Hispanic households that
owned computers increased from 13% to 30% which amounted to approximately
130% growth in four years;
- Between 1994 and 1998, the percentage of U.S. Hispanic households with
Internet access grew from 2% to 15%, which amounted to approximately 650%
growth in four years;
- According to International Data Corporation, the number of Internet users
in Latin America, excluding Portuguese-speaking Brazilians, is expected
to increase from 2.5 million at year end 1998 to 11.7 million by year end
2003,
- Spanish is the world's third most spoken language, used by approximately
350 million native speakers; and
- Twenty-one countries consider Spanish their primary language.
OUR STRATEGY
We are establishing quepasa.com as a leading Spanish-language portal and
search engine by executing a business strategy that includes:
- Developing quepasa.com in the United States and then globally as a
leading brand associated with the Internet for Spanish-language users;
- Acquiring and developing additional content and features for the
quepasa.com Web site;
- Entering into strategic relationships with business partners who offer
unique media, content, technology and distribution capabilities;
- Expanding into additional Spanish-speaking markets; and
- Generating revenue from the sale of advertising and through electronic
commerce.
2
<PAGE> 5
OUR STRATEGIC RELATIONSHIPS
We have developed strategic relationships with leading providers of media
and content, including:
- Telemundo Network Group LLC, a U.S. Spanish-language television
network owned primarily by Sony and Liberty Media;
- Miami Herald Online;
- Fox Sports World Espanol;
- Arizona Diamondbacks;
- Reuters NewMedia;
- UPI; and
- WeatherLabs.
Our search engine is provided by Inktomi, a leader in search technology.
Exodus and GTE, two of the largest companies involved in connecting users to the
Internet, provide high-speed connections between our users, quepasa.com and
Inktomi. We have an agreement with 24/7 Media, Inc., a leading provider of
Internet advertising solutions, to sell advertising on our Web site to customers
solicited by 24/7 Media.
OUR HISTORY
We were incorporated in Nevada in June 1997 under the name Internet
Century, Inc. and changed our name in December 1998 to quepasa.com, inc. to
reflect our decision to operate a Spanish-language portal and search engine. Our
corporate offices are located at One Arizona Center, 400 East Van Buren, Fourth
Floor, Phoenix, Arizona 85004, telephone number (602) 716-0106. Our quepasa.com
Web site is located at www.quepasa.com. Information contained in our Web site
should not be considered a part of this prospectus.
THE OFFERING
Unless otherwise indicated, all information in this prospectus assumes (1)
no exercise of the overallotment option granted to the underwriters and (2) an
offering price of $11.00 per share.
Securities Offered(1)...... 4,000,000 shares of common stock.
Common Stock Outstanding
Prior to Offering(2)..... 9,775,833 shares of common stock.
Common Stock to be
Outstanding After
Offering(2).............. 13,775,833 shares of common stock.
Use of Proceeds............ Marketing and advertising expenses; development and
acquisition costs for additional Web site content
and features; general, administrative and other
operating expenses; technology and equipment
purchases; and working capital. See "Use of
Proceeds."
Proposed Nasdaq National
Market Symbol............ PASA
Risk Factors............... Please read the Risk Factors section of this
prospectus because investment in our common stock
involves a high degree of risk and could result in
a loss of your entire investment.
- ---------------
(1) If the overallotment option granted to the underwriters is exercised in
full, 600,000 additional shares of common stock will be sold, with estimated
net proceeds to be received of $5,940,000 after deducting commissions and
expenses.
(2) Excludes an aggregate of 4,099,000 shares of common stock issuable upon
exercise of outstanding stock options and common stock purchase warrants and
400,000 shares of common stock issuable upon exercise of common stock
purchase warrants to be issued to the representative of the underwriters
upon completion of the offering. See "Management -- Stock Option Plan" and
"Underwriting."
3
<PAGE> 6
SUMMARY FINANCIAL DATA
The following tables set forth financial information which has been derived
from our audited financial statements for the period from inception, June 25,
1997, through December 31, 1997, for the year ended December 31, 1998 and
cumulative from inception, June 25, 1997 to December 31, 1998. The tables also
include financial information which has been derived from our unaudited
financial statements as of March 31, 1999, the three months ended March 31, 1999
and 1998 and cumulative from inception (June 25, 1997) through March 31, 1999.
<TABLE>
<CAPTION>
PERIOD FROM CUMULATIVE
INCEPTION CUMULATIVE FROM INCEPTION
THREE MONTHS ENDED (JUNE 25, 1997) FROM INCEPTION (JUNE 25, 1997)
MARCH 31, YEAR ENDED THROUGH (JUNE 25, 1997) THROUGH
STATEMENT OF ------------------------ DECEMBER 31, DECEMBER 31, THROUGH DECEMBER 31,
OPERATIONS DATA 1999 1998 1998 1997 MARCH 31, 1999 1998
--------------- ----------- ---------- ------------ --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Product and content
development
expenses........... $ 186,691 $ 4,330 $ 414,873 $ -- $ 601,564 $ 414,873
Advertising and
marketing
expenses........... 2,062,607 -- 250,419 -- 2,313,026 250,419
Stock-based
compensation
expenses........... 479,000 -- 5,265,364 -- 5,744,364 5,265,364
General and
administrative
expenses........... 985,464 9,137 931,172 3,703 1,920,339 934,875
Net loss............. $(3,718,384) $ (13,467) $(6,909,768) $ (2,903) $(10,631,055) $(6,912,671)
Weighted average
number of shares
outstanding........ 9,075,833 9,075,833 9,075,833 9,075,833 9,075,833 9,075,833
Net loss per share... $ (.41) -- $ (.76) -- $ (1.17) $ (.76)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1998 MARCH 31, 1999
-------- ---------- ---------------------------
BALANCE SHEET DATA ACTUAL ACTUAL ACTUAL AS ADJUSTED(1)
- ------------------ -------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Working capital............................. $ (2,883) $2,958,427 $ 843,803 $39,693,803
Total assets................................ $ 2,582 $4,860,759 $3,442,587 $42,292,587
Total liabilities........................... $ 5,465 $1,336,877 $3,158,089 $ 3,158,089
Stockholders' (deficit) equity.............. $ (2,883) $3,523,882 $ 284,498 $39,134,498
</TABLE>
- ---------------
(1) As adjusted to reflect the sale of 4,000,000 shares of common stock offered
hereby at an assumed offering price of $11.00 per share and the application
of the net proceeds. See "Use of Proceeds."
4
<PAGE> 7
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks and uncertainties described below and the other information in this
prospectus before deciding whether to invest in shares of our common stock. If
any of these risks occur, our business, results of operations and financial
condition could be adversely affected. This could cause the trading price of our
common stock to decline, and you might lose part or all of your investment.
OUR OPERATING HISTORY IS EXTREMELY LIMITED; WE EXPECT FUTURE LOSSES AND MAY NEED
MORE CAPITAL
We were incorporated in June 1997 and have generated no significant revenue
from our quepasa.com Web site. Accordingly, we have no operating history upon
which an investor can evaluate us, and our prospects are subject to the risks
and uncertainties encountered by companies that operate in the new and rapidly
evolving Internet market.
As of March 31, 1999, we had an accumulated deficit of approximately $10.6
million. Our limited operating history and the uncertainty of the Internet
market in which we operate our business make any prediction of our future
results of operations difficult or impossible. We expect to increase
considerably our operating expenses in the future, particularly advertising
expenses to develop and extend our quepasa.com brand and expenses relating to
content and features that we intend to develop, purchase or otherwise acquire
and add to our Web site. We do not expect that our revenue will cover those
expenses. As a result, we will continue to incur significant losses and may need
to raise additional capital. We cannot assure that we will be able to raise
additional capital and we do not know what the terms of such capital raising
would be. Any future sale of our equity securities would dilute the ownership
and control of our stockholders and could be at prices substantially below the
offering price.
WE WILL BE UNABLE TO GENERATE SUFFICIENT ADVERTISING REVENUE IF OUR TARGET
AUDIENCE DOES NOT ACCEPT OUR PRODUCTS AND SERVICES
We have only recently begun to promote our site and we cannot give
assurances that the Spanish-speaking population will accept our products and
services or that we will attract repeat users to our Web site. Because the
market for our products and services is new and evolving, it is difficult to
predict the future growth rate, if any, and the size of the market we have
targeted. If the market develops more slowly than we expect or becomes saturated
with competitors, or if our products and services are not accepted by the
market, we will be unable to generate enough advertising revenue to offset our
expenses and to earn profits.
WE MAY BE UNABLE TO DEVELOP THE QUEPASA.COM BRAND
We intend to spend a significant portion of the net proceeds from this
offering to create and sustain a distinct brand loyalty among our targeted
population of Internet users. We believe that establishing and maintaining the
quepasa.com brand is of critical importance to our efforts to attract and expand
our audience. We also believe that brand recognition will become more important
due to the increasing number of Internet sites. Promotion and enhancement of the
quepasa.com brand will depend largely on our success in providing high quality
products and services and Web site content that is of interest to the worldwide
Spanish-speaking population. We cannot assure that success. Even if our desired
results are achieved, it is likely that we will expend significant additional
amounts in further developing and maintaining brand loyalty. Failure to develop
brand loyalty among our users could result in our being unable to generate
enough advertising revenue to offset our expenses and to earn profits.
WEB-BASED ADVERTISING IS AN UNPROVEN SOURCE OF REVENUE
We will need revenue from the sale of advertisements on our Web pages to
offset expenses. At the present time, Web advertisers generally enter into only
short-term advertising contracts. Because Web site advertising is a new
phenomenon, few advertisers have significant experience with the Web as an
advertising medium. Consequently, many advertisers have not devoted a
substantial portion of their
5
<PAGE> 8
advertising expenditures to Web-based advertising, and may not find Web-based
advertising to be effective for promoting their products and services as
compared to traditional print and broadcast media.
No standards have yet been widely accepted for the measurement of the
effectiveness of Web-based advertising, and we can give no assurance that such
standards will be developed or adopted sufficiently to sustain Web-based
advertising as a significant advertising medium. We cannot give assurances that
banner advertising, the predominant revenue producing mode of advertising
currently used on the Web, will be accepted as an effective advertising medium
or that we can effectively transition to any other forms of Web-based
advertising, should they develop. Recently, software programs became available
that limit or remove advertisments from an Internet user's desktop. This
software, if generally adopted by users, may materially and adversely affect
Web-based advertising.
OUR BUSINESS DEPENDS UPON THIRD PARTIES
Our business depends upon third parties, including providers of technology,
infrastructure, content and features.
We supplement our Web site directory listings with Web search results
provided by Inktomi under a non-exclusive agreement. We depend upon Inktomi for
ongoing maintenance and technical support to ensure accurate and rapid
presentation of search results to users of our Web site. Termination of our
relationship with Inktomi or Inktomi's failure to renew our agreement upon
expiration could result in substantial additional costs to us in developing or
replacing technology. We also rely upon Exodus and GTE for our Internet and
e-mail connections. Any interruption in the Internet access provided by Exodus
or GTE or any other provider of access could disrupt our Web site operations and
impair relations with our users.
We license content, including technology and related databases, from third
parties for portions of our quepasa.com Web site, including news from Reuters
and UPI, weather from WeatherLabs and chat services from Volano. Any errors,
delays or failures experienced in connection with these third party technologies
and services could have a negative effect on our relationship with users of our
Web site, could materially and adversely affect our brand and our business and
could subject us to liability to third parties for business negligence such as
defamation or libel.
OUR BUSINESS IS SUBJECT TO THE RISK OF SYSTEM FAILURE
The continued and uninterrupted performance of our hardware and software is
critical to our reputation and our success in attracting traffic to our Web
site. Users of our site and our services, such as our e-mail services, may
become dissatisfied by system failures that may limit our Web site services.
Sustained or repeated system failures could significantly reduce the traffic on
our Web site and may impair our reputation and brand name. Our operations depend
on our ability to protect our computer systems from damage from fire, power
loss, water damage, telecommunications failures, vandalism and other malicious
acts, and similar unexpected adverse events. We may not carry enough business
interruption insurance to compensate for losses that may occur as a result of
any of these events. We also depend upon Internet browsers and Internet service
providers that provide users with access to the Internet and our Web site. Users
may experience difficulties due to system failures unrelated to our systems. Any
disruption in Internet access by Internet service providers and other third
party access providers, or any failure of such providers to handle higher
volumes of user traffic, could disrupt our Web site operations and impair
relations with our users.
OUR MANAGEMENT IS INEXPERIENCED AND MAY NOT BE ABLE TO MANAGE OUR GROWTH.
Several executive officers and members of our Board of Directors joined us
recently, our management team has worked together for only a short time, and
none of our executive officers has extensive experience managing a rapidly
growing business enterprise. Any growth we experience will place a significant
strain on our management and financial resources. Any inability of our
management to manage
6
<PAGE> 9
growth effectively could significantly increase our operating expenses, impair
our marketing efforts and limit the development of our Web site.
GROWTH OF OUR WEB SITE MAY BE LIMITED BY GOVERNMENTAL REGULATIONS
Laws and regulations may be adopted with respect to the Internet covering
issues ranging from user privacy and defamation to taxation and intellectual
property ownership. Any laws or regulations adopted in the future affecting the
Internet could subject us to substantial liability. Such laws or regulations
could also adversely affect the growth of the Internet generally, and decrease
the acceptance of the Internet as a communications and commercial medium. In
addition, the growing use of the Internet has burdened the existing
telecommunications infrastructure. Areas with high Internet use relative to the
existing telecommunications structure have experienced interruptions in phone
service leading local telephone carriers to petition regulators to govern
Internet service providers and impose access fees on them. Such regulations, if
adopted in the United States or other places, could increase significantly the
costs of communicating over the Internet, which could in turn decrease the
demand for our products and services. The adoption of various proposals to
impose additional taxes on the sale of goods and services through the Internet
could also reduce the demand for Web-based commerce.
WE MAY FACE LIABILITY FOR INFORMATION CONTENT AND COMMERCE-RELATED ACTIVITIES
Because materials may be downloaded by the services that we operate or
facilitate and the materials may subsequently be distributed to others, we could
face claims for errors, defamation, negligence, or copyright or trademark
infringement based on the nature and content of such materials. We could also be
exposed to liability because of the listings that we select and make available
through our Web site, or through content and materials posted by users in chat
room and message board services that we provide. Even to the extent that claims
made against us do not result in liability, we may incur substantial costs in
investigating and defending such claims.
COMPETITION FOR INTERNET USERS MAY LIMIT TRAFFIC ON, AND THE VALUE OF, OUR WEB
SITE
The market for Internet products and services and the market for Internet
advertising and electronic commerce arrangements are extremely competitive, and
we expect that competition will continue to intensify. We believe that the
principal competitive factors in these markets are name recognition,
distribution arrangements, functionality, performance, ease of use, the number
of value-added services and features, and the quality of support. Our primary
competitors are other companies providing portal or other online services,
especially to Spanish-language Internet users such as Yahoo!, America Online,
StarMedia Network, Prodigy, Microsoft, Lycos and Ole. Most of our competitors,
as well as a number of potential new competitors, have significantly greater
financial, technical and marketing resources than we do. Our competitors may
offer Internet products and services that are superior to ours or that achieve
greater market acceptance. There can be no assurance that competition will not
limit traffic on, and the value of, our Website.
OUR BUSINESS IS SUBJECT TO RISKS OF TECHNOLOGICAL CHANGE
The market for Internet products and services is characterized by rapid
technological developments, frequent new product introductions and evolving
industry standards. The emerging character of these products and services and
their rapid evolution will require that we continually improve the performance,
features and reliability of our Internet content, particularly in response to
competitive offerings. There can be no assurance that we will be successful in
responding quickly, cost effectively and sufficiently to these developments. In
addition, the widespread adoption of new Internet technologies or standards
could require substantial expenditures by us to modify or adapt our Web site and
services and could fundamentally affect the character, viability and frequency
of Web-based advertising, either of which could have a material adverse effect
on our business. In addition, new Internet services or enhancements offered by
us may contain design flaws or other defects that could require costly
modifications or result in a loss of consumer confidence.
7
<PAGE> 10
FAILURE OF OUR COMPUTER SYSTEM OR THE SYSTEMS OF THIRD PARTIES TO ACHIEVE YEAR
2000 COMPLIANCE COULD ADVERSELY AFFECT OUR BUSINESS
Many currently installed computer systems and software products are coded
to accept only two-digit entries to represent years in the date code field.
Computer systems and products that do not accept four-digit entries will need to
be upgraded or replaced to accept four-digit entries to distinguish years
beginning with 2000 from prior years. We are currently evaluating the Year 2000
issue as it relates to our entire internal computer system as well as computer
systems operated by third parties. We anticipate that we may incur internal
staff costs as well as consulting and other expenses related to making our
computer systems Year 2000 compliant. We will expense these costs as incurred.
In addition, computer systems operated by third parties with which our systems
interface may not continue to properly interface with our systems or be
compliant on a timely basis with Year 2000 requirements. Any failure of our
computer system or the systems of third parties to achieve Year 2000 compliance
could adversely affect our business.
OUR MANAGEMENT WILL CONTINUE TO CONTROL OUR OPERATIONS; OUR AUTHORIZED PREFERRED
STOCK MAY PREVENT A CHANGE IN OUR CONTROL
Upon completion of the offering, our officers and directors will own, or
control through a voting trust, approximately 57% of our common stock and will,
as a practical matter, continue to be able to elect all of our directors and
control our business. Our Articles of Incorporation authorize the issuance of up
to 5,000,000 shares of preferred stock without our stockholders' approval, which
could impair the voting power or other rights of the holders of the common
stock. The issuance of preferred stock could also be used by our Board of
Directors to prevent a change in control of our Company.
FUTURE SALES OF OUR COMMON STOCK OR SHARES ISSUABLE UPON EXERCISE OF STOCK
OPTIONS COULD ADVERSELY AFFECT OUR STOCK PRICE AND OUR ABILITY TO RAISE FUNDS IN
NEW STOCK OFFERINGS
We currently have 9,775,833 shares of common stock outstanding, of which
1,981,886 shares may now be sold, at the rate of at least 13,775 shares by each
of our stockholders every 90 days, under Rule 144 of the Securities Act and of
which 7,793,947 shares may be sold subject to the same volume limitation
commencing May 1999 through April 2000. Sale of substantial amounts of common
stock, or the perception that sales could occur, could reduce the market price
of the common stock. All of our stockholders have agreed not to sell or
otherwise transfer any of their shares until 180 days from the date of this
prospectus without the prior written consent of the representative of the
underwriters. A total of 6,000,000 shares of common stock have been reserved for
issuance upon the exercise of stock options granted under our Stock Option Plan
and 400,000 shares have been reserved upon exercise of common stock purchase
warrants to be issued to the representative of the underwriters. Currently,
there are outstanding stock options or common stock purchase warrants to acquire
4,099,000 shares of common stock at exercise prices ranging from $1.00 to the
greater of $12.00 or 120% of the offering price per share, including 1,400,000
common stock purchase warrants subject to demand and piggy-back registration
rights. See "Management -- Executive Compensation."
FORWARD-LOOKING STATEMENTS MAY BE UNRELIABLE
This prospectus contains forward-looking statements regarding our intent,
belief or current expectations. Discussions in this prospectus under the
headings "Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Our Business," as well as in
other parts of this prospectus include such forward-looking statements. These
statements are subject to a variety of risks and uncertainties, many of which
are beyond our control, which could cause our actual future results to differ
materially from those contemplated in the forward-looking statements. In
particular, the risks and uncertainties described under "Risk Factors" in this
prospectus could cause our actual future results to differ from what we
contemplate. Investors are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this prospectus.
8
<PAGE> 11
USE OF PROCEEDS
After payment of underwriting commissions and other expenses of the
offering, the net proceeds of the offering are estimated to be $38.9 million, or
$44.8 million if the overallotment option is exercised. We expect to use the net
proceeds approximately as follows:
- $24 million for marketing and advertising expenses in order to globally
develop and maintain the quepasa.com brand;
- $8 million to further develop and acquire additional content and features
for the quepasa.com Web site;
- $4 million for general, administrative and other operating expenses
including the recruitment, training and payment of salaries of new
employees;
- $2 million to purchase additional technology and equipment; and
- $900,000 for working capital.
There may be changes in our proposed use of proceeds due to changes in our
business or the Internet industry in general.
Proceeds not immediately needed will be invested in bank certificates of
deposit, treasury bills, insured bank deposits or similar investments.
DIVIDEND POLICY
We have never declared or paid dividends on our common stock and do not
intend to pay dividends on our common stock in the foreseeable future. Instead,
we will retain any earnings to finance the expansion of our business and for
general corporate purposes.
9
<PAGE> 12
DILUTION
At March 31, 1999, the net tangible book value of our outstanding shares of
common stock was a deficit of $1,718,000, or $.19 per common share. "Net
tangible book value" per share represents the total amount of our tangible
assets, less the total amount of our liabilities, divided by the number of
shares of common stock outstanding. Without taking into account any changes in
net tangible book value after March 31, 1999, other than to give effect to the
sale of the shares of common stock offered hereby at an assumed initial public
offering price of $11.00 per share, less underwriting discounts and commissions
and estimated costs of the offering, our net tangible book value at March 31,
1999 would have been $37,474,000 or $2.87 per share. This represents an
immediate increase in net tangible book value of $3.06 per share of common stock
to our existing stockholders and an immediate dilution of $8.13 per share to new
investors. "Dilution" per share represents the difference between the price to
be paid by the new stockholders and the net tangible book value per share of
common stock immediately after this offering.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $11.00
Net tangible book value per share before the offering..... $(.19)
Increase in net tangible book value per share attributable
to new investors purchasing in the offering............ $3.06
-----
Net tangible book value per share after the offering........ $ 2.87
------
Dilution per share to new investors......................... $ 8.13
======
</TABLE>
The following table sets forth the number of shares of common stock
purchased, the total consideration paid and the average price per share paid by
our existing stockholders as of March 31, 1999 and new investors purchasing the
shares of common stock offered hereby:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- ------------------------ PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
New investors............ 4,000,000 30.6% $44,000,000 88.3% $11.00
Existing
stockholders(1)........ 9,075,833 69.4% $ 5,811,776 11.7% $ .64
---------- ----- ----------- -----
TOTALS................... 13,075,833 100.0% $49,811,776 100.0%
</TABLE>
- ---------------
(1) Excludes 700,000 shares issued subsequent to March 31, 1999 and shares of
common stock issuable upon exercise of stock options and common stock
purchase warrants. See "Management -- Stock Option Plan" and "Underwriting."
10
<PAGE> 13
CAPITALIZATION
The following table sets forth our historical and as adjusted
capitalization as of March 31, 1999, after deducting underwriting discounts and
commissions and estimated offering expenses. As adjusted capitalization reflects
the sale of the 4,000,000 shares of common stock offered hereby at an assumed
offering price of $11.00 per share and the application of the net proceeds.
<TABLE>
<CAPTION>
MARCH 31, 1999 MARCH 31, 1999
ACTUAL AS ADJUSTED
-------------- --------------
<S> <C> <C>
Long-term liabilities(1).................................... $ 2,375,000 $ 2,375,000
Stockholders' equity
Preferred stock, 5,000,000 no par value shares authorized,
no shares issued....................................... -- --
Common stock, 50,000,000, $.001 par value shares
authorized, 9,075,833 shares outstanding, 13,075,833
shares outstanding as adjusted(2)...................... 9,076 13,076
Additional paid-in capital................................ 10,906,477 49,752,477
Retained (deficit)........................................ (10,631,055) (10,631,055)
------------ ------------
Total stockholders' equity........................ $ 284,498 $ 39,134,498
============ ============
Total capitalization.............................. $ 2,659,498 $ 41,509,498
============ ============
</TABLE>
- ---------------
(1) Excludes $1.5 million loaned to us subsequent to March 31, 1999 by our Chief
Executive Officer. See "Related Party and Other Material Transactions."
(2) Excludes 700,000 shares issued subsequent to March 31, 1999 and shares of
common stock issuable upon exercise of stock options and common stock
purchase warrants. See "Management -- Stock Option Plan" and "Underwriting."
11
<PAGE> 14
SELECTED FINANCIAL DATA
The following tables set forth financial information which has been derived
from our audited financial statements for the period from inception, June 25,
1997, through December 31, 1997, for the year ended December 31, 1998 and
cumulative from inception, June 25, 1997 to December 31, 1998. The tables also
include financial information derived from our unaudited financial statements as
of March 31, 1999, the three months ended March 31, 1999 and 1998 and cumulative
from inception (June 25, 1997) through March 31, 1999.
<TABLE>
<CAPTION>
PERIOD FROM CUMULATIVE
INCEPTION CUMULATIVE FROM INCEPTION
THREE MONTHS ENDED (JUNE 25, 1997) FROM INCEPTION (JUNE 25, 1997)
MARCH 31, YEAR ENDED THROUGH (JUNE 25, 1997) THROUGH
STATEMENT OF ------------------------ DECEMBER 31, DECEMBER 31, THROUGH DECEMBER 31,
OPERATIONS DATA 1999 1998 1998 1997 MARCH 31, 1999 1998
--------------- ----------- ---------- ------------ --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Product and content
development
expenses........... $ 186,691 $ 4,330 $ 414,873 $ -- $ 601,564 $ 414,873
Advertising and
marketing
expenses........... 2,062,607 -- 250,419 -- 2,313,026 250,419
Stock-based
compensation
expense............ 479,000 -- 5,265,364 -- 5,744,364 5,265,364
General and
administrative
expenses........... 985,464 9,137 931,172 3,703 1,920,339 934,875
Other -- net......... 4,622 -- 47,940 (800) 51,762 47,140
----------- ---------- ----------- ---------- ------------ -----------
Net loss............. $(3,718,384) $ (13,467) $(6,909,768) $ (2,903) $(10,631,055) $(6,912,671)
=========== ========== =========== ========== ============ ===========
Weighted average
number of shares
outstanding........ 9,075,833 9,075,833 9,075,833 9,075,833 9,075,833 9,075,833
=========== ========== =========== ========== ============ ===========
Net loss per share... $ (.41) -- $ (.76) -- $ (1.17) $ (.76)
=========== ========== =========== ========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1998 MARCH 31, 1999
---------- ---------- ---------------------------
BALANCE SHEET DATA ACTUAL ACTUAL ACTUAL AS ADJUSTED(1)
- ------------------ ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Working capital............................. $ (2,883) $2,958,427 $ 843,803 $39,693,803
Total assets................................ $ 2,582 $4,860,759 $3,442,587 $42,292,587
Total liabilities........................... $ 5,465 $1,336,877 $3,158,089 $ 3,158,089
Stockholders' (deficit) equity.............. $ (2,883) $3,523,882 $ 284,498 $39,134,498
</TABLE>
- ---------------
(1) As adjusted to reflect the sale of 4,000,000 shares of common stock offered
hereby at an assumed offering price of $11.00 per share and the application
of the net proceeds. See "Use of Proceeds."
12
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations for the three months ended March 31, 1999 and 1998 and the year ended
December 31, 1998 and the period from June 25, 1997 (inception) through December
31, 1997 should be read in conjunction with our financial statements, the notes
related thereto, and the other financial data included elsewhere in this
prospectus.
RESULTS OF OPERATIONS
We are a development stage company and commenced operations on June 25,
1997. Our operations for the period June 25, 1997 through approximately May 1998
were limited to organizing our company, raising operating capital, hiring
initial employees and drafting our business plan. For this reason our results of
operations for the three months ended March 31, 1998 and the period ended
December 31, 1997 are not comparable to the results of operations for the three
months ended March 31, 1999 and the year ended December 31, 1998, respectively.
In 1998 we hired many of our current management and employees, raised
working capital for development and operations and launched the quepasa.com
Website. We have had no significant revenue to date, but incurred $3.7 million
and $6.9 million of operating losses during the three months ended March 31,
1999 and the year ended December 31, 1998, respectively.
During the three months ended March 31, 1999, our $3.7 million loss
included a non-cash charge of $479,000 for stock based compensation due to the
issuance of stock options to employees and directors with an exercise price less
than fair market value. Approximately $2.0 million of advertising expense was
incurred of which approximately $1.2 million related to our radio broadcast
agreement with Heftel Broadcasting Corporation. The remainder of the loss
resulted from (1) general and administrative expenses, consisting primarily of
administrative salaries, professional fees, rent and utility expenses, and (2)
product and content development costs consisting primarily of programmer
salaries, Internet service costs, and the amortization of the Inktomi license
agreement. We also incurred sales and marketing expenses consisting primarily of
costs associated with other broadcast advertising contracts, promotional event
costs and marketing-related travel expenses.
During the year ended December 31, 1998, $5.3 million of our $6.9 million
loss represented a non-cash charge for the issuance of stock based compensation
and $1.3 million of general and administrative expenses and product and content
development costs.
During the three months ended March 31, 1999, interest expense was incurred
on a $2.0 million loan from The Monolith Limited Partnership, a principal
stockholder. During the year ended December 31, 1998, interest expense was
related to interest incurred on convertible notes payable.
We expect in the near term to incur significant continuing losses due to
ongoing substantial operating expenses offset by negligible revenue.
Details of the stock option grants and common stock issuances, discussed
above which resulted in stock based compensation for the three months ended
March 31, 1999 and the year ended December 31, 1998 are as follows:
<TABLE>
<CAPTION>
NUMBER OF STOCK BASED VESTING
THREE MONTHS ENDED MARCH 31, 1999 SHARES/OPTIONS EXERCISE PRICE COMPENSATION(2) PERIOD
--------------------------------- -------------- -------------- --------------- -------
<S> <C> <C> <C> <C>
STOCK OPTION GRANTS
Directors.............................. 50,000 $1.50 to $8.00 $ 453,000 (3)
Employees.............................. 35,000 $1.00 to $8.00 $ 26,000 3 years
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
NUMBER OF FAIR STOCK BASED
YEAR ENDED DECEMBER 31, 1998 SHARES/OPTIONS VALUE(1) COMPENSATION
---------------------------- -------------- -------- ------------
<S> <C> <C> <C>
COMMON STOCK ISSUANCE
Officer.................................................... 1,420,000 $1.00 $1,420,000
COMMON STOCK TRANSFER BY EXISTING STOCKHOLDERS
Officers and Directors..................................... 297,621 1.00 298,000
Consultants................................................ 1,607,151 1.00 1,607,000
Employees.................................................. 1,661,942 1.00 1,662,000
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF STOCK BASED VESTING
YEAR ENDED DECEMBER 31, 1998 SHARES/OPTIONS EXERCISE PRICE COMPENSATION(2) PERIOD
---------------------------- -------------- -------------- ------------------ ---------
<S> <C> <C> <C> <C>
STOCK OPTION GRANTS
Officer.............................. 50,000 $1.50 $113,000 (3)
Employees............................ 65,000 $1.00 - $1.50 $166,000 (3)
</TABLE>
- ---------------
(1) The fair value of the common stock on the date of these issuances was based
on the cash price paid for common stock and the conversion rate on debt
issued at the approximate times of the above transactions.
(2) For "non-employee" grants the fair value of the options granted is estimated
on the date of grant utilizing the Black-Scholes option pricing model based
upon an expected life of ten years, no volatility, risk free interest rates
of 6% and zero dividend yield.
(3) These options became exercisable on their date of grant.
LIQUIDITY AND CAPITAL RESOURCES
Since inception on June 25, 1997, we have received approximately $5.1
million to fund our operations from private placements of common stock and
convertible debt and $2.0 million from a loan advanced by Monolith.
Additionally, our Chief Executive Officer has agreed to lend us up to $3.0
million as needed for operations of which $1.5 million was advanced through
April 30, 1999. There are no conversion features associated with these loans and
the loans are due 24 months from the date funds are advanced under the loans.
Net cash used in operations was approximately $2.4 million for the three
months ended March 31, 1999. This resulted from an approximately $3.7 million
loss offset by receipt of a $1.5 million refundable deposit, an increase of
approximately $317,000 in accounts payable and other operating activities.
Additionally, we used approximately $1.1 million for prepaid broadcast
advertising.
Net cash used in investing activities was approximately $570,000 for the
three months ended March 31, 1999, consisting of $510,000 of fixed asset
purchases which primarily included technology products, furniture and fixtures
and $60,000 paid under the Inktomi licensing agreement.
Net cash provided by financing activities was approximately $1.3 million
for the three months ended March 31, 1999 and consisted of a $2.0 million loan
from Monolith, one of our principal stockholders. This loan was offset by
deferred initial public offering costs of approximately $340,000 and the payment
of accrued commissions and stock subscriptions refundable of approximately
$191,000 and $338,000, respectively.
Currently, we have commitments under non-cancelable operating leases for
office facilities and office equipment requiring monthly payments of
approximately $160,000 through September 2001. We have a commitment to pay
$650,000 pursuant to the terms of the Inktomi licensing agreement through August
2001. We are required to pay an additional $1.0 million under our sponsorship
agreement with the Arizona Diamondbacks, $1.0 million under our advertising
agreement with Telemundo, and $400,000 under our agreement with the Miami
Herald. These agreements are described under "Our Business -- Marketing and
Advertising of the Quepasa.com site" and "Our Business -- Our Strategic
Relationships."
14
<PAGE> 17
We expect to incur significantly higher costs, particularly marketing and
advertising costs, product content and development costs, general and
administrative costs and additional technology and equipment purchase costs
during the remainder of our calendar year in order to expand our business. We
expect to expend the largest portion of our existing capital and offering
proceeds on marketing and advertising expenses and do not expect significant
revenue to be realized, if at all, in 1999. Nevertheless, we believe that the
proceeds from this offering, together with our cash on hand and the $3.0 million
line of credit provided by our Chief Executive Officer will be sufficient to
meet our working capital and capital expenditure needs for two years. Although
we do not believe it will be necessary for us to raise additional funds in the
next six months, we may need additional funds at a later date to respond to
competitive pressures or to acquire complementary products, features, businesses
or technologies.
YEAR 2000 ISSUE
We depend on the delivery of information over the Internet, a medium which
is susceptible to the Year 2000 Issue. The "Year 2000 Issue" is typically the
result of limitations of certain software written using two digits rather than
four to define the applicable year. If software with date-sensitive functions is
not Year 2000 compliant, it may recognize a date using "00" as the year 1900
rather than the year 2000. The Year 2000 Issue could result in a system failure
or miscalculations causing significant disruption of our operations, including,
among other things, interruptions in Internet traffic, accessibility of our Web
site, delivery of our service, transaction processing or searching and other
features of our services. It is possible that this disruption will continue for
an extended period of time.
We depend on information contained primarily in electronic format in
databases and computer systems maintained by third parties and us. The
disruption of third-party systems or our systems interacting with these third
party systems could prevent us from delivering search results or other services
in a timely manner. In addition, we rely on the integration of many systems in
aggregating search data from multiple sources. The failure of any of those
systems as a result of Year 2000 compliance issues could prevent us from
delivering our services. Failure of our systems or third party systems providing
information used in our services could materially adversely affect our business
and results of operations.
We have not completed a formal audit of our internal systems. We are
seeking written confirmation of the Year 2000 status of our third party
software. We are also utilizing internal resources to test internally developed
software for Year 2000 compliance. Of the third party hardware and software that
is critical to us, we have collected Year 2000 testing results from Microsoft
and Dell Computer Corporation. We have also received written confirmation of
Year 2000 compliance from GTE as well as confirmation from the corporate Web
sites of Reuters and Exodus.
We may be required to modify or replace significant portions of our
software so that our systems will function properly with respect to dates in the
year 2000 and thereafter. If we are unable to make the required modifications or
conversions in a timely and cost-effective manner or if there is a malfunction
in our systems, potential systems interruptions or delays in services may have a
material adverse effect on our business and results of operations. Further, if
we fail to successfully resolve these issues, some or all of our operations may
shut-down, which would have a material adverse effect on our business and
results of operations.
We have not yet fully developed a comprehensive contingency plan to address
situations that may result if we are unable to achieve Year 2000 readiness of
our critical operations. Development of a contingency plan is in progress and is
expected to be developed in detail and expanded during the second half of 1999.
We may not be able to develop a contingency plan that will adequately address
all Year 2000 issues. Our failure to develop and implement, if necessary, an
appropriate contingency plan could materially adversely affect our business and
results of operations.
Substantially all of our computer equipment and software were purchased
since 1998, and accordingly, we do not anticipate spending material amounts on
the Year 2000 Issue.
15
<PAGE> 18
OUR BUSINESS
INTRODUCTION
Quepasa.com is a Spanish-language Internet portal and search engine focused
initially on the U.S. Hispanic market. Search engines are located on "portal"
Internet sites and provide Internet users with guides to online World Wide Web
information and content. In addition to offering search engines, portals draw
viewers to their Web sites by providing a one-stop destination for identifying,
selecting and accessing resources, services, content and information on the Web.
We provide users with information and interactive content centered around the
Spanish language. Because the language preference of many acculturated U.S.
Hispanics is English, we also offer our users the ability to access information
and services in the English language. Our portal includes a search engine, free
e-mail, Spanish-language news feeds, chat rooms and message boards. We are a
development stage company having launched the quepasa.com Web site in November
1998 and have not yet generated significant revenue. We anticipate that our
principal source of revenue will be fees for advertising products and services
on our Web site. However, we do not expect any significant revenue in 1999.
INDUSTRY BACKGROUND
Growth of the Internet and the World Wide Web
The Internet is evolving into a global medium, allowing millions of
individuals throughout the world to communicate, share information and engage in
commerce electronically. The Web is an interactive environment which facilitates
the exchange of information and entertainment among users worldwide. According
to International Data Corporation, the number of people worldwide accessing the
Web will grow from approximately 100 million at year end 1998 to 320 million by
2002. This growth is expected to be driven by the large and growing number of
personal computers installed in homes and offices, the declining prices of
personal computers, the improvements in network infrastructure, the availability
of faster and cheaper Internet access, and the increasing familiarity with and
acceptance of the Internet by businesses and consumers. Web usage is also
expected to continue to grow rapidly due to unique characteristics that
differentiate it from traditional media, such as real-time access to interactive
content, real-time communication capabilities and the absence of geographic or
temporal limitations.
Growth of Internet Advertising and Internet Commerce
With the growth in the number of Internet users and content providers, the
Internet is developing the attributes of a conventional mass medium, where
advertising subsidizes content delivered to users. In fact, technological
advances and the acceptance of the medium by businesses have led to rapid growth
in Internet advertising spending. Tools not available in traditional advertising
media, such as real-time measurement of consumers accessing an advertiser's Web
site through an advertising banner, further increase the attractiveness of Web
advertising by giving advertisers real-time feedback on advertising campaigns.
Forrester Research, Inc. estimates that spending on Web-based advertising will
increase from $1.5 billion in 1998 to more than $15.0 billion in 2003.
The growing acceptance and use of the Web has created an opportunity for
businesses to conduct commerce over the Internet. International Data Corporation
estimates that transactions on the Internet are expected to increase from
approximately $32.0 billion in 1998 to more than $425.0 billion in 2002.
Businesses typically use the Internet to offer standard products and services
that can be easily described with graphics and text and that do not necessarily
require a physical presence for purchase of items, such as airline tickets,
books and investment securities. The focus of electronic commerce transactions
evolved from companies facilitating Internet transactions between businesses to,
more recently, companies targeting business-to-consumer transactions. Internet
commerce enables these companies to develop relationships with customers on a
global basis without making significant investments in traditional sales and
distribution infrastructure.
16
<PAGE> 19
OUR MARKET IN THE UNITED STATES
We believe that the Spanish-language Internet market in the United States
is characterized by a growing Hispanic population, increasing Hispanic
purchasing power, greater advertising spending on Spanish-language media,
continuing use of the Spanish language by U.S. Hispanics and increasing computer
ownership and Internet usage by Hispanic households.
Hispanic Population Growth and Concentration
A large number of our users are Hispanics, one of the most rapidly growing
segments of the U.S. population. According to the U.S. Census Bureau and
published sources, the Hispanic population:
- Is estimated to be 29.6 million or 11% of the total U.S. population in
1998, an increase of approximately 31% from 22.5 million or 9% of the
total U.S. population in 1990.
- Is expected to account for 40% of the total U.S. population growth
between 1995 and 2010 and is expected to grow to 41.1 million or 14% of
the total U.S. population by 2010.
- Is relatively young, with almost 70% of U.S. Hispanics under 35, compared
with less than 50% of non-Hispanics, and with a median age of 26,
compared to 35 for the rest of the population.
We believe the relative youth of the Hispanic population will furnish
growth opportunities for products and services that appeal to a younger market,
such as that found on the Internet. In addition, 70% of all U.S. Hispanics live
in 12 metropolitan areas, which makes U.S. Hispanics an attractive demographic
group for advertisers, enabling them to cost effectively deliver messages to a
highly targeted audience.
Increasing Hispanic Purchasing Power
Total U.S. Hispanic purchasing power:
- Has risen at a compound annual growth rate of 8%, compared with 5% for
the rest of the population from 1993 to 1998.
- Is projected to be $383.0 billion in 1999, an increase of approximately
84% since 1990.
- Is expected to account for $443.0 billion or 7% of U.S. consumer
expenditures by 2000, and $938.0 billion or 9% of U.S. consumer
expenditures by 2010.
Greater Spanish-language Advertising Spending
According to Hispanic Business Magazine, $1.7 billion of total advertising
expenditures in the U.S. were directed toward Spanish-language media in 1998,
representing a 21% increase over 1997's total, and the highest year-to-year
percentage increase since 1993. In only five years, total advertising
expenditures in the Hispanic market have more than doubled from $829.7 million.
Continuing Use of the Spanish-language by U.S. Hispanics
According to published sources, approximately 90% of U.S. Hispanic adults
speak Spanish at home. Moreover, U.S. Hispanics are expected to continue to
speak Spanish because:
- Approximately two-thirds of U.S. Hispanic adults were born outside the
U.S.;
- Hispanic immigration into the U.S. is continuing;
- Hispanics generally seek to preserve their cultural identity; and
- Geographic concentration encourages communication in Spanish.
17
<PAGE> 20
Increasing Computer Ownership and Internet Usage by Hispanics
A February 1998 study by The Tomas Rivera Policy Institute estimates that
between 1994 and 1998 the percentage of U.S. Hispanic households that owned
computers increased from 13% to 30%, while U.S. Hispanic households with
Internet access grew from 2% to 15%, which amounted to approximately 650%
Internet access growth in four years. In addition, an independent study
indicated that as of 1998 approximately 2.4 million Hispanics owned personal
home computers in the top seven U.S. Hispanic markets, an increase of 58% from
1996.
OUR MARKET OUTSIDE THE UNITED STATES
Spanish is the world's third most spoken language, used by approximately
350 million native speakers. In addition, twenty-one countries consider Spanish
their primary language. Internet usage in Spain is increasing rapidly. For
example, a recent study by the Spanish Internet Users Association indicated that
approximately 2.3 million Spaniards accessed the Internet in 1998 and the number
is projected to grow to 8.7 million by 2001.
The Spanish-speaking Latin American market is comprised of Mexico, Central
America, parts of South America and the Spanish-speaking countries of the
Caribbean. Factors such as growing competition in telecommunications markets,
declining prices for personal computers and Internet access and favorable
demographics position Latin America as a strong potential growth market for
Internet products and services. According to International Data Corporation, the
number of Internet users in Latin America, excluding Portuguese-speaking
Brazilians, is expected to increase from 2.5 million at year end 1998 to 11.7
million at year end 2003. In particular, the number of Internet users in Mexico
is expected to increase from approximately 700,000 at year end 1998 to
approximately 3.9 million by the end of 2003, which represents a 43% compounded
annual growth rate.
THE QUEPASA.COM STRATEGY
We believe that a branded, multi-featured, Spanish-language Internet portal
and search engine that focuses primarily on the needs of the Spanish-language
market would be uniquely positioned to capitalize on the growth of this market
segment. Therefore, our strategy is to establish quepasa.com as a leading
worldwide Spanish-language portal and search engine offering the quepasa.com
services to Spanish-speaking Internet users residing in the United States, Latin
America, Europe and other regions of the world. In order to accomplish this
objective, we intend to continue to focus on developing content, a high volume
of traffic and strong brand recognition of the quepasa.com name. The basis of
our strategy is to provide Spanish-language Internet users with an innovative,
technologically-advanced, content-rich Web portal that creates value for the
user and establishes our platform as an attractive medium for advertisers,
marketers and companies engaged in electronic commerce.
We are establishing quepasa.com as a leading Spanish-language Web portal
and search engine by executing a business strategy that includes:
Developing quepasa.com in the United States and then globally as a leading
brand associated with the Internet for Spanish-language users
Our short range goal is to establish quepasa.com as the leading brand among
U.S. Spanish-speaking Internet users. We believe that establishing and then
promoting the quepasa.com brand is critical to our ability to attract users and
advertisers to our Web site. We also believe that branding and consumer loyalty
on the Internet are dependent upon our ability to differentiate our services and
to enhance our users' experience by continually offering innovative technology
and appealing features and effectively marketing these features to existing and
potential users of our Web site. We intend to improve our technical expertise
18
<PAGE> 21
to develop innovative new services, as well as enhance and expand existing
services. We also intend to continue our brand development through:
- Network television and national cable advertising;
- Network radio advertising;
- National print, outdoor and Internet advertising;
- Additional strategic partnerships;
- Additional marketing and distribution arrangements;
- Special event sponsorships; and
- Public and community relations programs.
Acquiring and Developing Additional Content and Features for the quepasa.com
Web Site
In addition to its search engine, quepasa.com provides content and Web site
features for the Spanish-speaking Internet user, including free e-mail,
Spanish-language news feeds, worldwide weather information, chat rooms and
message boards. In order to provide some of this content, we have entered into
agreements with content providers such as Reuters and UPI for Spanish-language
news, and WeatherLabs for worldwide weather information. These arrangements
allow us to increase our Web site content in order to attract and retain
Spanish-speaking Internet users and to solidify our position as an easy-to-use
interface for Spanish-language Web services and information. We have also
internally developed other content such as our e-mail and message boards and
have begun development of our own chat services. We recently entered into
relationships with Telemundo, Miami Herald Online and Fox Sports World Espanol
that will provide us with unique content. We intend to add additional content
and features through acquisition, licensing and internal development.
Entering Into Strategic Relationships with Business Partners Who Offer Unique
Media, Content, Technology and Distribution Capabilities
We intend to continue to establish strategic relationships with companies
that will enhance our services and increase our user base. We have strategic
relationships with companies such as Telemundo, Miami Herald Online, Inktomi,
Arizona Diamondbacks, GTE, Reuters and Exodus. These and other relationships are
summarized under "Our Business -- Our Strategic Relationships."
Expanding Into Additional Spanish-speaking Markets
We seek to establish quepasa.com as a leading destination site for
Spanish-speaking Internet users throughout the world. At the present time, the
majority of our users reside in the United States. As Internet access improves
and usage increases, we intend to allocate future resources to develop our brand
in non-U.S. Spanish-speaking markets, such as Latin America and Spain.
Generating Revenue from the Sale of Advertising and Through Electronic Commerce
We have an agreement with 24/7 Media, Inc., a leading provider of Internet
advertising solutions, to sell advertising on our Web site to customers
solicited by 24/7 Media. We intend to generate revenue from other electronic
commerce retailers that sell products or services to users through our Web site.
These products and services will be targeted toward the distinct tastes and
preferences of Spanish-speaking consumers and may include recorded music,
educational software and books.
THE QUEPASA.COM WEB SITE
Services and Content. In November 1998, we launched the quepasa.com Web
site which allows individuals to quickly access content and features which
appeal to Spanish-language Internet users. Although our content is directed
toward Spanish-speaking users, to better serve the U.S. Hispanic
19
<PAGE> 22
population, quepasa.com is also offered in English. By combining existing
services with specialized information from leading content providers,
quepasa.com provides subject or category specific content including topical
news, worldwide weather information, free e-mail, chat, message boards and
search capabilities.
The quepasa.com Web site currently offers a number of categories of topical
interest, including the following:
Arte y Cultura (Art and Culture)
Ciencia y Tecnologia (Science and Technology)
Ciencias Sociales (Social Sciences)
Computadoras y Internet (Computers and Internet)
Deportes y Recreacion (Sports and Recreation)
Economia y Negocios (Economy and Business)
Educacion (Education)
Empleos (Jobs)
Entretenimiento (Entertainment)
Noticias y Medios (News and Media)
Politica y Gobierno (Politics and Government)
Regional (Regional)
Salud (Health)
Temas de Sociedad (People and Society)
Viajes y Turismo (Travel and Tourism)
Search Engine. The quepasa.com search engine helps users find information
on the Web by searching through quepasa.com's index of Web documents. Our search
technology is provided by Inktomi which enables us to provide customers with a
variety of on-line search services.
Personalization Feature. We offer our users the ability to personalize
their quepasa.com home page. Quepasa.com users can create a personal profile to
select and update information of interest by category, such as news headlines,
business, sports scores, weather information and horoscopes. Users can also
arrange the position and location of the content on their quepasa.com home page
to suit their specific tastes and preferences.
Free E-Mail, Chat and Message Board Features. Quepasa.com offers free
e-mail and free Web community services that consist of chat services and message
boards. These features enable users to discuss topics of mutual interest by
participating in ongoing discussions or by creating their own topics for
discussion.
24 Hour Real-time News and Weather. Quepasa.com offers worldwide news
coverage from Reuters and UPI. Reuters provides us with worldwide editorialized,
topical news covering areas of special interest to Spanish-speaking users (in
Spanish and English), as well as a Spanish-language news feed that we intend to
format and edit internally to provide broad coverage of news that will be of
special interest to Spanish-speaking users. UPI provides real-time, news stories
written in Spanish by pool reporters from around the world. These pool stories
will enable us to supply a broad range of region-specific news items of interest
to Spanish-speaking Internet users. Our users are also able to search a database
of archived news stories published by Reuters over the prior 30-day period and
published by UPI over the prior two-year period but not earlier than December
1998. We have also arranged with the Miami Herald Online to obtain Spanish and
English language news content in the near future. Through an agreement with
WeatherLabs, we also offer worldwide weather information, including real time
weather reports and forecasts, for 5,000 U.S. and 2,400 international cities.
20
<PAGE> 23
OUR STRATEGIC RELATIONSHIPS
We have established strategic relationships with leading providers of
media, content and technology designed to:
- provide access to unique content;
- enhance our services;
- extend our audience reach;
- increase user traffic on our Web site;
- provide enhanced Web site functionality; and
- provide us with additional revenues.
These relationships include:
Telemundo. In April 1999, we entered into a strategic agreement with
Telemundo, a leading Spanish-language television broadcaster that has served the
U.S. Hispanic market for over 11 years. Under this agreement, we issued
Telemundo 600,000 shares of our common stock and warrants to purchase 1,000,000
shares of our common stock exercisable for two years from the date of this
prospectus at 120% of the public offering price per share. In exchange, we
received a $5.0 million advertising credit on the Telemundo television network
at the rate of $1.0 million for each of the next five years. We also agreed to
purchase an additional $1.0 million of advertising from Telemundo to be
broadcast over 26 weeks commencing in August 1999. This agreement also provides
that we will collaborate regarding online content development, co-branded
marketing promotions and other complementary aspects of our businesses. The
agreement may be cancelled by either party if we do not complete the offering of
our common stock by June 27, 1999 at a price of at least $10.00 per share.
Miami Herald Online. In April 1999, we entered into an agreement with
Miami Herald Online regarding content development and management. Under our
agreement, Miami Herald Online will provide the editorial staff to produce a
Spanish and an English news channel for us, in addition to providing us with
news from El Nuevo Herald, a Spanish-language daily newspaper, The Miami Herald,
the Knight Ridder national reporting staff and other Knight Ridder newspapers.
Additionally, Miami Herald Online will designate us as the preferred search
engine of El Nuevo Herald Digital and will provide us with 200,000 banner
impressions per month on its network of sites.
Fox Sports World Espanol. In April 1999, we entered into a sponsorship and
content agreement with Fox Sports World Espanol involving the Copa America 1999
soccer tournament scheduled to take place June 29 - July 18, 1999. Fox Sports
World Espanol holds the exclusive U.S. television rights for the tournament. Our
agreement calls for the parties to collaborate on the development of a
co-branded "copaamerica1999.com" event Web site. We will operate the event Web
site that will feature content such as match previews, summary articles, Copa
America updates, wire service news coverage and real-time scoring updates. The
arrangement also involves numerous media elements and joint marketing
promotions.
Other Strategic Relationships. We have developed marketing, technology and
content relationships with:
- Arizona Diamondbacks -- marketing promotions and sports information;
- Exodus Communications -- networking technology;
- GTE Internetworking -- networking technology;
- Inktomi -- search technology;
- Reuters NewMedia -- news, business and sports information;
- UPI -- news information;
- WeatherLabs -- weather information; and
- 24/7 Media -- Internet advertising sales services.
21
<PAGE> 24
MARKETING AND ADVERTISING OF THE QUEPASA.COM SITE
Our marketing goal is to increase traffic on the quepasa.com Web site and
to develop the quepasa.com brand in the United States and then globally as a
leading brand associated with the Internet for Spanish-speaking users. Our
marketing plan includes the use of multiple advertising media, such as national
network and cable television, network radio, national print, outdoor and
Web-based advertising.
In February 1999, we chose Garcia/ LKS advertising agency as our global
marketing partner because of its strong track record in building brands and
launching products in the Hispanic market. Garcia/ LKS is led by principals
Lionel Sosa and Luis Garcia. The agency has represented Fortune 500 companies,
including Coca Cola, Levi-Strauss, Proctor & Gamble and Sprint. The agency has
also provided demographic specific marketing expertise for the political
campaigns of President Ronald Reagan, President George Bush and Texas Governor
George W. Bush.
In March 1999, we launched an approximately $800,000 26-week nationwide
advertising campaign with the Telemundo Network Group. Telemundo, which is
primarily owned by Sony and Liberty Media, is a leading Spanish-language
television broadcaster that has served the U.S. Hispanic market for over 11
years. Telemundo's affiliate base, covering 63 television markets, reaches
approximately 85% of all U.S. Hispanic households. Sony and Liberty Media
provide Telemundo with substantial financial resources, strong management and a
vast programming library. Telemundo intends to draw on this library in order to
target a younger, bilingual Hispanic audience. Telemundo's programming includes
shows such as "Cinemundo Primer," a primetime program featuring popular U.S. and
Latin American movies, many appearing for the first time on Spanish-language
television, "Ocurrio Asi de Noche," an Emmy award-winning investigative news
magazine, and "Discovery" offering nature, science, technology and history
programming from the Discovery Channel.
In February 1999, we initiated a nationwide radio advertising campaign with
Heftel Broadcasting Corporation, the largest Spanish radio broadcaster in the
United States, with approximately 19 million Spanish-speaking listeners. Heftel
owns and operates 39 stations in 11 of the top 15 Hispanic markets, including
the most-listened to Spanish-language stations in nine markets. We believe the
sponsorship with Heftel will provide us with an effective platform to
communicate our message to our target audience, because approximately 65% of
U.S. Hispanics reside in Heftel's top 15 markets. The quepasa.com sponsorship
with Heftel includes the purchase of air time in the top Hispanic radio markets,
"on-air promos" by radio personalities and prominent sponsorships of Hispanic
community festivals and events involving Heftel radio stations, such as the
Calle Ocho Festival in the Little Havana area of Miami. Calle Ocho is the
largest street festival in the U.S., attended by more than one million people in
1998.
Our Copa America sponsorship with Fox Sports World Espanol provides that we
will be the only Internet search engine and portal to advertise on the network
in the United States. As a major sponsor of this event we are entitled to the
following advertising and promotional elements:
- Commercial announcements during Copa America soccer matches;
- On-air mentions and graphics directing viewers to our event Web site;
- On-screen displays of our logo next to the soccer game clock;
- Title sponsorship of two Copa America consumer promotions;
- An exclusive promotional partnership with Fox Sports World Espanol which
places our logo on at least 600,000 printed promotional pieces;
- Commercial announcements and on-screen displays of our logo during Fox
Sports World's weekly telecasts of South American Soccer for 39 weeks
beginning on April 19, 1999.
We also intend to increase our Web site traffic by increasing the number
and visibility of entry points to the quepasa.com Web site through co-branding
and other marketing arrangements with content providers and high-traffic
Spanish-language Web sites. For instance, we have arranged with the Miami
22
<PAGE> 25
Herald Online to develop news channels for our Web site and to promote our Web
site on the Miami Herald Online network of sites.
In an effort to increase hits, Web site operators are increasingly adding
content and other features to their sites to encourage users to spend more time
there. We intend to regularly enhance our technological features and services
and update our content in order to encourage consumers to use our Web site more
frequently. To this end, we have launched a flexible, subject-based format for
our services and content to provide consumers with ease of use and flexibility
to customize their quepasa.com site to fit their specific tastes and
preferences. Because customizing these services typically requires some effort
and time on the part of the consumer, we believe that consumers who use these
personalized services are more likely to continue to use quepasa.com and not
change to a competitive service.
Our impressions grew from approximately 275,000 in February 1999 to
approximately 2,025,000 in March 1999 and our user session length grew from an
average of approximately 11.5 minutes to approximately 17.0 minutes. Moreover,
total user sessions grew from 79,125 in February 1999 to 236,175 in March 1999.
Between March and April 1999 our e-mail users grew from 2,413 to 12,804. We
believe that this growth in our Web site traffic was a result of our advertising
campaigns with Heftel and Telemundo and the continued development of our Web
site content and features.
We intend to use approximately $24.0 million of the proceeds of the
offering to further advertise and market the quepasa.com Web site. See "Use of
Proceeds."
OUR PLAN TO SELL ADVERTISING ON THE QUEPASA.COM SITE
We have had nominal advertising revenue to date, but we expect to earn a
significant portion of our future revenue from the sale of advertisements placed
on our Web site. In exchange for up to 50% of our advertising revenue, we have
entered into an agreement with 24/7 Media, Inc. to use its best efforts to sell
advertising on our Web site to customers solicited by 24/7 Media. The agreement
may be terminated by either party by giving the other at least four months'
written notice. 24/7 Media is a leading provider of Internet advertising and
online direct marketing solutions with one of the largest Internet sales forces
in the industry. 24/7 Media's clients include AT&T WorldNet, EarthLink and the
Associated Press. In the future, we may elect to develop an internal advertising
staff. We do not expect significant revenue from advertising in 1999.
We expect advertisements on the quepasa.com site to be of the banner or
billboard style, which are designed to display additional advertisements as the
consumer selects various topics on the Web site. From each advertisement screen,
users can proceed directly to an advertiser's own Web site, thus enabling the
advertiser to directly interact with a user who has expressed interest in the
advertisement. We believe that since users view advertisements only after they
request a new page, the focus of the user's attention to the advertisement is
likely to be higher than it is in other forms of media. With our subject-based
format, growing number of services and ability to target user interest from an
attractive demographic group with appropriate advertising, we believe we can
increase the effectiveness of advertisements placed on the quepasa.com Web site.
We hope this will permit us to command higher advertising returns than many
other Web sites.
We also intend to develop innovative approaches for advertisers through
advancements by others in demographic trending and consumer tracking. We seek to
attract the largest possible Web audience in the Spanish-speaking Internet
market, in order to give advertisers the most efficient and effective
advertising placements. We are developing services that encourage consumers to
provide demographic and interest information that can be used to more
effectively target our advertising. Our recently launched membership
registration system requires users to create a quepasa.com account in order to
access our chat, e-mail and message board services. At the time of registration,
users are assigned a unique user identification and password after providing us
with personal information that will allow advertisers to target users with a
specific demographic profile. Users can access their quepasa.com account and
personalized settings from any Internet access device.
23
<PAGE> 26
OUR DEVELOPMENT AND ACQUISITION OF WEB SITE TECHNOLOGIES
We believe we can differentiate our services and promote the quepasa.com
brand by developing innovative proprietary technology and integrating technology
licensed from third parties where appropriate. Our strategy is to develop or
obtain technologies that are able to expand with the growth in content of the
Internet. For instance, we recently developed our own e-mail service which we
believe provides superior functionality, message volume, data storage and
incoming and outgoing file attachment capabilities than most other free e-mail
services.
In July 1998, we entered into a three-year agreement with Inktomi to
provide search engine capability for our quepasa.com Web site. Under the terms
of the agreement, we will pay Inktomi a minimum fee of $750,000 over the
three-year period for Inktomi's search engine services. The fee could increase
based upon the number of searches performed by Inktomi for our users.
Inktomi's search engine technology enables us to provide a variety of
on-line search services to our customers. Inktomi provides and manages all
hardware, software and operational aspects of its search engine and the
associated database of Internet content. Inktomi also provides us with a
programming interface and software tools to enable us to custom design our
search service user interface. Separating the user interface enables this
portion of the service to reside in a different physical location from the
Inktomi search engine and to run on our choice of computer equipment. In
addition, we can customize our user interface as to look, feel and functionality
and can change the user interface at any time without affecting the operation of
the Inktomi search engine.
Inktomi's search engine consists of a crawler, an indexer and search engine
servers. The crawler and indexer are software programs that collect and organize
information and store that information on the cluster of search engine servers.
The search engine servers are a collection of workstations that are linked
together as a coupled cluster through the use of Inktomi's software. The search
engine servers provide powerful full-text query operations, including full
Boolean support, phrase and adjacency searching, date restrictions and the
recognition of multimedia files and other embedded objects. Search results are
relevance-ranked using state-of-the-art text indexing methods.
Connectivity services which link our users to our Web site and to Inktomi's
search engine are provided to us by Exodus and GTE. Exodus is one of the largest
providers of connectivity services, with a client list that includes Microsoft
Hotmail, Ebay, GeoCities, HotBot and Inktomi. GTE delivers complete network
solutions, dedicated Internet access, high performance Internet hosting, managed
Internet security, network management, systems integration and Web-based
applications development for integrating the Internet into business operations.
COMPETITORS AND COMPETITIVE FACTORS AFFECTING OUR BUSINESS
The market for Internet products, services, advertising and commerce is
intensely competitive, and we expect that competition will continue to
intensify. We believe that the principal competitive factors in these markets
are name recognition, distribution arrangements, functionality, performance,
ease of use, the number of value-added services and features, and quality of
support. Our primary competitors are other companies providing portal services,
especially to the Spanish-language Internet users, such as Yahoo!, America
Online, StarMedia Network, Prodigy, Microsoft networks in LatinAmerica, Mexico
and Spain, Lycos and Ole.
Other portal competitors include Alta Vista, Excite and Infoseek. In
addition, a number of companies offering Internet products and services,
including our direct competitors, recently began integrating multiple features
within the products and services they offer to users. Integration of Internet
products and services is occurring through development of competing products and
through acquisitions of, or entering into joint ventures and/or licensing
arrangements involving, competitors. For example, the Web browsers offered by
Netscape and Microsoft, which are the two most widely-used browsers and
substantial sources of traffic for us, may incorporate and promote information,
search and retrieval capabilities in future releases or upgrades that could make
it more difficult for Internet viewers to find and use our products and
services.
24
<PAGE> 27
Microsoft recently announced it intended to license products and services
from Alta Vista and that it will feature and promote Alta Vista services on the
Microsoft Network and other Microsoft on-line properties. We expect that such
search services may be tightly integrated into the Microsoft operating system,
the Internet Explorer browser, and other software applications, and that
Microsoft will promote such services within the Microsoft Network or through
other Microsoft-affiliated end-user services such as MSNBC or WebTV Networks,
Inc.
Many large media companies have announced that they are contemplating
developing Internet navigation services and are attempting to become "gateway"
sites for Web users. In the event these companies develop such portal sites, we
could lose a substantial portion of our user traffic. Further, entities that
sponsor or maintain high-traffic Web sites or that provide an initial point of
entry for Internet viewers, such as the Regional Bell Operating Companies or
Internet service providers, such as Microsoft and America Online, currently
offer and can be expected to consider further development, acquisition or
licensing of Internet search and navigation functions. These functions may be
competitive with those offered by us. Our competitors could also take actions
that could make it more difficult for viewers to find and use our products and
services. Consolidations, integration and strategic relationships involving
competitors could have a material adverse effect on our business.
In addition to the large multinational portals, we compete with a number of
smaller portals and search engines that provide region-specific information to
users or market to users with specific interests.
Most of our existing competitors, as well as new competitors such as
Spanish-language media companies, other portals and Internet industry
consolidators, have significantly greater financial, technical and marketing
resources than we do. As a development stage company, we need to hire a number
of additional employees, especially in the areas of business development and
marketing. There can be no assurance that our competitors will not offer
Internet products and services that are superior to ours or that achieve greater
market acceptance. There can be no assurance that we will be able to compete
successfully against current or future competitors or that competition will not
have a material adverse effect on our business.
EMPLOYEES
At April 28, 1999, we had 42 employees, including our seven executive
officers.
FACILITIES
We lease approximately 13,277 square feet of space for our executive
offices in Phoenix, Arizona for $24,341 per month pursuant to a lease which
expires in October 2002.
25
<PAGE> 28
OUR MANAGEMENT
OFFICERS AND DIRECTORS
Information concerning each of our executive officers and directors is set
forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jeffrey S. Peterson... 26 Chairman of the Board of Directors, and Chief Executive
Officer
Gary A. Trujillo...... 38 President and Director
Michael A. Hubert..... 33 Chief Operating Officer and Director
Bryan L. Ross......... 25 Chief Technical Officer and Director
Juan C. Galan......... 33 Chief Financial Officer
Robert J. Taylor...... 30 Vice President -- Strategy and Operations
Victor H. Roldan...... 31 Vice President
Jerry J. Colangelo.... 59 Director
Gregory J. Kolanek.... 29 Director
Edwin C. Lynch........ 63 Director
Alan J. Sokol......... 40 Director
Lionel Sosa........... 59 Director
</TABLE>
Directors hold office for a period of one year from their election at the
annual meeting of stockholders or until their successors are duly elected and
qualified. Officers are elected by, and serve at the discretion of, the Board of
Directors. Our audit committee consists of Messrs. Hubert and Sosa. We intend to
add at least one independent director to the audit committee as soon as
practicable following the offering, but in no event later than 90 days from this
date.
JEFFREY S. PETERSON has served as Chairman of the Board of Directors and
Chief Executive Officer since May 1998 and was our Chief Technology Officer from
July 1997 until May 1998. From January 1997 to June 1997, Mr. Peterson served as
co-owner of NetCentury, an Internet design firm he founded. From July 1995 until
December 1996, Mr. Peterson was a General Securities Principal and Registered
Representative with West America Securities Corporation. From February 1995 to
May 1995, he was a General Securities Principal and Registered Representative
with Kensington Securities, Inc. From August 1993 to April 1995, Mr. Peterson
was a self-employed computer consultant for JP Consulting, a computer-based
consulting company he founded. Mr. Peterson is an experienced Modula, Java, and
C++ programmer, who has been involved in the programming and operations of
computers and digital communications for over 15 years. He has developed
software applications for operating systems and digital platforms, beginning
with Cp/M based systems in the early 1980s to Unix (Sun Solaris, BSD, Linux,
Irix) and Windows NT. Mr. Peterson is bilingual in English and Spanish.
GARY A. TRUJILLO joined us in April 1999 as President and was appointed a
director at that time. In 1990, Mr. Trujillo founded Southwest Harvard Group, a
Hispanic-owned and operated business consulting firm, and has served as its
President and Chief Executive Officer from inception to present. Mr. Trujillo is
a director of Southwest Harvard Group, Blue Cross and Blue Shield of Arizona,
Wells Fargo & Co., Arizona (Advisory Board), Corella Electric Wire & Cable, The
Arizona Community Foundation and South Mountain Community College ACE
Entrepreneur Program. Mr. Trujillo is a member of the Greater Phoenix Leadership
and The Young Presidents Organization. In 1998, Mr. Trujillo received the
Individual Business Minority Advocate Award and was voted by Arizona Business
Journal as the second most influential member of the Arizona Hispanic business
community. Mr. Trujillo started his career as an investment banker with Salomon
Brothers, Inc. in New York City. Mr. Trujillo holds a B.S. degree in Accounting
from Arizona State University and an M.B.A. degree from Harvard Business School.
26
<PAGE> 29
MICHAEL A. HUBERT joined us in December 1998, became our Chief Operating
Officer in January 1999 and was appointed a director in February 1999. From May
1998 to November 1998, Mr. Hubert was employed by WGM Corporation, the General
Partner of The Monolith Limited Partnership, a venture capital fund which is one
of our principal stockholders. At Monolith he assisted early stage businesses in
strategy and organizational development. From May 1992 to April 1998, Mr. Hubert
was employed by The Barrington Consulting Group, a national business advisory
consulting firm, where he last served as Senior Manager. Mr. Hubert holds a B.S.
degree in Finance from Arizona State University and an M.B.A. degree from
Southern Methodist University.
BRYAN L. ROSS joined us in November 1998 as Chief Technology Officer and
became a director in March 1999. From July 1998 to November 1998, he was
Director of Software Development for Today.com, Inc., a Web design firm. From
July 1997 to June 1998, he was lead computer programmer for the Kemtah Group, an
Internet consulting firm. From 1994 to 1997, he was a Web Master first at
Bethany College and subsequently at MicroAge, a computer distributor, where he
designed and maintained Interactive Web sites. From 1991 to July 1996, Mr. Ross
was an independent computer consultant in Scotts Valley, California.
JUAN C. GALAN joined us in January 1999 as our Chief Financial Officer.
From April 1997 to January 1999, he was employed by Vistoso Partners LLC, a
Phoenix, Arizona real estate development company, as Controller. From June 1993
to April 1997, Mr. Galan was employed by Nielsen Media Research, formerly a Dun
& Bradstreet company, as Administration Manager-Technology and Business
Services, having joined the company initially as a Senior Financial Analyst.
From March 1992 to June 1993, Mr. Galan was the Controller and Project Manager
for Newport Realty, Inc. in Tampa, Florida. Mr. Galan holds a B.S. degree in
Finance from Western Kentucky University.
ROBERT J. TAYLOR joined us in March 1999 as Vice President of Strategy and
Operations. From August 1997 to March 1999, he was a Senior Consultant for CSC
Index, the management consulting division of Computer Sciences Corporation.
During his tenure with CSC, Mr. Taylor focused his business consulting on
large-scale change initiatives, strategy implementation, new business start-ups
and organizational design for Fortune 500 organizations. From January 1992 to
August 1995, Mr. Taylor held the positions of Production Supervisor and Senior
Industrial Engineer with Michelin Tire Corporation. Mr. Taylor received a
Bachelor of Science degree in Industrial and Systems Engineering from Virginia
Tech University and an M.M.M. degree from the J.L. Kellogg Graduate School of
Management at Northwestern University in 1995.
VICTOR H. ROLDAN joined us in January 1999 as a Vice President. From
October 1997 to January 1999, Mr. Roldan founded and operated Roldan &
Associates, a business consulting firm. From January 1995 to October 1997 he
practiced law in Costa Rica, first for Montero Bejarano & Associates and then
for Alfredo Fournier & Associates. Mr. Roldan holds a B.A. and a degree of Law
from the Francisco Marroquin University, Guatemala and a degree of Law from the
University of Costa Rica, San Jose.
JERRY J. COLANGELO joined us as a director in April 1999. He has been the
President and Chief Executive Officer of the Phoenix Suns professional
basketball team since 1987 and was the Suns' General Manager from 1968 to 1987.
He has also served as Chief Executive Officer and Managing General Partner of
the Arizona Diamondbacks professional baseball team since 1995. He is a director
of US West, Inc. and Stratford American Corporation, a holding company for real
estate property.
GREGORY J. KOLANEK joined us as a director in February 1999. He was
employed by Cisco Systems, Inc. from January 1995 to November 1998, first as a
sales application support engineer, then as a Web Project Production Manager.
Since November 1998 he has been a private investor. From October 1992 to January
1995, he was a Desktop Publishing Specialist for Delco Systems and from July
1990 to July 1994, he was co-founder and keyboardist for the band Dishwalla.
EDWIN C. LYNCH joined us as a director in April 1999. Since 1969 Mr. Lynch
has been the General Partner of Westcor Partners, a Phoenix, Arizona based real
estate development company. Westcor presently owns or manages in excess of 15
million square feet of retail property and in excess of one million square feet
of Class A office property in metropolitan Phoenix, Arizona. Mr. Lynch is a
director of
27
<PAGE> 30
Sentinel Savings & Loan, the Phoenix Chamber of Commence, the Arizona Bankers
Association, and the University of Arizona Foundation. He is also a General
Partner of the Phoenix Suns professional basketball team.
ALAN J. SOKOL joined us as a director in April 1999 in connection with our
strategic relationship agreement with Telemundo. He has been the Chief Operating
Officer of Telemundo since August 1998. He served as Senior Vice President,
Corporate Development of Sony Pictures Entertainment from June 1996 to August
1998. From April 1995 to June 1996 he was a Senior Vice President of Savoy
Pictures, Inc., a motion picture production and distribution company. Prior to
that time he was a partner in the Los Angeles law firm of Jeffer, Mangels,
Butler & Marmaro.
LIONEL SOSA joined us as a director in February 1999 and has been Chief
Executive Officer of Garcia/LKS Advertising Agency since January 1996. From
January 1994 to December 1995 Mr. Sosa was Chairman of DMB&B/Americas, a network
of 23 advertising agencies in the U.S. and Latin America. From June 1980 to
December 1993, he founded and was Chief Executive Officer of Sosa, Bromley,
Aguilar & Associates, an advertising agency. Mr. Sosa is the author of The
Americano Dream: How Latinos Can Achieve Success in Business and Life. He was
named one of the 100 most influential Hispanics in the U.S. for 1998-99 by
Hispanic Business magazine and was chosen as Adweek magazine's Advertising
Executive of the Year in 1993 and its Marketing Executive of the Year in 1994.
Mr. Sosa is a director of Taco Cabana, a publicly-traded restaurant chain.
KEY EMPLOYEES
MICHAEL J. OFFENBECHER has served as our Vice President -- Technology since
November 1998. He was the Chief Engineer for software development of InfoPak,
Incorporated, a Web design firm, from 1993 to 1997 where he was responsible for
software development projects. From 1997 until November 1998, he was a Senior
Software Engineer for Cyclone Software Corporation in Scottsdale, Arizona. Mr.
Offenbecher earned a Bachelor of Science degree and Electrical Engineering
degree from Kansas State University.
LUIS GARCIA has served as our Vice President -- Design and Content since
February 1999. He was a Web developer, Software Engineer and subsequently, Vice
President of Operations for Cybertoons Digital of Milwaukee, Wisconsin from
September 1996 until February 1999. From April 1996 until September 1996, he was
a Web developer for Platinum Creative in Winter Park, Florida. Mr. Garcia
received a B.S. degree in Systems Engineering from the Universidad Metropolitana
in Caracas, Venezuela and subsequently was a programming instructor there from
October 1994 to April 1996.
We have employment agreements with Michael J. Offenbecher and Luis Garcia
terminating in October 2000 and February 2001, respectively.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid to our Chief Executive Officer since we were formed in June
1997. No officer has been paid compensation for services in excess of $100,000
per year through December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
--------------------------------------- --------------------------------------
OTHER RESTRICTED SHARES ALL
NAME AND ANNUAL STOCK UNDERLYING OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
- ------------------ ---- ------- ------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jeffrey S. Peterson 1998 $31,500 -- -- -- 50,000 $81,500
Chief Executive 1997 -- -- -- -- -- --
Officer
</TABLE>
28
<PAGE> 31
The following executive officers are expected to receive total compensation
in excess of $100,000 during 1999. Each of these executive officers has executed
employment agreements that contain non-competition and confidentiality
agreements, expire on the dates indicated and provide for the payment of annual
salaries and the forgiveness of loans indicated below.
<TABLE>
<CAPTION>
FORGIVENESS TOTAL EXPIRATION
NAME ANNUAL SALARY OF LOAN(3) COMPENSATION(4) DATE
- ---- ------------- ----------- --------------- ----------
<S> <C> <C> <C> <C>
Jeffrey S. Peterson(1)...................... $150,000 $100,000 $250,000 11/02
Gary A. Trujillo............................ $125,000 $100,000 $225,000 4/03
Michael A. Hubert(2)........................ $120,000 $ 35,000 $155,000 12/00
Bryan L. Ross(2)............................ $ 75,000 $ 40,000 $115,000 11/00
Juan C. Galan(2)............................ $100,000 $ 20,000 $120,000 1/02
Victor H. Roldan(2)......................... $ 60,000 $ 5,000 $ 65,000 1/02
Robert J. Taylor(2)......................... $ 80,000 $ 20,000 $100,000 3/02
</TABLE>
- ---------------
(1) Mr. Peterson's employment agreement also provides for (a) the issuance of
200,000 stock options exercisable at $12.00 per share, 1,500,000 stock
options exercisable at $8.00 per share and 50,000 stock options exercisable
at $1.50 per share, and (b) the payment of $500,000 plus salary for the
remainder of the term of the employment agreement if Mr. Peterson's services
are terminated for any reason other than cause or if we materially change
his duties as defined by his employment agreement.
(2) Messrs. Trujillo, Hubert, Ross, Galan, Roldan and Taylor have been granted
stock options to purchase 350,000 shares at $10.00 per share, 75,000 shares
at $8.00 per share, 115,000 shares at $8.00 per share, 100,000 shares at
$8.00 per share, 20,000 shares at $1.00 per share and 60,000 shares at $8.00
per share, respectively.
(3) We have made loans to each of the executive officers in the amounts shown.
50% of each loan will be forgiven on the six month anniversary of employment
and the balance of the loan will be forgiven on the one year anniversary of
employment, except that 100% of Mr. Hubert's loan will be forgiven on his
six month anniversary of employment. All loans bear interest at 10% per
annum until paid or forgiven.
(4) Does not include car allowances, health insurance, housing allowances and
other non-material compensation.
Our outside directors do not receive any cash compensation for services as
directors, although they are reimbursed for out-of-pocket expenses in attending
Board of Directors' meetings and we intend to issue them stock options in the
future.
STOCK OPTION PLAN
We have a stock option plan (the "Plan") which provides for the grant of
options intended to qualify as "incentive stock options" or "nonqualified stock
options" within the meaning of Section 422 of the United States Internal Revenue
Code of 1986 (the "Code"). Incentive stock options are issuable only to
employees.
The purposes of the Plan are to attract and retain the best available
personnel, to provide additional incentives to our employees and to promote the
success of our business.
We have reserved 6,000,000 shares of common stock for issuance under the
Plan, which is administered by our Board of Directors. Under the Plan, the Board
of Directors determines which individuals will receive options, the time period
during which the options may be partially or fully exercised, the number of
shares of common stock that may be purchased under each option and the option
price. As of the date hereof, options to purchase 4,099,000 shares of common
stock at a weighted average exercise price of $7.43 per share were outstanding
under the Plan and 1,901,000 shares remained available
29
<PAGE> 32
for future option grants. Of these options, 3,595,000 have been issued to
executive officers and directors at an average exercise price of $9.62 per
share.
The per share exercise price of the common stock subject to options must
not be less than the fair market value of the common stock on the date the
option is granted. In the case of incentive stock options, the aggregate fair
market value (determined as of the date the option is granted) of the common
stock that any person may purchase in any calendar year pursuant to the exercise
of incentive stock options must not exceed $100,000. No person who owns,
directly or indirectly, at the time of the granting of an incentive stock
option, more than 10% of the total combined voting power of all classes of our
stock is eligible to receive incentive stock options under the Plan unless the
option price is at least 110% of the fair market value of the common stock
subject to the option on the date of grant. The stock options are subject to
anti-dilution provisions in the event of stock splits, stock dividends and the
like.
No incentive stock options are transferable by an optionee other than by
will or the laws of descent and distribution, and during the lifetime of an
optionee, the option is only exercisable by the optionee. The exercise date of
an option granted under the Plan must not be later than ten years from the date
of grant. Any options that expire unexercised or that terminate upon an
optionee's ceasing to be employed by us will become available once again for
issuance. Shares issued upon exercise of an option rank equally with other
shares then outstanding. No options have been exercised under the Plan.
The following table sets forth certain information regarding grants of
stock options to Jeffrey S. Peterson, the only executive officer who received
stock options during 1998. The fair value of the option grant has been estimated
on the date of the grant utilizing the Black-Scholes option pricing model with
the following assumptions: no volatility, ten year life, risk free rate of
return of 6% and a 0% dividend yield.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS EXERCISE
OPTIONS/SARS GRANTED TO OR BASE GRANT DATE
GRANTED EMPLOYEES PRICE GRANT DATE PRESENT VALUE
------------ ------------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Jeffrey Peterson.................... 50,000 23% $1.50 November 1998 $146,000
</TABLE>
30
<PAGE> 33
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the holdings
of common stock (1) by each person who, as of March 8, 1999, holds of record or
is known by us to hold beneficially or of record, more than 5% of our common
stock, (2) by each executive officer and director, and (3) by all officers and
directors as a group. The address of each person is our address at One Arizona
Center, 400 E. Van Buren, Fourth Floor, Phoenix, Arizona 85004.
<TABLE>
<CAPTION>
PERCENT PERCENT
SHARES OF CLASS OF CLASS
NAME OWNED(2) PRIOR TO OFFERING(2) AFTER OFFERING
- ---- --------- -------------------- --------------
<S> <C> <C> <C>
Jeffrey S. Peterson(1).............................. 2,686,033 23.3% 17.2%
Gary A. Trujillo.................................... 275,000 2.8% 2.0%
Michael A. Hubert................................... 347,621 3.5% 2.5%
Bryan L. Ross....................................... 115,000 1.2% *
Juan C. Galan....................................... 50,000 * *
Robert J. Taylor.................................... 25,000 * *
Victor H. Roldan.................................... 20,000 * *
Jerry J. Colangelo.................................. 75,000 * *
Gregory J. Kolanek.................................. 25,000 * *
Edwin C. Lynch...................................... 50,000 * *
Alan J. Sokol(3).................................... 1,600,000 14.8% 10.8%
Lionel Sosa......................................... 25,000 * *
Michael D. Silberman................................ 829,508 8.5% 6.0%
Kevin Dieball....................................... 1,071,434 11.0% 7.8%
The Monolith Limited Partnership.................... 1,390,715 14.2% 10.1%
Telemundo Network Group LLC(4)...................... 1,600,000 14.8% 10.8%
Keith Fredriksen.................................... 574,950 5.9% 4.2%
All executive officers and directors as a group (12
persons).......................................... 5,243,704 40.7% 31.1%
</TABLE>
- ---------------
* Less than 1.0%.
(1) Excludes 4,310,057 shares which Mr. Peterson has the right to vote pursuant
to a voting trust agreement. See "Related Party and Other Material
Transactions."
(2) Includes shares of common stock subject to stock options which are presently
exercisable or which may be exercisable within 60 days following the date of
this prospectus.
(3) Represents 600,000 shares of common stock owned by Telemundo Network Group
LLC, and warrants to purchase 1,000,000 shares of common stock. Mr. Sokol is
the Chief Operating Officer of Telemundo. He disclaims beneficial ownership
of all shares of our common stock owned beneficially by Telemundo.
(4) Includes 1,000,000 shares of common stock underlying currently exercisable
warrants to purchase common stock.
RELATED PARTY AND OTHER MATERIAL TRANSACTIONS
In May 1998 Jeffrey S. Peterson, our Chairman, Chief Executive Officer and
President, and Michael D. Silberman, a principal stockholder, conveyed an
aggregate of 3,863,106 shares of their common stock to five persons for $.00035
per share. The shares were conveyed at that time to induce these five persons to
provide strategic planning and business development services to us.
In order to raise working capital, we have issued the following securities
to investors:
- In May 1998 we issued a $100,000 convertible promissory note to Enver
Zaky for working capital, $50,000 of which was subsequently converted by
Mr. Zaky into our common stock at $1.00 per share.
31
<PAGE> 34
- In July 1998 we issued a $1.0 million promissory note to two investors
which was subsequently converted into our common stock at $1.56 per
share.
- In November and December 1998 we sold 1,259,167 shares of our common
stock to a group of investors for $3.75 per share.
In July 1998 we loaned Mr. Peterson $100,000 pursuant to his employment
agreement. We agreed that if Mr. Peterson was employed by us on April 1, 1999
the loan would be forgiven. The loan bears interest at 10% per annum. Similar
loans were made to several other of our officers. See "Management -- Executive
Compensation."
In February 1999 we agreed to pay Garcia/LKS, an advertising agency owned
in part by Lionel Sosa, one of our directors, for advertising services a monthly
retainer fee of $78,000. We intend to sign an agreement with Garcia/LKS on these
terms, cancelable by either party on 30 days notice. In April 1999 we issued
Garcia/LKS, 50,000 shares of our common stock in exchange for $500,000 of
advertising and marketing services to be credited against our monthly retainer
fee.
In March 1999 The Monolith Limited Partnership, a principal stockholder,
sold 216,436 shares of our common stock at $7.00 per share and loaned us $2.0
million for working capital. The loan bears interest at 12% per annum through
June 1999 and then 14% per annum through March 2001 and is payable monthly when
the loan is due.
In March 1999 Jeffrey S. Peterson, our Chief Executive Officer, sold
446,000 shares of our common stock at $7.00 per share, including 25,000 shares
sold to each of Jerry J. Colangelo and Edwin C. Lynch both of whom subsequently
became directors. Mr. Peterson agreed to loan us up to $3.0 million of the
proceeds from the sale of our common stock at any time prior to the completion
of the offering to be used by us for working capital. The loans bear monthly
interest of 12% per annum for four months and then 14% per annum for the next 20
months, at which time each loan will become due. At April 30, 1999 Mr. Peterson
had loaned us a total of $1.5 million. Subsequently in April 1999 Mr. Peterson
transferred 50,000 shares of our common stock to our President, Gary A.
Trujillo, pursuant to his employment agreement.
In April 1999 Michael D. Silberman, Kevin Dieball and The Monolith Limited
Partnership, all of whom are principal stockholders of our company, and two
other stockholders executed a voting trust agreement covering a total of
4,310,057 shares of our common stock for the benefit of Jeffrey S. Peterson.
Under the terms of the voting trust, Mr. Peterson is entitled to vote all shares
held by the five stockholders until March 31, 2003. The purpose of the voting
trust was to assure that Mr. Peterson retained effective voting control of our
company following completion of the offering. The five stockholders did not
receive any compensation for entering into the agreement.
In April 1999 we entered into a sponsorship agreement with the Arizona
Diamondbacks, a major league baseball team. Jerry J. Colangelo, who subsequently
became one of our directors, is the Chief Executive Officer and Managing General
Partner of the Arizona Diamondbacks. See "Our Business -- Our Strategic
Relationships."
In April 1999 we entered into a sponsorship agreement with Telemundo.
Subsequently, Telemundo became a principal stockholder of our company and Alan
J. Sokol its Chief Operating Officer became one of our directors. See "Our
Business -- Our Strategic Relationships."
In our opinion, the transactions described above were on terms no less
favorable than those which could have been obtained from unaffiliated third
parties.
32
<PAGE> 35
DESCRIPTION OF SECURITIES
COMMON STOCK
We are authorized to issue 50,000,000 shares of $.001 par value common
stock, of which 9,775,833 shares are outstanding as of the date of this
prospectus. Each share of common stock is entitled to one vote on all matters
submitted to a vote of the stockholders, and cumulative voting is not permitted.
Upon issuance, shares of common stock are not subject to further assessment or
call. Subject to the prior rights of any series of preferred stock that may be
issued by us in the future, holders of common stock are entitled to receive
ratably such dividends that may be declared by the Board of Directors out of
funds legally available therefor and are entitled to share ratably in all assets
remaining after payment of liabilities in the event of our liquidation,
dissolution or winding up. Holders of common stock have no preemptive rights or
rights to convert their common stock into any other securities. The outstanding
common stock is fully paid and nonassessable.
We have not paid dividends on our common stock since inception and do not
plan to pay dividends in the foreseeable future. Any earnings will be retained
to finance growth.
PREFERRED STOCK
Our Articles of Incorporation authorize the issuance of up to 5,000,000
shares of preferred stock with such rights and preferences as may be determined
from time to time by our Board of Directors. Accordingly, under the Articles of
Incorporation, the Board of Directors may, without stockholder approval, issue
preferred stock with dividend, liquidation, conversion, voting, redemption or
other rights which could adversely affect the voting power or other rights of
the holders of the common stock. The issuance of any shares of preferred stock
having rights superior to those of the common stock may result in a decrease of
the value or market price of the common stock and could further be used by the
Board of Directors as a device to prevent a change in our control. We have no
other anti-takeover provisions in our Articles of Incorporation or Bylaws.
Holders of the preferred stock may have the right to receive dividends, certain
preferences in liquidation and conversion rights.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of common stock in the public market
could adversely affect prevailing market prices. Furthermore, since only a
limited number of shares will be available for sale shortly after this offering
because of certain contractual and legal restrictions on resale (as described
below), sales of substantial amounts of our common stock in the public market
after the 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 13,775,833
shares of common stock. Of these shares, all 4,000,000 shares sold in the
offering (plus any shares issued upon exercise of the underwriters'
overallotment option) will be freely tradable without restriction under the
Securities Act, unless purchased by our "affiliates" as that term is defined in
Rule 144 under the Securities Act (generally, our officers, directors or 10%
stockholders).
The remaining 9,775,833 shares outstanding are "restricted securities"
within the meaning of 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 of the Securities Act. Sales of
restricted securities in the public market, or the availability of such
securities for sale, could adversely affect the market price of the common
stock.
Our existing stockholders have entered into lock-up agreements providing
that they will not offer, sell, contract to sell, pledge, hypothecate or grant
any option to purchase or otherwise dispose of our common stock or any
securities exercisable for or convertible into our common stock for a period of
180 days after the effective date of the offering without the prior written
consent of the representative of the underwriters.
33
<PAGE> 36
As a result of these contractual restrictions, notwithstanding possible earlier
eligibility for sale under the provisions of Rule 144, shares subject to lock-up
agreements will not be salable until such agreements expire or are waived by the
representative of the underwriters. Notwithstanding the lock-up agreements,
1,981,886 shares may be sold, subject to the volume limitations set forth below
under Rule 144 of the Securities Act and the remaining 7,793,947 shares may be
sold commencing from May 1999 through December 1999.
In general, under Rule 144 as currently in effect, and beginning after the
180 day lock-up period, a person who has beneficially owned restricted
securities 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 one
percent of the number of shares of common stock then outstanding, which will
amount to 13,775 shares immediately after the offering, or the average weekly
trading volume of the common stock during the four calendar weeks preceding the
sale. Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about us. Under Rule 144(k), a person who is not deemed to have been our
affiliate at any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years, is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
We have granted demand and piggy-back registration rights covering (1)
400,000 shares of common stock underlying the common stock purchase warrants to
be issued to the representative of the underwriters and (2) 1,000,000 common
stock purchase warrants issued to Telemundo. We intend to register the shares of
common stock underlying our Stock Option Plan, which means that common stock
issued upon exercise of stock options will generally be freely tradeable without
restriction under the Securities Act. We have agreed with the underwriters that
we will not file a registration statement covering our Stock Option Plan shares
until at least 180 days after this offering.
TRANSFER AGENT
Corporate Stock Transfer, Inc., Denver, Colorado, is our transfer agent.
The transfer agent's address is 370-17th Street, Suite 2350, Denver, Colorado
80202-4614, and its telephone number is (303)595-3300.
LIMITATION ON LIABILITY
Our Bylaws provide our directors, officers, employees and agents
substantial protection against personal liability related to actions taken in
their capacity as representatives of the Company. The effect of this provision
is that we may be required to pay reasonably incurred expenses such as
attorney's fees, judgments, penalties, fines and amounts paid in settlements
associated with work related actions, suits or proceedings. We shall pay these
expenses if an independent group, as defined in our Bylaws, determines that the
individuals conducted themselves in good faith, and that they reasonably
believed:
- In the case of conduct in their official capacity with us, that their
conduct was in our best interest, or
- In all other cases, except criminal cases, that their conduct was at
least not opposed to our best interest, or
- In the case of any criminal proceeding, that they had no reason to
believe their conduct was unlawful.
Our Bylaws specifically limit the payment of expenses in connection with a
proceeding brought by or in the right of the Company to reasonable expenses,
including attorney's fees.
34
<PAGE> 37
UNDERWRITING
Subject to the terms and conditions of our underwriting agreement, the
underwriters named below, for whom Cruttenden Roth Incorporated is acting as
Representative, have severally agreed to purchase from us and we have agreed to
sell to the Underwriters, the respective number of shares of common stock set
forth opposite each underwriter's name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Cruttenden Roth Incorporated................................
---------
Total............................................. 4,000,000
---------
</TABLE>
Our underwriting agreement provides that the obligations of the
underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in our business, the receipt of certificates,
opinions and letters from our counsel and independent public accountants. The
nature of the underwriters' obligation is such that they are committed to
purchase and pay for all the shares of common stock if any are purchased.
We have been advised by the representative that the underwriters propose to
offer the shares of common stock directly to the public on the terms set forth
on the cover page of this prospectus. The underwriters may allow selected
dealers a concession of not more than $ per share, and the underwriters may
allow, and such selected dealers may reallow, a concession of not more than
$ per share, to other dealers. After the initial public offering of the
shares, the public offering price and other selling terms may be changed by the
representative. No change in such terms shall change the amount of proceeds to
be received by us as set forth on the cover page of this prospectus.
We have granted an option to the underwriters, exercisable for a period of
45 days after the date of this prospectus, to purchase up to an additional
600,000 shares of common stock at the same price per share as the initial shares
to be purchased by the underwriters to cover overallotments, if any. To the
extent that the underwriters exercise this option, each of the underwriters will
be committed, subject to certain conditions, to purchase such additional shares
of common stock in approximately the same proportion as set forth in the above
table.
The representative of the underwriters has advised us that it does not
expect any sales of the shares of common stock offered hereby to be made to
discretionary accounts controlled by the underwriters.
We have agreed to issue to the representative at the closing of the
offering warrants to purchase up to 400,000 shares of common stock at an
exercise price per share equal to 120% of the initial per share public offering
price. The representative's warrants are exercisable for a period of four years
beginning one year from the date of this prospectus.
The holders of the representative's warrants will have no voting, dividend
or other shareholder rights until the representative's warrants are exercised.
The terms of the representative's warrants were established as the result of
negotiations between the Representative and us. If the representative's warrants
are exercised, the representative may realize additional compensation. By their
terms, the representative's warrants will be restricted from sale, transfer,
assignment or hypothecation, except to persons that are officers of the
representative. The number of shares covered by the representative's warrants
and the exercise price are subject to adjustment to prevent dilution. In
addition, we have granted certain rights to the holders of the representative's
warrants to register the representative's warrants and the common stock
underlying the representative's warrants under the Securities Act.
We have agreed to pay Cruttenden Roth a nonaccountable expense allowance
equal to 2% of the aggregate price of the shares of common stock offered hereby
(including with respect to shares of common stock underlying the overallotment
option, if and to the extent it is exercised) set forth on the front cover of
this prospectus. The representative's expenses in excess of the nonaccountable
expense allowance, including its legal expenses, will be borne by the
representative.
35
<PAGE> 38
All of our stockholders have entered into lock-up agreements with the
representative which provide that they will not offer, sell or otherwise dispose
of any common stock for a period of 180 days after the commencement of the
offering without the prior written consent of Cruttenden Roth. Cruttenden Roth
has no present intention to release the locked-up shares prior to expiration of
the 180-day period although Cruttenden Roth may release the locked-up shares
prior to expiration of such period. The granting of any release would be
conditioned, in the judgment of Cruttenden Roth, on such sale not materially
adversely impacting the prevailing trading market for the common stock on the
Nasdaq National Market. Specifically, factors such as average trading volume,
recent price trends, and the need for additional public float in the market for
the common stock would be considered in evaluating such a request.
Prior to the offering, there has been no established trading market for the
common stock. Consequently, the initial public offering price for the common
stock offered hereby has been determined by negotiations between the
representative and us. Among the factors considered in such negotiations were
the preliminary demand for the common stock, the prevailing market and economic
conditions, our results of operations, estimates of our business potential and
prospects, the present state of our business operations, an assessment of our
management, the consideration of these factors in relation to the market
valuation of comparable companies in related businesses, the current condition
of the markets in which we operate, and other factors deemed relevant. There can
be no assurance that an active trading market will develop for the common stock
or that the common stock will trade in the public market after the offering at
or above the initial public offering price.
The representative has advised us that, pursuant to Regulation M under the
Securities Act, some persons participating in the offering may engage in
transactions, including stabilizing bids, syndicate covering transactions or the
imposition of penalty bids, that may have the effect of stabilizing or
maintaining the market price of the shares of common stock at a level above that
which might otherwise prevail in the open market. A "stabilizing bid" is a bid
for or the purchase of shares of common stock on behalf of the underwriters for
the purpose of fixing or maintaining the price of the common stock. A "syndicate
covering transaction" is the bid for or purchase of common stock on behalf of
the underwriters to reduce a short position incurred by the underwriters in
connection with the offering. A "penalty bid" is an arrangement permitting the
representative to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with the offering if the common
stock originally sold by such underwriter or syndicate member purchased by the
representative in a syndicate covering transaction and has therefore not been
effectively placed by such underwriter or syndicate member. The representative
has advised us that such transactions may be effected on the Nasdaq National
Market or otherwise and, if commenced, may be discontinued at any time.
The underwriting agreement provides that we will indemnify the underwriters
and their controlling persons against liabilities under the Securities Act or
will contribute to payments the underwriters and their controlling persons may
be required to make in respect thereof.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Kummer Kaempfer Bonner & Renshaw, Las Vegas, Nevada. Certain legal matters in
connection with the offering will be passed upon for us by Brownstein Hyatt &
Farber, P.C., Denver, Colorado and the Law Office of Gary A. Agron, Englewood,
Colorado and for the underwriters by Bryan Cave LLP, Phoenix, Arizona.
36
<PAGE> 39
EXPERTS
Our financial statements for the year ended December 31, 1998 and for the
period from inception (June 25, 1997) to December 31, 1997, have been included
in this prospectus in reliance on the report of Ehrhardt Keefe Steiner & Hottman
PC, independent public accountants, as given upon the authority of said firm as
experts in accounting and auditing. With respect to the unaudited interim
financial information for the three months ended March 31, 1999 and 1998 and the
March 31, 1999 information included in the period cumulative from inception
(June 25, 1997) to March 31, 1999, the independent public accountants have not
audited or reviewed such financial information and have not expressed an opinion
or any other form of assurance with respect to such financial information.
CHANGE OF ACCOUNTANTS
On December 11, 1998 we engaged BDO Seidman, LLP as our independent public
accountant. BDO Seidman, LLP resigned as our independent public accountant on
February 4, 1999 because they were unwilling to be associated with our financial
statements due to the background of one of our employees. This employee's
background included fines and other sanctions imposed by the NASD and the
Arizona Corporation Commission and a pending public order of investigation
instituted by the Securities and Exchange Commission. We employed this employee
from January 1, 1999 through February 15, 1999 at which time he resigned. This
employee was never appointed as an officer or director of quepasa.com, inc. He
owns 443,450 shares of our common stock and remains an employee of WGM
Corporation, the general partner of The Monolith Limited Partnership, one of our
principal stockholders.
Prior to their resignation, BDO Seidman, LLC had not completed their audits
of any of our financial statements for any period. There were no disagreements
between us and BDO Seidman, LLC on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures
which, if not resolved to the satisfaction of BDO Seidman, LLC would have caused
them to make reference to the matter in their report. We allowed BDO Seidman,
LLC to read and make comment on this disclosure.
On February 10, 1999, we engaged Ehrhardt Keefe Steiner & Hottman, PC as
our independent public accountants. Prior to their appointment, we did not
consult with them on issues relating to our accounting principles or the type of
audit opinion with respect to our financial statements to be issued by them.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement under the Securities Act of 1933, as amended, covering the common
stock. As permitted by the rules and regulations of the Commission, this
prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits. For further information with respect to our company
and the common stock, reference is made to the Registration Statement and the
exhibits, which may be examined without charge at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street
N.W., Washington, D.C. 20549, copies of which may be obtained from the
Commission upon payment of the prescribed fees.
We will be subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and will file reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information may be inspected at the public reference facilities of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of these materials may be obtained at prescribed rates from the
Commission at that address. The reports, proxy statements and other information
can also be inspected at the Commission's regional offices at 7 World Trade
Center, Suite 300, New York, New York 10048 and at Northwestern Atrium Center,
500 West Madison, Chicago, Illinois 60621 and on the Commission's Web site at
www.sec.gov.
We will furnish to our stockholders annual reports which will include
audited financial statements. We may also furnish to our stockholders quarterly
financial statements and other reports that may be authorized by our Board of
Directors.
37
<PAGE> 40
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Financial Statements
Balance Sheets............................................ F-3
Statements of Operations.................................. F-4
Statement of Changes in Stockholders' Equity (Deficit).... F-5
Statements of Cash Flows.................................. F-6
Notes to Financial Statements............................... F-8
</TABLE>
F-1
<PAGE> 41
INDEPENDENT AUDITORS' REPORT
Board of Directors
quepasa.com, inc.
Phoenix, Arizona
We have audited the accompanying balance sheets of quepasa.com, inc. (A
Development Stage Company) as of December 31, 1998 and 1997 and the related
statements of operations, changes in stockholders' equity (deficit) and cash
flows for the year ended December 31, 1998 and from Inception (June 25, 1997) to
December 31, 1997 and cumulative from Inception to December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of quepasa.com, inc. as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the year ended December 31, 1998 and from Inception (June 25, 1997) to
December 31, 1997 and cumulative from Inception to December 31, 1998 in
conformity with generally accepted accounting principles.
Ehrhardt Keefe Steiner & Hottman PC
February 17, 1999
Denver, Colorado
F-2
<PAGE> 42
QUEPASA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------
1999 1998 1997
------------ ----------- -------
(UNAUDITED)
<S> <C> <C> <C>
Current assets
Cash and cash equivalents............................. $ 549,974 $ 2,199,172 $ 2,582
Deposits receivable................................... -- 1,533,632 --
Stock subscription receivable (Note 7)................ -- 125,000 --
Prepaid advertising (Note 6).......................... 1,076,918 -- --
------------ ----------- -------
Total current assets.......................... 1,626,892 3,857,804 2,582
------------ ----------- -------
Property and equipment, net of accumulated depreciation
of $35,226 (March 31, 1999) and $6,532 (December 31,
1998) (Note 2)........................................ 836,227 354,620 --
Other assets
License agreements, net of accumulated amortization of
$166,665 (March 31, 1999) and $104,165 (December
31, 1998) (Note 3)................................. 583,335 645,835 --
Deferred offering costs (Note 6)...................... 342,441 -- --
Deposits and other assets............................. 53,692 2,500 --
------------ ----------- -------
Total other assets............................ 979,468 648,335 --
------------ ----------- -------
Total assets............................................ $ 3,442,587 $ 4,860,759 $ 2,582
============ =========== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable........................................ $ 388,436 $ 71,222 $ 5,465
Accrued commissions (Note 7).......................... 24,089 215,233 --
Stock subscription (Note 7)........................... -- 337,500 --
Current portion of license agreement fees payable
(Note 3)........................................... 275,000 272,500 --
Accrued interest...................................... 20,000 -- --
Accrued payroll and related taxes..................... 75,564 2,922 --
------------ ----------- -------
Total current liabilities..................... 783,089 899,377 5,465
Long-term liabilities
Licensing agreement fees payable (Note 3)............. 375,000 437,500 --
Note payable (Note 4)................................. 2,000,000 -- --
------------ ----------- -------
Total liabilities............................. 3,158,089 1,336,877 5,465
------------ ----------- -------
Commitments and contingencies (Notes 6 and 8)
Stockholders' equity (deficit) (Notes 4 and 7)
Preferred stock, authorized 5,000,000 shares -- none
issued or outstanding.............................. -- -- --
Common stock, authorized 50,000,000 shares, $0.001 par
value; issued and outstanding 9,075,833 shares
(March 31, 1999 and December 31, 1998) and
5,680,000 shares (December 31, 1997)............... 9,076 9,076 5,680
Additional paid-in capital............................ 10,906,477 10,427,477 (5,660)
Deficit accumulated during the development stage...... (10,631,055) (6,912,671) (2,903)
------------ ----------- -------
Total stockholders' equity (deficit).......... 284,498 3,523,882 (2,883)
------------ ----------- -------
Total liabilities and stockholders' equity (deficit).... $ 3,442,587 $ 4,860,759 $ 2,582
============ =========== =======
</TABLE>
See notes to financial statements.
F-3
<PAGE> 43
QUEPASA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
CUMULATIVE FROM CUMULATIVE FROM
INCEPTION INCEPTION INCEPTION
THREE MONTHS ENDED (JUNE 25, 1997) (JUNE 25, 1997) (JUNE 25, 1997)
MARCH 31, YEAR ENDED TO TO TO
------------------------ DECEMBER 31, DECEMBER 31, MARCH 31, DECEMBER 31,
1999 1998 1998 1997 1999 1998
----------- ---------- ------------ --------------- --------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Product and content
development
expenses........... $ 186,691 $ 4,330 $ 414,873 $ -- $ 601,564 $ 414,873
Advertising and
marketing
expenses........... 2,062,607 -- 250,419 -- 2,313,026 250,419
Stock based
compensation
expenses........... 479,000 -- 5,265,364 -- 5,744,364 5,265,364
General and
administrative
expenses........... 985,464 9,137 931,172 3,703 1,920,339 934,875
----------- ---------- ----------- ---------- ------------ -----------
Total
operating
expenses... 3,713,762 13,467 6,861,828 3,703 10,579,293 6,865,531
----------- ---------- ----------- ---------- ------------ -----------
Loss from
operations......... (3,713,762) (13,467) (6,861,828) (3,703) (10,579,293) (6,865,531)
Other income
(expense) Interest
expense............ (20,000) -- (48,994) -- (68,994) (48,994)
Other.............. 15,378 -- 1,054 800 17,232 1,854
----------- ---------- ----------- ---------- ------------ -----------
Net other income
(expenses)......... (4,622) -- (47,940) 800 (51,762) (47,140)
----------- ---------- ----------- ---------- ------------ -----------
Net loss............. $(3,718,384) $ (13,467) $(6,909,768) $ (2,903) $(10,631,055) $(6,912,671)
=========== ========== =========== ========== ============ ===========
Net loss per share,
basic and
diluted............ $ (.41) $ -- $ (.76) $ -- $ (1.17) $ (.76)
=========== ========== =========== ========== ============ ===========
Weighted average
number of shares
outstanding, basic
and diluted........ 9,075,833 9,075,833 9,075,833 9,075,833 9,075,833 9,075,833
=========== ========== =========== ========== ============ ===========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 44
QUEPASA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (JUNE 25, 1997) TO
DECEMBER 31, 1997, THE YEAR ENDED DECEMBER 31, 1998 AND
THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE
------------------ PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
--------- ------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Issuance of common stock for cash
from initial capitalization, June
1997 (Note 7)...................... 5,680,000 $5,680 $ (5,660) $ -- $ 20
Net loss for the period.............. -- -- -- (2,903) (2,903)
--------- ------ ----------- ------------ -----------
Balance, December 31, 1997........... 5,680,000 5,680 (5,660) (2,903) (2,883)
Issuance of common stock and stock
based compensation May 1998 (Note
7)................................. 1,420,000 1,420 4,985,294 -- 4,986,714
Issuance of common stock in
conversion of note payable $1.56
per share) November 1998 (Note
4)................................. 666,666 667 1,039,113 -- 1,039,780
Issuance of common stock in
conversion of note payable ($1.00
per share), November 1998 (Note
4)................................. 50,000 50 49,950 -- 50,000
Issuance of common stock for cash at
$3.75 per share, net of $640,587 of
offering costs November and
December 1998 (Note 7)............. 1,259,167 1,259 4,080,030 -- 4,081,289
Issuance of compensatory stock
options to employees October
through December 1998 (Note 7)..... -- -- 278,750 -- 278,750
Net loss for the year................ -- -- -- (6,909,768) (6,909,768)
--------- ------ ----------- ------------ -----------
Balance, December 31, 1998........... 9,075,833 9,076 10,427,477 (6,912,671) 3,523,882
Issuance of compensatory stock
options to employees, January 1999
(Note 7)........................... -- -- 26,450 -- 26,450
Issuance of compensatory stock
options to officers and directors,
March 1999 (Note 7)................ -- -- 452,550 -- 452,550
Net loss for the period
(unaudited)........................ -- -- -- (3,718,384) (3,718,384)
--------- ------ ----------- ------------ -----------
Balance, March 31, 1999
(unaudited)........................ 9,075,833 $9,076 $10,906,477 $(10,631,055) $ 284,498
========= ====== =========== ============ ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 45
QUEPASA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
CUMULATIVE CUMULATIVE
FROM FROM
INCEPTION INCEPTION INCEPTION
THREE MONTHS ENDED (JUNE 25, 1997) (JUNE 25, 1997) (JUNE 25, 1997)
MARCH 31, YEAR ENDED TO TO TO
---------------------- DECEMBER 31, DECEMBER 31, MARCH 31, DECEMBER 31,
1999 1998 1998 1997 1999 1998
----------- -------- ------------ --------------- --------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities
Net loss....................... $(3,718,384) $(13,467) $(6,909,768) $(2,903) $(10,631,055) $(6,912,671)
Adjustments to reconcile net
loss to net cash (used in)
provided by operating
activities
Depreciation and
amortization.............. 91,194 -- 110,697 -- 201,891 110,697
Stock based compensation.... 479,000 -- 5,265,364 -- 5,744,364 5,265,364
Accrued interest on
convertible notes
payable................... -- -- 39,780 -- 39,780 39,780
Change in assets and
liabilities
Deposits receivable....... 1,533,632 -- (1,533,632) -- -- (1,533,632)
Prepaid advertising....... (1,076,918) -- -- -- (1,076,918) --
Deposits and other
assets................. (51,192) -- (2,500) -- (53,692) (2,500)
Accounts payable.......... 317,214 10,325 65,757 5,465 388,436 71,222
Accrued payroll and
related taxes.......... 72,642 -- 2,922 -- 75,564 2,922
----------- -------- ----------- ------- ------------ -----------
1,365,572 10,325 3,948,388 5,465 5,319,425 3,953,853
----------- -------- ----------- ------- ------------ -----------
Net cash (used in)
provided by operating
activities........... (2,352,812) (3,142) (2,961,380) 2,562 (5,311,630) (2,958,818)
----------- -------- ----------- ------- ------------ -----------
Cash flows from investing
activities
Purchase of fixed assets....... (510,301) -- (361,152) -- (871,453) (361,152)
Payments on license
agreement................... (60,000) -- (40,000) -- (100,000) (40,000)
----------- -------- ----------- ------- ------------ -----------
Net cash used in
investing
activities........... (570,301) -- (401,152) -- (971,453) (401,152)
----------- -------- ----------- ------- ------------ -----------
Cash flows from financing
activities
Checks in excess of bank
balance..................... -- 560 -- -- -- --
Stock subscription
receivable.................. 125,000 -- (125,000) -- -- (125,000)
Net proceeds from private
placements.................. -- -- 4,081,289 -- 4,081,289 4,081,289
Proceeds from issuance of note
payable..................... 2,000,000 -- -- -- 2,000,000 --
Proceeds from convertible note
payable..................... -- -- 1,100,000 -- 1,100,000 1,100,000
Accrued interest............... 20,000 -- -- -- 20,000 --
Deferred initial public
offering costs.............. (342,441) -- -- -- (342,441) --
Accrued commissions............ (191,144) -- 215,233 -- 24,089 215,233
Stock subscription............. (337,500) -- 337,500 -- -- 337,500
Proceeds from issuance of
common stock................ -- -- 100 20 120 120
Payments on notes payable...... -- -- (50,000) -- (50,000) (50,000)
----------- -------- ----------- ------- ------------ -----------
Net cash provided by
financing
activities........... 1,273,915 560 5,559,122 20 6,833,057 5,559,142
----------- -------- ----------- ------- ------------ -----------
</TABLE>
F-6
<PAGE> 46
<TABLE>
<CAPTION>
CUMULATIVE CUMULATIVE
FROM FROM
INCEPTION INCEPTION INCEPTION
THREE MONTHS ENDED (JUNE 25, 1997) (JUNE 25, 1997) (JUNE 25, 1997)
MARCH 31, YEAR ENDED TO TO TO
---------------------- DECEMBER 31, DECEMBER 31, MARCH 31, DECEMBER 31,
1999 1998 1998 1997 1999 1998
----------- -------- ------------ --------------- --------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net (decrease) increase in cash
and cash equivalents........... (1,649,198) (2,582) 2,196,590 2,582 549,974 2,199,172
Cash and cash equivalents,
beginning of period............ 2,199,172 2,582 2,582 -- -- --
----------- -------- ----------- ------- ------------ -----------
Cash and cash equivalents, end of
period......................... $ 549,974 $ -- $ 2,199,172 $ 2,582 $ 549,974 $ 2,199,172
=========== ======== =========== ======= ============ ===========
</TABLE>
Supplemental disclosure of cash flow information:
Cash paid for interest was $48,994 for the year ended December 31,
1998 and $0 from Inception (June 25, 1997) to December 31, 1997.
Supplemental schedule of non-cash investing and financing activities:
During 1998, the Company entered into a licensing agreement requiring
total future payments of $750,000 (Note 3).
During 1998, convertible notes of $1,050,000 were converted into
common stock.
F-7
<PAGE> 47
QUEPASA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
quepasa.com, inc. (the Company), a Nevada Corporation, was incorporated in
June 1997. The Company is a Spanish Language Internet portal and search engine.
The portal offers a number of services such as news, chat and free e-mail. The
Company's portal draws viewers to their Web sites by providing a one-stop
destination for identifying, selecting and accessing resources, services,
content and information on the Web. The Company is targeted to provide users
with information and interactive content centered around the Spanish language.
The Company is a development-stage company that has not had any significant
revenue since inception. The Company realized a net loss of approximately $6.9
million including a $5.3 million non-cash charge for stock based compensation
during the year ended December 31, 1998 and there is no assurance that the
Company will generate revenue or earn profit in the future.
During 1998, the Company changed its name from Internet Century, Inc. to
quepasa.com, inc.
Interim Financial Statements (Unaudited)
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position of the Company at
March 31, 1999 and the results of its operations and changes in cash flows for
the three months ended March 31, 1999 and 1998 and the three months ended March
31, 1999 included in the period cumulative from inception to March 31, 1999. The
results of operations for the three months ended March 31, 1999 and 1998 are not
necessarily indicative of the results to be expected for a full year.
Stock Split
In October 1998, the Company's Board of Directors authorized a 284 for one
stock split. The financial statements have been presented as if the split had
occurred at inception.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and investments with
original maturities of three months or less.
Deposits Receivable
Accounts receivable at December 31, 1998 represents refunds due from a
media company for advances paid by the Company under an advertising agreement
which was canceled prior to advertising services being rendered. The amount was
received subsequent to December 31, 1998.
Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization
expense is generally provided on a straight-line basis using estimated useful
lives of three to five years.
Deferred Offering Costs
Deferred offering costs represents cost incurred in conjunction with the
Company's proposed public offering. Deferred offering costs will be offset
against net proceeds, if successful, or expensed in operations if the offering
is unsuccessful.
F-8
<PAGE> 48
QUEPASA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND 1998 IS UNAUDITED)
License Agreement
The Company entered into a licensing agreement pursuant to which the
Company licenses an internet-based search engine. The minimum annual royalty has
been capitalized and is being amortized over three years, which is the minimum
term of the agreement (Note 3).
Revenue Recognition
Advertising revenues are expected to be derived principally from short-term
advertising contracts. Revenues are generally recognized ratably over the period
in which the advertisement is displayed, provided that the Company does not have
any significant remaining obligations and collection of the resulting receivable
is probable. To the extent that web site impression deliveries are falling short
of the guarantees, the Company would defer recognition of the corresponding
revenues.
Income Taxes
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statements
and tax basis of assets and liabilities using the enacted tax rates in effect
for the year in which the differences are expected to reverse. The measurement
of deferred tax assets is reduced, if necessary, by the amount of any tax
benefits that, based on available evidence, are not expected to be realized.
Basic and Diluted Net Loss Per Share
The Company computes net loss per share in accordance with the provisions
of Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128") and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under the
provisions of SFAS 128 and SAB 98, basic and diluted net loss per share is
computed by dividing the net loss available to common stockholders for the
period by the weighted average number of common shares outstanding for the
period. The calculation of basic and diluted net loss per share excludes shares
of common stock issuable upon exercise of employee stock options as the effect
of the exercise would be antidilutive.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
Advertising Costs
Advertising costs are expensed as incurred in accordance with Statement of
Position 93-7, "Reporting on Advertising Costs". Advertising costs for the year
ended December 31, 1998 and for the period from Inception (June 25, 1997) to
December 31, 1997 totaled $132,377 and $0, respectively.
Product and Content Development
Costs incurred in the classification and organization of listings within
the Company's web-site and the development of new products and enhancements to
existing products are charged to expense as incurred. Material software
development costs incurred subsequent to the establishment of technological
feasibility
F-9
<PAGE> 49
QUEPASA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND 1998 IS UNAUDITED)
are capitalized. 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.
Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments, which
principally include cash, deposit receivable, accounts payable, accrued expenses
and a note payable, approximate fair value due to the relatively short maturity
of the financial instruments.
The fair value of the Company's debt instruments are based on the amount of
future cash flows associated with cash instrument using the Company's borrowing
rate. At March 31, 1999 and December 31, 1998 and 1997, the carrying value of
all financial instruments was not materially different from fair value.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities", which is
effective for financial statements issued for all fiscal quarters of fiscal
years beginning after June 15, 1999. This statement requires companies to
recognize all derivative contracts at either assets or liabilities in the
balance sheet and to measure them at fair value. If certain conditions are not a
derivative may be specifically designated as a hedge, the objective of which is
to match the timing of gain or loss recognition on the hedging derivative with
the recognition (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the period of
change. Historically, the Company has not entered into derivative contracts to
hedge existing risks or for speculative purposes. Accordingly, the Company does
not expect adoption of the new standards on January 1, 2000 to effect its
financial statements.
NOTE 2 -- PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------
1999 1998 1997
----------- -------- ----
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment and software........................ $449,430 $344,948 $ --
Furniture, fixtures and equipment...................... 337,228 16,204 --
Leasehold improvements................................. 84,795 -- --
-------- -------- ----
871,453 361,152 --
Less accumulated depreciation and amortization......... (35,226) (6,532) --
-------- -------- ----
Property and equipment................................. $836,227 $354,620 $ --
</TABLE>
NOTE 3 -- LICENSE AGREEMENT
On July 21, 1998, the Company entered an Information Services Agreement
(the "Agreement") with Inktomi Corporation ("Inktomi") whereby Inktomi will
provide certain services, including but not limited to, search services enabling
the Company to access Inktomi database of internet websites. The agreement
requires quarterly payments ranging from $60,000 to $75,000 and expires in
August 2001. The total service
F-10
<PAGE> 50
QUEPASA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND 1998 IS UNAUDITED)
fees payable may increase based upon actual use of Inktomi services. The license
was capitalized and is being amortized on a straight-line basis over the term of
the agreement of three years.
Minimum payments under the licensing agreement are as follows as of March
31, 1999:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1999........................................................ $212,500
2000........................................................ 250,000
2001........................................................ 187,500
--------
$650,000
========
</TABLE>
NOTE 4 -- NOTES PAYABLE
Convertible Note Payable
In May 1998, the Company issued $100,000 of convertible debt. The
convertible debt accrued interest at 12% per annum and was scheduled to mature
on the earlier of May 31, 2000 or the closing date of the Company's initial
public offering, if any. The Company had the right to convert unpaid note
principal plus any accrued interest into 100,000 shares of common stock at any
time during the term of the Note.
In November 1998, the Company converted $50,000 of the Note into 50,000
shares of the Company's common stock and repaid the balance of $50,000.
In July 1998, the Company issued $1,000,000 of convertible debt. The
convertible debt accrued interest at 12% per annum and was payable on the
earlier of May 31, 2000 or at the closing date of the Company's initial public
offering, if any. The Company had the right to convert unpaid principal plus any
accrued interest into 666,666 shares of common stock at any time during the term
of the notes. The Company believes this conversion feature was based on the fair
market value of the common stock on the date of issuance.
In November 1998, the notes and accrued interest of $39,780 were converted
into 666,666 shares of the Company's common stock.
Loans from Related Parties (Unaudited)
In March of 1999, the Company received a $2 million loan from a stockholder
of the Company. The note bears interest at 12% per annum through June 1999 and
then 14% per annum through maturity, March, 2001.
The Chief Executive Officer has agreed to lend the Company up to $3 million
as needed for operations. Any amounts loaned will bear interest at 12% per annum
for four months and 14% per annum for the next 20 months and mature 24 months
from issuance. In April 1999, the Company was advanced $1,500,000 under the
terms of this agreement.
F-11
<PAGE> 51
QUEPASA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 5 -- INCOME TAXES
No provision for federal and state income taxes has been recorded as the
Company has incurred net operating losses through March 31, 1999. The following
table sets forth the primary components of deferred tax assets:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------
1999 1998 1997
----------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C>
Net operating loss carryforwards.................. $10,631,000 $ 6,910,000 $ 3,000
Nondeductible expenses............................ (5,744,000) (5,265,000) --
----------- ----------- -------
Gross deferred tax assets......................... 4,887,000 1,645,000 3,000
Valuation allowance............................... (4,887,000) (1,645,000) (3,000)
----------- ----------- -------
$ -- $ -- $ --
=========== =========== =======
</TABLE>
At March 31, 1999 (unaudited) and December 31, 1998 and 1997, the Company
fully reserved its deferred tax assets. The Company believes sufficient
uncertainty exists regarding the reliability of tax assets such that a full
valuation allowance is appropriate.
At December 31, 1998, the Company had approximately $1,645,000 of federal
net operating loss carryforwards for tax reporting purposes available to offset
future taxable income. These carryforwards expire in 2013. The Company has
approximately $1,645,000 of state net operating loss carryforwards for tax
reporting purposes which expire in 2003.
NOTE 6 -- COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company signed a three year lease agreement for an office located in
Las Vegas, Nevada commencing August 15, 1998. The monthly lease payments range
from $1,670 to $1,770. The lease expires August 14, 2001.
The Company signed a three year lease agreement for office equipment
commencing in August 1998. The monthly rent payment is $328 and the lease
expires in September of 2001.
Future minimum rental payments under non-cancelable operating and equipment
leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1999........................................................ $20,240
2000........................................................ 20,847
2001........................................................ 14,168
-------
$55,255
=======
</TABLE>
Facilities and equipment leases expense for the three months ended March
31, 1999 and 1998 and the year ended December 31, 1998 and for the period from
Inception (June 25, 1997) to December 31, 1997 was $47,000, $0, $45,068 and $0,
respectively.
F-12
<PAGE> 52
QUEPASA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND 1998 IS UNAUDITED)
Employment Agreements
The Company has employment agreements with many of its employees and all of
its executive officers. The agreements provide for base salary, forgivable loans
and bonus provisions. The chief executive officer's agreement provides for a
$500,000 payment upon termination without cause. The forgivable loans have been
expensed as compensation when made to the employees.
Proposed Public Offering
On January 15, 1999, the Company entered into a letter-of-intent with an
investment banker relating to a proposed initial public offering of shares of
common stock of the Company.
The initial public offering is expected to consist of the sale of 4,000,000
shares of common stock, plus an option for the underwriters to sell an
additional 600,000 shares to cover overallotments. The Company has also
authorized the issuance of 400,000 warrants to purchase common stock to the
underwriters. In conjunction with the proposed offering, the underwriter's are
expected to receive compensation equal to the maximum allowable under the
Corporate Financing Rule of the National Association of Securities Dealers, Inc.
for comparable size offerings.
Advertising Contracts
In January 1999, the Company entered a 26-week sponsorship agreement with a
Spanish language television broadcaster. Based on the terms of the agreement,
the Company will receive media spots for approximately $800,000. Prepayments
made under this agreement were capitalized and are being amortized over the
period in which the advertisement is broadcasted. As of March 31, 1999
(unaudited), approximately $677,000 is included in prepaid advertising as a
result of this agreement.
In February 1999, the Company entered a contract for an 8-week nationwide
advertising campaign with a Spanish language radio broadcaster located in the
United States. The contract calls for an initial payment of $1.6 million and
subsequent monthly payments for broadcasting as incurred. Payments made under
this agreement were capitalized and are being amortized over the period in which
the advertisement is broadcasted. As of March 31, 1999 (unaudited),
approximately $400,000 is included in prepaid advertising as a result of this
agreement.
In February 1999, the Company entered into an advertising agreement with an
entity partially owned by a Director of the Company. The agreement provides for
advertising services for a flat fee of $78,000 per month and is cancelable by
either party with 30 days written notice. During the three months ended March
31, 1999 $78,833 was paid under the terms of this agreement. In addition,
approximately $210,000 was paid to the related party in exchange for other
promotional items.
NOTE 7 -- STOCKHOLDERS' EQUITY
Upon incorporation on June 25, 1997, the Company issued 5,680,000 shares of
common stock for $20.00 to the Chief Executive Officer and the other founder of
the Company.
Private Placement
During November and December of 1998, the Company issued 1,259,167 shares
of common stock in a private placement for cash at $3.75 per share. The Company
received proceeds of $4,081,289 net of related costs of $640,587. In January
1999, $125,000 of the proceeds were received and are reflected as
F-13
<PAGE> 53
QUEPASA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND 1998 IS UNAUDITED)
stock subscription receivable. Of the related costs, $24,089 and $215,233 were
unpaid as of March 31, 1999 and December 31, 1998, respectively.
During December 1998, the Company received excess proceeds of $337,500 with
respect to these private placements. These amounts were refunded upon the
investors request in January 1999.
Stock Option Plan
In October 1998 and later amended, the Company adopted a Stock Option Plan
(the "Plan") which provides for the granting of options to officers, directors,
and consultants. The plan permits the granting of "incentive stock options"
meeting the requirements of Section 422A of the Internal Revenue Code as well as
"nonqualified" which do not satisfy the requirements of that section. 6,000,000
shares of common stock have been restricted under the plan for the granting of
options. The Plan will be in effect until November 1, 2009, unless extended by
the Company's stockholders. The options are exercisable to purchase stock for a
period of ten years from the date of grant.
Incentive Stock Options granted pursuant to this Plan may not have an
option price that is less than the fair market value of the stock on the date
the option is granted. Incentive stock options granted to significant
stockholder shall have an option price of not less than 110% of the fair market
value of the stock on the date of the grant. Options granted under the plan vest
one third at the end of each of the three years of service following the grant
date. The Board of Directors of the Company may waive the vesting requirements
at its discretion. All stock options issued under the Plan are exercisable for a
period of 10 years from the date of grant.
Employee Compensatory Stock and Stock Options
During May of 1998, the Company issued 1,420,000 shares of common stock to
a former officer of the Company and the original stockholders of the Company
transferred 3,566,714 existing shares to several employees and one advisor. The
fair market value of the common stock on the date of these issuances was
determined to be $1.00 based on the issuance of convertible debt in May of 1998
which was convertible into common stock at $1.00 per share. Approximately $5
million in compensation expense is reflected in the December 31, 1998 financial
statements as a result of these transactions.
Throughout 1998, the Company issued "nonqualified" options to purchase
common stock to several employees under the stock option plan. Compensation
expense of approximately $279,000 was recognized based on the difference between
the exercise price and fair value of the stock on the date of grant in
accordance with APB No. 25.
In November 1998, the Company granted 50,000 stock options to purchase
common stock to the Chief Executive Officer. The options are exercisable at
$1.50, vest immediately and have a term of 10 years.
In January 1999, the Company granted 1,500,000 stock options to purchase
common stock to the Chief Executive Officer. The options are exercisable at
$8.00, vest immediately and have a term of 10 years.
In April 1999, the Chief Executive Officer was also granted options to
purchase up to 200,000 shares of common stock exercisable at $12.00 per share
that vest over a three year period.
In January 1999, the Company granted 35,000 options to employees with an
exercise price of $1.00. These options vest over a period of three years.
Additionally, the Company granted a total of 50,000 options to two directors.
The options, 25,000 at an exercise price of $1.50 and 25,000 at an exercise
price
F-14
<PAGE> 54
QUEPASA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND 1998 IS UNAUDITED)
of $8.00 all vested immediately. Based on the fair market value of the Company's
common stock on the date of grant and in consideration of vesting periods,
$479,000 of compensation expense was recorded during the three months ended
March 31, 1999 (unaudited) as a result of these transactions. Additionally,
2,100,000 options were granted to employees with an exercise prices ranging from
$8 - $12. The exercise price of the options were equal to or greater than the
fair value of the common stock on the date of grant. As the Company has adopted
the disclosure-only provisions of Statement of Financial Accounting Standard No.
123, "Accounting for Stock-Based Compensation," no compensation expense has been
recognized related to these options.
Had compensation cost for stock-based compensation been determined based on
the fair value or the grant date consistent with the method of SFAS 123, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts presented below:
<TABLE>
<CAPTION>
CUMULATIVE CUMULATIVE
INCEPTION FROM INCEPTION FROM INCEPTION
THREE MONTHS (JUNE 25, 1997) (JUNE 25, 1997) (JUNE 25, 1997)
ENDED YEAR ENDED TO TO TO
MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31, MARCH 31, DECEMBER 31,
1999 1998 1998 1997 1999 1998
------------ --------- ------------ --------------- --------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net loss
As reported........ $ (3,718,384) $(13,467) $(6,909,768) $2,903 $(10,631,055) $(6,912,671)
Pro forma.......... $(10,967,256) $(13,467) $(7,124,768) $2,903 $(18,094,927) $(7,127,671)
Basic and diluted
loss per share
As reported........ $ (.41) $ -- $ (.76) $ -- $ (1.17) $ (.76)
Pro forma.......... $ (1.21) $ -- $ (.79) $ -- $ (2.00) $ (.79)
</TABLE>
The fair value of option grants is estimated on the date of grants
utilizing the Black-Scholes option pricing model with the following assumptions
for 1998: expected life of 10 years, no volatility, risk-free interest rates of
6%, and a 0% dividend yield.
At March 31, 1999 (unaudited) and December 31, 1998, 2,463,000 and 215,000
of common stock options were outstanding, respectively. All of these potential
common shares were excluded from the computation of diluted earnings per share
because their inclusion would be antidilutive.
Summarized information relating to stock options is as follows:
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
COMMON AVERAGE GRANT-DATE
STOCK EXERCISE FAIR
OPTIONS PRICE VALUE
--------- -------- ----------
<S> <C> <C> <C>
Outstanding, December 31, 1997....................... -- -- --
Issued............................................... 215,000 2.45 3.75
--------- ----- -----
Outstanding, December 31, 1998....................... 215,000 2.45 3.75
Issued............................................... 2,248,000 7.82 8.20
--------- ----- -----
Outstanding, March 31, 1999 (unaudited).............. 2,463,000 7.35 7.81
========= ===== =====
</TABLE>
F-15
<PAGE> 55
QUEPASA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND 1998 IS UNAUDITED)
The range of exercise prices and remaining contractual lives for the
options outstanding at March 31, 1999 (unaudited) are as follows:
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
COMMON AVERAGE GRANT-DATE
STOCK EXERCISE FAIR
OPTIONS PRICE VALUE
- --------- ------------ ----------
<S> <C> <C>
175,000 $1.00 - 1.50 $9.75
100,000 3.75 9.50
2,188,000 8.00 9.90
- ---------
2,463,000
=========
</TABLE>
NOTE 8 SUBSEQUENT EVENTS (UNAUDITED)
In April 1999, the Company's Sponsorship Agreement with the Spanish
language television broadcaster (note 6) was expanded under a separate
agreement. Under the terms of the expanded agreement, the Company issued 600,000
shares of common stock and 1,000,000 warrants to purchase common stock. The
warrants are exercisable for a period of 2 years at 120% of the public offering
price per share. In exchange for the common stock issued, the Company received a
$5 million advertising credit to be utilized ratably over 5 years. Additionally,
the Company agreed to purchase an additional $1 million of advertising to be
broadcast over 26 weeks commencing August, 1999. As a result of the common stock
warrants issued approximately $200,000 of expense will be recognized during the
year ended December 31, 1999. The agreement may be cancelled by either party if
the proposed initial public offering is not successful.
In April 1999, the Company issued 50,000 shares of its Common Stock to an
entity partially owned by a director of the Company for advertising and
marketing services valued at $500,000.
In April 1999, the Company entered into a sponsorship agreement with the
Arizona Diamondbacks. A director of the Company serves as the Arizona
Diamondbacks' Chief Executive Officer and General Manager who subsequently
became a Director of the Company. Under this agreement, the Company will receive
English and Spanish television and radio broadcast time, ballpark signage, and
Internet and print promotions for a sponsorship fee of $1.5 million, $500,000 of
which was paid in April 1999 with the remaining $1 million payable over the 1999
baseball season.
In April 1999, the Company entered into an agreement with the Miami Herald,
providing for Spanish language news features on the Company's web site and other
promotional item. The agreement requires approximately $400,000 to be paid over
the remainder of 1999.
In April 1999, the Company's President received options to purchase 350,000
shares of common stock. The options are exercisable at $10.00 per share and
one-half of these options vest immediately and the remaining vest ratably over
three years. In addition, the Company's Chief Executive Officer transferred
50,000 shares and the Company issued 50,000 shares to the new president. As a
result of these transactions, the Company will record a $1,000,000 charge to
earnings in April 1999 for stock based compensation.
As a result of the above transactions, the issuance of 200,000 options to
the Chief Executive Officer in April 1999, and various other subsequent events,
a total of 4,099,000 options are outstanding as of April 27, 1999.
F-16
<PAGE> 56
[INSIDE BACK COVER PAGE -- SCREEN SHOT OF MAP REFLECTING
TOTAL U.S. HISPANIC POPULATION BREAKDOWN]
<PAGE> 57
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[QUEPASA.COM LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 58
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION(1)
<TABLE>
<S> <C>
SEC Registration Statement.................................. $ 17,983
NASD Filing Fee............................................. $ 6,596
Blue Sky Filing Fees........................................ $ 2,500
Blue Sky Legal Fees......................................... $ 5,000
Printing Expenses........................................... $150,600
Legal Fees and Expenses..................................... $375,000
Accounting Fees............................................. $125,000
Transfer Agent Fees......................................... $ 5,000
Nasdaq Application Fee...................................... $ 25,000
Miscellaneous Expenses...................................... $ 37,921
--------
Total............................................. $750,000
========
</TABLE>
- ---------------
(1) All expenses, except the SEC registration fee and NASD filing fee, are
estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
ARTICLE TWELFTH OF THE REGISTRANT'S AMENDED ARTICLES OF INCORPORATION
PROVIDE AS FOLLOWS:
"The liability of the directors of the Corporation for monetary
damages for breach of fiduciary duty is eliminated to the fullest extent
provided by Nevada law.
Directors and officers of the Corporation shall be indemnified by the
Corporation against any liability to the fullest extent provided by Nevada
law."
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the last three years, the Registrant sold the following securities
which were not registered under the Securities Act, as amended.
<TABLE>
<CAPTION>
NAME DATE NUMBER OF SHARES PRICE PER SHARE
- ---- ------ ---------------- ---------------
<S> <C> <C> <C>
Jeffrey Peterson...................................... Jun-97 2,840,000 $.0000035
Jennifer Ferlaino..................................... Jun-97 2,840,000 $.0000035
Michael Silberman..................................... May-98 1,420,000 $ 0.0001
Enver Zaky(1)......................................... Nov-98 50,000 $ 1.00
Mitchell Pierce(2).................................... Nov-98 333,333 $ 1.56
Tim Pring(2).......................................... Nov-98 333,333 $ 1.56
Louis Grubb........................................... Nov-98 66,667 $ 3.75
Daniel Louis Grubb.................................... Nov-98 66,667 $ 3.75
Bradley T. Pring...................................... Nov-98 106,667 $ 3.75
Marshall Chesrown..................................... Nov-98 100,000 $ 3.75
John Pring............................................ Nov-98 26,667 $ 3.75
John Elway............................................ Nov-98 133,333 $ 3.75
Felix Sabates......................................... Nov-98 66,666 $ 3.75
Mayer Shirazipour..................................... Nov-98 100,000 $ 3.75
Mitchell Pierce....................................... Dec-98 103,333 $ 3.75
Al Monjazeb........................................... Dec-98 30,000 $ 3.75
Anthony Bily.......................................... Dec-98 53,333 $ 3.75
Laurence R. Davis..................................... Dec-98 20,000 $ 3.75
</TABLE>
II-1
<PAGE> 59
<TABLE>
<CAPTION>
NAME DATE NUMBER OF SHARES PRICE PER SHARE
- ---- ------ ---------------- ---------------
<S> <C> <C> <C>
D.A. Huschke.......................................... Dec-98 26,667 $ 3.75
Fredrick Kaefer....................................... Dec-98 27,000 $ 3.75
Michael Maynard....................................... Dec-98 40,000 $ 3.75
John McGrath.......................................... Dec-98 20,000 $ 3.75
James Peterson........................................ Dec-98 20,000 $ 3.75
Peter A. Pfer......................................... Dec-99 27,000 $ 3.75
Lyle Reigel........................................... Dec-98 52,700 $ 3.75
Chester Sawko......................................... Dec-98 20,000 $ 3.75
Rick Scheer........................................... Dec-98 31,800 $ 3.75
Joe Seiwert III....................................... Dec-98 20,000 $ 3.75
David Solana.......................................... Dec-98 26,667 $ 3.75
Miartin Sousa......................................... Dec-98 20,000 $ 3.75
Keith Stone........................................... Dec-98 27,000 $ 3.75
Donald Strate......................................... Dec-98 27,000 $ 3.75
---------
Total....................................... 9,075,833
</TABLE>
- ---------------
(1) Conversion of a promissory note issued by the Registrant in May 1998.
(2) Conversion of a promissory note issued by the Registrant in July 1998.
In April 1999 the Registrant issued (a) 600,000 shares of its common stock
and warrants to purchase 1,000,000 additional shares to Telemundo Network Group
LLC in exchange for, among other things, $5 million of prepaid advertising
credit on the Telemundo Network, (b) 50,000 shares of its common stock to
Garcia/LKS in exchange for $500,000 of prepaid marketing and advertising
services and (c) 50,000 shares of its common stock to Gary A. Trujillo, our
President, as compensation under his employment agreement.
With respect to the sales made, the Registrant relied on Section 4(2) and
Regulation D Rule 506 of the Securities Act of 1933, as amended (the "Securities
Act"). No advertising or general solicitation was employed in offering the
securities. The securities were offered to a limited number of persons all of
whom were business associates of the Registrant or its executive officers and
directors, and the transfer thereof was appropriately restricted by the
Registrant. All persons were accredited investors as that term is defined in
Rule 501 of Regulation D under the Securities Act and were capable of analyzing
the merits and risks of their investment and who acknowledged in writing that
they were acquiring the securities for investment and not with a view toward
distribution or resale and understood the speculative nature of their
investment.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
----------- -----
<C> <S>
1.01 -- Form of Underwriting Agreement
1.02 -- Form of Representative's Warrant
3.01 -- Articles of Incorporation of the Registrant, as
amended(1)
3.02 -- Bylaws of the Registrant(1)
3.03 -- Amended and Restated Bylaws of the Registrant
5.01 -- Opinion of Kummer Kaempfer Bonner & Renshaw, regarding
legality of the common stock and warrants (includes
Consent)
10.01 -- Agreement with Inktomi Corporation(1)
10.02 -- Agreement with UPI(1)
10.03 -- Agreement with Reuters NewMedia, Inc., as amended(1)
10.04 -- Office Lease (Arizona)
10.05 -- Employment Agreement with Mr. Peterson, as amended(1)
10.06 -- Employment Agreement with Mr. Silberman, as amended(1)
10.07 -- Employment Agreement with Mr. Galan(1)
</TABLE>
II-2
<PAGE> 60
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
----------- -----
<C> <S>
10.08 -- Employment Agreement with Mr. Ross(1)
10.09 -- Employment Agreement with Mr. Offenbecher(1)
10.10 -- Employment Agreement with Mr. Roldan(1)
10.11 -- Employment Agreement with Mr. Garcia (Luis)(1)
10.12 -- Agreement with WeatherLabs, Inc.(1)
10.13 -- Agreement with Heftel Broadcasting Company(1)
10.14 -- Agreement with GTE Internetworking, Inc.(1)
10.15 -- Agreement with Exodus Communications, Inc.(1)
10.16 -- Agreement with Telemundo Network Group, Inc.(1)
10.17 -- Agreement with 24/7 Media, Inc.(1)
10.18 -- Employment Agreement with Mr. Hubert, as amended(1)
10.19 -- Office Lease (Nevada)(1)
10.20 -- 1998 Stock Option Plan, as amended and forms of Option
Agreements(1)
10.21 -- Monolith Promissory Notes(1)
10.22 -- Agreement with Garcia/LKS
10.23 -- Employment Agreement with Mr. Taylor(1)
10.24 -- Form of Voting Trust Agreement
10.25 -- Jeffrey S. Peterson Loan Agreement
10.26 -- Agreement with Telemundo Network Group LLC
10.27 -- Telemundo Warrant
10.28 -- Agreement with Arizona Diamondbacks
10.29 -- Agreement with Miami Herald Online
10.30 -- Amended and Restated Employment Agreement with Mr.
Peterson
10.31 -- Agreement with Fox Sports World Espanol Agreement
10.32 -- Amendment of Employment Agreement with Mr. Galan
10.33 -- Amended and Restated 1998 Stock Option Plan
10.34 -- Employment Agreement with Mr. Trujillo
16.01 -- Letter from BDO Seidman, LLP(1)
23.05 -- Consent of Kummer Kaempfer Bonner & Renshaw (Included in
Exhibit 5.01, above)
23.06 -- Consent of Ehrhardt Keefe Steiner & Hottman, PC(1)
23.07 -- Consent of Ehrhardt Keefe Steiner & Hottman, PC
</TABLE>
- ---------------
(1) Previously filed.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes:
(a) That insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant, 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
II-3
<PAGE> 61
question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(b) That subject to the terms and conditions of Section 13(a) of the
Securities Exchange Act of 1934, it will file with the Securities and
Exchange Commission such supplementary and periodic information, documents
and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority
conferred in that section.
(c) That any post-effective amendment filed will comply with the
applicable forms, rules and regulations of the Commission in effect at the
time such post-effective amendment is filed.
(d) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(e) 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 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.
(f) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(g) To provide to the Underwriter at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriter to permit prompt delivery to each
purchaser.
II-4
<PAGE> 62
SIGNATURES
Pursuant to the requirements of the Securities Act, as amended, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Phoenix,
state of Arizona, on April 28, 1999.
quepasa.com, inc.
By:
----------------------------------
Jeffrey S. Peterson
Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally, Jeffrey S.
Peterson and Michael A. Hubert, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
conforming all that said attorneys-in-fact and agents, or any of them or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act, as amended, this
registration statement has been signed below by the following persons on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Chief Executive Officer and April 28, 1999
- ----------------------------------------------------- Chairman of the Board of
Jeffrey S. Peterson Directors
President and Director April 28, 1999
- -----------------------------------------------------
Gary A. Trujillo
Chief Operating Officer and April 28, 1999
- ----------------------------------------------------- Director
Michael A. Hubert
Chief Technical Officer and April 28, 1999
- ----------------------------------------------------- Director
Bryan L. Ross
Chief Financial Officer (Principal April 28, 1999
- ----------------------------------------------------- Accounting Officer)
Juan C. Galan
</TABLE>
II-5
<PAGE> 63
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director , 1999
- -----------------------------------------------------
Lionel Sosa
Director , 1999
- -----------------------------------------------------
Gregory J. Kolanek
Director , 1999
- -----------------------------------------------------
Jerry J. Colangelo
Director , 1999
- -----------------------------------------------------
Alan J. Sokol
Director , 1999
- -----------------------------------------------------
Edwin C. Lynch
</TABLE>
II-6
<PAGE> 64
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
----------- -----
<C> <S>
1.01 -- Form of Underwriting Agreement
1.02 -- Form of Representative's Warrant
3.01 -- Articles of Incorporation of the Registrant, as
amended(1)
3.02 -- Bylaws of the Registrant(1)
3.03 -- Amended and Restated Bylaws of the Registrant
5.01 -- Opinion of Kummer, Kaempfer, Bonner & Renshaw, regarding
legality of the common stock (includes Consent)
10.01 -- Agreement with Inktomi Corporation(1)
10.02 -- Agreement with UPI(1)
10.03 -- Agreement with Reuters NewMedia, Inc., as amended(1)
10.04 -- Office Lease (Arizona)
10.05 -- Employment Agreement with Mr. Peterson, as amended(1)
10.06 -- Employment Agreement with Mr. Silberman, as amended(1)
10.07 -- Employment Agreement with Mr. Galan(1)
10.08 -- Employment Agreement with Mr. Ross(1)
10.09 -- Employment Agreement with Mr. Offenbecher(1)
10.10 -- Employment Agreement with Mr. Roldan(1)
10.11 -- Employment Agreement with Mr. Garcia (Luis)(1)
10.12 -- Agreement with WeatherLabs, Inc.(1)
10.13 -- Agreement with Heftel Broadcasting Company(1)
10.14 -- Agreement with GTE Internetworking, Inc.(1)
10.15 -- Agreement with Exodus Communications, Inc.(1)
10.16 -- Agreement with Telemundo Network Group, Inc.(1)
10.17 -- Agreement with 24/7 Media, Inc.(1)
10.18 -- Employment Agreement with Mr. Hubert, as amended(1)
10.19 -- Office Lease (Nevada)(1)
10.20 -- 1998 Stock Option Plan, as amended and forms of Option
Agreements(1)
10.21 -- Monolith Promissory Notes(1)
10.22 -- Agreement with Garcia/LKS
10.23 -- Employment Agreement with Mr. Taylor(1)
10.24 -- Form of Voting Trust Agreement
10.25 -- Jeffrey S. Peterson Loan Agreement(1)
10.26 -- Agreement with Telemundo Network Group LLC
10.27 -- Telemundo Warrant
10.28 -- Agreement with Arizona Diamondbacks
10.29 -- Agreement with Miami Herald Online
10.30 -- Amended and Restated Employment Agreement with Mr.
Peterson
10.31 -- Agreement with Fox Sports World Espanol Agreement
10.32 -- Amendment of Employment Agreement with Mr. Galan
10.33 -- Amended and Restated 1998 Stock Option Plan
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
----------- -----
<C> <S>
10.34 -- Employment Agreement with Mr. Trujillo
16.01 -- Letter from BDO Seidman, LLP(1)
23.05 -- Consent of Kummer, Kaempfer, Bonner & Renshaw (Included
in Exhibit 5.01, above)
23.06 -- Consent of Ehrhardt Keefe Steiner & Hottman, PC(1)
23.07 -- Consent of Ehrhardt Keefe Steiner & Hottman, PC
</TABLE>
- ---------------
(1) Previously filed.
<PAGE> 1
DRAFT #2
4/21/99
QUEPASA.COM, INC.
__________ SHARES
COMMON STOCK
UNDERWRITING AGREEMENT
[DATE], 1999
CRUTTENDEN ROTH INCORPORATED,
as Representative of the several Underwriters
The undersigned, QUEPASA.COM, INC., a Nevada corporation (the
"Company") hereby addresses you as the representative (the "Representative") of
each of the persons, firms and corporations listed on Schedule I hereto
(collectively, the "Underwriters") and hereby confirm its agreement with the
several Underwriters as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and
sell to the Underwriters _____________ shares of its Common Stock (the "Firm
Shares"). Solely for the purpose of covering over-allotments in the sale of the
Firm Shares, the Company further proposes to grant the right to the Underwriters
to purchase up to an additional ___________ shares of its Common Stock (the
"Option Shares"), as provided in Section 3 of this Agreement. The Firm Shares
and the Option Shares are herein sometimes referred to as the Shares and are
more fully described in the Prospectus hereinafter defined.
2. PURCHASE, SALE AND DELIVERY OF FIRM SHARES. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Underwriters the Firm Shares, and each such Underwriter agrees, severally and
not jointly, (i) to purchase from the Company, at a purchase price of per share,
the number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto and (ii) to purchase from the Company any additional number of
Option Shares which such Underwriter may become obligated to purchase pursuant
to Section 3 hereof.
The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as you may request upon at least forty-eight hours' prior notice to the
Company shall be delivered by or on behalf of the Company to
<PAGE> 2
you, through the facilities of the Depository Trust Company ("DTC"), for the
account of such Underwriter, against payment by or on behalf of such Underwriter
of the purchase price therefor by wire transfer of Clearinghouse (next-day)
funds to the account specified by the Company to you at least forty-eight hours
in advance. The Company will cause the certificates representing the Shares to
be made available for checking and packaging at least twenty-four hours prior to
the Time of Delivery (as defined below) with respect thereto at the office of
DTC or its designated custodian (the "Designated Office"). The time and date of
such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m.,
Phoenix, Arizona time, on , 1999 or such other time and date as you and the
Company may agree upon in writing, and, with respect to the Optional Shares,
9:30 a.m., Phoenix, Arizona time, on the ate specified by you in the written
notice given by you of the Underwriters' election to purchase such Optional
shares, or such other time and date as you and the Company may agree upon in
writing. Such time and date for delivery of the Firm Shares is herein called the
"First Time of Delivery," such time and date for delivery of the Optional
Shares, if not the First Time of Delivery, is herein called the "Second Time of
Delivery," and each such time and date for delivery is herein called a "Time of
Delivery."
The documents to be delivered at each Time of Delivery by or
on behalf of the parties hereto pursuant to Section 6 hereof, including the
cross receipt for the Shares will be delivered at the offices of Bryan Cave LLP,
Two North Central Avenue, Suite 2200, Phoenix, Arizona 85004 (the "Closing
Location"), and the Shares will be delivered at the Designated Office, all at
such Time of Delivery. A meeting will be held at the Closing Location at 3:00
p.m., Phoenix, Arizona time, on the Business Day next preceding such Time of
Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 2, "Business Day" shall mean each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close.
3. PURCHASE, SALE AND DELIVERY OF THE OPTION SHARES. The
Company hereby grants an option to the Underwriters to purchase from it up to
______________ Option Shares on the same terms and conditions as the Firm
Shares; provided, however, that such option may be exercised only for the
purpose of covering any over-allotments which may be made by the Underwriters in
the sale of the Firm Shares. No Option Shares shall be sold or delivered unless
all of the Firm Shares previously have been, or simultaneously are, sold and
delivered.
The option is exercisable on behalf of the several
Underwriters by you, as Representative, at any time, and from time to time,
before the expiration of 45 days from the date of this Agreement, for the
purchase of all or part of the Option Shares covered thereby, by notice given by
you to the Company in the manner provided in Section 13 hereof (the "Option
Notice"), setting forth the number of Option Shares as to which the Underwriters
are exercising the option, and the date of delivery of said Option Shares, which
date shall not be less than two business days after such Option Notice unless
otherwise agreed to by the parties. You may terminate the option at any time, as
to any unexercised portion thereof, by giving written notice to the Company to
such effect.
2
<PAGE> 3
You, as Representative, shall make such allocation of the
Option Shares among the Underwriters as may be required to eliminate purchases
of fractional Shares.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
(a) The Company represents and warrants to and agrees with
each Underwriter that:
(i) The Company meets the requirements for use of Form
S-1 under the Securities Act of 1933, as amended (the "Act").
A registration statement on Form S-1 (Registration No.
________________) in respect to the Shares, including a
preliminary prospectus, and such amendments to such
registration statement as may have been required to the date
of this Agreement, has been prepared by the Company pursuant
to and in conformity with the requirements of the Act, and the
rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission")
promulgated thereunder and has been filed with the Commission
under the Act. Copies of such registration statement,
including any amendments thereto, each related preliminary
prospectus (meeting the requirements of Rule 430 or 430A of
the Rules and Regulations) contained therein, the exhibits,
financial statements and schedules have heretofore been
delivered by the Company to you. If such registration
statement has not become effective under the Act, a further
amendment to such registration statement, including a form of
final prospectus, necessary to permit such registration
statement to become effective will be filed promptly by the
Company with the Commission. If such registration statement
has become effective under the Act, a final prospectus
containing information permitted to be omitted at the time of
effectiveness by Rule 430A of the Rules and Regulations will
be filed promptly by the Company with the Commission in
accordance with Rule 424(b) of the Rules and Regulations. The
term Registration Statement as used herein means the
registration statement as amended at the time it becomes or
became effective under the Act (the "Effective Date") and, in
the event any post-effective amendment thereto becomes
effective prior to the First Time of Delivery, the
registration statement as so amended, including financial
statements and all exhibits and all documents incorporated by
reference therein and, if applicable, the information deemed
to be included by Rule 430A of the Rules and Regulations. The
term Prospectus as used herein means the prospectus as first
filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations or, if no such filing is required, the form of
final prospectus included in the Registration Statement at the
Effective Date, except that if the prospectus provided to the
Underwriters by the Company for use in connection with the
offering of Shares differs from the Prospectus on file with
the Commission at the time the Registration Statement becomes
effective (whether or not the Company is required to file with
the Commission such revised Prospectus pursuant to Rule 424(b)
of the Rules and Regulations), the term Prospectus shall refer
to such revised Prospectus from and after the time it is first
provided to the Underwriters for such use. The term
Preliminary Prospectus as used herein shall mean a preliminary
3
<PAGE> 4
prospectus as contemplated by Rule 430 or 430A of the Rules
and Regulations included at any time in the Registration
Statement. All references in this Agreement to financial
statements and schedules and other information which is
contained, included, stated or described in the Registration
Statement, Preliminary Prospectus or the Prospectus shall be
deemed to mean and include all such financial statements and
schedules and other information which is incorporated by
reference in, or deemed to be a part of, the Registration
Statement, Preliminary Prospectus or Prospectus, as the case
may be.
(ii) The Commission has not issued, and is not to the
best knowledge of the Company threatening to issue, an order
preventing or suspending the use of any Preliminary Prospectus
or the Prospectus nor instituted proceedings for that purpose.
Each Preliminary Prospectus at its date of issue, the
Registration Statement and the Prospectus and any amendments
or supplements thereto contains or will contain, as the case
may be, all statements which are required to be stated therein
by, and in all material respects conforms or will conform, as
the case may be, to the requirements of, the Act and the Rules
and Regulations. Neither the Registration Statement nor any
amendment thereto, as of the applicable effective date,
contains or will contain, as the case may be, any untrue
statement of a material fact or omits or will omit to state
any material fact required to be stated therein or necessary
to make the statements therein not misleading, and neither the
Prospectus nor any supplement thereto contains or will
contain, as the case may be, any untrue statement of a
material fact or omits or will omit to state any material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that the
Company makes no representation, warranty or agreement as to
information contained in or omitted from the Registration
Statement, the Preliminary Prospectus or the Prospectus, or
any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company
by or on behalf of the Underwriters specifically for use in
the preparation of: (i) the statements therein regarding
over-allotment, stabilization or passive market making by the
Underwriters, or (ii) the section thereof under the caption
Underwriting.
(iii) The documents, if any, incorporated by reference
in the Prospectus, at the time they were filed with the
Commission, complied in all material respects with the
requirements of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the rules and regulations
adopted by the Commission thereunder (the "1934 Act Rules and
Regulations"), and, when read together and with the other
information contained in the Prospectus, at the time the
Registration Statement became effective and at the First Time
of Delivery, did not or will not, as the case may be, contain
an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading.
4
<PAGE> 5
(iv) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Nevada, with full corporate power and
authority to own, lease and operate its properties and conduct
its business as described in the Registration Statement; the
Company is duly qualified to transact business as a foreign
corporation in good standing in each state or other
jurisdiction in which its ownership or leasing of property or
conduct of business requires such qualification, except where
the failure to be so qualified would not, individually or in
the aggregate, have a material adverse effect on the ability
of the Company to conduct its business as described in the
Registration Statement. The Company does not own or control,
directly or indirectly, any corporation, association or other
entity. The Company has no subsidiaries (as defined in Rule
405 of the Rules and Regulations).
(v) The Company has full right and corporate power and
authority to enter into this Agreement and to perform the
transactions contemplated hereby. The filing of the
Registration Statement and the execution and delivery of this
Agreement have been duly authorized by the Board of Directors
of the Company. This Agreement constitutes a valid and legally
binding obligation of the Company enforceable in accordance
with its terms (except to the extent the enforceability of the
indemnification, exculpation and contribution provisions of
Section 7 hereof may be limited by applicable law, and except
as enforceability of this Agreement may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and other laws affecting creditors' rights
generally and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in
equity or at law). The issue and sale of the Shares by the
Company and the performance of this Agreement by the Company
and the consummation of the transactions herein contemplated
will not result in a violation of the Company's articles of
incorporation or bylaws or result in a breach or violation of
any of the terms and provisions of, or constitute a default
under, or result in the creation or imposition of any lien,
charge or encumbrance upon any properties or assets of the
Company under, any statute which is applicable to it, or under
any indenture, mortgage, deed of trust, note, loan agreement,
sale and leaseback arrangement or other agreement or
instrument to which the Company is a party or by which they
are bound or to which any of the properties or assets of the
Company is subject, or any order, rule or regulation
applicable to the Company of any court or public, regulatory
or governmental agency or body having jurisdiction over the
Company or its properties, other than any such breach,
violation, default, lien, charge or encumbrance, as the case
may be, which does not individually or in the aggregate
materially adversely affect the business of the Company. No
consent, approval, authorization, order, registration or
qualification of or with any court or public, regulatory or
governmental agency or body is required for the consummation
of the transactions herein contemplated, except such as may be
required by the National Association of Securities Dealers,
Inc. (the "NASD") or under the Act or the Rules and
Regulations or any state securities laws.
5
<PAGE> 6
(vi) Except as described in the Prospectus, the Company
has not sustained since the date of the latest audited
financial statements included in the Prospectus any material
loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action,
order or decree. Except as contemplated in the Prospectus,
subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the
Company has not incurred any material liabilities or material
obligations, direct or contingent, other than in the ordinary
course of business, or entered into any material transactions
not in the ordinary course of business, and there has not been
any material change in the capital stock or long-term debt of
the Company or any material adverse change in the financial
condition, net worth, business, management, or results of
operations of the Company. The Company has filed all necessary
federal, state and foreign income and franchise tax returns
and paid all taxes shown as due thereon, except as are being
contested by the Company in good faith. All tax liabilities,
including those being contested by the Company, are adequately
provided for on the books of the Company. The Company has made
all necessary payroll tax payments and is current and
up-to-date as of the date of this Agreement to the extent
necessary to avoid a material adverse effect on the business
of the Company. The Company has no knowledge of any tax
proceeding or action pending or threatened against the
Company.
(vii) Except as described in the Prospectus, there is
no action, suit, arbitration, investigation or governmental
proceeding, domestic or foreign, pending or, to the best of
the Company's knowledge, threatened or involving the
properties or business of the Company which challenges the
validity of this Agreement or any action taken or required to
be taken by the Company pursuant to or in connection with this
Agreement or which could reasonably be expected to materially
and adversely affect the financial condition, operation,
properties, business or results of operations of the Company.
The Company is not a party and is not subject to the
provisions of any injunction, judgment, decree or order of any
court or any public, regulatory or governmental agency or
body. There are no contracts or documents to which the Company
is a party which would be required to be filed as exhibits to
the Registration Statement by the Act or by the Rules and
Regulations which have not been filed as exhibits to the
Registration Statement; the contracts and documents to which
the Company is a party which are so described in the
Registration Statement are in full force and effect on the
date hereof; and the Company does not have notice that any
other party is in breach of or default under any of such
contracts to a material extent.
(viii) The Company has duly and validly authorized
capital stock as described in the Prospectus. Except as
disclosed in or contemplated by the Prospectus and the
financial statements of the Company and the related notes
thereto included in the Prospectus, the Company does not have
outstanding any options to purchase or any preemptive rights
or other rights to subscribe or to
6
<PAGE> 7
purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its
capital stock or any such options, rights, convertible
securities or obligations. The description of outstanding
warrants to purchase Common Stock and the Company's stock
option plans and the options or other rights granted and
exercised thereunder set forth in the Prospectus accurately
presents in all material respects the information required to
be shown with respect to such warrants, plans, options and
rights. All outstanding shares of Common Stock of the Company
conform, and the Shares when issued will conform, in all
material respects to the description thereof in the
Registration Statement and the Prospectus and have been, or,
when issued and paid for will be, duly authorized, validly
issued, fully paid and nonassessable, issued in material
compliance with all applicable Federal and state securities
laws and not issued in violation of or subject to any
preemptive rights or other rights to purchase or subscribe for
securities of the Company. No shareholder of the Company has
any right to require the Company to register the sales of any
shares or other securities owned by such shareholder under the
Act in the public offering contemplated by this Agreement.
Upon delivery of the Shares to be sold by the Company and full
payment therefor pursuant to this Agreement, good and valid
title to such Shares, free and clear of all liens,
encumbrances, security interests, restrictions on transfer,
equities or claims whatsoever, will pass to the Underwriters.
(ix) The Company owns no real property and the Company
has good and marketable title to personal property owned by
it, subject to no lien, charge, defect or encumbrances of any
kind except such as are described in the Prospectus, such as
not materially interfere with the use made and proposed to be
made of such property by the Company. Except as disclosed in
the Prospectus, the Company owns or leases all such assets as
are materially necessary to its operations as now conducted.
(x) Ehrhardt Keefe Steiner & Hottman PC, the accounting
firm which has certified the financial statements filed with
the Commission as a part of the Registration Statement, is an
independent public accounting firm within the meaning of the
Act and the Rules and Regulations.
(xi) The financial statements and schedules of the
Company, including the notes thereto, filed with and as a part
of the Registration Statement, are accurate in all material
respects and present fairly the financial position of the
Company as of the respective dates thereof and the results of
operations and statements of cash flow for the respective
periods covered thereby, all in conformity with generally
accepted accounting principles applied on a consistent basis
throughout the periods involved except as otherwise disclosed
in the Prospectus. The selected financial data included in the
Registration Statement and Prospectus present fairly the
information shown therein and have been compiled on a basis
consistent with that of the audited financial statements
included in the Registration Statement and Prospectus.
7
<PAGE> 8
(xii) The Company is not in default with respect to any
contract or agreement to which it is a party; provided that
this representation shall not apply to defaults which in the
aggregate could not materially adversely affect the financial
condition or the business of the Company.
(xiii) The Company is not in breach or violation of any
provision of its articles of incorporation or bylaws or any
laws, ordinances or governmental rules or regulations to which
it is subject, and the Company has not failed to obtain,
maintain or comply with the terms of any of the material
licenses, certificates, permits, franchises, easements,
consents, or other governmental authorizations necessary to
the ownership, leasing and operation of its properties or to
the conduct of its business, which breach, violation or
failure would materially adversely affect the business,
operations, properties, profits or financial condition of the
Company.
(xiv) Except as described in the Prospectus, the
Company has sufficient interests in all patents, trademarks,
service marks, trade names, domain names, copyrights, trade
secrets, information, proprietary rights and processes
("Intellectual Property") necessary for the conduct of the
business now conducted by it as described in the Prospectus,
and, to the Company's knowledge necessary in connection with
the products and services under development, without, to the
Company's knowledge, any infringement of or the interests of
others, and has taken all reasonable steps necessary to secure
interests in such Intellectual Property from its contractors;
except as set forth in the Prospectus, the Company is not
aware of outstanding options, licenses or agreements of any
kind relating to the Intellectual Property of the Company
which are required to be set forth in the Prospectus, and,
except as set forth in the Prospectus, the Company is not a
party to or bound by any options, licenses or agreements with
respect to the Intellectual Property of any other person or
entity which are required to be set forth in the Prospectus;
none of the technology employed by the Company has been
obtained or is being used by the Company in violation of any
contractual fiduciary obligation binding on the Company or to
the knowledge of the Company any of its directors, officers or
employees or otherwise in violation of the rights of any
persons; except as disclosed in the Prospectus, the Company
has not received any written or, to the Company's knowledge,
oral communications alleging that the Company has violated,
infringed or conflicted with, or by conducting its business as
set forth in the Prospectus, would violate, infringe or
conflict with any of the Intellectual Property of any other
person or entity other than any such violations, infringements
or conflicts which, individually or in the aggregate, have not
had and are not reasonably likely to result in a material
adverse effect on the Company's conduct of its business as
described in the Prospectus or on its result of operations or
financial condition; and the Company has taken and will
maintain reasonable measures to prevent the unauthorized
dissemination or publication of its confidential information
and, to the extent contractually required to do so, the
confidential information of third parties in their possession.
8
<PAGE> 9
(xv) The Company maintains insurance of the types and
in the amounts generally deemed adequate for its business,
including, but not limited to, general liability insurance,
business interruption insurance and insurance covering
personal property owned or leased by the Company against
theft, damage, destruction, acts of vandalism and all other
risks customarily insured against, all of which insurance is
in full force and effect.
(xvi) The Company has not taken and will not take,
directly or indirectly, any action designed to or which might
reasonably be expected to cause or result in stabilization or
manipulation of the price of the Company's Common Stock, and
the Company is not aware of any such action taken or to be
taken by any director, officer, employee, consultant, or
shareholder of the Company.
(xvii) The Company is not and, after giving effect to
the offering and sale of the Shares, will not be an
"investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(xviii) The Common Stock of the Company is registered
pursuant to Section 12(g) of the Securities Exchange Act of
1934, as amended, and is approved for trading on the Nasdaq
Stock Market National Market (the "NNM") under the symbol
"PASA." The Company has taken no action that was designed to
terminate, or that is likely to have the affect of
terminating, trading of its Common Stock on the NNM, nor has
the Company received any notification that the Commission or
the Nasdaq Stock Market is contemplating terminating such
trading.
(xix) Neither the Company nor any of its affiliates
does business with the government of Cuba or with any person
or affiliate located in Cuba, within the meaning of Section
517.075 of the Florida Statutes.
(xx) Except as disclosed in the Registration Statement
and the Prospectus, no officer, director or beneficial of five
percent or more of the Company's capital stock is, directly or
indirectly, associated with a NASD member broker-dealer and
the Company has no management or financial consulting
agreement with any third party.
(xxi) No person is entitled, directly or indirectly, to
compensation from the Company for services as a finder in
connection with the transactions contemplated by this
Agreement.
(xxii) The Company has reviewed its operations and that
of any third parties with which the Company has a material
relationship to evaluate the extent to which the business or
operations of the Company or any of its subsidiaries will be
affected by Year 2000 issues. As a result of such review, the
Company represents and warrants that the disclosure in the
Registration Statement relating to Year 2000 issues is
accurate and complies in all material respects with the rules
and regulations of the Act. "Year 2000 issues" as used herein
means Year 2000 issues
9
<PAGE> 10
described in or contemplated by the Commission's
Interpretation: Disclosure of Year 2000 Issues and
Consequences by Public Companies, Investment Advisers,
Investment Companies, and Municipal Securities Issuers
(Release No. 33-7558).
(b) Any certificate signed by any officer of the Company
and delivered to you or to counsel for the Underwriters shall be deemed
a representation and warranty by the Company to each Underwriter as to
the matters covered thereby.
5. ADDITIONAL COVENANTS. The Company covenants and agrees with
the several Underwriters that:
(a) If the Registration Statement is not effective under
the Act, the Company will use its best efforts to cause the
Registration Statement to become effective as promptly as possible, and
it will notify you, promptly after it shall receive notice thereof, of
the time when the Registration Statement has become effective. The
Company (i) will prepare and timely file with the Commission under Rule
424(b) of the Rules and Regulations, if required, a Prospectus
containing information previously omitted at the time of effectiveness
of the Registration Statement in reliance on Rule 430A of the Rules and
Regulations or otherwise; (ii) will not file any amendment to the
Registration Statement or supplement to the Prospectus of which the
Underwriters shall not previously have been advised and furnished with
a copy or to which the Underwriters shall have reasonably objected in
writing or which is not in compliance in all material respects with the
Rules and Regulations; and (iii) will promptly notify you after it
shall have received notice thereof of the time when any amendment to
the Registration Statement becomes effective or when any supplement to
the Prospectus has been filed.
(b) The Company will advise the Underwriters promptly,
after it has received notice or obtained knowledge thereof, of any
comments of the Commission with respect to the Registration Statement,
of any request of the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional
information, or of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the use
of the Prospectus or of the institution or threat of any proceedings
for that purpose, and the Company will use its best efforts to prevent
the issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof,
if issued.
(c) The Company will cooperate with the Underwriters and
their counsel in endeavoring to qualify the Shares for sale under (or
obtain exemptions from the application of) the securities laws of such
jurisdictions as they may have designated and will make such
applications, file such documents, and furnish such information as may
be reasonably necessary so as to permit the continuance of sales and
dealings therein for so long as may be necessary to complete the
distribution of the Shares, provided the Company shall not be required
to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction where it is not now so
qualified. The Company will advise you promptly of the suspension of
the qualification or registration of (or any such
10
<PAGE> 11
exemption relating to) the Shares for offering, sale or trading in any
jurisdiction or any initiation or threat of any proceeding for any such
purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company, with your
cooperation, will use its best efforts to obtain the withdrawal
thereof. (d) The Company will deliver to, or upon the order of, the
Underwriters, without charge from time to time, as many copies of any
Preliminary Prospectus (including all documents incorporated by
reference therein) as they may reasonably request. The Company will
deliver to, or upon the order of, the Underwriters without charge as
many copies of the Prospectus (including all documents incorporated by
reference therein), or as it thereafter may be amended or supplemented,
as they may from time to time reasonably request. The Company consents
to the use of such Prospectus by the Underwriters and by all dealers to
whom the Shares may be sold, in connection with the offering or sale of
the Shares and for such period of time thereafter as the Prospectus is
required by law to be delivered in connection therewith. The Company
will deliver to you at or before the First Time of Delivery two signed
copies of the Registration Statement and all amendments thereto,
including all exhibits filed therewith or incorporated by reference
therein, and all documents incorporated by reference in the Prospectus,
and will deliver to the Underwriters such number of copies of the
Registration Statement, without exhibits, and of all amendments
thereto, as they may reasonably request.
(e) If, during the period in which a prospectus is required
by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which, in the reasonable judgment of the Company
or in your reasonable judgment or in the written opinion of counsel for
the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in light of the
circumstances existing at the time the Prospectus is delivered to a
purchaser, not misleading, or, if it is necessary at any time to amend
or supplement the Prospectus to comply with any law, the Company
promptly will prepare and file with the Commission an appropriate
amendment to the Registration Statement or supplement to the Prospectus
so that the Prospectus as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or
so that the Prospectus will comply with applicable law.
(f) The Company will make generally available to its
shareholders, as soon as it is practicable to do so, but in any event
not later than 18 months after the effective date of the Registration
Statement, an earnings statement in reasonable detail, covering a
period of at least 12 consecutive months beginning after the effective
date of the Registration Statement, which earnings statement shall
satisfy the requirements of Section 11(a) of the Act and Rule 158 of
the Rules and Regulations and will advise the Underwriters in writing
when such statement has been so made available.
(g) The Company will, for a period of five years from the
Effective Date, deliver to the Underwriters at their principal
executive offices a reasonable number of copies of annual reports,
quarterly reports, current reports and copies of all other documents,
reports and information furnished by the Company to its shareholders or
filed
11
<PAGE> 12
with any securities exchange or national securities market pursuant to
the requirements of such exchange or market or with the Commission
pursuant to the Act or the 1934 Act. Any report, document or other
information required to be furnished under this subsection (g) shall be
furnished as soon as practicable after such report, document or
information becomes available.
(h) The Company will apply the proceeds from the sale of
the Shares as set forth in the description under the caption "Use of
Proceeds" in the Prospectus.
(i) The Company will supply you with copies of all
correspondence to and from, and all documents issued to and by, the
Commission in connection with the registration of the Shares under the
Act.
(j) Prior to each Time of Delivery, the Company will
furnish to you, as soon as they have been prepared, copies of any
unaudited interim consolidated financial statements of the Company for
any periods subsequent to the periods covered by the financial
statements appearing in the Registration Statement and the Prospectus.
(k) Prior to the 30th day after the last Time of Delivery,
the Company will not issue any press releases or other communications
directly or indirectly and will hold no press conferences with respect
to the Company, the financial condition, results of operations,
business, properties, assets or liabilities of the Company, or the
offering of the Shares, without your prior written consent except as
otherwise required by law.
(l) The Company will use its best efforts to obtain
approval for, and maintain the listing of the Shares on, the NNM.
(m) For a period of 180 days from the Effective Date, the
Company will not, and will cause its directors, officers and
pre-Effective Date securityholders (including, without limitation,
holders of options, warrants or other rights to acquire securities of
the Company) to not (in each case without the Representative's prior
written consent), (i) offer, pledge, sell, hypothecate, contract to
sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, lend
or otherwise transfer or dispose of, directly or indirectly, any shares
of Common Stock or (ii) enter into any hedge, swap or other arrangement
that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is be settled by
delivery of Common Stock or such other securities, in cash or
otherwise, without your prior written consent, except for the Shares
sold hereunder and except for sales by the Company of shares of Common
Stock to the Company's employees pursuant to the exercise of options
under the Company's stock option plan as described in the Prospectus.
The foregoing sentence shall not apply to the sale of any Shares to the
Underwriters pursuant to this Agreement.
(n) The Company will file with the Commission such
information on Form 10-Q or Form 10-K as may be required by Rule 463
under the Act.
12
<PAGE> 13
(o) The Company will maintain and keep accurate books and
records reflecting its assets and will maintain internal accounting
controls which provide reasonable assurance that (i) transactions are
executed in accordance with management's authorization, (ii)
transactions are recorded as necessary to permit the preparation of the
Company's consolidated financial statements and to maintain
accountability for the assets of the Company, (iii) access to the
assets of the Company is permitted only in accordance with management's
authorization, and (iv) the recorded accounts of the assets of the
Company are compared with existing assets at reasonable intervals.
(p) Prior to the Effective Date, the Company shall have
issued to the transfer agent for the Common Stock (the "Transfer
Agent") a "stop transfer" instruction with respect to all the shares of
Common Stock issued and outstanding immediately prior to the Effective
Date (the "Pre-offering Shares"), instructing the Transfer Agent to not
honor any requests to transfer any Pre-offering Shares prior to the
expiration of the 180-day period described in Section 5(m) of this
Agreement without the Representative's prior written consent, and such
stop transfer instruction shall be in full force and effect at each
Time of Delivery.
(q) The Company shall have furnished to the Representative,
at least five days before the Effective Date, a true, correct and
complete copy of the stock transfer records of the Company from the
date of the Company's inception, and the Company will make available
its stock transfer records to the Representative upon the
Representative's request during the 12-month period following the
Effective Date.
(r) The Company will not, without the prior written consent
of the Representative, directly or indirectly grant any options,
warrants or rights to purchase or acquire Common Stock for a period of
[120] days commencing on the Effective Date or permit to be outstanding
during such period any such options, warrants or rights, other than (i)
an aggregate of up to _________ options and warrants; (ii) warrants or
other rights which are outstanding on the Effective Date and describe
din the Prospectus; and (iii) the Representative's Warrants. The
Company will not, without the prior written consent of the
Representative, grant any options, warrants or rights to purchase or
acquire Common Stock for a price below the market price for the Common
Stock on the date of grant, for a period of one year commencing on the
Effective Date. The Company will not, without the prior written consent
of the Underwriter, file a Registration Statement on Form S-8 during
the 180 day period following the Effective Date.
(s) The Company will not prepay any indebtedness owed to
The Monolith Limited Partnership or Jeffrey S. Peterson, prior to the
one year anniversary date of the first Time of Delivery, and will not
amend or otherwise modify the terms of any such indebtedness during
such period, without the prior written consent of the Representative.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase and pay for the Shares being sold
hereunder by the Company to the Underwriters shall be subject to the accuracy in
all material respects, as of the date hereof and as of
13
<PAGE> 14
each Time of Delivery of the representations and warranties of the Company
contained herein, to the performance in all material respects by the Company of
its covenants and obligations hereunder, and to the additional conditions set
forth in this Section 6.
(a) If the Company and the Underwriters have determined not
to proceed pursuant to Rule 430A, the Registration Statement shall have
become effective not later than 10:00 a.m., Phoenix, Arizona, on the
day following the date of this Agreement or such later date as may be
consented to in writing by you. If the Company and the Underwriters
have determined to proceed pursuant to Rule 430A, all filings required
by Rule 424 and Rule 430A of the Rules and Regulations shall have been
made. No stop order suspending the effectiveness of the Registration
Statement, as amended from time to time, shall have been issued and no
proceeding for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened or contemplated
by the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the
reasonable satisfaction of the Underwriters.
(b) No person or entity shall have disclosed in writing to
the Company or the Underwriters on or prior to the relevant Time of
Delivery, that the Registration Statement or Prospectus or any
amendment or supplement thereto contains an untrue statement of fact
which, in the opinion of counsel to the Underwriters, is material, or
omits to state a fact which, in the opinion of such counsel, is
material and is required to be stated therein or is necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading.
(c) You shall have received opinions of the Law Office of
Gary A. Agron and Brownstein, Hyatt, Farber & Strickland, counsel for
the Company, addressed to you and dated such Time of Delivery to the
effect that:
(i) The Company has been duly incorporated and is a
validly existing corporation in good standing under the laws
of the State of Nevada with corporate power and authority to
own, lease and operate its properties and conduct its business
as described in the Registration Statement. The Company is
duly qualified as a foreign corporation in good standing in
each state or other jurisdiction in which its ownership or
leasing of property or conduct of business legally requires
such qualification, except where, in the aggregate, the
failure to be so qualified would not have a material adverse
effect on the ability of the Company to conduct its business
as described in the Registration Statement.
(ii) The Company's authorized capital stock is as set
forth under the caption "Capitalization" in the Prospectus.
The Common Stock of the Company conforms in all material
respects to the description thereof in the Prospectus under
the caption "Description of Capital Stock," and the statements
in the Prospectus under such caption fairly summarize in all
material respects the provisions referred to in the Company's
articles of incorporation, bylaws and the law of the State of
14
<PAGE> 15
Nevada. The form of certificate used to evidence the Common
Stock filed as an exhibit to the Registration Statement has
been approved by the Company's Board of Directors, and
assuming such certificate is signed by the proper and
authorized officers of the Company as required by the law of
the State of Nevada will comply as to form with the
requirements of such law. The outstanding shares of Common
Stock have been duly authorized and are validly issued, fully
paid and non-assessable, were issued in material compliance
with all applicable Federal and state securities laws and the
laws of the State of Nevada, and were not issued in violation
of or subject to any preemptive rights or other rights to
purchase or subscribe for securities of the Company. The
Shares being sold by the Company have been duly authorized
and, when delivered and fully paid for in accordance with this
Agreement, will be validly issued, fully paid and
non-assessable, and the shareholders of the Company have no
preemptive rights with respect to the Shares. Except as
disclosed in the Prospectus, there are no outstanding options,
warrants, or other rights calling for the issuance of, and no
present commitments, plans or arrangements of the Company at
this time to issue any shares of capital stock of the Company
or any security convertible into or exchangeable for capital
stock of the Company. Upon delivery of the Shares being sold
by the Company and full payment therefor pursuant to this
Agreement and registration of the ownership of such Shares by
the transfer agent for such Shares, good and valid title to
such Shares free and clear of all liens, encumbrances,
security interests, restrictions on transfer, equities or
claims whatsoever other than those created or granted by this
Agreement or by the Underwriters, will pass to the
Underwriters.
(iii) Such counsel has been advised by the staff of the
Commission that the Registration Statement has become
effective under the Act and, to the best knowledge of such
counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or
contemplated under the Act; any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424(b)
of the Rules and Regulations has been made in the manner and
within the time period required by such Rule 424(b).
(iv) The Registration Statement and the Prospectus, and
each amendment or supplement thereto, as of their respective
effective or issue dates, comply as to form in all material
respects with the requirements of Form S-1 under the Act and
the applicable Rules and Regulations (except that such counsel
need express no opinion or belief as to numerical, financial
and statistical data, financial statements and notes and
related schedules thereto).
(v) The descriptions in the Registration Statement and
Prospectus of contracts and other documents filed as exhibits
to the Registration Statement are accurate in all material
respects.
15
<PAGE> 16
(vi) No authorization, approval, consent, order,
registration or qualification of or with any court or public,
regulatory or governmental body, authority or agency is
required with respect to the Company in connection with the
transactions contemplated by this Agreement, except such as
may be required under the Act, the Rules and Regulations or
the 1934 Act or by the NASD or under state securities laws in
connection with the purchase and distribution of the Shares by
the Underwriters.
(vii) The Company has the corporate power and authority
to enter into this Agreement and to sell and deliver the
Shares to be sold by it to the several Underwriters. The
filing of the Registration Statement with the Commission has
been duly authorized by the Board of Directors of the Company.
This Agreement has been duly authorized, executed and
delivered by the Company, and is a valid and legally binding
obligation of the Company enforceable in accordance with its
terms (except to the extent the enforceability of the
indemnification, exculpation and contribution provisions of
Section 7 hereof may be limited by applicable law and except
as enforceability of this Agreement may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other laws affecting creditors' rights
generally and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in
equity or at law). The making and performance of this
Agreement by the Company and the consummation of the
transactions herein contemplated will not result in a
violation of the Company's articles of incorporation or bylaws
or to the best knowledge of such counsel result in a breach or
violation of any of the terms and provisions of, or constitute
a default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any properties or assets
of the Company under, any applicable Federal or state statute,
or under any indenture, mortgage, deed of trust, note, loan
agreement, lease, franchise, license, permit or any other
agreement or instrument known to such counsel to which the
Company is a party or by which it is bound or to which any of
the properties or assets of the Company is subject, or any
order, rule or regulation known to such counsel of any court
or public, regulatory or governmental agency, authority or
body having jurisdiction over the Company or its properties,
except, in the case of any such violation, breach, default,
creation or imposition, to such extent as does not materially
adversely affect the business of the Company.
(viii) To the best knowledge of such counsel, (i) there
are no legal, governmental or regulatory proceedings pending
or threatened to which the Company is a party or of which the
business or properties of the Company is the subject which
(individually or in the aggregate) would have a material
adverse effect on the business or property of the Company or
on the ability of the Company to consummate the transactions
contemplated herein, and which are not disclosed in the
Registration Statement and Prospectus; (ii) there are no
contracts or documents of a character required to be described
in the Registration Statement or the Prospectus or to be filed
as an exhibit to the Registration Statement which are not
16
<PAGE> 17
described therein or filed as required; (iii) the Company is
not a party or subject to the provisions of any injunction,
judgment, decree or order of any court or any public,
regulatory or governmental agency, authority or body which
would have a material adverse effect on the business or
property of the Company or on the ability of the Company to
consummate the transactions contemplated herein; and (iv)
there are no applicable Federal or state statutes, orders,
rules or regulations required to be described in the
Registration Statement or Prospectus under the Act, the 1934
Act or applicable state securities laws which are not
described therein as required.
(ix) The Company holds all licenses, certificates,
permits, franchises, consents, authorizations and approvals
from all state and federal regulatory authorities, that are
required for the Company to conduct its business as described
in the Prospectus, except in the case of any such license,
certificate, permit, franchise, consent, authorization or
approval the loss of which or failure to maintain would not
have a material adverse effect on the business of the Company.
(x) The Company is not in violation of its articles of
incorporation and bylaws. The Company is not in breach of, or
in default with respect to, any provisions of any agreement,
mortgage, deed of trust, lease, note, agreement, franchise,
license, indenture, permit or other instrument known to such
counsel to which the Company is a party or by which the
Company or any of the properties thereof may be bound or
affected, which breach or default would have a material
adverse effect on the business or property of the Company or
on the Company's ability to consummate the transactions
contemplated herein, and the Company is in material compliance
with all judgments, decrees and orders of any court to which
the Company is subject, except where noncompliance would not
have a material adverse effect on the business of the Company.
(xi) The Company is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(xii) No holders of securities of the Company have
preemptive rights or other rights to purchase or subscribe for
shares of Common Stock or other securities of the Company, nor
any rights to require the Company to register any securities
under the Act in connection with the transactions contemplated
hereby.
Such counsel shall confirm that during the preparation of the
Registration Statement and Prospectus, such counsel participated in conferences
with officers and other representatives of the Company, representatives of the
independent certified public accountants for the Company and representatives of
the Underwriters and their counsel, at which time the contents of the
Registration Statement and Prospectus and related matters were discussed and
although such counsel is not opining with respect to and does not assume any
responsibility for the accuracy, truthfulness, completeness or fairness of the
statements contained in the Registration Statement or Prospectus, such counsel
confirms that no facts have come to their attention which have caused them to
believe that either (i) the Prospectus or any supplement thereto as of its date
(other than numerical, financial
17
<PAGE> 18
or statistical data, the financial statements and notes or any related schedules
thereto, as to which such counsel need express no opinion or belief) contains
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading or
(ii) the Registration Statement or any amendment thereto at the time it became
effective (other than numerical, financial or statistical data, the financial
statements and notes or any related schedules thereto, as to which such counsel
need express no opinion or belief) contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
In rendering the foregoing opinion, such counsel may expressly
state that it is qualified to render an opinion only as to matters involving the
Federal laws of the United States, the general corporation law of the State of
Nevada and may rely as to all matters of fact upon, among other things,
certificates and written statements of officers of the Company and government
officials and the representations and warranties of the Company contained
herein; provided that such counsel shall state that nothing has come to the
attention of such counsel that would reasonably cause such counsel to believe
that such counsel and the Underwriters are not justified in relying upon such
certificates, statements, representations and warranties.
(d) You shall have received on such Time of Delivery, from
Bryan Cave LLP, counsel to the Underwriters, such opinion or opinions,
dated such Time of Delivery with respect to corporate existence and
good standing of the Company, the validity of the Shares, the
Registration Statement, the Prospectus and other related matters as you
may reasonably require; the Company shall have furnished to such
counsel such documents as they reasonably request for the purpose of
enabling them to opine with respect to such matters.
(e) On the date of the Prospectus and on each Time of
Delivery, you shall have received from Ehrhardt Keefe Steiner & Hottman
PC a letter or letters, dated the date of the Prospectus and Time of
Delivery, respectively, in form and substance reasonably satisfactory
to you, providing confirmation that they are independent public
accountants with respect to the Company within the meaning of the Act
and the published Rules and Regulations, and the answer to Item 509 of
Regulation S-K set forth in the Registration Statement is correct
insofar as it relates to them, and providing a statement similar in
substance to the one set forth in Schedule II hereto.
(f) Except as contemplated in the Prospectus, (i) the
Company shall not have sustained since the date of the latest audited
financial statements included in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree; and (ii)
subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus, the Company shall not
have incurred any liability or obligation, direct or contingent, or
entered into transactions, and there shall not have been any change in
the capital stock or long-term debt of the Company or any change in the
financial condition, net worth, business, management,
18
<PAGE> 19
or results of operations of the Company, the effect of which, in any
such case described in clause (i) or (ii), is in your reasonable
judgment so material or materially adverse as to make it impracticable
to proceed with the public offering or the delivery of the Shares being
delivered on such Time of Delivery on the terms and in the manner
contemplated in the Prospectus.
(g) There shall not have occurred any of the following: (i)
a suspension or material limitation in trading in securities generally
on the New York Stock Exchange or the American Stock Exchange or the
NNM or establishing on such exchanges or the NNM by the Commission or
by such exchanges or the NNM of minimum or maximum prices which are not
in force and effect on the date hereof; (ii) a general moratorium on
commercial banking activities declared by either federal or state
authorities; or (iii) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of
a national emergency or war, any calamity or crisis, material change in
national, international or world affairs, natural disaster, material
change in the international or domestic markets, or material change in
the existing financial, political or economic conditions in the United
States or elsewhere, or the enactment, publication, decree, or other
promulgation of any federal or state statute, regulation, rule, or
order of any court or other governmental authority, or the taking of
any action by any federal, state or local government or agency in
respect of fiscal or monetary affairs, if the effect of any such event
specified in this clause (iii) is in your reasonable judgment so
material or materially adverse as to make it impracticable to proceed
with the public offering or the delivery of the Shares on the terms and
in the manner contemplated in the Prospectus.
(h) As a condition precedent to the several obligations of
the Underwriters to purchase and pay for the Shares being sold
hereunder, you shall have received a certificate or certificates, dated
the Time of Delivery and signed on behalf of the Company by the
President and Chief Executive Officer and the Chief Financial Officer
of the Company stating that: (A) such party has carefully examined the
Registration Statement and the Prospectus as amended or supplemented
and all documents incorporated by reference therein and nothing has
come to such party's attention that would lead him to believe that
either the Registration Statement or the Prospectus, or any amendment
or supplement thereto or any documents incorporated by reference
therein as of their respective effective, issue or filing dates,
contained, and the Prospectus as amended or supplemented and all
documents incorporated by reference therein and when read together with
the documents incorporated by reference therein, at such Time of
Delivery, contains any untrue statement of a material fact, or omits to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that
such party makes no representation, warranty or agreement as to
information contained in or omitted from the Registration Statement,
the Preliminary Prospectus or the Prospectus, or any such amendment or
supplement thereto, in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of the
Underwriters specifically for use in the preparation of (i) the
statements therein regarding over-allotment, stabilization or passive
market making by the Underwriters, or (ii) the section thereof under
the caption
19
<PAGE> 20
"Underwriting"; (B) all representations and warranties made herein by
the Company are true and correct in all material respects at such Time
of Delivery, with the same effect as if made on and as of such Time of
Delivery, and all agreements herein required to be performed by the
Company on or prior to such Time of Delivery have been duly performed
in all material respects; and (C) such other matters as you may
reasonably request.
(i) As a condition precedent to the several obligations of
the Underwriters to purchase and pay for the Shares being sold
hereunder, the Company shall not have failed, refused, or been unable,
on or by such Time of Delivery to have performed in all material
respects any agreement on its part required to be performed by it or
any of the conditions herein contained and required to be performed or
satisfied by it on or by such Time of Delivery.
(j) The Shares shall have been approved for trading or
quotation upon official notice of issuance on the NNM under the symbol
"PASA," and on the Time of Delivery the Shares shall be trading or
quoted under such symbol.
(k) As a condition precedent to the several obligations of
the Underwriters to purchase and pay for the shares being sold
hereunder, you shall have received, at or prior to the first Time of
Delivery:
(i) from each officer and each director of the Company,
and each record holder of shares of Common Stock outstanding
immediately prior to the first Time of Delivery, an executed
"lock-up" agreement in the form of Exhibit A hereto;
(ii) from the Transfer Agent an acknowledgment of the
Company's instruction's described in Section 5(p) of this
Agreement; and
(iii) from the Company, a noncompetition agreement,
duly executed, between the Company and Jeffrey S. Peterson, in
form and substance satisfactory to you (you agree that a
two-year noncompetition period following termination of
employment is satisfactory for purposes of such agreement).
All such opinions, certificates, letters and documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory to you and to Bryan Cave LLP, counsel for the several Underwriters.
The Company will furnish you with such conformed copies of such opinions,
certificates, letters and documents as you may reasonably request.
If any of the conditions specified above in this Section 6
shall not have been satisfied at or prior to the Time of Delivery or waived by
you in writing, this Agreement may be terminated by you on written notice to the
Company.
20
<PAGE> 21
7. INDEMNIFICATION.
(a) The Company will indemnify and hold harmless each
Underwriter and its officers and directors and each person, if any, who
controls any Underwriter within the meaning of the Act or the 34 Act,
against any losses, claims, damages or liabilities, joint or several,
to which such Underwriter, officer, director or controlling person may
become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement,
in any Preliminary Prospectus, in the Prospectus, or in any amendment
or supplement thereto, or in any Blue Sky application or other document
executed by the Company or based on any information furnished in
writing by the Company and filed in any jurisdiction in order to
qualify any or all of the Shares under (or obtain exemption from) the
securities laws thereof (Blue Sky Application), 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, in light of the circumstances under which they were made, not
misleading; and will reimburse each Underwriter and each such officer,
director and controlling person for any legal or other expenses
reasonably incurred by such Underwriter, officer, director or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that
the Company shall not be liable in any such case to the extent, but
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 that is: (i) contained in the
Registration Statement, such Preliminary Prospectus, the Prospectus, or
any such amendment or supplement thereto, or in such Blue Sky
Application or such other document and (ii) both relates to and was
made in reliance upon and in conformity with written information
furnished to the Company by you or by any Underwriter through you,
specifically for use in the preparation of: (a) the last paragraph of
the cover page of the form of prospectus included in the Registration
Statement, such Preliminary Prospectus or the Prospectus, or any such
amendment or supplement thereto or (b) the statements therein regarding
over-allotment, stabilization or passive market making by the
Underwriters or (c) the section thereof under the caption Underwriting;
and provided, further, that if any Preliminary Prospectus or the
Prospectus contained any alleged untrue statement or allegedly omitted
to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading and such statement or
omission shall have been corrected in a revised Preliminary Prospectus
or in the Prospectus or in an amended or supplemented Prospectus, the
Company shall not be liable to any Underwriter, officer, director or
controlling person under this subsection (a) with respect to such
alleged untrue statement or alleged omission to the extent that any
such loss, claim, damage or liability of such Underwriter, officer,
director or controlling person results from the fact that such
Underwriter sold Shares to a person or entity to whom there was not
sent or given, at or prior to the written confirmation of such sale,
such revised Preliminary Prospectus or Prospectus or amended or
supplemented Prospectus.
21
<PAGE> 22
(b) Each Underwriter will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed
the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company or any
such director, officer or controlling person may become subject, under
the 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, any Preliminary
Prospectus, the Prospectus, any amendment or supplement thereto, or any
Blue Sky Application or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, in each
case to the extent, but 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 that is:
(i) contained in the Registration Statement, such Preliminary
Prospectus, the Prospectus, or any such amendment or supplement
thereto, or in such Blue Sky Application or such other document and
(ii) both relates to and was made in reliance upon and in conformity
with written information furnished to the Company by you or by any
Underwriter through you, specifically for use in the preparation of:
(a) the last paragraph of the cover page of the form of prospectus
included in the Registration Statement, such Preliminary Prospectus or
the Prospectus, or any such amendment or supplement thereto or (b) the
statements therein regarding over-allotment, stabilization or passive
market making by the Underwriters or (c) the section thereof under the
caption Underwriting; and each Underwriter will reimburse the Company
and each such director, officer and controlling person for any legal or
other expenses reasonably incurred by the Company or any such director,
officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action.
(c) Any party which proposes to assert the right to be
indemnified under this Section 7 shall, within ten days after receipt
of notice of commencement of any action, suit or proceeding against
such party in respect of which a claim is to be made against an
indemnifying party under this Section 7 notify each such indemnifying
party of the commencement of such action, suit or proceeding, enclosing
a copy of all papers served, but the omission so to notify such
indemnifying party of any such action, suit or proceeding shall not
relieve such indemnifying party from any liability which it may have to
any indemnified party otherwise than under this Section 7. In case any
such action, suit or proceeding 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 that it shall wish, jointly with any
other indemnifying party, similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for
any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in
connection with the defense thereof. The indemnified party shall have
the right to employ its own counsel
22
<PAGE> 23
in any such action, but the fees and expenses of such counsel shall be
solely at the expense of such indemnified party unless (i) the
employment of counsel by such indemnified party at the expense of the
indemnifying party has been authorized in writing by the indemnifying
party, (ii) the indemnified party shall have been advised by such
counsel in a written opinion that there may be a conflict of interest
between the indemnifying party and the indemnified party in the conduct
of the defense, or certain aspects of the defense, of such action (in
which case the indemnifying party shall not have the right to direct
the defense of such action with respect to those matters or aspects of
the defense on which a conflict exists or may exist on behalf of the
indemnified party) or (iii) the indemnifying party shall not in fact
have employed counsel to assume the defense of such action, in any of
which events the reasonable fees and expenses of such party to the
extent applicable shall be borne by the indemnifying party. An
indemnifying party shall not be liable for any settlement of any action
or claim effected without its prior written consent. Each indemnified
party, as a condition of such indemnity, shall furnish such information
concerning itself or the claim in question as an indemnifying party may
reasonably request in connection with the defense of such claim and
shall cooperate in good faith with the indemnifying party in the
defense of any such action or claim.
(d) If the indemnification provided for in this Section 7
is for any reason, other than pursuant to the terms hereof, judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and upon the expiration of time to appeal or the
denial of the last right to appeal) to be unavailable to an indemnified
party under paragraphs (a), (b) or (c) above 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 or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company
and the Underwriters from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault, as applicable, of the Company and
the Underwriters in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as other relevant equitable considerations.
The relative benefits received by, as applicable, the Company and the
Underwriters shall be deemed to be in the same proportion as the total
net proceeds from the offering (before deducting expenses) received by
the Company bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on
the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue
statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be
just and equitable if contributions pursuant to this paragraph 4 were
determined by pro rata allocation (even if the
23
<PAGE> 24
Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Subsection (d). The amount
paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred
to above in this Subsection (d) 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 Subsection (d), no Underwriter
shall be required to contribute any amount in excess of the aggregate
underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations in
this Subsection (d) to contribute are several in proportion to their
respective underwriting obligations and not joint.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties, and agreements of the Company contained in Sections
4, 5, 7, and 11, herein or in certificates delivered pursuant hereto, and the
agreements of the Underwriters contained in Sections 7 and 11 hereof, and the
liability of a defaulting Underwriter, if any, pursuant to Section 9 hereof,
shall remain operative and in full force and effect regardless of any
termination or cancellation of this Agreement or any investigation made by or on
behalf of any Underwriter or any controlling person thereof, the Company or any
of its officers, directors or any controlling person thereof, and shall survive
delivery of the Shares to the Underwriters hereunder.
9. SUBSTITUTION OF UNDERWRITERS.
(a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder, you may
in your discretion arrange for you or another party or other parties
reasonably satisfactory to the Company to purchase such Shares on the
terms contained herein. If within thirty-six hours after such default
by any Underwriter you do not arrange for the purchase of such Shares,
then the Company shall be entitled to a further period of thirty-six
hours within which to procure another party or parties reasonably
satisfactory to you to purchase such Shares on such terms. In the event
that, within the respective prescribed periods, you notify the Company
that you have so arranged for the purchase of such Shares, or the
Company notify you that they have so arranged for the purchase of such
Shares, you or the Company shall have the right to postpone the Time of
Delivery for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements,
and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in the written opinion
of your counsel may thereby be made necessary. The term Underwriter as
used in this Agreement shall include any persons substituted under this
Section I with like effect as if such person had originally been a
party to this Agreement with respect to such Shares and any such
substituted person shall be entitled to all of the benefits conferred
hereby and shall be subject to all of the obligations of an Underwriter
hereunder as if such person had originally been a party to this
Agreement.
24
<PAGE> 25
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters made
by you or the Company as provided in subsection (a) above, the
aggregate number of Shares which remains unpurchased does not exceed
one tenth of the total Shares to be sold on the Time of Delivery, then
the Company shall have the right to require each non-defaulting
Underwriter to purchase the Shares which such Underwriter agreed to
purchase hereunder and, in addition, to require each non-defaulting
Underwriter to purchase its pro rata share (based on the number of
Shares which such Underwriter agreed to purchase hereunder) of the
Shares of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters made
by you or the Company as provided in subsection (a) above, the number
of Shares which remains unpurchased exceeds one tenth of the total
Shares to be sold on the Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require the
non-defaulting Underwriters to purchase the unpurchased Shares of the
defaulting Underwriter or Underwriters, then this Agreement shall
thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to
be borne by the Company and the Underwriters as provided in Section 11
hereof and the indemnity and contribution agreements in Section 7
hereof; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. EFFECTIVE DATE AND TERMINATION.
(a) This Agreement shall become effective at _____ a.m.,
Phoenix, Arizona time, on the first business day following the
effective date of the Registration Statement, or at such earlier time
after the effective date of the Registration Statement as you in your
discretion shall first release the Shares for offering to the public;
provided, however, that the provisions of Section 7 and Section 11
shall at all times be effective. For the purposes of this Section
10(a), the Shares shall be deemed to have been released to the public
upon release by you of the publication of a newspaper advertisement
relating to the Shares or upon release of telegrams, facsimile
transmissions or letters offering the Shares for sale to securities
dealers, whichever shall first occur.
(b) This Agreement may be terminated by you at any time
before it becomes effective in accordance with Section 10(a) by notice
to the Company; provided, however, that the provisions of this Section
10(a) and of Section 7 and Section 11 hereof shall at all times be
effective. In the event of any termination of this Agreement pursuant
to Section 10(a) or this Section 10(b) hereof, the Company shall not
then be under any liability to any Underwriter except as provided in
Section 7 or Section 11 hereof.
(c) This Agreement may be terminated by you at any time at
or prior to the First Time of Delivery by notice to the Company if any
condition specified in Section 6 hereof required to be satisfied by the
25
<PAGE> 26
Company shall not have been satisfied by the Company in all material
respects on or prior to the First Time of Delivery. Any such
termination shall be without liability of any party to any other party
except as provided in Sections 7 and Section 11 hereof.
(d) This Agreement also may be terminated by you, by notice
to the Company, as to any obligation of the Underwriters to purchase
the Option Shares, if any condition specified in Section 6 hereof shall
not have been satisfied by the Company in all material respects at or
prior to the Second Time of Delivery or as provided in Section 9 of
this Agreement.
If you terminate this Agreement as provided in Sections 10(b),
10(c) or 10(d), you shall notify the Company in writing or by telephone or
telegram, confirmed by letter.
11. COSTS AND EXPENSES. The Company will bear and pay the
costs, fees and expenses incident to the registration of the Shares and public
offering thereof, including, without limitation, (a) the fees and expenses of
the Company's accountants and the fees and expenses of counsel for the Company,
(b) the preparation, printing, filing, delivery and shipping of the Registration
Statement, each Preliminary Prospectus, the Prospectus and any amendments or
supplements thereto and the printing, delivery and shipping of this Agreement,
the Agreement Among Underwriters, the Selected Dealer Agreement, Underwriters'
Questionnaires and Powers of Attorney and any Blue Sky Memoranda, to the
Underwriters, (c) the furnishing of copies of such documents, (d) the
registration or qualification (or obtaining exemption therefrom) of the Shares
for offering and sale under the securities laws of the various states, including
the reasonable fees and disbursements of Underwriters' counsel relating thereto,
(e) the fees payable to the NASD and the Commission in connection with their
review of the proposed offering of the Shares, (f) all printing and engraving
costs related to preparation of the certificates for the Shares, including
transfer agent and registrar fees, (g) all initial transfer taxes, if any, (h)
all fees and expenses relating to the authorization of the Shares for trading on
the NNM, (i) all travel expenses, including air fare and accommodation expenses,
of representatives of the Company in connection with the offering of the Shares
and (j) all of the other costs and expenses incident to the performance by the
Company of the registration and offering of the Shares; provided, however, that
the Underwriters will bear and pay all of the fees and expenses of the
Underwriters' counsel (other than fees and disbursements relating to the
registration or qualification of the Shares for offering and sale under the
securities laws of the various states), the Underwriters' out-of-pocket
expenses, and any advertising costs and expenses incurred by the Underwriters
incident to the public offering of the Shares.
If this Agreement is terminated by you in accordance with the
provisions of Section 10(c), the Company shall reimburse the Underwriters for
all of their out-of-pocket expenses, including the reasonable fees and
disbursements of counsel to the Underwriters.
12. NOTICES. All notices or communications hereunder, except
as herein otherwise specifically provided, shall be in writing and if sent to
the Underwriters shall be mailed, delivered, sent by facsimile transmission, or
telegraphed and confirmed c/o:
26
<PAGE> 27
Cruttenden Roth Incorporated
or if sent to the Company shall be mailed, delivered, sent by
facsimile transmission, or telegraphed and confirmed to the Company at:
quepasa.com, inc.
One Arizona Center
400 East Van Buren, Fourth Floor
Phoenix, Arizona 85004
Attention: President
Facsimile: (602) 716-0200
Notice to any Underwriter pursuant to Section 7 shall be
mailed, delivered, sent by facsimile transmission, or telegraphed and confirmed
to such Underwriter's address as it appears in the Underwriters' Questionnaire
furnished in connection with the offering of the Shares or as otherwise
furnished to the Company. Any party hereto may change such address or facsimile
number for notices by sending to the other parties to this Agreement written
notice of a new address or facsimile number for such purpose.
13. PARTIES. This Agreement shall inure to the benefit of and
be binding upon the Company, the Underwriters and their respective successors
and assigns. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, corporation, partnership or other entity,
other than the parties hereto and their respective successors and assigns and
the controlling persons, officers and directors referred to in Section 7, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision herein contained; this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective successors and assigns and
said controlling persons and said officers and directors, and for the benefit of
no other person, corporation, partnership or other entity. No purchaser of any
of the Shares from any Underwriter shall be construed a successor or assign
hereunder by reason merely of such purchase.
In all dealings with the Company under this Agreement you
shall act on behalf of each of the several Underwriters, and the Company shall
be entitled to act and rely upon any statement, instruction, demand, request,
notice or agreement on behalf of the Underwriters, made or given by you on
behalf of the Underwriters, as if the same shall have been made or given in
writing by all of the Underwriters.
14. COUNTERPARTS. This Agreement may be executed by any one or
more of the parties hereto in any number of counterparts, each of which shall be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
27
<PAGE> 28
15. PRONOUNS. Whenever a pronoun of any gender or number is
used herein, it shall, where appropriate, be deemed to include any other gender
and number.
16. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other section, paragraph or
provision hereof.
17. GENERAL. This Agreement constitutes the entire agreement
of the parties to this Agreement and supersedes all prior written and oral
agreements and all contemporaneous oral agreements, undertakings and
negotiations with respect to the subject matter hereof. The section headings in
this Agreement are for the convenience of the parties only and will not affect
the construction or interpretation of this Agreement. This Agreement may be
amended or modified, and the observance of any term of this Agreement may be
waived, only by a writing signed by the Company, and by you or, in the case of a
waiver, by the party waiving compliance.
18. APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Arizona without giving
effect to the provisions thereof regarding the choice of law.
If the foregoing is in accordance with your understanding, please so
indicate in the space provided below for such purpose, whereupon this letter
shall constitute a binding agreement among the Company, and the Underwriters.
quepasa.com, inc.
By:
-------------------------
Name:
-----------------------
Title:
----------------------
Accepted in ________________________,
_______________ as of the date first
above written, on behalf of ourselves
and each of the several Underwriters
named in Schedule I hereto.
CRUTTENDEN ROTH INCORPORATED
As Representative for the Several Underwriters
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
28
<PAGE> 29
SCHEDULE I
<TABLE>
<CAPTION>
Name Number of Shares
- ---- ----------------
<S> <C>
Cruttenden Roth Incorporated ----------
----------
Total ==========
</TABLE>
29
<PAGE> 30
SCHEDULE II
Pursuant to Section 6(f) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
1. They are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable Rules
and Regulations thereunder.
2. In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
prospective financial statements and/or pro forma financial information)
examined by them and included in the Prospectus or the Registration Statement
comply as to form with the applicable accounting requirements of the Act and the
Rules and Regulations with respect to registration statements on Form S-1; and,
if applicable, they have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the interim
financial statements, selected financial data, pro forma financial information,
prospective financial statements and/or condensed financial statements derived
from audited financial statements of the Company for the periods specified in
such letter, as indicated in their reports thereon, copies of which have been
furnished to the Representative of the Underwriters (the "Representative").
3. The unaudited selected financial information with respect
to the consolidated results of operations and financial position of the Company
for the fiscal years included in the Prospectus agrees with the corresponding
amounts (after restatements where applicable) in the audited consolidated
financial statements for such years which were included in the Prospectus.
4. They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and on the
basis of limited procedures specified in such letter nothing came to their
attention as a result of the foregoing procedures that cause them to believe
that this information does not conform in all material respects with the
disclosure requirements of Items 301, 302, 402 and 503(d), respectively, of
Regulation S-K
5. On the basis of a reading of the unaudited financial
statements, pro forma financial statements, if any, and other information
contained in the Prospectus, a reading of the latest available interim financial
statements of the Company, inspection of the minute books of the Company since
the date of the latest audited financial statements included in the Prospectus,
inquiries of officials of the Company responsible for financial and accounting
matters and such other inquiries and procedures as may be specified in such
letter, nothing came to their attention that caused them to believe that:
(a) any of the above unaudited financial statements or
other information contained in the Prospectus do not comply as to form
with the accounting requirements of the Rules and Regulations or that
such unaudited financial statements are not fairly
30
<PAGE> 31
presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with the audited financial
statements;
(b) as of a specified date not more than two days prior to
the date of such letter, there have been any changes in the capital
stock or any increase in the indebtedness of the Company, or any
increases or decreases in net current assets or net assets or any
changes in any other items specified by the Representative, in each
case as compared with amounts shown in the latest balance sheet
included in the Prospectus, except in each case for changes, increases
or decreases which the Prospectus discloses have occurred or may occur
or which are described in such letter; or
(c) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred to
in clause (B) above there were any decreases in revenues or the total
or per share amounts of net income, or any other changes in any items
specified by the Representative, in each case as compared with the
comparable period of the preceding year and with any other period of
corresponding length specified by the Representative, except in each
case for changes or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter.
In addition to the audit referred to in their report(s) included in the
Prospectus and the limited procedures, inspection of minute books, inquiries and
other procedures referred to in paragraph 5 above, they have carried out certain
specified procedures, not constituting an audit in accordance with generally
accepted auditing standards, with respect to certain amounts, percentages and
financial information specified by the Representative, which are derived from
the general accounting records of the Company for the periods covered by their
reports and any interim or other periods since the latest period covered by
their reports, which appear in the Prospectus, or in Part II of, or in exhibits
and schedules to, the Registration Statement specified by the Representative,
and have compared certain of such amounts, percentages and financial information
with the accounting records of the Company and have found them to be in
agreement.
31
<PAGE> 32
EXHIBIT A
Form of Lock-up Agreement
_____________________, 1999
Cruttenden Roth Incorporated
As Representative of the Several Underwriters
Re: Lock-up Agreement Affecting Stock of quepasa.com, inc.
Ladies and Gentlemen:
The undersigned shareholder (the "Shareholder") of quepasa.com, inc., a
Nevada corporation (the "Company"), wishes to facilitate the initial public
offering (the "Offering") of shares of common stock of the Company. The
Shareholder recognizes that the Offering will be of benefit to the Company and
the Shareholder.
To induce you, as the representative (the "Representative") of the
underwriters (the "Underwriters") of the Offering to enter into an underwriting
agreement with the Company (the "Underwriting Agreement") relating to the
Offering and to you and the Underwriters to complete the purchase of the shares
of common stock pursuant to such Underwriting Agreement, the Shareholder hereby
agrees with the Underwriters as follows:
1. During the term of this Agreement, as specified in
paragraph 3 hereof, the Shareholder will not, directly or indirectly, offer,
sell, contract to sell, pledge, hypothecate or otherwise dispose of any shares
of the Company's common stock or any securities convertible into or exercisable
or exchangeable for, or any rights to purchase or acquire, shares of the
Company's common stock or the beneficial ownership thereof (collectively the
"Subject Securities"), without your prior written consent as Representative of
the Underwriters.
2. Any purported transfer of any Subject Securities in
violation of paragraph 1 hereof (an "Unauthorized Transfer") will be null and
void. The Company will not be required to register, recognize or give effect to
any Unauthorized Transfer and the purported transferee of any Subject Securities
or any interest therein pursuant to an Unauthorized Transfer will not acquire
any rights in such Subject Securities during the term of this Agreement as
specified in paragraph 3 hereof. The Company may issue stop transfer or similar
instructions to the transfer agent for its common stock covering all Subject
Shares, but shall not be required to do so.
3. This Agreement shall become effective upon the execution
hereof by the Shareholder. This Agreement shall terminate without any prior
notice upon the earlier of (i) the
A-1
<PAGE> 33
date which is one hundred and eighty (180) days after the effective date of the
Registration Statement filed by the Company with the Securities and Exchange
Commission on March 10, 1999 (SEC Registration No. 33-74201) in connection with
the Offering, or (ii) the termination or cancellation of the Underwriting
Agreement for any reason prior to the sale of the common stock to the
Underwriters. Notwithstanding the foregoing, this Agreement shall terminate
immediately upon the abandonment of the Registration Statement.
4. This Agreement shall be construed and enforced in
accordance with the laws of the State of Arizona. The Underwriters shall be
entitled to all legal and equitable remedies in enforcing this Agreement,
including without limitation an injunction against any sale of shares of the
common stock in contravention of this Agreement. If at any time subsequent to
the date of this Agreement any provision hereof shall be held by any court of
competent jurisdiction to be illegal, void or unenforceable, such provision
shall be of no force and effect, but the illegality or unenforceability of such
provision shall have no effect upon, and shall not impair the legality or
enforceability of, any other provision of this Agreement.
5. This Agreement may be executed in one or more counterparts,
each of which shall be an original, but all of which taken together shall
constitute one and the same instrument.
6. All of the terms and provisions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, successors,
personal representatives and permitted assigns of the parties hereto.
If the foregoing correctly sets forth the agreement between the
undersigned and the Underwriters, please indicate your acceptance in the space
provided below for that purpose.
Very truly yours,
-------------------------------------
(Signature)
Print Name:
--------------------------
Date:
--------------------------------
Agreed to and accepted as of the date above written:
Cruttenden Roth Incorporated,
For itself and as Representative of the several Underwriters
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
A-2
<PAGE> 1
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE THIS WARRANT CAN BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE UNDERLYING SECURITIES MAY
NOT BE SOLD, TRANSFERRED, OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT, UNLESS SUCH REGISTRATION IS NOT THEN REQUIRED.
UNDERWRITER'S PURCHASE WARRANT
QUEPASA.COM, INC.
COMMON STOCK PURCHASE WARRANT
Warrant No. __________
THIS CERTIFIES THAT, for value received, Cruttenden Roth Incorporated,
Inc., an Arizona corporation (the "Underwriter"), or its successors and
permitted assigns (the "Holder") is entitled to subscribe for and purchase from
QUEPASA.COM, INC., a Nevada corporation with an address at One Arizona Center,
400 East Van Buren, 4th Floor, Phoenix, Arizona 85004 (the "Company"), at any
time from and after Midnight (Phoenix, Arizona time) on _____________ [INSERT:
the month, day and year that correspond to the effective date of the IPO
registration statement] and prior to 5:00 p.m. (Phoenix, Arizona time) on , 2004
[INSERT: the fifth anniversary of the effective date of the IPO registration
statement] (the "Exercise Period"), _____ shares of the Company's common stock,
$.001 par value per share (the "Common Stock"). The purchase price for each
share of Common Stock hereunder shall be $__________ [165% of the public
offering price] (as adjusted in accordance with this Warrant, the "Purchase
Price"), subject, however, to the provisions and upon the terms and conditions
set forth in this Warrant.
This Warrant is one of the "Underwriter's Warrants" issued pursuant to
the Underwriting Agreement dated , 1999 (the "Underwriting Agreement") between
the Company and Cruttenden Roth Incorporated, as the representative of the
several underwriters relating to the initial public offering of Common Stock by
the Company.
1. Exercise; Issuance of Certificates; Payment for Shares. The rights
represented by this Warrant may be exercised by the Holder, in whole or in part,
at any time or from time to time during the Exercise Period, upon presentation
and surrender of this Warrant to the Company, at its principal office as set
forth on the first page of this Warrant, with a duly executed subscription (in
the form attached hereto) and accompanied by payment of the Purchase Price for
each share of Common Stock purchased. Such payment shall be made, in cash or by
certified, bank, or cashier's check, payable to the order of the Company.
Notwithstanding the foregoing provisions requiring payment in cash or by check,
the Holder may from time to time at the Holder's option pay the Purchase Price
or any portion thereof by surrendering to the Company, in lieu of such payment,
the
<PAGE> 2
right of the Holder to receive a number of shares of Common Stock having an
aggregate Market Value equal to such Purchase Price (or portion thereof) on the
date of exercise (a "Cashless Exercise"). For purposes of the foregoing, the
"Market Value" of a share of Common Stock as of a relevant date means the
closing price on the trading day preceding such date with respect to the Common
Stock on a national securities exchange or the Nasdaq National Market or Nasdaq
SmallCap Market, as the case may be . The closing price shall be: (i) the last
sale price of shares of the Common Stock on such trading day or, if no such sale
takes place on such date, the average of the closing bid and asked prices
thereof on such date, in each case as officially reported by the principal
exchange on which the Common Stock is then listed or admitted to trading or by
the Nasdaq Stock Market; or (ii) if no shares of Common Stock are then listed or
admitted to trading on any national securities exchange or the Nasdaq National
Market or the Nasdaq SmallCap Market, the average of the reported closing bid
and asked prices thereof on such date in the over-the-counter market as shown on
the National Association of Securities Dealers automated quotation system. The
Cashless Exercise rights of the Holder shall be of no force or effect unless the
Common Stock is then listed, admitted to trading, or reported.
The shares of Common Stock purchased hereunder shall be deemed to have
been issued to the Holder as of the close of business on the date on which this
Warrant shall have been surrendered to the Company, along with the subscription
and full payment, whether by cash, check or Cashless Exercise, for the shares
purchased. Certificates for the shares so purchased and, unless this Warrant
shall have expired, a new Warrant representing the number of shares of Common
Stock, if any, with respect to which this Warrant shall not then have been
exercised, shall be delivered to the Holder within a reasonable time, and in any
event within 30 days, after the Holder has complied with the provisions of this
Section 1.
2. Restrictions on Transfer of Warrant. For the one year period after
the Issue Date the Holder may not sell, assign pledge, hypothecate or otherwise
transfer any rights under this Warrant to anyone other than (a) any officer or
partner of Holder; (b) any successor to the business of Holder; (c) any other
underwriter named in the Underwriting Agreement; or (d) any transferee who
receives this Warrant by operation of law as a result of the death or
dissolution of any Holder permitted by this Section 2.
3. Reservation of Shares. The Company covenants and agrees that all
securities that it may issue upon the exercise of the rights represented by this
Warrant will, upon issuance, be fully paid and nonassessable and free from all
taxes, liens and charges. The Company further agrees that at all such times
there shall be authorized and reserved for issuance upon exercise of this
Warrant such number of shares of Common Stock as shall be required for issuance
on full exercise of this Warrant.
4. Exchange, Assignment, or Loss of Warrant.
(a) This Warrant is exchangeable, without expense other than
as provided in this Section 4, at the option of the Holder, upon presentation
and surrender hereof to the Company, for other Warrants of different
denominations entitling the holder(s) thereof to purchase in the aggregate the
same number of shares of Common Stock purchasable hereunder.
2
<PAGE> 3
(b) This Warrant may not be sold, transferred, assigned, or
hypothecated except as permitted under Section 2 herein and except in compliance
with Federal and state securities laws. Any permitted transfer shall be made by
surrender of this Warrant to the Company, together with a duly executed
assignment (in the form of the assignment attached to this Warrant) and funds
sufficient to pay any transfer tax, whereupon the Company shall, without charge,
execute and deliver a new Warrant or Warrants in the name(s) of the assignee(s)
named in such instrument of assignment, and this Warrant shall be canceled. Any
transferee of this Warrant, by its acceptance thereof, agrees to be bound by the
terms of this Warrant, with the same force and effect as if a signatory thereto.
(c) Subject to (b) above, this Warrant may be divided or
combined with other Warrants that carry the same rights upon presentation and
surrender of this Warrant at the office of the Company together with a written
notice, signed by the Holder, specifying the names and denominations in which
new Warrants are to be issued.
(d) The Company will execute and deliver a new Warrant of like
tenor and date upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction, or mutilation of this Warrant, and (i) in the case of
loss, theft, or destruction, upon receipt by the Company of indemnity
satisfactory to the Company, or (ii) in the case of mutilation, upon
presentation, surrender, and cancellation of this Warrant.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity.
The rights of the Holder are limited to those expressed in the Warrant and are
not enforceable against the Company except to the extent set forth herein.
6. Adjustment and Other Events.
(a) If the Company shall, after the Issue Date, declare any
dividend or other distribution upon its outstanding Common Stock payable in
Common Stock or shall subdivide its outstanding shares of Common Stock into a
greater number of shares, then the number of shares of Common Stock that may
thereafter be purchased upon the exercise of the rights represented by this
Warrant must be increased in proportion to the increase through such dividend,
distribution, or subdivision, and the Purchase Price must be decreased in such
proportion. If the Company shall at any time combine the outstanding shares of
its Common Stock into a smaller number of shares, the number of shares of Common
Stock that may thereafter be purchased upon the exercise of the rights
represented hereby will be decreased in proportion to the decrease through such
combination, and the Purchase Price will be increased in such proportion.
(b) If, after the Issue Date, there shall occur (i) any
reclassification, capital reorganization, or other change of outstanding Common
Stock of the Company (other than a change described or referred to in Subsection
6(a)), or (ii) any consolidation or merger of the Company with or into another
corporation or other entity (other than a consolidation or merger in which the
Company is the continuing corporation and that does not result in any
reclassification,
3
<PAGE> 4
capital reorganization or other change of the shares of Common Stock issuable
upon exercise of this Warrant), or (iii) sale or conveyance to a third party of
all or substantially all of the Company's assets as an entirety, then and in
such event the terms of this Section 6 will be deemed to be appropriately
adjusted, and the Company will cause effective provision to be made, so that the
Holder shall have the right thereafter, by exercising this Warrant, to purchase
the kind and amount of shares of stock and other securities and property, if any
receivable upon such reclassification, capital reorganization, or other change,
consolidation, merger, sale or conveyance that the Holder would have received
had this Warrant been exercised in full immediately prior to such event.
(c) If, after the Issue Date, the Company shall at any time or
from time to time (i) distribute (otherwise than as a dividend in cash or in
Common Stock or in securities convertible into or exchangeable for Common Stock)
to the holders of Common Stock (or grant any rights to such holders to acquire)
assets, including stock or other securities of the Company (or the right to
acquire the same) or any subsidiary, without any consideration paid or to be
paid by such holders or for a consideration paid less than the fair market value
of such assets as reasonably and objectively determined by the Board of
Directors of the Company (other than the issuance of options or shares upon the
exercise of options granted under any stock option plan pursuant to which
options may be granted to officers, employees, directors or consultants of the
Company), or (ii) declare a distribution, right or dividend upon the Common
Stock in cash or assets other than shares of Common Stock, then the Company
shall reserve, and the Holder of this Warrant shall thereafter upon exercise of
this Warrant be entitled to receive, for each share of Common Stock purchasable
hereunder on the record date established by the Company for the determination of
holders of Common Stock entitled to receive such distribution, right or dividend
(or if no such record date shall have been established, on the date of such
distribution, grant of such right or payment of such dividend), (i) the amount
of such assets that would have been distributable to, or as to which such right
would have been granted to, the Holder hereof or (ii) the amount of such
dividend (to the extent above-stated) that the Holder would have received, had
the Holder been a holder of the number of shares of Common Stock purchasable
under this Warrant on such record (or other) date. Such entitlement by the
Holder shall be without increase in (except in respect for the consideration, if
any, paid for such assets by the holders of Common Stock) the then current
Purchase Price.
(d) If: (i) there shall be an event requiring an adjustment as
provided in subsections 6(a) or 6(b); (ii) the Company shall make a distribution
that may come within subsection 6(c); (iii) the Company shall offer for
subscription pro rata to the holders of its Common Stock any additional shares
of stock of any class, or other rights; or (iv) there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Company; then, in any
one or more of such cases, the Company shall give to the Holder (1) at least
twenty days' prior written notice of the date on which the books of the Company
shall close or a record shall be taken for such dividend, distribution or
subscription rights, or for determining rights to vote in respect of any merger,
consolidation, reorganization or reclassification, and (2) in the case of any
such merger, consolidation, reorganization or reclassification at least twenty
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause and to the extent applicable
shall specify (A) in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be entitled thereto,
and (B) when the holders of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such merger,
consolidation, reorganization, liquidation or winding up, as the case may be.
Upon the happening of an event requiring adjustment of the Purchase Price or the
4
<PAGE> 5
kind or amount of securities or property purchasable hereunder, the Company
shall forthwith give notice to the Holder, which notice shall be accompanied by
a certificate of the Company, stating the adjusted Purchase Price and the
adjusted number of shares of Common Stock purchasable or the kind and amount of
any such securities or property purchasable upon exercise of this Warrant, as
the case may be, and setting forth in reasonable detail the method of
calculation and the facts upon which the calculation is based.
(e) No fractional shares of Common Stock or script
representing fractional shares of Common Stock shall be issued upon the exercise
of this Warrant, and the Company shall have no obligation for any cash payment
with respect thereto. If a fractional share shall result from adjustments in the
number of shares of Common Stock purchasable hereunder, the number of shares of
Common Stock purchasable hereunder shall, on an aggregate basis taking into
account all prior adjustments, be rounded up to the next whole number.
(f) Irrespective of any adjustment or change in the Purchase
Price or the number of shares of Common Stock or other securities actually
purchasable under this Warrant, this Warrant may continue to express the
Purchase Price and the number of shares of Common Stock purchasable hereunder as
such price and number of shares were expressed on this Warrant when initially
issued.
7. Registration Rights Under the Securities Act of 1933.
(a) Optional Registrations. If at any time or times after the
commencement of the Exercise Period and prior to the seventh anniversary of the
Issue Date, the Company shall determine to register any shares of its Common
Stock (or securities convertible into or exchangeable or exercisable for shares
of the Common Stock or any class of common stock into which the Common Stock has
theretofore been converted or for which the Common Stock has been exchanged)
under the Securities Act of 1933, as amended (the "Act") (whether in connection
with a public offering of securities by the Company (a "primary offering"), a
public offering of securities by security holders (a "secondary offering"), or
both), but not in connection with a registration effected solely to implement an
employee benefit plan or a transaction to which Rule 145 or any other similar
rule of the Securities and Exchange Commission (the "Commission") under the Act
is applicable or a registration on any form which does not include substantially
the same information as would be required to be included in a registration
statement covering the Registrable Securities (including Form S-4 or any form
substituted therefor), the Company will promptly give written notice thereof to
the Holders of Registrable Securities (as defined in Subsection 7(c) below) then
outstanding. In connection with any such registration, the Company will use its
best efforts to effect the registration under the Act of all Registrable
Securities which such Holders may request in a writing delivered to the Company
within 15 days after the notice given by the Company pursuant to Section 10
hereof; provided, however, that in the case of the registration of shares of
Common Stock by the Company in connection with an underwritten public offering,
if the managing underwriter determines that a limitation on the number of shares
to be underwritten is required, the managing underwriter may (subject to the
allocation priority set forth below) exclude from such registration and
underwriting some or all of the Registrable Securities which would otherwise be
underwritten pursuant to the notice described herein. The Company shall advise
all
5
<PAGE> 6
Holders of Registrable Securities promptly after such determination by the
managing underwriter, and the number of shares of securities that are entitled
to be included in the registration and underwriting (other than those to be sold
for the account of the Company) shall be allocated among Holders of Registrable
Securities and other security holders (excluding directors and officers of the
Company), if any, who have registration rights with respect to the securities
they desire to have registered in proportion, as nearly as practicable, to their
respective holdings of securities of the Company. All expenses of the
registration and offering (including transfer taxes on shares being sold by the
Holders and the fees and disbursements of one law firm acting as counsel to the
Holders) shall be borne by the Company, except that the Holders shall bear all
underwriting discounts and selling commissions attributable to their Registrable
Securities being registered. Without in any way limiting the types of
registrations to which this paragraph 7(a) shall apply, in the event that the
Company shall effect a shelf registration under Rule 415 promulgated under the
Securities Act, or any other similar rule or regulation ("Rule 415"), the
Company shall take all necessary action, including, without limitation, the
filing of post-effective amendments, to permit the Holders to include their
shares in such registration in accordance with the terms of this Subsection
7(a).
(b) Demand Registration. If on any one occasion during the
Exercise Period (which, for purposes of this Section 7(b), shall not extend
beyond the fifth anniversary of the effective date of the registration statement
referred to in the Underwriting Agreement), one or more of the Holders holding
at least sixty percent (60%) of the Registrable Securities then held by all of
the Holders shall notify the Company in writing that he or they intend to offer
or cause to be offered for public sale all or any portion of his or their
Registrable Securities having an aggregate proposed offering price of not less
than $500,000.00 (the "Minimum"), the Company will notify all of the Holders of
Registrable Securities who would be entitled to notice of a proposed
registration under Subsection 7(a) above of its receipt of such notification
from such Holder or Holders. Upon the written request of any such Holder
delivered to the Company within 15 days after delivery by the Company of such
notification pursuant to Section 10 hereof, the Company will use its best
efforts to cause such of the Registrable Securities as may be requested by any
Holders (including the Holder or Holders giving the initial notice of intent to
register hereunder) to be registered under the Securities Act in accordance with
the terms of this Subsection 7(b), which registration may be under any form of
registration statement eligible for use by the Company for such purpose. All
expenses of the registration and offering (including transfer taxes on shares
being sold by the Holders and the fees and disbursements of one law firm acting
as counsel to the Holders) shall be borne by the Company, except that the
Holders shall bear the underwriting discounts and selling commissions
attributable to their Registrable Securities being registered. If the Company
shall furnish to the Holders requesting a registration statement under this
Subsection 7(b) a certificate signed by the President of the Company stating
that, in the good faith judgment of the Board of Directors, it would not be in
the best interests of the Company and its stockholders generally for such
registration statement to be filed, the Company shall have the right to defer
such filing for a period of not more than 90 days after the receipt of the
request for registration; provided, however, that the Company may not utilize
this right to defer more than once. The Company shall not be required to cause a
registration statement requested pursuant to this Subsection 7(b) to become
effective prior to 90 days following the effective date of a registration
statement initiated by the Company, if the request for registration has been
received by the Company subsequent to the
6
<PAGE> 7
giving of written notice by the Company, made in good faith, to the Holders of
Registrable Securities to the effect that the Company is commencing to prepare a
Company-initiated registration statement (other than a registration effected
solely to implement an employee benefit plan or a transaction to which Rule 145
or any other similar rule of the Commission under the Securities Act is
applicable); provided, however, that the Company shall use its best efforts to
achieve such effectiveness promptly following such 90-day period if the request
pursuant to this Subsection 7(b) has been made prior to the expiration of such
90-day period. If so requested by any Holder in connection with a registration
under this paragraph, the Company will take such steps as are required to
register such Holder's Registrable Securities for sale on a delayed or
continuous basis. The Company will take such steps as are required to keep any
registration statement under this Subsection 7(b) effective until the earlier
of: (i) 270 days after the effective date of any such registration statement; or
(ii) the sale of all of the Registrable Securities registered thereunder. The
obligation of the Company hereunder shall be deemed satisfied only when a
registration statement covering all shares of Registrable Securities specified
in notices received as aforesaid shall have become effective and, if the method
of disposition is a firm commitment underwritten public offering, all such
shares have been sold pursuant thereto. In connection with such a firm
commitment underwriting, the Company shall have the right to include in the
registration statement therefor shares of Common Stock to be offered and sold
for the account of the Company and other security holders of the Company;
provided, however, that no Registrable Shares shall be excluded from such
registration and underwriting by reason of the inclusion of any securities for
the Company's account or for the account of other securityholders. Any deferral
of the filing or effectiveness of a registration statement pursuant to this
Subsection 7(b) shall extend, by a period equal to the number of days of all
such deferrals, the period during which the Holders of Registrable Securities
shall be entitled to demand registration under this Subsection 7(b).
If the method of disposition is an underwritten public
offering, the Company may designate the managing underwriter of such offering,
subject to approval of the holders of a majority of the Registrable Securities
to be sold in such offering, which approval shall not be unreasonably withheld
or delayed.
(c) Registrable Securities. For the purposes of this Section
7, the term "Registrable Securities" shall mean any Common Stock purchasable
upon exercise of this Warrant or any other Warrant originally issued pursuant to
the Underwriting Agreement (collectively "Underwriters' Warrants") (or any
Warrant(s) issued in replacement hereof or thereof), and any other capital stock
issued or issuable with respect to the Common Stock issued or issuable upon the
exercise of this Warrant or any other Underwriters' Warrants.
In connection with any registration statement which pertains
to Registrable Securities, the selling Holders shall (i) enter into any
reasonable underwriting agreement required by the proposed underwriter for the
selling Holders, if any, and (ii) immediately notify the Company, at any time
when a prospectus relating to the Holder's Registrable Securities is required to
be delivered under the Act, of the happening of any event relating to
information respecting such Holder as a result of which the prospectus which
forms a part of such registration statement contains an untrue statement of a
material fact or omits any material fact necessary to make the statements
therein not misleading.
7
<PAGE> 8
(d) Further Obligations of the Company. Whenever under the
preceding subsections of this Section 7 the Company is required hereunder to
register any Registrable Securities, it agrees that it shall also do the
following:
(i) Use its best efforts to diligently prepare and
file with the Commission a registration statement and such amendments and
supplements to said registration statement and the prospectus used in connection
therewith as may be necessary to keep said registration statement effective and
to comply with the provisions of the Act with respect to the sale of securities
covered by said registration statement for the period necessary to complete the
proposed public offering;
(ii) Furnish to each selling Holder of Registrable
Securities such copies of each preliminary and final prospectus and such other
documents as such Holder may reasonably request to facilitate the public
offering of his Registrable Securities;
(iii) Enter into any reasonable underwriting
agreement required by the proposed underwriter, if any, for the selling Holders;
(iv) Use its best efforts to register or qualify the
securities covered by said registration statement under the securities or
blue-sky laws of such jurisdictions as any selling Holder may reasonably request
if such registration or qualification is necessary in the judgment of the
Company's counsel, provided that the Company shall not be required to register
or qualify the securities in any jurisdictions which require it to subject
itself to general service of process therein:
(v) Immediately notify each of the selling Holders,
at any time when a prospectus relating to his Registrable Securities is required
to be delivered under the Act, of the happening of any event as a result of
which such prospectus contains an untrue statement of a material fact or omits
any material fact necessary to make the statements therein not misleading, and,
at the request of any such selling Holder, prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(vi) Cause all such Registrable Securities to be
listed on or included in each securities exchange or quotation system on which
similar securities issued by the Company are then listed;
(vii) Comply with all applicable rules and
regulations of the Commission and make generally available to its security
holders, in each case as soon as practicable, an earnings statement of the
Company which will satisfy the provisions of Section 11(a) of the Securities
Act; and
(viii) Obtain and furnish to each of the selling
Holders, immediately prior to the effectiveness of the registration statement
(and, in the case of an underwritten offering, at the
8
<PAGE> 9
time of delivery of any Registrable Securities sold pursuant thereto), a cold
comfort letter from the Company' s independent public accountants in customary
form and covering such matters of the type customarily covered by cold comfort
letters as the holders of a majority of the Registrable Securities being sold
reasonably request.
(e) Indemnification. Incident to any registration statement
referred to in this Section 7, and subject to applicable law, the Company will
indemnify and hold harmless, each Holder of Registrable Securities (including
its partners, directors, officers, employees and agents) so registered, and each
person who controls any of them within the meaning of Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the "Exchange Act"), from and against any
and all losses, claims, damages, expenses and liabilities, joint or several
(including any investigation, legal and other expenses incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claim asserted), to which they, or any of them, may become subject under the
Act, the Exchange Act or otherwise, insofar as such losses claims damages or
liabilities arise out of or are based on (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement
(including any related preliminary or definitive prospectus, or any amendment or
supplement to such registration statement or prospectus), (ii) any omission or
alleged omission to state in such document a material fact required to be stated
in it or necessary to make the statements in it not misleading, or (iii) any
violation by the Company of the Securities Act, any state securities or blue sky
laws or any rule or regulation thereunder in connection with such registration.
The indemnity agreement of the Company contained in this Subsection 7(e) shall
not apply to amounts paid in settlement of any loss, claim, damage, expense or
liability if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld). Nor shall the Company be
liable to any person for any loss, claim, damage, expense or liability arising
from any written information such person furnishes to the Company expressly for
use in connection with a registration statement or from the person's failure to
deliver, at the time required by the Act, a final or amended prospectus that
corrects any actual or alleged untrue statement or omission in any preliminary
prospectus. With respect to any untrue statement or omission or alleged untrue
statement or omission in the information furnished in writing to the Company by
such Holder expressly for use in such registration statement, such Holder will
indemnify and hold harmless each underwriter, the Company (including its
directors, officers, employees and agents), each other Holder of Registrable
Securities (including its respective partners directors, officers, employees and
agents) so registered, and each person who controls any of them within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, expenses and liabilities,
joint or several, to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise to the same extent provided in the
immediately preceding sentence. In no event, however, shall the liability of a
Holder for indemnification under this Subsection 7(e) exceed the proceeds
received by such Holder from its sale of Registrable Securities under such
registration statement.
(f) Notice and Defense. Promptly after any indemnified party
under Subsection 7(e) receives notice of the commencement of any action
(including any governmental action), such indemnified party shall, if it intends
to make a claim against any indemnifying party under
9
<PAGE> 10
Subsection 7(e), deliver to the indemnifying party a written notice describing
the action. The indemnifying party shall have the right to assume the defense
thereof with counsel mutually satisfactory to the parties. An indemnified party
shall have the right to retain its own counsel, at the indemnifying party's
expense, if an actual or potential conflict of interest prevents representations
of such indemnified party by the counsel retained by the indemnifying party. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under Subsection 7(e) to the extent of such prejudice.
8. Transfer to Comply with the Securities Act of 1933.
(a) This Warrant and the shares of Common Stock or any other
security issued or issuable upon exercise of this Warrant may not be offered or
sold except in compliance with the Act and then only against receipt of an
agreement of such person to whom such offer or sale is made to comply with the
provisions of this Section 8 with respect to any resale or other disposition of
such securities; except that no such agreement shall be required from any person
purchasing shares of Common Stock pursuant to a registration statement effective
under the Act.
(b) The Company may cause a legend in substantially the form
set forth on the first page of this Warrant to be placed on each Warrant and
certificate representing shares of Common Stock, any Common Stock Warrant or any
other security issued or issuable upon exercise of this Warrant, unless counsel
for the Company is of the opinion as to any such certificate that such legend is
unnecessary.
9. Applicable Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Nevada.
10. Notice. All notices and other communications provided for herein
shall be in writing and telecopied, mailed or to the intended recipient to the
following addresses: (i) if to the Holder, to Cruttenden Roth Incorporated,
11811 North Tatum Boulevard, Suite 4040, Phoenix, Arizona 85028; and (ii) if to
the Company, at its address appearing on page 1 of this Warrant. The Holder and
the Company may change its address for delivery of notice to such other address
as may be designated therefor by written notice to the other hereunder. All such
communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
11. Survival. The various rights and obligations of the Holder and of
the Company as set forth in Sections 7 and 8 herein shall survive the exercise
and surrender of this Warrant.
12. Successors and Assigns. All the covenants and provisions of this
Warrant shall bind and inure to the benefit of the Holder and the Company and
their respective successors and assigns.
13. Descriptive Headings. The descriptive headings of the several
Sections of this Warrant are inserted for convenience only and do not constitute
a part of this Warrant.
10
<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by its officer duly authorized.
DATED: , 1999.
------------------------------
QUEPASA.COM, INC.
By:
------------------------------
Jeffrey S. Peterson,
President
ATTEST:
- -------------------------------------------------
, Secretary
- ------------------------------------
11
<PAGE> 12
ASSIGNMENT
(to be executed only upon assignment of the Warrant)
FOR VALUE RECEIVED, the undersigned assigns and transfers to the
Assignee named below all of the rights of the undersigned under the attached
Warrant, with respect to the number of shares of Common Stock of QUEPASA.COM,
INC., a Nevada corporation (the "Company") set forth below:
<TABLE>
<CAPTION>
Name Number
of Assignee Address of Shares
----------- ------- ---------
<S> <C> <C>
</TABLE>
The undersigned does hereby irrevocably constitute and appoint
________________________ as Attorney-in-fact to transfer such right on the books
of the Company, with full power of substitution.
Dated: , 1999.
---------------------
-------------------------------------
By:
----------------------------------
Its:
---------------------------------
12
<PAGE> 13
SUBSCRIPTION
(To be executed only upon exercise of Warrant)
quepasa.com, inc.
One Arizona Center
400 East Van Buren, 4th Floor
Phoenix, Arizona 85004
The undersigned hereby elects to purchase, pursuant to the provisions
of the within Warrant held by the undersigned, _________ shares of Common Stock.
(Check Appropriate Box)
[ ] Payment of the Purchase Price per share accompanies this Subscription.
[ ] Pursuant to Section 1 of the within Warrant, the undersigned hereby
surrenders the right to receive ____ shares of Common Stock to which
this exercise relates, in payment of the Purchase Price for all shares
of Common Stock to which this exercise relates.
DATED:
-----------------------
-----------------------------------
By:
--------------------------------
Its:
-------------------------------
13
<PAGE> 1
EXHIBIT 3.03
AMENDED AND RESTATED BYLAWS
OF
QUEPASA.COM, INC.
A NEVADA CORPORATION
<PAGE> 2
AMENDED AND RESTATED BYLAWS
Table of Contents
ARTICLE PAGE
I. Offices....................................................... 1
II. Shareholders.................................................. 1
III. Board of Directors............................................ 8
IV. Officers and Agents........................................... 12
V. Stock......................................................... 15
VI. Indemnification of Certain Persons............................ 17
VII. Provision of Insurance........................................ 20
VIII. Miscellaneous................................................. 20
Effective: April 26, 1999
<PAGE> 3
AMENDED AND RESTATED BYLAWS
OF
QUEPASA.COM, INC.
ARTICLE I
OFFICES
The principal office of the corporation shall be designated from time
to time by the corporation and may be within or outside of Nevada.
The corporation may have such other offices, either within or outside
Nevada, as the board of directors may designate or as the business of the
corporation may require from time to time.
The registered office of the corporation required by the General
Corporation Law of Nevada to be maintained in Nevada may be, but need not be,
identical with the principal office, and the address of the registered office
may be changed from time to time by the board of directors.
ARTICLE II
SHAREHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of the shareholders shall
be held on a date and at a time fixed by the board of directors of the
corporation (or by the president in the absence of action by the board of
directors), beginning with the year 1999, for the purpose of electing directors
and for the transaction of such other business as may come before the meeting.
If the election of directors is not held on the day fixed as provided herein for
any annual meeting of the shareholders, or any adjournment thereof, the board of
directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as it may conveniently be held.
A shareholder may apply to the district court in the county in Nevada
where the corporation's principal office is located or, if the corporation has
no principal office in Nevada, to the district court of the county in which the
corporation's registered office is located to seek an order that a shareholder
meeting be held (i) if an annual meeting was not held within six months after
the close of the corporation's most recently ended fiscal year or fifteen months
after its last annual meeting, whichever is earlier, or (ii) if the shareholder
participated in a proper call of or proper demand for a special meeting and
notice of the special meeting was not given within thirty days after the date of
the call or the date the last of the demands necessary to require calling of the
meeting was received by the corporation pursuant to the General Corporation Law
of Nevada, or the special meeting was not held in accordance with the notice.
Section 2. SPECIAL MEETINGS. Unless otherwise prescribed by statute,
special meetings of the shareholders may be called for any purpose by the
president or by the board of directors. The president shall call a special
meeting of the shareholders if the corporation receives one or more written
demands for the meeting, stating the purpose or purposes for which it is to be
held,
<PAGE> 4
signed and dated by holders of shares representing at least ten percent of all
the votes entitled to be cast on any issue proposed to be considered at the
meeting.
Section 3. PLACE OF MEETING. The board of directors may designate any
place, either within or outside Nevada, as the place for any annual meeting or
any special meeting called by the board of directors. A waiver of notice signed
by all shareholders entitled to vote at a meeting may designate any place,
either within or outside Nevada, as the place for such meeting. If no
designation is made, or if a special meeting is called other than by the board,
the place of meeting shall be the principal office of the corporation.
Section 4. NOTICE OF MEETING. Written notice stating the place, date,
and hour of the meeting shall be given not less than ten nor more than sixty
days before the date of the meeting, except if any other longer period is
required by the General Corporation Law of Nevada. The secretary shall be
required to give such notice only to shareholders entitled to vote at the
meeting except as otherwise required by the General Corporation Law of Nevada.
Notice of a special meeting shall include a description of the purpose
or purposes of the meeting. Notice of an annual meeting need not include a
description of the purpose or purposes of the meeting except the purpose or
purposes shall be stated with respect to (i) an amendment to the articles of
incorporation of the corporation, (ii) a merger or share exchange in which the
corporation is a party and, with respect to a share exchange, in which the
corporation's shares will be acquired, (iii) a sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all or
substantially all of the property of the corporation or of another entity which
this corporation controls, in each case with or without the goodwill, (iv) a
dissolution of the corporation, (v) restatement of the articles of
incorporation, or (vi) any other purpose for which a statement of purpose is
required by the General Corporation Law of Nevada. Notice shall be given
personally or by mail, private carrier, electronically transmitted facsimile or
other form of wire or wireless communication by or at the direction of the
president, the secretary, or the officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed and if in a
comprehensible form, such notice shall be deemed to be given and effective when
deposited in the United States mail, properly addressed to the shareholder at
his address as it appears in the corporation's current record of shareholders,
with first class postage prepaid. If notice is given other than by mail, and
provided that such notice is in a comprehensible form, the notice is given and
to be effective when sent.
If requested by the person or persons lawfully calling such meeting,
the secretary shall give notice thereof at corporate expense. No notice need be
sent to any shareholder if three successive notices mailed to the last known
address of such shareholder have been returned as undeliverable until such time
as another address for such shareholder is made known to the corporation by such
shareholder. In order to be entitled to receive notice of any meeting, a
shareholder shall advise
2
<PAGE> 5
the corporation in writing of any change in such shareholder's mailing address
as shown on the corporation's books and records.
When a meeting is adjourned to another date, time or place, notice need
not be given of the new date, time or place if the new date, time or place of
such meeting is announced before adjournment at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact any
business which may have been transacted at the original meeting. If the
adjournment is for more than 120 days, or if a new record date is fixed for the
adjourned meeting, a new notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting as of the new record date.
A shareholder may waive notice of a meeting before or after the time
and date of the meeting by a writing signed by such shareholder. Such waiver
shall be delivered to the corporation for filing with the corporate records, but
this delivery and filing shall not be conditions to the effectiveness of the
waiver. Further, by attending a meeting either in person or by proxy, a
shareholder waives objection to lack of notice or defective notice of the
meeting unless the shareholder objects at the beginning of the meeting to the
holding of the meeting or the transaction of business at the meeting because of
lack of notice or defective notice. By attending the meeting, the shareholder
also waives any objection to consideration at the meeting of a particular matter
not within the purpose or purposes described in the meeting notice unless the
shareholder objects to considering the matter when it is presented.
Section 5. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to (i) notice of or vote at any meeting of shareholders or
any adjournment thereof, (ii) receive distributions or share dividends, (iii)
demand a special meeting, or (iv) make a determination of shareholders for any
other proper purpose, the board of directors may fix a future date as the record
date for any such determination of shareholders, such date in any case to be not
more than seventy days, and, in case of a meeting of shareholders, not less than
ten days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed by the
directors, the record date shall be the day before the notice of the meeting is
given to shareholders, or the date on which the resolution of the board of
directors providing for a distribution is adopted, as the case may be. When a
determination of shareholders entitled to vote at any meeting of shareholders is
made as provided in this section, such determination shall apply to any
adjournment thereof unless the board of directors fixes a new record date, which
it must do if the meeting is adjourned to a date more than 120 days after the
date fixed for the original meeting. Unless otherwise specified when the record
date is fixed, the time of day for such determination shall be as of the
corporation's close of business on the record date.
Notwithstanding the above, the record date for determining the
shareholders entitled to take action without a meeting or entitled to be given
notice of action so taken shall be the date a writing upon which the action is
taken is first received by the corporation. The record date for
3
<PAGE> 6
determining shareholders entitled to demand a special meeting shall be the date
of the earliest of any of the demands pursuant to which the meeting is called.
Section 6. VOTING LISTS. After a record date is fixed for a
shareholders' meeting, the secretary shall make, at the earlier of ten days
before such meeting or two business days after notice of the meeting has been
given, a complete list of the shareholders entitled to be given notice of such
meeting or any adjournment thereof. The list shall be arranged by voting groups
and within each voting group by class or series of shares, shall be in
alphabetical order within each class or series, and shall show the address of
and the number of shares of each class or series held by each shareholder. For
the period beginning the earlier of ten days prior to the meeting or two
business days after notice of the meeting is given and continuing through the
meeting and any adjournment thereof, this list shall be kept on file at the
principal office of the corporation, or at a place (which shall be identified in
the notice) in the city where the meeting will be held. Such list shall be
available for inspection on written demand by any shareholder (including for the
purpose of this Section 6 any holder of voting trust certificates) or his agent
or attorney during regular business hours and during the period available for
inspection. The original stock transfer books shall be prima facie evidence as
to who are the shareholders entitled to examine such list or transfer books or
to vote at any meeting of shareholders.
Any shareholder, his agent or attorney may copy the list during regular
business hours and during the period it is available for inspection, provided
(i) the shareholder has been a shareholder for at least three months immediately
preceding the demand or holds at least five percent of all outstanding shares of
any class of shares as of the date of the demand, (ii) the demand is made in
good faith and for a purpose reasonably related to the demanding shareholder's
interest as a shareholder, (iii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iv) the records are directly connected with the described purpose, and (v) the
shareholder pays a reasonable charge covering the costs of labor and material
for such copies, not to exceed the estimated cost of production and
reproduction.
Section 7. RECOGNITION PROCEDURE FOR BENEFICIAL OWNERS. The board of
directors may adopt by resolution a procedure whereby a shareholder of the
corporation may certify in writing to the corporation that all or a portion of
the shares registered in the name of such shareholder are held for the account
of a specified person or persons. The resolution may set forth (i) the types of
nominees to which it applies, (ii) the rights or privileges that the corporation
will recognize in a beneficial owner, which may include rights and privileges
other than voting, (iii) the form of certification and the information to be
contained therein, (iv) if the certification is with respect to a record date,
the time within which the certification must be received by the corporation, (v)
the period for which the nominee's use of the procedure is effective, and (vi)
such other provisions with respect to the procedure as the board deems necessary
or desirable. Upon receipt by the corporation of a certificate complying with
the procedure established by the board of directors, the persons specified in
the certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the registered holders of the number of shares specified in
place of the shareholder making the certification.
4
<PAGE> 7
Section 8. QUORUM AND MANNER OF ACTING. A majority of the votes
entitled to be cast on a matter by a voting group represented in person or by
proxy, shall constitute a quorum of that voting group for action on the matter.
If less than a majority of such votes are represented at a meeting, a majority
of the votes so represented may adjourn the meeting from time to time without
further notice, for a period not to exceed 120 days for any one adjournment. If
a quorum is present at such adjourned meeting, any business may be transacted
which might have been transacted at the meeting as originally noticed. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, unless the meeting is adjourned and a
new record date is set for the adjourned meeting.
If a quorum exists, action on a matter other than the election of
directors by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast within the voting group opposing
the action, unless the vote of a greater number or voting by classes is required
by law or the articles of incorporation.
Section 9. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy by signing an appointment form or similar writing, either
personally or by his duly authorized attorney-in-fact. A shareholder may also
appoint a proxy by transmitting or authorizing the transmission of a facsimile
or other electronic transmission providing a written statement of the
appointment to the proxy, a proxy solicitor, proxy support service organization,
or other person duly authorized by the proxy to receive appointments as agent
for the proxy, or to the corporation. The transmitted appointment shall set
forth or be transmitted with written evidence from which it can be determined
that the shareholder transmitted or authorized the transmission of the
appointment. The proxy appointment form or similar writing shall be filed with
the secretary of the corporation before or at the time of the meeting. The
appointment of a proxy is effective when received by the corporation and is
valid for eleven months unless a different period is expressly provided in the
appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile,
of an appointment of a proxy may be substituted for or used in lieu of the
original appointment for any purpose for which the original appointment could be
used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate votes
before the proxy exercises his authority under the appointment. Other notice of
revocation may, in the discretion of the corporation, be deemed to include the
appearance at a shareholders' meeting of the shareholder who granted the proxy
and his voting in person on any matter subject to a vote at such meeting.
5
<PAGE> 8
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment.
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by the
shareholder (including a shareholder who is a successor to the shareholder who
granted the proxy) either personally or by his attorney-in-fact, notwithstanding
that the revocation may be a breach of an obligation of the shareholder to
another person not to revoke the appointment.
Subject to Section 11 and any express limitation on the proxy's
authority appearing on the appointment form, the corporation is entitled to
accept the proxy's vote or other action as that of the shareholder making the
appointment.
Section 10. VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to one vote, except in the election of directors, and
each fractional share shall be entitled to a corresponding fractional vote on
each matter submitted to a vote at a meeting of shareholders, except to the
extent that the voting rights of the shares of any class or classes are limited
or denied by the articles of incorporation as permitted by the General
Corporation Law of Nevada. Cumulative voting shall not be permitted in the
election of directors or for any other purpose. Each record holder of stock
shall be entitled to vote in the election of directors and shall have as many
votes for each of the shares owned by him as there are directors to be elected
and for whose election he has the right to vote.
At each election of directors, that number of candidates equaling the
number of directors to be elected, having the highest number of votes cast in
favor of their election, shall be elected to the board of directors.
Except as otherwise ordered by a court of competent jurisdiction upon a
finding that the purpose of this Section would not be violated in the
circumstances presented to the court, the shares of the corporation are not
entitled to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the first corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation except to the extent the second corporation holds the shares
in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of
redemption is mailed to the holders and a sum sufficient to redeem the shares
has been deposited with a bank, trust company or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares.
Section 11. CORPORATION'S ACCEPTANCE OF VOTES. If the name signed on
a vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a
6
<PAGE> 9
shareholder, the corporation, if acting in good faith, is entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and
give it effect as the act of the shareholder. If the name signed on a vote,
consent, waiver, proxy appointment or proxy appointment revocation does not
correspond to the name of a shareholder, the corporation, if acting in good
faith, is nevertheless entitled to accept the vote, consent, waiver, proxy
appointment or proxy appointment revocation and to give it effect as the act of
the shareholder if:
(i) the shareholder is an entity and the name signed purports to
be that of an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder
and, if the corporation requests, evidence of fiduciary status
acceptable to the corporation has been presented with respect
to the vote, consent, waiver, proxy appointment or proxy
appointment revocation;
(iii) the name signed purports to be that of a receiver or trustee
in bankruptcy of the shareholder and, if the corporation
requests, evidence of this status acceptable to the
corporation has been presented with respect to the vote,
consent, waiver, proxy appointment or proxy appointment
revocation;
(iv) the name signed purports to be that of a pledgee, beneficial
owner or attorney-in-fact of the shareholder and, if the
corporation requests, evidence acceptable to the corporation
of the signatory's authority to sign for the shareholder has
been presented with respect to the vote, consent, waiver,
proxy appointment or proxy appointment revocation;
(v) two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at
least one of the co-tenants or fiduciaries, and the person
signing appears to be acting on behalf of all the co-tenants
or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy appointment
or proxy appointment revocation is otherwise proper under
rules established by the corporation that are not inconsistent
with this Section 11.
The corporation is entitled to reject a vote, consent, waiver, proxy
appointment or proxy appointment revocation if the secretary or other officer or
agent authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
Neither the corporation nor its officers nor any agent who accepts or
rejects a vote, consent, waiver, proxy appointment or proxy appointment
revocation in good faith and in
7
<PAGE> 10
accordance with the standards of this Section is liable in damages for the
consequences of the acceptance or rejection.
Section 12. INFORMAL ACTION BY SHAREHOLDERS. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a written consent (or counterparts thereof) that sets forth the
action so taken is signed by shareholders holding at least that proportion of
the voting power necessary to approve such action and received by the
corporation. Such consent shall have the same force and effect as a vote of the
shareholders and may be stated as such in any document. Action taken under this
Section 12 is effective as of the date the last writing necessary to effect the
action is received by the corporation, unless all of the writings specify a
different effective date, in which case such specified date shall be the
effective date for such action. The record date for determining shareholders
entitled to take action without a meeting is the date the corporation first
receives a writing upon which the action is taken.
Any shareholder who has signed a writing describing and consenting to
action taken pursuant to this Section 12 may revoke such consent by a writing
signed by the shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the corporation before the effectiveness of the action.
Section 13. MEETINGS BY TELECOMMUNICATION. Any or all of the
shareholders may participate in an annual or special shareholders' meeting by,
or the meeting may be conducted through the use of, any means of communication
by which all persons participating in the meeting may hear each other during the
meeting. A shareholder participating in a meeting by this means is deemed to be
present in person at the meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 1. GENERAL POWERS. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the corporation shall
be managed under the direction of, its board of directors, except as otherwise
provided in the General Corporation Law of Nevada or the articles of
incorporation.
Section 2. NUMBER, QUALIFICATIONS AND TENURE. The number of directors
of the corporation may be fixed from time to time by the board of directors,
within a range of no less than one or more than fifteen, but no decrease in the
number of directors shall have the effect of shortening the term of any
incumbent director. A director shall be a natural person who is eighteen years
of age or older. A director need not be a resident of Nevada or a shareholder of
the corporation.
8
<PAGE> 11
Directors shall be elected at each annual meeting of shareholders. Each
director shall hold office until the next annual meeting of shareholders
following his election and thereafter until his successor shall have been
elected and qualified. Directors shall be removed in the manner provided by the
General Corporation Law of Nevada. Any director may be removed by the
shareholders of the voting group that elected the director, with cause, at a
meeting called for that purpose. The notice of the meeting shall state that the
purpose or one of the purposes of the meeting is removal of the director. A
director may be removed only if the number of votes cast in favor of removal
exceeds the number of votes cast against removal.
Section 3. VACANCIES. Any director may resign at any time by giving
written notice to the secretary. Such resignation shall take effect at the time
the notice is received by the secretary unless the notice specifies a later
effective date. Unless otherwise specified in the notice of resignation, the
corporation's acceptance of such resignation shall not be necessary to make it
effective. Any vacancy on the board of directors may be filled by the
affirmative vote of a majority of the shareholders at a special meeting called
for that purpose or by the board of directors. If the directors remaining in
office constitute fewer than a quorum of the board, the directors may fill the
vacancy by the affirmative vote of a majority of all the directors remaining in
office. If elected by the directors, the director shall hold office until the
next annual shareholders' meeting at which directors are elected. If elected by
the shareholders, the director shall hold office for the unexpired term of his
predecessor in office; except that, if the director's predecessor was elected by
the directors to fill a vacancy, the director elected by the shareholders shall
hold office for the unexpired term of the last predecessor elected by the
shareholders.
Section 4. REGULAR MEETINGS. A regular meeting of the board of
directors shall be held without notice immediately after and at the same place
as the annual meeting of shareholders. The board of directors may provide by
resolution the time and place, either within or outside Nevada, for the holding
of additional regular meetings without other notice.
Section 5. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the president or any one of the directors.
The person or persons authorized to call special meetings of the board of
directors may fix any place, either within or outside Nevada, as the place for
holding any special meeting of the board of directors called by them.
Section 6. NOTICE. Notice of the date, time and place of any special
meeting shall be given to each director at least two days prior to the meeting
by written notice either personally delivered or mailed to each director at his
business address, or by notice transmitted by private courier, electronically
transmitted facsimile or other form of wire or wireless communication. If
mailed, such notice shall be deemed to be given and to be effective when
deposited in the United States mail, properly addressed, with first class
postage prepaid. If notice is given by electronically transmitted facsimile or
other similar form of wire or wireless communication, such notice shall be
deemed to be given
9
<PAGE> 12
and to be effective when sent. If a director has designated in writing one or
more reasonable addresses or facsimile numbers for delivery of notice to him,
notice sent by mail, electronically transmitted facsimile or other form of wire
or wireless communication shall not be deemed to have been given or to be
effective unless sent to such addresses or facsimile numbers, as the case may
be.
A director may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such director. Such waiver shall be
delivered to the secretary for filing with the corporate records, but such
delivery and filing shall not be conditions to the effectiveness of the waiver.
Further, a director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless at the beginning of the meeting, or
promptly upon his later arrival, the director objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice and does not thereafter vote for or assent to action taken at the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
Section 7. QUORUM. A majority of the number of directors fixed by the
board of directors pursuant to Article III, Section 2 or, if no number is fixed,
a majority of the number in office immediately before the meeting begins, shall
constitute a quorum for the transaction of business at any meeting of the board
of directors.
Section 8. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 9. COMPENSATION. By resolution of the board of directors, any
director may be paid any one or more of the following: his expenses, if any, of
attendance at meetings, a fixed sum for attendance at each meeting, a stated
salary as director, or such other compensation as the corporation and the
director may reasonably agree upon. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
Section 10. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors or committee of the board at
which action on any corporate matter is taken shall be presumed to have assented
to all action taken at the meeting unless (i) the director objects at the
beginning of the meeting, or promptly upon his arrival, to the holding of the
meeting or the transaction of business at the meeting and does not thereafter
vote for or assent to any action taken at the meeting, (ii) the director
contemporaneously requests that his dissent or abstention as to any specific
action taken be entered in the minutes of the meeting, or (iii) the director
causes written notice of his dissent or abstention as to any specific action to
be received by the presiding officer of the meeting before its adjournment or by
the secretary promptly after the adjournment of the meeting. A director may
dissent to a specific action at a meeting, while assenting to others. The right
to dissent to a specific action taken at a meeting of the board of
10
<PAGE> 13
directors or a committee of the board shall not be available to a director who
voted in favor of such action.
Section 11. COMMITTEES. By resolution adopted by a majority of all the
directors in office when the action is taken, the board of directors may
designate from among its members an executive committee and one or more other
committees, and appoint one or more members of the board of directors to serve
on them. To the extent provided in the resolution.
Sections 4, 5, 6, 7, 8 or 12 of Article III, which govern meetings,
notice, waiver of notice, quorum, voting requirements and action without a
meeting of the board of directors, shall apply to committees and their members
appointed under this Section 11.
Neither the designation of any such committee, the delegation of
authority to such committee, nor any action by such committee pursuant to its
authority shall alone constitute compliance by any member of the board of
directors or a member of the committee in question with his responsibility to
conform to the standard of care set forth in Article III, Section 14 of these
bylaws.
Section 12. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at a meeting of the directors or any committee designated
by the board of directors may be taken without a meeting if a written consent
(or counterparts thereof) that sets forth the action so taken is signed by all
of the directors entitled to vote with respect to the action taken. Such consent
shall have the same force and effect as a unanimous vote of the directors or
committee members and may be stated as such in any document. Unless the consent
specifies a different effective time or date, action taken under this Section 12
is effective at the time or date the last director signs a writing describing
the action taken, unless, before such time, any director has revoked his consent
by a writing signed by the director and received by the president or the
secretary of the corporation.
11
<PAGE> 14
Section 13. TELEPHONIC MEETINGS. The board of directors may permit any
director (or any member of a committee designated by the board) to participate
in a regular or special meeting of the board of directors or a committee thereof
through the use of any means of communication by which all directors
participating in the meeting can hear each other during the meeting. A director
participating in a meeting in this manner is deemed to be present in person at
the meeting.
Section 14. STANDARD OF CARE. A director shall perform his duties as a
director, including without limitation his duties as a member of any committee
of the board, in good faith, in a manner he reasonably believes to be in the
best interests of the corporation, and with the care an ordinarily prudent
person in a like position would exercise under similar circumstances. In
performing his duties, a director shall be entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by the persons herein
designated. However, he shall not be considered to be acting in good faith if he
has knowledge concerning the matter in question that would cause such reliance
to be unwarranted. A director shall not be liable to the corporation or its
shareholders for any action he takes or omits to take as a director if, in
connection with such action or omission, he performs his duties in compliance
with this Section 14.
The designated persons on whom a director is entitled to rely are (i)
one or more officers or employees of the corporation whom the director
reasonably believes to be reliable and competent in the matters presented, (ii)
legal counsel, public accountant, or other person as to matters which the
director reasonably believes to be within such person's professional or expert
competence, or (iii) a committee of the board of directors on which the director
does not serve if the director reasonably believes the committee merits
confidence.
ARTICLE IV
OFFICERS AND AGENTS
Section 1. GENERAL. The officers of the corporation shall be a chief
executive officer and/or president, a secretary and a treasurer, and may also
include one or more vice presidents, each of which officer shall be appointed by
the board of directors and shall be a natural person eighteen years of age or
older. One person may hold more than one office. The board of directors or an
officer or officers so authorized by the board may appoint such other officers,
assistant officers, committees and agents, including a chairman of the board,
assistant secretaries and assistant treasurers, as they may consider necessary.
Except as expressly prescribed by these bylaws, the board of directors or the
officer or officers authorized by the board shall from time to time determine
the procedure for the appointment of officers, their authority and duties and
their compensation, provided that the board of directors may change the
authority, duties and compensation of any officer who is not appointed by the
board.
Section 2. APPOINTMENT AND TERM OF OFFICE. The officers of the
corporation to be appointed by the board of directors shall be appointed at each
annual meeting of the board held after each annual meeting of the shareholders.
If the appointment of officers is not made at such
12
<PAGE> 15
meeting or if an officer or officers are to be appointed by another officer or
officers of the corporation, such appointments shall be made as determined by
the board of directors or the appointing person or persons. Each officer shall
hold office until the first of the following occurs: his successor shall have
been duly appointed and qualified, his death, his resignation, or his removal in
the manner provided in Section 3.
Section 3. RESIGNATION AND REMOVAL. An officer may resign at any time
by giving written notice of resignation to the president, secretary or other
person who appoints such officer. The resignation is effective when the notice
is received by the corporation unless the notice specifies a later effective
date.
Any officer or agent may be removed at any time with or without cause
by the board of directors or an officer or officers authorized by the board.
Such removal does not affect the contract rights, if any, of the corporation or
of the person so removed. The appointment of an officer or agent shall not in
itself create contract rights.
Section 4. VACANCIES. A vacancy in any office, however occurring, may
be filled by the board of directors, or by the officer or officers authorized by
the board, for the unexpired portion of the officer's term. If an officer
resigns and his resignation is made effective at a later date, the board of
directors, or officer or officers authorized by the board, may permit the
officer to remain in office until the effective date and may fill the pending
vacancy before the effective date if the board of directors or officer or
officers authorized by the board provide that the successor shall not take
office until the effective date. In the alternative, the board of directors, or
officer or officers authorized by the board of directors, may remove the officer
at any time before the effective date and may fill the resulting vacancy.
Section 5. PRESIDENT. The president shall preside at all meetings of
shareholders and all meetings of the board of directors unless the board of
directors has appointed a chairman, vice chairman, or other officer of the board
and has authorized such person to preside at meetings of the board of directors.
Subject to the direction and supervision of the board of directors, the
president shall be the chief executive officer of the corporation, and shall
have general and active control of its affairs and business and general
supervision of its officers, agents and employees. Unless otherwise directed by
the board of directors, the president shall attend in person or by substitute
appointed by him, or shall execute on behalf of the corporation written
instruments appointing a proxy or proxies to represent the corporation, at all
meetings of the stockholders of any other corporation in which the corporation
holds any stock. On behalf of the corporation, the president may in person or by
substitute or by proxy execute written waivers of notice and consents with
respect to any such meetings. At all such meetings and otherwise, the president,
in person or by substitute or proxy, may vote the stock held by the corporation,
execute written consents and other instruments with respect to such stock, and
exercise any and all rights and powers incident to the ownership of said stock,
subject to the instructions, if any, of the board of directors. The president
shall have custody of the treasurer's bond, if any. The president shall have
such additional authority and duties as are appropriate and customary for the
office of
13
<PAGE> 16
president and chief executive officer, except as the same may be expanded or
limited by the board of directors from time to time.
Section 6. VICE PRESIDENTS. The vice presidents shall assist the
president and shall perform such duties as may be assigned to them by the
president or by the board of directors. In the absence of the president, the
vice president, if any (or, if more than one, the vice presidents in the order
designated by the board of directors, or if the board makes no such designation,
then the vice president designated by the president, or if neither the board nor
the president makes any such designation, the senior vice president as
determined by first election to that office), shall have the powers and perform
the duties of the president.
Section 7. SECRETARY. The secretary shall (i) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
board of directors, a record of all actions taken by the shareholders or board
of directors without a meeting, a record of all actions taken by a committee of
the board of directors in place of the board of directors on behalf of the
corporation, and a record of all waivers of notice of meetings of shareholders
and of the board of directors or any committee thereof, (ii) see that all
notices are duly given in accordance with the provisions of these bylaws and as
required by law, (iii) serve as custodian of the corporate records and of the
seal of the corporation and affix the seal to all documents when authorized by
the board of directors, (iv) keep at the corporation's registered office or
principal place of business a record containing the names and addresses of all
shareholders in a form that permits preparation of a list of shareholders
arranged by voting group and by class or series of shares within each voting
group, that is alphabetical within each class or series and that shows the
address of, and the number of shares of each class or series held by, each
shareholder, unless such a record shall be kept at the office of the
corporation's transfer agent or registrar, (v) maintain at the corporation's
principal office the originals or copies of the corporation's articles of
incorporation, bylaws, minutes of all shareholders' meetings and records of all
action taken by shareholders without a meeting for the past three years, all
written communications within the past three years to shareholders as a group or
to the holders of any class or series of shares as a group, a list of the names
and business addresses of the current directors and officers, a copy of the
corporation's most recent corporate report filed with the Secretary of State,
and financial statements showing in reasonable detail the corporation's assets
and liabilities and results of operations for the last three years, (vi) have
general charge of the stock transfer books of the corporation, unless the
corporation has a transfer agent, (vii) authenticate records of the corporation,
and (viii) in general, perform all duties incident to the office of secretary
and such other duties as from time to time may be assigned to him by the
president or by the board of directors. Assistant secretaries, if any, shall
have the same duties and powers, subject to supervision by the secretary. The
directors and/or shareholders may however respectively designate a person other
than the secretary or assistant secretary to keep the minutes of their
respective meetings.
14
<PAGE> 17
Any books, records, or minutes of the corporation may be in written
form or in any form capable of being converted into written form within a
reasonable time.
Section 8. TREASURER. The treasurer shall be the principal financial
officer of the corporation, shall have the care and custody of all funds,
securities, evidences of indebtedness and other personal property of the
corporation and shall deposit the same in accordance with the instructions of
the board of directors. Subject to the limits imposed by the board of directors,
he shall receive and give receipts and acquittances for money paid in on account
of the corporation, and shall pay out of the corporation's funds on hand all
bills, payrolls and other just debts of the corporation of whatever nature upon
maturity. He shall perform all other duties incident to the office of the
treasurer and, upon request of the board, shall make such reports to it as may
be required at any time. He shall, if required by the board, give the
corporation a bond in such sums and with such sureties as shall be satisfactory
to the board, conditioned upon the faithful performance of his duties and for
the restoration to the corporation of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation. He shall have such other powers and perform such other
duties as may from time to time be prescribed by the board of directors or the
president. The assistant treasurers, if any, shall have the same powers and
duties, subject to the supervision of the treasurer.
The treasurer shall also be the principal accounting officer of the
corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account as
required by the General Corporation Law of Nevada, prepare and file all local,
state and federal tax returns, prescribe and maintain an adequate system of
internal audit and prepare and furnish to the president and the board of
directors statements of account showing the financial position of the
corporation and the results of its operations.
ARTICLE V
STOCK
Section 1. CERTIFICATES. The board of directors shall be authorized to
issue any of its classes of shares with or without certificates. The fact that
the shares are not represented by certificates shall have no effect on the
rights and obligations of shareholders. If the shares are represented by
certificates, such shares shall be represented by consecutively numbered
certificates signed, either manually or by facsimile, in the name of the
corporation by the president. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, such certificate may
nonetheless be issued by the corporation with the same effect as if he were such
officer at the date of its issue. All certificates shall be consecutively
numbered, and the names of the owners, the number of shares, and the date of
issue shall be entered on the books of the corporation. Each certificate
representing shares shall state upon its face:
(i) That the corporation is organized under the laws of Nevada;
15
<PAGE> 18
(ii) The name of the person to whom issued;
(iii) The number and class of the shares and the designation of the
series, if any, that the certificate represents;
(iv) The par value, if any, of each share represented by the
certificate;
(v) Any restrictions imposed by the corporation upon the transfer
of the shares represented by the certificate.
If shares are not represented by certificates, within a reasonable time
following the issue or transfer of such shares, the corporation shall send the
shareholder a complete written statement of all of the information required to
be provided to holders of uncertificated shares by the General Corporation Law
of Delaware.
Section 2. CONSIDERATION FOR SHARES. Certificated or uncertificated
shares shall not be issued until the shares represented thereby are fully paid.
The board of directors may authorize the issuance of shares for consideration
consisting of any tangible or intangible property or benefit to the corporation,
including cash, promissory notes, services performed or other securities of the
corporation. Future services shall not constitute payment or partial payment for
shares of the corporation. The promissory note of a subscriber or an affiliate
of a subscriber shall not constitute payment or partial payment for shares of
the corporation unless the note is negotiable and is secured by collateral,
other than the shares being purchased, having a fair market value at least equal
to the principal amount of the note. For purposes of this Section 2, "promissory
note" means a negotiable instrument on which there is an obligation to pay
independent of collateral and does not include a non-recourse note.
Section 3. LOST CERTIFICATES. In case of the alleged loss, destruction
or mutilation of a certificate of stock, the board of directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as the board may prescribe. The board of directors may in
its discretion require an affidavit of lost certificate and/or a bond in such
form and amount and with such surety as it may determine before issuing a new
certificate.
Section 4. TRANSFER OF SHARES. Upon surrender to the corporation or to
a transfer agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and receipt of such documentary stamps as may be required by law and
evidence of compliance with all applicable securities laws and other
restrictions, the corporation shall issue a new certificate to the person
entitled thereto, and cancel the old certificate. Every such transfer of stock
shall be entered on the stock books of the corporation which shall be kept at
its principal office or by the person and at the place designated by the board
of directors.
16
<PAGE> 19
Except as otherwise expressly provided in Article II, Sections 7 and
11, and except for the assertion of dissenters' rights to the extent provided in
Article 113 of the Nevada General Corporation Law, the corporation shall be
entitled to treat the registered holder of any shares of the corporation as the
owner thereof for all purposes, and the corporation shall not be bound to
recognize any equitable or other claim to, or interest in, such shares or rights
deriving from such shares on the part of any person other than the registered
holder, including without limitation any purchaser, assignee or transferee of
such shares or rights deriving from such shares, unless and until such other
person becomes the registered holder of such shares, whether or not the
corporation shall have either actual or constructive notice of the claimed
interest of such other person.
Section 5. TRANSFER AGENT, REGISTRARS AND PAYING AGENTS. The board may
at its discretion appoint one or more transfer agents, registrars and agents for
making payment upon any class of stock, bond, debenture or other security of the
corporation. Such agents and registrars may be located either within or outside
Nevada. They shall have such rights and duties and shall be entitled to such
compensation as may be agreed.
ARTICLE VI
INDEMNIFICATION OF CERTAIN PERSONS
Section 1. INDEMNIFICATION. For purposes of Article VI, a "Proper
Person" means any person (including the estate or personal representative of a
director) who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether formal or informal, by
reason of the fact that he is or was a director, officer, employee, fiduciary or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, fiduciary or agent of any
foreign or domestic profit or nonprofit corporation or of any partnership, joint
venture, trust, profit or nonprofit unincorporated association, limited
liability company, or other enterprise or employee benefit plan. The corporation
shall indemnify any Proper Person against reasonably incurred expenses
(including attorneys' fees), judgments, penalties, fines (including any excise
tax assessed with respect to an employee benefit plan) and amounts paid in
settlement reasonably incurred by him in connection with such action, suit or
proceeding if it is determined by the groups set forth in Section 4 of this
Article that he conducted himself in good faith and that he reasonably believed
(i) in the case of conduct in his official capacity with the corporation, that
his conduct was in the corporation's best interests, or (ii) in all other cases
(except criminal cases), that his conduct was at least not opposed to the
corporation's best interests, or (iii) in the case of any criminal proceeding,
that he had no reasonable cause to believe his conduct was unlawful. Official
capacity means, when used with respect to a director, the office of director
and, when used with respect to any other Proper Person, the office in a
corporation held by the officer or the employment, fiduciary or agency
relationship undertaken by the employee, fiduciary, or agent on behalf of the
corporation. Official capacity does not include service for any other domestic
or foreign corporation or other person or employee benefit plan.
17
<PAGE> 20
A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in or beneficiaries of the plan is conduct that satisfies the
requirement in (ii) of this Section 1. A director's conduct with respect to an
employee benefit plan for a purpose that the director did not reasonably believe
to be in the interests of the participants in or beneficiaries of the plan shall
be deemed not to satisfy the requirement of this section that he conduct himself
in good faith.
No indemnification shall be made under this Article VI to a Proper
Person with respect to any claim, issue or matter in connection with a
proceeding by or in the right of a corporation in which the Proper Person was
adjudged liable to the corporation or in connection with any proceeding charging
that the Proper Person derived an improper personal benefit, whether or not
involving action in an official capacity, in which he was adjudged liable on the
basis that he derived an improper personal benefit. Further, indemnification
under this section in connection with a proceeding brought by or in the right of
the corporation shall be limited to reasonable expenses, including attorneys'
fees, incurred in connection with the proceeding.
Section 2. RIGHT TO INDEMNIFICATION. The corporation shall indemnify
any Proper Person who was wholly successful, on the merits or otherwise, in
defense of any action, suit, or proceeding as to which he was entitled to
indemnification under Section 1 of this Article VI against expenses (including
attorneys' fees) reasonably incurred by him in connection with the proceeding
without the necessity of any action by the corporation other than the
determination in good faith that the defense has been wholly successful.
Section 3. EFFECT OF TERMINATION OF ACTION. The termination of any
action, suit or proceeding by judgment, order, settlement or conviction, or upon
a plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person seeking indemnification did not meet the standards
of conduct described in Section 1 of this Article VI. Entry of a judgment by
consent as part of a settlement shall not be deemed an adjudication of
liability, as described in Section 2 of this Article VI.
Section 4. GROUPS AUTHORIZED TO MAKE INDEMNIFICATION DETERMINATION.
Except where there is a right to indemnification as set forth in Sections 1 or 2
of this Article or where indemnification is ordered by a court in Section 5, any
indemnification shall be made by the corporation only as determined in the
specific case by a proper group that indemnification of the Proper Person is
permissible under the circumstances because he has met the applicable standards
of conduct set forth in Section 1 of this Article. This determination shall be
made by the board of directors by a majority vote of those present at a meeting
at which a quorum is present, which quorum shall consist of directors not
parties to the proceeding ("Quorum"). If a Quorum cannot be obtained, the
determination shall be made by a majority vote of a committee of the board of
directors designated by the board, which committee shall consist of two or more
directors not parties to the proceeding, except that directors who are parties
to the proceeding may participate in the designation of directors for the
committee. If a Quorum of the board of directors cannot be obtained and the
committee cannot be established, or even if a Quorum is obtained or the
18
<PAGE> 21
committee is designated and a majority of the directors constituting such Quorum
or committee so directs, the determination shall be made by (i) independent
legal counsel selected by a vote of the board of directors or the committee in
the manner specified in this Section 4 or, if a Quorum of the full board of
directors cannot be obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote of the full board
(including directors who are parties to the action) or (ii) a vote of the
shareholders.
Authorization of indemnification and advance of expenses shall be made
in the same manner as the determination that indemnification or advance of
expenses is permissible except that, if the determination that indemnification
or advance of expenses is permissible is made by independent legal counsel,
authorization of indemnification and advance of expenses shall be made by the
body that selected such counsel.
Section 5. COURT-ORDERED INDEMNIFICATION. Any Proper Person may apply
for indemnification to the court conducting the proceeding or to another court
of competent jurisdiction for mandatory indemnification under Section 2 of this
Article, including indemnification for reasonable expenses incurred to obtain
court-ordered indemnification. If a court determines that the Proper Person is
entitled to indemnification under Section 2 of this Article, the court shall
order indemnification, including the Proper Person's reasonable expenses
incurred to obtain court-ordered indemnification. If the court determines that
such Proper Person is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances, whether or not he met the standards of
conduct set forth in Section 1 of this Article or was adjudged liable in the
proceeding, the court may order such indemnification as the court deems proper
except that if the Proper Person has been adjudged liable, indemnification shall
be limited to reasonable expenses incurred in connection with the proceeding and
reasonable expenses incurred to obtain court-ordered indemnification.
Section 6. ADVANCE OF EXPENSES. Reasonable expenses (including
attorneys' fees) incurred in defending an action, suit or proceeding as
described in Section 1 may be paid by the corporation to any Proper Person in
advance of the final disposition of such action, suit or proceeding upon receipt
of (i) a written affirmation of such Proper Person's good faith belief that he
has met the standards of conduct prescribed by Section 1 of this Article VI,
(ii) a written undertaking, executed personally or on the Proper Person's
behalf, to repay such advances if it is ultimately determined that he did not
meet the prescribed standards of conduct (the undertaking shall be an unlimited
general obligation of the Proper Person but need not be secured and may be
accepted without reference to financial ability to make repayment), and (iii) a
determination is made by the proper group (as described in Section 4 of this
Article VI) that the facts as then known to the group would not preclude
indemnification. Determination and authorization of payments shall be made in
the same manner specified in Section 4 of this Article VI.
Section 7. ADDITIONAL INDEMNIFICATION TO CERTAIN PERSONS OTHER THAN
DIRECTORS. In addition to the indemnification provided to officers, employees,
fiduciaries or agents because of their status as Proper Persons under this
Article, the corporation may also indemnify and advance
19
<PAGE> 22
expenses to them if they are not directors of the corporation to a greater
extent than is provided in these bylaws, if not inconsistent with public policy,
and if provided for by general or specific action of its board of directors or
shareholders or by contract.
Section 8. WITNESS EXPENSES. The sections of this Article VI do not
limit the corporation's authority to pay or reimburse expenses incurred by a
director in connection with an appearance as a witness in a proceeding at a time
when he has not been made or named as a defendant or respondent in the
proceeding.
Section 9. REPORT TO SHAREHOLDERS. Any indemnification of or advance of
expenses to a director in accordance with this Article VI, if arising out of a
proceeding by or on behalf of the corporation, shall be reported in writing to
the shareholders with or before the notice of the next shareholders' meeting. If
the next shareholder action is taken without a meeting at the instigation of the
board of directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such action.
20
<PAGE> 23
ARTICLE VII
Section 1. PROVISION OF INSURANCE. By action of the board of directors,
notwithstanding any interest of the directors in the action, the corporation may
purchase and maintain insurance, in such scope and amounts as the board of
directors deems appropriate, on behalf of any person who is or was a director,
officer, employee, fiduciary or agent of the corporation, or who, while a
director, officer, employee, fiduciary or agent of the corporation, is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee, fiduciary or agent of any other foreign or domestic profit or
nonprofit corporation or of any partnership, joint venture, trust, profit or
nonprofit unincorporated association, limited liability company, other
enterprise or employee benefit plan, against any liability asserted against, or
incurred by, him in that capacity or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against such
liability under the provisions of Article VI or applicable law. Any such
insurance may be procured from any insurance company designated by the board of
directors of the corporation, whether such insurance company is formed under the
laws of Nevada or any other jurisdiction of the United States or elsewhere,
including any insurance company in which the corporation has an equity interest
or any other interest, through stock ownership or otherwise.
ARTICLE VIII
MISCELLANEOUS
Section 1. SEAL. The board of directors may adopt a corporate seal,
which shall contain the name of the corporation and the words, "Seal, Nevada."
Section 2. FISCAL YEAR. The fiscal year of the corporation shall be as
established by the board of directors.
Section 3. AMENDMENTS. The board of directors shall have power, to the
maximum extent permitted by the Nevada General Corporation Law, to make, amend
and repeal the bylaws of the corporation at any regular or special meeting of
the board unless the shareholders, in making, amending or repealing a particular
bylaw, expressly provide that the directors may not amend or repeal such bylaw.
The shareholders also shall have the power to make, amend or repeal the bylaws
of the corporation at any annual meeting or at any special meeting called for
that purpose.
Section 4. RECEIPT OF NOTICES BY THE CORPORATION. Notices, shareholder
writings consenting to action, and other documents or writings shall be deemed
to have been received by the corporation when they are actually received: (1) at
the registered office of the corporation in Nevada; (2) at the principal office
of the corporation (as that office is designated in the most recent document
filed by the corporation with the secretary of state for Nevada designating a
principal office) addressed to the attention of the secretary of the
corporation; (3) by the secretary of the corporation wherever the secretary may
be found; or (4) by any other person authorized from time to time by the board
of directors or the president to receive such writings, wherever such person is
found.
21
<PAGE> 24
Section 5. GENDER. The masculine gender is used in these bylaws as a
matter of convenience only and shall be interpreted to include the feminine and
neuter genders as the circumstances indicate.
Section 6. CONFLICTS. In the event of any irreconcilable conflict
between these bylaws and either the corporation's articles of incorporation or
applicable law, the latter shall control.
Section 7. DEFINITIONS. Except as otherwise specifically provided in
these bylaws, all terms used in these bylaws shall have the same definition as
in the General Corporation Law of Nevada.
22
<PAGE> 1
KUMMER KAEMPFER BONNER & RENSHAW
ATTORNEYS AT LAW
[Letterhead]
April 23, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: quepasa.com,inc.
REGISTRATION STATEMENT ON FORM S-1
REGISTRATION NO. 333-74201
Ladies and Gentlemen:
As special Nevada counsel to quepasa.com, inc., a Nevada corporation
(the "Company"), we are rendering this opinion in connection with the
registration by the Company of warrants (the "Warrants") to purchase 400,000
shares of the Company's common stock, $.001 par value ("Common Stock"),
4,600,000 shares of Common Stock including 600,000 shares subject to an
over-allotment option and an additional 400,000 shares of Common Stock
underlying the Warrants (collectively, the "Shares") and the proposed issuance
and sale of the Warrants and Shares under the above-referenced registration
statement.
We have examined all instruments, documents and records which we deemed
relevant and necessary for the basis of our opinion hereinafter expressed. In
such examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies.
Based on such examination and subject to the completion of all
conditions to closing provided under the relevant underwriting agreement, and
subject to such other limitations hereinabove provided, we are of the opinion
that the Share are validly authorized shares of Common Stock, and when issued,
will be legally issued, fully paid and nonassessable, and that the Warrants are
validly authorized Warrants to purchase shares of Common Stock and when issued
will be legally issued, fully paid and nonassessable.
<PAGE> 2
Securities and Exchange Commission
April 23, 1999
Page 2
We hereby consent to the filing of the foregoing opinion as an Exhibit
to the above-referenced registration statement to be filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, and to the
use of our name in such registration statement and in the related Prospectus
under the heading "Legal Matters."
Sincerely,
/s/ Kummer Kaempfer Bonner & Renshaw
--------------------------------------
KUMMER KAEMPFER BONNER & RENSHAW
<PAGE> 1
Exhibit 10.04
ARIZONA FULL-SERVICE OFFICE LEASE
ONE ARIZONA CENTER
THIS LEASE is made and entered into as of by and
between ROUSE-PHOENIX CORPORATE CENTER LIMITED PARTNERSHIP, a Maryland limited
partnership ("Landlord") by ROUSE OFFICE MANAGEMENT OF ARIZONA, INC., Managing
Agent, and QUEPASA.COM, INC., a Nevada corporation ("Tenant").
In consideration of the rents hereinafter reserved and the agreements
hereinafter set forth, Landlord and Tenant mutually agree as follows:
1. SUMMARY OF TERMS.
The following is a summary of the principal terms of the Lease. Any
capitalized term set forth below shall, for the purposes of this Lease, have the
meaning ascribed to it in this Section 1.
A. Description of Premises
(1) Building: The building known as One Arizona Center and located
at 400 East Van Buren Street, Phoenix, Arizona 85004.
(2) Business Community: Arizona Center
(3) Premises: Approximately 13,277 square feet of Rental Area on the
fourth floor of the Building as shown on Schedule A.
B. Rent
(1) Annual Basic Rent: (Year 3 below includes the six (6) month
period of June 1, 2002 through November 30, 2002)
<TABLE>
<CAPTION>
PSF Annual Monthly
--- ------ -------
Period Basic Rent Basic Rent Installment
- ------ ---------- ---------- -----------
<S> <C> <C> <C>
Year 1: $22.00 $292,094.00 $24,341.17
Year 2: $22.50 $298,732.50 $24,894.38
Year 3: $23.50 $312,009.50 $26,000.79
</TABLE>
(2) Advance Rent: None.
(3) Security Deposit: Twenty-six Thousand Dollars and No Cents
($26,000.00) to be held by Landlord as provided in Section 6.4.
C. Adjustments.
(1) Base Operating Costs: The Base Operating Costs for the Premises
shall be the Operating Costs for the Operating Year which commenced January 1,
1999 and ends December 31, 1999, multiplied by Tenant's Fractional Share.
(2) Adjustment Period Consumer Price Index. Intentionally omitted.
<PAGE> 2
D. Term
(1) Term: Three (3) years and six (6) months, subject to
Section 4.
(2) Lease Commencement Date: June 1, 1999, subject to Section 4.
(3) Termination Date: November 30, 2002, subject to Section 4.
E. Notice and Payment
(1) Tenant Notice Address:
Quepasa.com, Inc.
400 E. Van Buren
Phoenix, Arizona 85004
Attention Errol Shiffman
(2) Landlord Notice Address:
Rouse Office Management of Arizona, Inc.
455 N. 3rd Street - Suite 385
Phoenix, Arizona 85004-2167
and
Ringwalt & Liesche Co.
1440 Kiewit Plaza
Omaha, NE 68131
Attn: Mr. Michael A. Goldberg
with a copy to:
ROUSE OFFICE MANAGEMENT OF ARIZONA, INC.
c/o The Rouse Company
10275 Little Patuxent Pkwy
Columbia, Maryland 21044
Attention: General Counsel
(3) Landlord Payment Address:
Rouse Office Management of Arizona, Inc.
P.O. Box 29367
Phoenix, AZ 85038-9397
(Please designate the account name of Rouse-Phoenix Corporate
Center Limited Partnership on all checks so delivered.)
F. Broker
Phil Briedenbach
Colliers International
3636 North Central Avenue
Phoenix, Az. 85012
2. DEFINITIONS.
<PAGE> 3
For purposes of this Lease, the Schedules attached and made a part hereof
and all agreements supplemental to this Lease, the following terms shall have
the respective meanings as set forth in the following Section, subsection,
paragraph and Schedule references:
<TABLE>
<CAPTION>
Reference
<S> <C>
Alterations .................................................... 15.1
Annual Basic Rent .............................................. 1.B.(1)
Bankruptcy Code ................................................ 19.1
Building ....................................................... 1.A.(1)
Casualty ....................................................... 17.1
Common Area .................................................... 10.1
Default Rate ................................................... 6.5
Event of Default ............................................... 20.1
Event of Tenant's Bankruptcy ................................... 19.1
Fractional Share ............................................... 7.1
Insolvency Laws ................................................ 19.1
Landlord Notice Address ........................................ 1.E.
Landlord Payment Address ....................................... 1.E.
Lease Commencement Date ........................................ 1.D.(2)
Mortgage ....................................................... 27
Mortgagee ...................................................... 27
Operating Costs ................................................ 7.1
Operating Costs Statement ...................................... 7.2
Operating Year ................................................. 7.1
Premises ....................................................... 1.A.(3)
Property ....................................................... 7.1
Public Areas ................................................... Schedule C
REA ............................................................ 7.1
Rental Area .................................................... 3
Rental Year .................................................... 6.1
Rules and Regulations .......................................... 9
Security Deposit ............................................... 1.B.(3)
Tenant Allowance ............................................... 5.1
Tenant Improvements ............................................ 5.1
Tenant Notice Address .......................................... 1.E.
Tenant's Share of Increased Operating Costs .................... 7.2
Tenant's Personal Property ..................................... 15.3
Term ........................................................... 4.1
Termination Date ............................................... 1.D.(3)
Transfer ....................................................... 25
</TABLE>
3. LEASED PREMISES; MEASUREMENT.
3.3. Leased Premises. Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, the Premises as shown on the plan attached hereto as
Schedule A, together with the right to use, in common with others, the Common
Area. The rental area of the Premises ("Rental Area") has been computed in
accordance with the applicable formula set forth in Schedule X attached hereto
and made a part hereof.
<PAGE> 4
3.4. Measurement. Within sixty (60) days following completion of the
Tenant Improvements, either Landlord or Tenant shall have the right to remeasure
the Premises in accordance with the above formula and if such measurement shall
disclose that the Rental Area of the Premises is different from that set forth
in Section 1.A. hereof, the Annual Basic Rent and the Tenant's Fractional Share
shall be adjusted accordingly. If neither party elects to remeasure the Premises
during such sixty (60) day period, then the Rental Area set forth in Section
1.A. shall be conclusively deemed the Rental Area of the Premises.
3.5. Tenant's Right to Expand. Tenant anticipates that its business
operation may grow during the Term of this Lease and such growth could require
Tenant to expand into additional or larger space. To the extent that additional
or larger space is available for leasing at the time Tenant requests same,
Landlord agrees to use reasonable efforts to meet Tenant's reasonable expansion
requirements subject to the following terms and conditions: (a) that the
additional or larger space shall be located either on the third, fourth or fifth
floors of the Building; (b) that the Annual Basic Rent for the additional or
larger alternate space shall be at the current market rental rate for such space
(taking into consideration, the current market tenant improvement rate), as
determined by Landlord, but not more than the rate at which Landlord would offer
such space to any third party; (c) that there shall be no abatement of rent; (d)
that Landlord shall not be obligated to construct, pay for or grant an allowance
with respect to tenant improvements; (e) that Tenant shall not be in default of
the Lease and shall be in possession of the Premises at the time Tenant
exercises this right to expand; and (f) that Tenant shall execute documents in
the form and substance reasonably required by Landlord to reflect the expansion
of the Premises.
Landlord shall have six (6) months following Tenant's notice to satisfy
Tenant's expansion requirements. If Landlord is not able to satisfy Tenant's
expansion requirements within said six (6) month period, then Tenant shall have
the right to terminate this Lease any time after the end of the twenty-fourth
(24th) month of the Term by giving Landlord not less than three (3) months
notice of its election to terminate. Tenant shall have no rights to terminate
this Lease during the first twenty-four months of the Term if Landlord is unable
to satisfy its expansion requirements during said period.
4. TERM AND COMMENCEMENT OF TERM.
4.1. Term. The term of this Lease (the "Term") shall commence on the Lease
Commencement Date; provided, however, that if the Premises are not Ready for
Occupancy as of such Lease Commencement Date for any reason, except for delays
caused by Tenant, then the Lease Commencement Date shall be delayed until the
earlier of:
a. the date on which Tenant shall take possession of all or any
portion of the Premises, provided that such possession shall be only with the
written approval of Landlord; or
b. the date the Premises are Ready for Occupancy;
and, if necessary, the Termination Date shall be adjusted to effect the total
number of years in the Term, as set forth in subsection 1.D. plus the part of
the month, if any, from the adjusted Lease Commencement Date to the first full
month of the Term.
In the event the Premises are not Ready for Occupancy by the Lease
Commencement Date, as initially set forth above, because of a delay caused by
Tenant, then said Lease Commencement Date shall not be delayed and Tenant's
obligations shall commence as of said date, notwithstanding the status of
construction.
The Term shall be for the period of time specified in Section 1.D.(1) plus
the part of the month, if any, from the Lease Commencement Date to the first day
of the first full calendar month in the Term, unless earlier terminated pursuant
to any other provision of this Lease or pursuant to law. At Landlord's
<PAGE> 5
request, Tenant shall promptly enter into one or more supplementary written
agreements, in such form as Landlord shall reasonably prescribe, specifying the
Lease Commencement Date and the Termination Date.
4.2. Ready For Occupancy. For purposes hereof, the Premises shall be
deemed conclusively ready for occupancy ("Ready for Occupancy") upon the
completion of the following conditions:
a. Landlord has substantially completed its work on the Tenant's
Improvements except for punch list items; and
b. Landlord shall have received any governmental approvals which are
necessary in order for Tenant to occupy the Premises, unless Tenant's acts or
omissions have caused such approvals to be denied, in which case Tenant shall be
deemed to have waived this condition 4.2.b.
5. TENANT IMPROVEMENTS AND ACCEPTANCE OF PREMISES.
5.1. Tenant Improvements. Upon execution of this Lease by Tenant and the
delivery thereof to Landlord, Landlord shall make improvements to the Premises
("Tenant Improvements") in accordance with Plans and Specifications to be
prepared by Landlord and approved in writing by Tenant, which approval shall not
be unreasonably withheld. Once the Plans and Specifications are acceptable to
both parties, it is agreed that same shall be attached hereto and become a part
of this Lease, being identified as Schedule B. All materials shall be
building-standard materials unless otherwise specified in Schedule B. Except as
otherwise specifically provided in this Lease, Landlord shall not be responsible
for performing or paying for the moving or installation of telephone and
computer systems, wiring or cabling, or the acquisition, moving or installation
of Tenant's furnishings, fixtures and equipment in the Premises. Landlord agrees
to bear the cost of the Tenant Improvements in an amount not to exceed Four
Dollars and Fifty Cents ($4.50) per square foot of the Rental Area of the
Premises ("Tenant Allowance"). Tenant covenants and agrees to pay to Landlord
all costs and expenses incurred by Landlord in performing the Tenant
Improvements in excess of the Tenant Allowance and to make such payment within
thirty (30) days after receipt of an invoice for same from Landlord. Any excess
of the Tenant Allowance over the total cost of constructing the Tenant
Improvements shall belong solely to Landlord.
Any other initial improvements to the Premises not shown on the Plans and
Specifications or any special equipment installed in the Premises on behalf of
Tenant (i.e. UPS power supply, supplemental HVAC, etc.) shall be subject to
Landlord's prior written approval and such improvements and/or equipment shall
be constructed or installed by Landlord, and the cost thereof shall be paid by
Tenant to Landlord within thirty (30) days following receipt of an invoice for
same from Landlord. Any amounts payable by Tenant hereunder shall include
Landlord's standard construction management fee, not to exceed thirteen and
one-half percent (13-1/2%), computed on the total cost of construction,
including but not limited to the cost of developing, preparing and modifying
construction drawings.
Landlord covenants and agrees to competitively bid the Tenant Improvement
work and, upon request by Tenant, provide Tenant with copies of all bids and/or
contracts for construction services, provided, Tenant understands and agrees
that Landlord shall have the right to make the final selection from all bids
submitted to Landlord.
5.2. Acceptance of Premises. Prior to occupancy, Landlord and Tenant shall
conduct a joint inspection of the Premises during which they shall develop a
mutually agreeable punchlist of items to be completed by Landlord. Tenant's
occupancy of the Premises shall be deemed to constitute acceptance of the
Premises and acknowledgment by Tenant that Landlord has fully complied with its
obligations hereunder to construct and deliver the Premises to Tenant, except
for the punchlist items, which shall be completed by Landlord within a
reasonable time thereafter. Landlord shall have the right to enter the Premises
to complete or repair any such punchlist items and entry by Landlord, its
agents, employees or contractors for such purpose shall not constitute an actual
or constructive eviction, in whole or in part, or
<PAGE> 6
entitle Tenant to any abatement or diminution of rent or relieve Tenant of any
of its obligations under this Lease, or impose any liability upon Landlord or
its agents, employees or contractors.
6. RENT.
6.1. Annual Basic Rent. Tenant shall pay to Landlord during each Rental
Year of the Term fixed rent equal to the Annual Basic Rent as set forth in
Section 1.B.(1). Annual Basic Rent shall be payable in advance on the first day
of each month of the Term in equal monthly installments, without notice, demand,
abatement (except as otherwise specifically provided in this Lease), deduction
or set-off. If the Term of this Lease shall commence on a day other than the
first day of a month, the first payment shall include any prorated Annual Basic
Rent for the period from the Lease Commencement Date to the first day of the
first full calendar month of the Term.
"Rental Year" shall mean each successive twelve (12) calendar month period
occurring during the Term of this Lease, or portion of such a period, with the
first Rental Year commencing as of the Lease Commencement Date and ending on the
last day of the twelfth full calendar month thereafter and the last Rental Year
ending on the Termination Date. For any Rental Year of less or more than twelve
full months, Annual Basic Rent shall be adjusted accordingly. All Annual Basic
Rent and Tenant's Share of Increased Operating Costs shall be paid to Landlord
at the Landlord Payment Address.
6.2. Intentionally omitted.
6.3. Intentionally Omitted.
6.4 Advance Rent; Security Deposit.
A. Advance Rent. Intentionally Deleted.
B. Security Deposit. Tenant shall, upon execution of this Lease,
deposit with Landlord the Security Deposit to assure Tenant's performance of all
terms, provisions and conditions of this Lease. Landlord shall have the right,
but not the obligation, at any time, to apply the Security Deposit to cure any
breach by Tenant under this Lease and, in that event, Tenant shall immediately
pay Landlord any amount necessary to restore the Security Deposit to its
original amount. To the extent permitted by law, Landlord shall be entitled to
the full use of the Security Deposit and shall not be required either to keep
the Security Deposit in a separate account or to pay interest on account
thereof. Any portion of the Security Deposit which is not utilized by Landlord
for any purpose permitted under this Lease shall be returned to Tenant within
sixty (60) days after the end of the Term provided Tenant has performed all of
the obligations imposed upon Tenant pursuant to this Lease.
6.5. Late Charge. Tenant hereby acknowledges that the late payment of rent
by Tenant to Landlord will cause Landlord to incur costs not contemplated in
this Lease, the exact amount of which will be difficult and impracticable to
ascertain. Such costs include, but are not limited to, processing,
administrative, and accounting costs. Accordingly, if Tenant fails to make any
payment of Annual Basic Rent, Tenant's Share of Increased Operating Costs, or
other sums required to be paid hereunder on or before the date when payment is
due, Tenant shall pay to Landlord a late charge to cover extra administrative
costs and loss of use of funds equal to (a) six percent (6%) of the amount due
for the first month or portion thereof that such amount is past due plus (b)
interest on the amount remaining unpaid thereafter at the rate of twenty-four
percent (24%) per annum; provided, however, that should such late charge at any
time violate any applicable law, the late charge shall be reduced to the highest
rate permitted by law (the foregoing rate being herein referred to as the
"Default Rate"). Such late charge represents a fair and reasonable estimate of
the costs that Landlord will incur by reason of late payment of rent by Tenant
and is not intended to constitute a penalty. Landlord's acceptance of any rent
after it has become
<PAGE> 7
due and payable shall not excuse any delays with respect to future rental
payments or constitute a waiver of any of Landlord's rights under this Lease.
6.6. Additional Taxes. In addition to the Rent and all other sums payable
by Tenant hereunder, Tenant shall promptly pay to Landlord any transaction
privilege, use or franchise taxes assessed or levied upon Landlord with respect
to the rentals or other payments made under leases for the Building, and whether
paid to or for the benefit or account of Landlord, as well as all taxes assessed
or imposed upon Landlord's gross receipts, gross income, other receipts or other
benefits received or deemed by the taxing authority to have been received from
leasing the Building, including, without limitation, the transaction privilege
tax of Arizona, any tax imposed by the City of Phoenix, as well as any similar
privilege, franchise or excise tax imposed by any other governmental body, and
any taxes assessed or imposed in lieu of or in substitution for any of the
foregoing taxes, whether now existing or hereafter enacted, excluding, however,
any income taxes imposed on Landlord in connection with leases for the Building
unless levied in substitution or in lieu of any of the foregoing taxes. Tenant
shall apply for a separate privilege tax license related solely to the Premises.
7. OPERATING COST ESCALATIONS.
7.1. Definitions. For purposes of this Lease, the following definitions
shall apply:
a. "Operating Year" means each respective calendar year or part
thereof during the Term of this Lease or any renewal thereof, or at the option
of Landlord, any other twelve month period or part thereof designated by
Landlord during the Term of this Lease or any renewal thereof.
b. "Property" means the Building, the land upon which the Building
is situated, the Common Area, and such additional facilities in subsequent years
as may be determined by Landlord to be reasonably necessary or desirable for the
management, maintenance or operation of the Building.
c. "Operating Costs" means all expenses and costs (but not specific
costs which are allocated or separately billed to and paid by specific tenants)
of every kind and nature which Landlord shall pay or become obligated to pay
because of or in connection with owning, operating, managing, painting,
repairing, insuring and cleaning the Property, including, but not limited to,
the following:
(i) cost of all supplies and materials used, and labor charges
incurred, in the operation, maintenance, decoration, repairing and cleaning of
the Property, including janitorial service for all floor area leased to tenants;
(ii) cost of all equipment purchased or rented which is utilized
in the performance of Landlord's obligations hereunder, and the cost of
maintenance and operation of any such equipment;
(iii) cost of all maintenance and service agreements for the
Property and the equipment therein, including, without limitation, alarm
service, security service, window cleaning, and elevator maintenance;
(iv) accounting costs, including the cost of audits by certified
public accountants, outside legal and engineering fees and expenses incurred in
connection with the operation and management of the Property;
(v) wages, salaries and related expenses including the costs of
all on-site and off-site agents or employees engaged in the operation,
maintenance, security and management of the Property; provided, however, the
wages, salaries and related expenses of any agents or employees not exclusively
engaged in the operation, maintenance, security and management of the Property
shall be apportioned as deemed appropriate by Landlord;
<PAGE> 8
(vi) cost of repairs, replacements and general maintenance to
the Property, including without limitation the mechanical, electrical and
heating, ventilating and air-conditioning equipment and/or systems (excluding
alterations attributable solely to tenants, capital improvements unless they are
included under c(xi), and repairs and general maintenance paid by proceeds of
insurance or by tenants or other third parties);
(vii) any and all Common Area maintenance, repair or redecoration
(including repainting) and exterior and interior landscaping;
(viii) cost of removal of trash, rubbish, garbage and other refuse
from the Property as well as removal of ice and snow from the sidewalks on or
adjacent to the Property;
(ix) all charges for electricity, gas, water, sewerage service,
heating, ventilation and air-conditioning and other utilities furnished to the
Property (including legal, architectural and engineering fees incurred in
connection therewith);
(x) amortization of capital improvements made to the Building
after the year of substantial completion of the Building, which improvements
were undertaken by Landlord with the reasonable expectation that the same would
result in more efficient operation of the Building or are made by Landlord
pursuant to any governmental law, regulation or action not applicable to the
Building at commencement of construction of the Building; provided that the cost
of each such capital improvement, together with any financing charges incurred
in connection therewith, shall be amortized over the useful life thereof and
only that portion attributable to each Operating Year shall be included herein
for such Operating Year;
(xi) a management fee for the operation and management of
the Property;
(xii) costs and expenses incurred in order to comply with
covenants and conditions contained in liens, encumbrances and other matters of
public record affecting the Property; and
(xiii) cost of all insurance coverage for the Property from time
to time maintained by Landlord, including but not limited to the costs of
premiums for insurance with respect to personal injury, bodily injury, including
death, property damage, business interruption, workmen's compensation insurance
covering personnel and such other insurance as Landlord shall deem necessary,
which insurance Landlord may maintain under policies covering other properties
owned by Landlord in which event the premium shall be reasonably allocated;
(xiv) all real estate taxes, personal property taxes levied
pursuant to Arizona Revised Statutes, Sections 42-681, et seq., relating to
possessory interests, assessments (special or otherwise), levies, ad valorem
charges, benefit charges, water and sewer rents, rates and charges, privilege
permits and any other governmental liens, impositions or charges of a similar or
dissimilar nature, including but not limited to any assessment imposed or
voluntarily paid pursuant to Arizona Revised Statutes, Sections 42-571, et seq.,
and any payments in lieu of such charges, regardless of whether any such items
shall be extraordinary or ordinary, general or special, foreseen or unforeseen,
levied, assessed, or imposed on or with respect to all or any part of the
Property or upon the rent due and payable hereunder by the City of Phoenix,
County of Maricopa, State of Arizona, or any other taxing authority, or pursuant
to an allocation thereof charged against the Property under an REA (all of the
foregoing being referred to as "Taxes"); provided, however, that if at any time
during the Term or any extension thereof the method of taxation prevailing at
the commencement of the Term shall be altered or eliminated so as to cause the
whole or any part of the above items which would otherwise be included in Taxes
to be replaced by a levy, assessment or imposition, which is (A) a tax
assessment, levy, imposition or charge based on the rents received from the
Property whether or not wholly or partially a capital levy or otherwise, or (B)
a tax,
<PAGE> 9
assessment, levy, imposition or charge measured by or based in whole or in part
upon all or any portion of the Property and imposed on Landlord, or (C) a
license fee measured by the rent payable by Tenant to Landlord, or (D) any other
tax, levy, imposition, charge or license fee, however described or imposed, then
such levy, assessment or imposition shall be included in Taxes; provided,
however, in no event shall Tenant be required to pay any inheritance, estate,
succession, income, profits or franchise taxes unless they are in lieu of or in
substitution for any of the above items which would otherwise be included in
Taxes.
Any of the foregoing costs which under generally accepted accounting
principles would be considered capital expenditures shall be amortized in
accordance with generally accepted accounting principles.
Notwithstanding the above, Operating Costs shall not include (a) payments
of principal and interest on any mortgages, deeds of trust or other financing
instruments relating to the financing of the Property, (b) leasing commissions
or brokerage fees, and (c) costs associated with preparing, improving or
altering for space for any leasing or releasing of any space within the
Building.
For any Operating Year during which less than ninety-five percent (95%) of
the Rental Area of the Building is occupied, the calculation of that portion of
Operating Costs which vary with occupancy shall be adjusted to equal the
Operating Costs which Landlord projects would have been incurred had the
Building been ninety-five percent occupied during such Operating Year.
d. "Fractional Share" shall mean a fraction, the numerator of which
is the Rental Area of the Premises and the denominator of which is the total
Rental Area of the Building. For the purposes of this subparagraph, the Rental
Area of the Building shall mean the sum of the Rental Area of all floors of the
Building as determined by Landlord.
7.2. Payment of Operating Cost Escalation. For each Operating Year,
commencing January 1, 2000, Tenant shall pay to Landlord, in the manner provided
herein, Tenant's share of increased Operating Costs which shall be computed by
multiplying the Operating Costs for the Operating Year by Tenant's Fractional
Share and subtracting the Base Operating Costs from the result obtained
("Tenant's Share of Increased Operating Costs") but in no event less than the
Base Operating Costs; provided, however, that for the Operating Years during
which the Term begins and ends, Tenant's Share of Increased Operating Costs
shall be prorated based upon the actual number of days Tenant occupied, or could
have occupied, the Premises during each such Operating Year.
Tenant's Share of Increased Operating Costs shall be paid, in advance,
without notice, demand, abatement (except as otherwise specifically provided in
this Lease), deduction or set-off, on the first day of each calendar month
during the Term, said monthly amounts to be determined on the basis of estimates
prepared by Landlord on an annual basis and delivered to Tenant prior to the
commencement of each Operating Year. If, however, Landlord fails to furnish any
such estimate prior to the commencement of an Operating Year, then (a) until the
first day of the month following the month in which such estimate is furnished
to Tenant, Tenant shall pay to Landlord on the first day of each month an amount
equal to the monthly sum payable by Tenant to Landlord under this subsection 7.2
in respect of the last month of the preceding Operating Year; (b) promptly after
such estimate is furnished to Tenant, Landlord shall give notice to Tenant
whether the installments of Tenant's Share of Increased Operating Costs paid by
Tenant for the current Operating Year have resulted in a deficiency or
overpayment compared to payments which would have been paid under such estimate,
and Tenant, within ten (10) days after receipt of such estimate, shall pay any
deficiency to Landlord and any overpayment shall be credited against future
payments required by Tenant under such estimate; and (c) on the first day of the
month following the month in which such estimate is furnished to Tenant and
monthly thereafter throughout the remainder of the Operating Year, Tenant shall
pay to Landlord the monthly payment shown on such estimate. Landlord may at any
time or from time to time furnish to Tenant a revised estimate of Tenant's Share
of Increased Operating
<PAGE> 10
Costs for such Operating Year, and in such case, Tenant's monthly payments shall
be adjusted and paid or credited, as the case may be, substantially in the same
manner as provided in the preceding sentence.
After the end of each Operating Year, Landlord shall determine actual
Operating Costs for such Operating Year and shall provide to Tenant an
"Operating Costs Statement" setting forth the actual Tenant's Share of Increased
Operating Costs for such Operating Year. Within thirty (30) days after delivery
of the Operating Costs Statement, Tenant shall pay Landlord any deficiency
between the amount shown as Tenant's Share of Increased Operating Costs in the
Operating Costs Statement and the total of the estimated payments made by Tenant
during the Operating Year. In the event of overpayment, such amount shall be
credited against future payments required on account of Tenant's Share of
Increased Operating Costs, or if the Term has expired, Landlord shall refund to
Tenant the amount of any overpayment.
Each Operating Costs Statement provided by Landlord shall be conclusive
and binding upon Tenant unless within thirty (30) days after receipt thereof,
Tenant notifies Landlord that it disputes the correctness thereof, specifying
those respects in which it claims the Operating Costs Statement to be incorrect.
Unless resolved by the parties, such dispute shall be determined by arbitration
in accordance with the then prevailing rules of the American Arbitration
Association. If the arbitration proceedings result in a determination that the
Operating Costs Statement contained an aggregate discrepancy of less than five
percent (5%), Tenant shall bear all costs in connection with such arbitration.
Pending determination of the dispute, Tenant shall pay any amounts due from
Tenant in accordance with the Operating Costs Statement, but such payment shall
be without prejudice to Tenant's claims. Tenant, for a period of thirty (30)
days after delivery of the Operating Costs Statement in each Operating Year and
upon at least ten (10) days written notice to Landlord, shall have reasonable
access during Landlord's normal business hours (8:30 a.m. until 5:00 p.m. on
business days) to the books and records of Landlord relating to Operating Costs
for the purpose of verifying the Operating Costs Statement, Tenant to bear all
costs relating to such inspection. Tenant shall reimburse Landlord for any cost
for photocopying that it desires.
8. USE, CARE AND REPAIR OF PREMISES BY TENANT.
8.1. Permitted Uses. Tenant shall use and occupy the Premises solely for
general office purposes in accordance with applicable zoning regulations and for
no other purpose. Tenant shall not do anything or permit anything to be done in
or on the Premises, or bring or keep anything therein which will, in any way,
obstruct, injure, annoy or interfere with the rights of Landlord or other
tenants, or subject Landlord to any liability for injury to persons or damage to
property, or interfere with the good order of the Building, or conflict with the
laws, rules or regulations of any Federal, state or city authority. Tenant shall
apply for a separate privilege tax license with regard to the business carried
on by Tenant in the Premises.
8.2. Care of Premises. Tenant shall, at its sole expense, keep the
Premises and the improvements and appurtenances therein in good order and
condition consistent with the operation of a first-class office building, and at
the expiration of the Term, or at the sooner termination of this Lease as herein
provided, deliver up the same broom clean and in as good order and condition as
at the beginning of the Term, ordinary wear and tear and damage by fire or other
casualty excepted. Tenant, at its sole expense, shall promptly replace damaged
or broken doors and glass in and about the interior of the Premises and shall be
responsible for the repair and maintenance of all special or custom Tenant
Improvements and Alterations, including, without limitation, the repair and
replacement of appliances and equipment installed specifically for Tenant such
as refrigerators, disposals, computer room air conditioning, sinks and special
plumbing, special light fixtures and bulbs for those fixtures, non-standard
outlets and plug-in strips, and special cabinetry. Consistent with the
provisions of Section 22, Tenant shall pay for all property damage sustained by
other tenants or occupants of the Building, due to any waste, misuse or neglect
by Tenant of the Premises and any fixtures and appurtenances related thereto or
due to any breach of this Lease by Tenant, its employees, agents,
representatives or invitees.
<PAGE> 11
8.3. Hazardous Substances. For purposes of this provision, "Hazardous
Substances" shall mean any hazardous or toxic substance, material or waste, now
or hereafter defined or regulated under the Resource Conservation and Recovery
Act (42 U.S.C. Section 6901 et seq.), the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), the Clean
Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section
7401 et seq.), and the Toxic Substances Control Act (15 U.S.C. Section 2601 et
seq.), and all similar federal, state and local statutes, laws, rules and
regulations in connection with environmental conditions, health and safety,
including without limitation, asbestos and petroleum products (collectively,
"Environmental Laws"). Tenant covenants and agrees that it will not use or allow
the Premises to be used for the storage, use, treatment or disposal of any
Hazardous Substance, without Landlord's prior written consent. Notwithstanding
the foregoing, Landlord's prior written consent shall not be required with
respect to Tenant's use, storage or sale of certain supplies or products, which
might contain or might be considered a Hazardous Substance, in the normal course
of Tenant's business in accordance with the specific use permitted by this
Lease, provided, however, that Tenant shall (i) comply with all other provisions
of this Section; (ii) notify Landlord in writing from time to time of the
identity and approximate quantity of such Hazardous Substance; and (iii) keep
each such Hazardous Substance on the Premises in quantities as small as
reasonably practicable, but in no event large enough to activate reporting
requirements under any Environmental Law. Tenant, at Tenant's sole cost and
expense shall promptly contain and remediate any release of a Hazardous
Substance on the Property to the extent such release arises directly from the
actions of Tenant, its agents, servants and employees.
Tenant shall indemnify, reimburse and hold harmless Landlord, its
partners and affiliates agents from and against any damages, claims, judgments,
fines, penalties, costs, liabilities (including sums paid in settlement of
claims) or loss including reasonable attorneys' fees, reasonable consultants'
fees, and reasonable expert fees incurred by any of them to the extent resulting
from Tenant's use, handling, generation, treatment, storage, disposal, other
management or release of any Hazardous Substance at or from the Premises or the
Property, whether or not Tenant has acted negligently with respect to such
Hazardous Substance. This indemnity shall survive the expiration or earlier
termination of this Lease.
8.4. Compliance with Laws. Tenant, at its sole cost and expense, shall
conform to and comply with and shall cause the Premises to conform to and comply
with all federal, state, county, municipal and other governmental statutes,
laws, rules, orders, regulations, and ordinances applicable to Tenant or
resulting from Tenant's use or occupancy of the Premises or the Property or any
part thereof.
9. RULES AND REGULATIONS.
Tenant and its agents and invitees shall abide by and observe the rules
and regulations attached hereto as Schedule C for the operation and maintenance
of the Building or any new rules and regulations which may from time to time be
issued by Landlord ("Rules and Regulations"), provided that any new rules or
regulations are not inconsistent with the provisions of this Lease. Nothing in
this Lease shall be interpreted to impose upon Landlord any duty or obligation
to enforce any such rules and regulations against any other tenant in the
Building, and Landlord shall not be liable to Tenant for any violation of these
rules and regulations by any other tenant or its agents or invitees.
10. COMMON AREA.
10.1. Definition of Common Area. As used herein, "Common Area" means those
areas and facilities which may be furnished by Landlord on or near the Property,
as designated by Landlord from time to time, intended for the general common use
and benefit of all tenants of the Building and their agents, representatives,
licensees, employees and invitees, including, without limitation, any and all
stairs, landings, roofs, utility and mechanical rooms and equipment, service
closets, corridors, elevators, lobbies, lavatories and other public areas of the
Building and all access roads, pedestrian walkways, plazas and landscaped areas
(including the Gardens at Arizona Center), and loading docks located upon the
Property. Common Area shall not include any parking decks or parking garages.
<PAGE> 12
10.2. Use of Common Area. Tenant shall have the non-exclusive right to use
the Common Area in common with Landlord, other tenants in the Building, and
others entitled to the use thereof, subject to such reasonable rules and
regulations governing the use of the Common Area as Landlord may from time to
time prescribe and subject to such easements therein as Landlord may from time
to time grant to others. Tenant shall not obstruct in any way any portion of the
Common Area or in any way interfere with the rights of other persons entitled to
use the Common Area and shall not, without the prior written consent of
Landlord, use the Common Area in any manner, directly or indirectly, for the
location or display of any merchandise or property belonging to Tenant or for
the location of signs relating to Tenant's operations in the Premises. The
Common Area shall at all times be subject to the exclusive control and
management of Landlord.
10.3. Alterations to the Common Area. Landlord reserves the right at any
time and from time to time (i) to change or alter the location, layout, nature
or arrangement of the Common Area or any portion thereof, including but not
limited to the arrangement and/or location of entrances, passageways, doors,
corridors, stairs, lavatories, elevators, parking areas, and other public areas
of the building, and (ii) to construct additional improvements on the Property
and make alterations thereof or additions thereto and build additional stories
on or in any such buildings or build adjoining same; provided, however, that no
such change or alteration shall deprive Tenant of access to the Premises or
reduce the Rental Area of the Premises, unless such reduction is required by
Federal, State or local laws or regulations, in which event, a reduction in the
Premises shall be permitted with a commensurate reduction in rent. Landlord
shall have the right to close temporarily all or any portion of the Common Area
to such extent as may, in the reasonable opinion of Landlord, be necessary to
prevent a dedication thereof to the public, provided that Tenant is not thereby
denied access to the Premises, or for repairs, replacements or maintenance to
the Common Area, provided such repairs, replacements or maintenance are
performed expeditiously and in such a manner as not to deprive Tenant of access
to the Premises.
10.4. Maintenance. Landlord covenants to keep, maintain, manage and
operate the Common Area in a manner consistent with the operation of a first
class office building and to keep the sidewalks and driveways, if any,
constituting a portion of the Common Area clean and reasonably clear of snow and
ice. Landlord reserves the right of access to the Common Area through the
Premises for the purposes of operation, decoration, cleaning, maintenance,
safety, security, alterations and repairs.
11. SERVICES AND UTILITIES.
So long as Tenant is not in an Event of Default under this Lease, Landlord
shall provide the following facilities and services to Tenant, the cost of such
facilities and services to be included in Landlord's Operating Costs (except as
otherwise provided herein):
a. At least one elevator (if the building contains an elevator) subject to
call at all times, including Sundays and holidays.
b. During "Tenant's operating hours" as hereinafter defined, central
heating and air conditioning during the seasons of the year when these services
are normally and usually furnished, and within the temperature ranges and in
such amounts normally or usually furnished in comparable office buildings in the
immediate vicinity. For the purposes of this paragraph b, the term "Tenant's
operating hours" shall mean the periods from 8:00 a.m. until 12:00 a.m. daily.
The legal holidays observed by Landlord are New Year's Day, Memorial Day
observed, Independence Day, Labor Day, Thanksgiving, and Christmas. Landlord
shall provide the aforesaid services at other times, at Tenant's expense,
provided Tenant gives Landlord notice by 1:00 p.m. on weekdays for after-hour
service on the next weekday, by 1:00 p.m. the day before a holiday for service
on a holiday, and by 1:00 p.m. on Friday for after-hour service on Saturday or
service on Sunday. Such after-hour, holiday or special weekend service shall be
charged to Tenant at rates to be calculated by Landlord based on Landlord's
costs, which rates shall be given to
<PAGE> 13
Tenant on request. Landlord reserves the right to adjust, from time to time, the
rate at which such services shall be provided corresponding to adjustments in
Landlord's costs. Tenant shall pay for such service promptly upon receipt of an
invoice with respect thereto. As of the Lease Commencement Date, the cost of
such after-hour service is Forty Dollars ($40.00) per hour per floor.
For the purposes of this Section, the term "holidays" shall include: New
Year's Day, Presidents' Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Notwithstanding anything contained in this
Section 11 to the contrary, Landlord reserves the right to submeter the Premises
to measure the actual amount of electricity used and bill Tenant for same.
c. Reasonable amounts of electric current for lighting and normal and
customary items of office equipment (subject to the provisions of Section 12
below).
d. Cleaning in Landlord's standard manner.
e. Replacement of light tubes or bulbs for building standard lighting
fixtures. All light tube or bulb replacements for special non-standard lighting
fixtures shall be furnished and installed by Landlord at Tenant's expense.
f. Rest room facilities and necessary lavatory supplies, including hot and
cold running water at the points of supply, as provided for general use of all
tenants in the Building and routine maintenance, painting, and electric lighting
service for all public areas of the Building in such manner as Landlord deems
reasonable.
Any failure by Landlord to furnish the foregoing services, resulting from
circumstances beyond Landlord's reasonable control or from interruption of such
services due to repairs or maintenance, shall not render Landlord liable in any
respect for damages to either person or property, nor be construed as an
eviction of Tenant, nor cause an abatement of rent hereunder, nor relieve Tenant
from any of its obligations hereunder. If any public utility or governmental
body shall require Landlord or Tenant to restrict the consumption of any utility
or reduce any service for the Premises or the Building, Landlord and Tenant
shall comply with such requirements, whether or not the utilities and services
referred to in this Section 11 are thereby reduced or otherwise affected,
without any liability on the part of Landlord to Tenant or any other person or
any reduction or adjustment in rent payable hereunder. Landlord and its agents
shall be permitted reasonable access to the Premises for the purpose of
installing and servicing systems within the Premises deemed necessary by
Landlord to provide the services and utilities referred to in this Section 11 to
Tenant and other tenants in the Building.
Landlord reserves the right to charge Tenant the reasonable cost, based on
usage, of the removal of all trash and the reasonable cost of water/sewerage or
electric service to the extent Tenant's trash disposal, water/sewerage and/or
electrical usage exceeds, in Landlord's reasonable opinion, normal usage for an
office tenant.
12. ELECTRIC CURRENT.
Landlord shall be under no obligation to furnish electrical energy to
Tenant in amounts greater than needed for lighting and normal and customary
items of equipment for general office purposes, and Tenant shall not install or
use on the Premises any electrical equipment, appliance or machine which shall
require amounts of electrical energy exceeding the standard wattage provided for
the Building, unless the installation and use of such additional electrical
equipment, appliance, or machine has been approved by Landlord pursuant to terms
and conditions set forth in a separate agreement, which approval shall not be
unreasonably withheld and may be conditioned upon the payment by Tenant of the
cost of the additional electrical energy and modifications to the Building's
electrical system required for the operation of such electrical equipment,
appliance, or machine.
<PAGE> 14
13. LOSS, DAMAGE AND INJURY.
To the maximum extent permitted by law, Tenant shall occupy and use the
Premises, the Building and the Common Area at Tenant's own risk. Consistent with
the provisions of subsection 16.4, Tenant's Personal Property and personal items
of those claiming by, through or under Tenant, located in or on the Premises or
the Building shall be and remain at the sole risk of Tenant or such other
person.
No representation, guaranty, assurance, or warranty is made or given by
Landlord that the communications or security systems, devices or procedures
used, if any, will be effective to prevent injury to Tenant or any other person
or damage to, or loss (by theft or otherwise) of any of Tenant's Personal
Property or of the property of any other person, and Landlord reserves the right
to discontinue or modify at any time such communications or security systems,
devices, or procedures without liability to Tenant.
14. REPAIRS BY LANDLORD.
Landlord shall keep the Premises and the Building and all machinery,
equipment, fixtures and systems of every kind attached to, or used in connection
with the operation of, the Building, including all electrical, heating,
mechanical, sanitary, sprinkler, utility, power, plumbing, cleaning,
refrigeration, ventilating, air conditioning and elevator systems and equipment
(excluding, however, lines, improvements, systems and machinery for water, gas,
steam and electricity owned and maintained by any public utility company or
governmental agency or body) in good order and repair consistent with the
operation of the Building as a first-class office building. Landlord, at its
expense (subject to reimbursement by Tenant pursuant to Section 7), shall make
all repairs and replacements necessary to comply with its obligations set forth
in the immediately preceding sentence, except for (a) repairs required to be
made by Tenant pursuant to Section 8 and (b) repairs caused by the willful
misconduct of Tenant, its agents, employees, invitees and guests, which repairs
shall be made by Landlord at the cost of Tenant, and for which Tenant shall pay
promptly upon receipt of an invoice setting forth the cost of such repairs.
There shall be no abatement in rents due and payable hereunder and no liability
on the part of Landlord by reason of any inconvenience or annoyance arising from
Landlord's making repairs, additions or improvements to the Building in
accordance with its obligations hereunder.
15. ALTERATIONS, TITLE AND PERSONAL PROPERTY.
15.1. Alterations. Tenant shall in no event make or permit to be made any
alteration, modification, substitution or other change of any nature to the
mechanical, electrical, plumbing, HVAC , and sprinkler systems within or serving
the Premises. After completion of Tenant's Improvements within the Premises,
Tenant shall not make or permit any other improvements, alterations, fixed
decorations, substitutions or modifications, structural or otherwise, to the
Premises or the Building ("Alterations") without the prior written approval of
Landlord. Landlord's approval shall include the conditions under which
acceptable Alterations may be made. Alterations shall include, but not be
limited to, the installation or modification of carpeting, walls, partitions,
counters, doors, shelves, lighting fixtures, hardware, locks, ceiling, window
and wall coverings; but shall not include the initial Tenant's Improvements
placed within the Premises pursuant to Section 5.1. All Alterations shall be
based on complete plans and specifications prepared and submitted by Tenant to
Landlord for approval, except in the instance of cosmetic changes, such as
painting and carpeting, in which case Tenant shall provide Landlord with samples
showing colors, styles, etc. All Alterations shall be made by Landlord at
Tenant's sole cost, payable by Tenant within thirty (30) days after receipt of
an invoice for same from Landlord, which cost shall include Landlord's standard
construction management fee. Tenant shall be responsible for the cost of any
additional improvements within the Premises or the Common Area required by The
Americans with Disabilities Act of 1990 as a result of Tenant's Alterations.
<PAGE> 15
If Tenant makes any Alterations without the prior consent of Landlord,
then, in addition to Landlord's other remedies, Landlord may correct or remove
such Alterations and Tenant shall pay the cost thereof on demand.
15.2. Title. The Tenant Improvements, all Alterations and all equipment,
machinery, furniture, furnishings, and other property or improvements installed
or located in the Premises by or on behalf of Landlord or Tenant, other than
Tenant's Personal Property, (a) shall immediately become the property of
Landlord and (b) shall remain upon and be surrendered to Landlord with the
Premises as a part thereof at the end of the Term. Notwithstanding the
foregoing, Landlord may, upon notice to Tenant at the time Alterations are made,
elect that any Alterations be removed at the end of the Term, and thereupon,
Landlord shall at Tenant's sole expense, cause such Alterations to be removed
and restore the Premises to its condition prior to the making of such
Alterations, reasonable wear and tear excepted. Tenant shall promptly reimburse
Landlord for the cost of such work, which reimbursement obligation shall survive
termination of the Lease.
15.3. Tenant's Personal Property. "Tenant's Personal Property" means all
equipment, machinery, furniture, furnishings and/or other property now or
hereafter installed or placed in or on the Premises by and at the sole expense
of Tenant with respect to which Tenant has not been granted any credit or
allowance by Landlord and which (a) is not used, or was not procured for use, in
connection with the operation, maintenance or protection of the Premises or the
Building; (b) is removable without damage to the Premises or the Building; and
(c) is not a replacement of any property of Landlord, whether such replacement
is made at Tenant's expense or otherwise. Notwithstanding any other provision of
this Lease, Tenant's Personal Property shall not include any Alterations or any
improvements or other property installed or placed in or on the Premises as part
of Tenant's Improvements, whether or not installed at Tenant's expense. Tenant
shall promptly pay all personal property taxes on Tenant's Personal Property, as
applicable. Provided that Tenant is not then in default of any of its
obligations under this Lease, Tenant may remove all Tenant's Personal Property
from the Premises at the termination of this Lease. Any property belonging to
Tenant or any other person which is left in the Premises after the date the
Lease is terminated for any reason shall be deemed to have been abandoned. In
such event, Landlord shall have the right to declare itself the owner of such
property and to dispose of it in whatever manner Landlord considers appropriate
without waiving its right to claim from Tenant all expenses and damages caused
by Tenant's failure to remove such property, and Tenant shall not have any right
to compensation or claim against Landlord as a result.
16. INSURANCE.
16.1. Tenant's Insurance. Tenant, at its expense, shall obtain and
maintain in effect as long as this Lease remains in effect and during such other
time as Tenant occupies the Premises or any part thereof insurance policies in
accordance with the following provisions.
A. Coverage.
(i) commercial general liability insurance policy, including
insurance against assumed or contractual liability under this Lease, with
respect to the Property, to afford protection with limits, per occurrence, of
not less than Two Million Dollars ($2,000,000), combined single limit, with
respect to personal injury, bodily injury, including death, and property damage
and Four Million Dollars ($4,000,000) aggregate (occurrence form), such
insurance to provide for no deductible;
(ii) all-risk property insurance policy, including theft, written at
replacement cost value and with replacement cost endorsement, covering all of
Tenant's Personal Property in the Premises, and covering loss of income
resulting from casualty, such insurance to provide for no deductible greater
than Five Thousand Dollars ($5,000).
<PAGE> 16
(iii) worker's compensation or similar insurance policy offering
statutory coverage and containing statutory limits, which policy shall also
provide Employer's Liability Coverage of not less than Five Hundred Thousand
Dollars ($500,000) per occurrence.
(iv) Tenant shall require any construction contractor retained by it
to perform work on the Premises to carry and maintain, at no expense to
Landlord, during such times as contractor is working in the Premises, a
non-deductible (a) commercial general liability insurance policy, including, but
not limited to, contractor's liability coverage, contractual liability coverage,
completed operations coverage, broad form property damage endorsement and
contractor's protective liability coverage, to afford protection with limits per
person and for each occurrence, of not less than Two Million Dollars
($2,000,000), combined single limit, and with respect to personal injury and
death and property damage, Four Million Dollars ($4,000,000) aggregate
(occurrence form) and Two Million Dollars ($2,000,000) aggregate completed
operations; (b) automobile liability insurance in the amount of One Million
Dollars ($1,000,000) combined single limit for bodily injury and property
damage; (c) worker's compensation insurance or similar insurance in form and
amounts as required by law; and (d) any other insurance reasonably required of
Tenant by Landlord or any Mortgagee.
(v) Notwithstanding anything set forth above in this subsection 16.1
to the contrary, all dollar limits specified herein shall be increased from time
to time as reasonably necessary to effect economically equivalent insurance
coverage, or coverage deemed adequate in light of then existing circumstances.
B. Policies.
Such policies shall be maintained with companies licensed to do business
in the State where the Premises are located and in form reasonably acceptable to
Landlord and will be written as primary policy coverage and not contributing
with, or in excess of, any coverage which Landlord shall carry. Such policies
shall be provided on an occurrence form basis unless otherwise approved by
Landlord and shall include Landlord and its managing agent as additional insured
as to coverage under paragraphs 16.1.A.(i) and 16.1.A.(iv). Such policies shall
also contain a waiver of subrogation provision and a provision stating that such
policy or policies shall not be canceled, non-renewed, reduced in coverage or
materially altered except after thirty (30) day's written notice, said notice to
be given in the manner required by this Lease to Landlord, Attention: Risk
Management Department. All such policies of insurance shall be effective as of
the date Tenant occupies the Premises and shall be maintained in force at all
times during the Term of this Lease and all other times during which Tenant
shall occupy the Premises. Tenant shall deposit the policy or policies of such
required insurance or certificates thereof with Landlord prior to the Lease
Commencement Date.
16.2. Tenant's Failure to Insure. If Tenant shall fail to obtain insurance
as required under this Section 16, Landlord may, but shall not be obligated to,
obtain such insurance, and in such event, Tenant shall pay the premium for such
insurance upon demand by Landlord.
16.3. Compliance with Policies. Tenant shall not do or allow to be done,
or keep, or allow to be kept, anything in, upon or about the Premises which will
contravene Landlord's policies insuring against loss or damage by fire, other
casualty, or any other cause, including without limitation, public liability, or
which will prevent Landlord from procuring such policies in companies acceptable
to Landlord. If any act or failure to act by Tenant in and about the Building
and the Premises shall cause the rates with respect to Landlord's insurance
policies to be increased beyond those rates that would normally be applicable
for such limits of coverage, Tenant shall pay the amount of any such increases
upon demand by Landlord.
16.4. Waiver of Right of Recovery. Except as provided in Section 8.3,
neither party, including Landlord's managing agent, shall be liable to the other
party, including Landlord's managing agent, or to any insurance company (by way
of subrogation or otherwise) insuring the other party, for any loss or
<PAGE> 17
damage to any building, structure or other tangible property, or loss of income
resulting therefrom, or losses under worker's compensation laws and benefits
even though such loss or damage might have been occasioned by the negligence of
such party, its agents or employees. The provisions of this Section 16.4 shall
not limit the indemnification for liability to third parties pursuant to Section
22.
16.5. Landlord's Insurance. Landlord shall carry commercial general
liability insurance with regard to the Property and all-risk property insurance
on the Property, including Tenant Improvements and Alterations but excluding
Tenant's Personal Property.
Landlord shall not be obligated to repair any damage to Tenant's Personal
Property or replace the same.
17. DAMAGE AND DESTRUCTION.
17.1. Landlord's Obligation to Repair and Reconstruct. If, as the result
of fire, the elements, accident or other casualty (any of such causes being
referred to herein as a "Casualty"), the Premises shall be rendered wholly or
partially untenantable (damaged to such an extent as to preclude Tenant's use of
the Premises for the purposes originally intended), then, subject to the
provisions of subsection 17.2, Landlord shall cause such damage to be repaired,
including Tenant Improvements and Alterations, and the Annual Basic Rent and
Tenant's Share of Increased Operating Costs (but not any amounts due Landlord
either by reason of Tenant's failure to perform any of its obligations hereunder
or by reason of Landlord's having provided Tenant with additional services
hereunder) shall be abated proportionately as to the portion of the Premises
rendered untenantable during the period of such untenantability. All such
repairs shall be made at the expense of Landlord, subject to the availability of
insurance proceeds and Tenant's responsibilities set forth herein. Landlord
shall not be liable for interruption to Tenant's business or for damage to or
replacement or repair of Tenant's Personal Property, all of which replacement or
repair shall be undertaken and completed by Tenant, at Tenant's expense.
If the Premises shall be damaged by Casualty, but the Premises shall not
be thereby rendered wholly or partially untenantable, Landlord shall promptly
cause such damage to be repaired and there shall be no abatement of rent
reserved hereunder.
17.2. Termination of Lease. (A) If the Premises are (1) rendered wholly
untenantable, or (2) damaged as a result of any cause which is not covered by
Landlord's insurance, or (B) if the Building is damaged to the extent of fifty
percent (50%) or more of the gross leasable area thereof, or (C) if, for reasons
beyond Landlord's control or by virtue of the terms of any financing of the
Building, sufficient insurance proceeds are not available for the reconstruction
or restoration of the Building or Premises, then, in any of such events,
Landlord may elect to terminate this Lease by giving to Tenant notice of such
election within ninety (90) days after the occurrence of such event, or after
the insufficiency of such proceeds becomes known to Landlord, whichever is
applicable. If such notice is given, the rights and obligations of the parties
shall cease as of the date set forth in such notice, and the Annual Basic Rent
and Tenant's Share of Increased Operating Costs (but not any amounts due
Landlord either by reason of Tenant's failure to perform any of its obligations
hereunder or by reason of Landlord's having provided Tenant with additional
services hereunder) shall be adjusted as of the date set forth in such notice,
or, if the Premises were rendered untenantable, as of the date of the Casualty.
17.3. Demolition of the Building. If the Building shall be so
substantially damaged that it is reasonably necessary, in Landlord's judgment,
to demolish the Building for the purpose of reconstruction, Landlord may
demolish the same, in which event the Annual Basic Rent and Tenant's Share of
Increased Operating Costs (but not any amounts due Landlord either by reason of
Tenant's failure to perform any of its obligations hereunder or by reason of
Landlord's having provided Tenant with additional services hereunder) shall be
abated to the same extent as if the Premises were rendered wholly untenantable
by a Casualty.
<PAGE> 18
17.4. Insurance Proceeds. If the Lease is not terminated pursuant to
subsection 17.2, Landlord shall, subject to the terms of any Mortgage, disburse
and apply any insurance proceeds received by Landlord to the restoration and
rebuilding of the Building in accordance with subsection 17.1 hereof. All
insurance proceeds payable with respect to the Premises and the Building shall
belong to and shall be payable to Landlord. Notwithstanding anything to the
contrary, Tenant shall be entitled to receive all proceeds payable with respect
to Tenant's Personal Property.
18. CONDEMNATION.
18.1. Termination. If either the entire Premises or the Building shall be
acquired or condemned by any governmental authority under its power of eminent
domain for any public or quasi-public use or purpose, this Lease shall terminate
as of the date of vesting or acquisition of title in the condemning authority
and the rents hereunder shall be abated on that date. If less than the whole but
more than fifty percent (50%) of the Rental Area of the Premises or more than
fifty percent (50%) of the total area of the Building (even if the Premises are
unaffected) or such portion of the Common Area as shall render the Premises or
the Building untenantable should be so acquired or condemned, Landlord and
Tenant shall each have the option to terminate this Lease by notice given to the
other within ninety (90) days of such taking. In the event that such a notice of
termination is given, this Lease shall terminate as of the date of vesting or
acquisition of title in the condemning authority and the Annual Basic Rent and
Tenant's Share of Increased Operating Costs (but not any amounts due Landlord
either by reason of Tenant's failure to perform any of its obligations
hereunder, or by reason of Landlord's having provided Tenant with additional
services hereunder) shall be adjusted as of such date.
If (a) neither Landlord nor Tenant shall exercise their respective options
to terminate this Lease, as hereinabove set forth, or (b) some lesser portion of
the Premises or the Building or Common Area, which does not give rise to a right
to terminate pursuant to this subsection 18.1, is taken by the condemning
authority, this Lease shall continue in force and effect, but from and after the
date of the vesting of title in the condemning authority, the Annual Basic Rent
payable hereunder during the unexpired portion of the Term shall be reduced in
proportion to the reduction in the total Rental Area of the Premises, and any
Tenant's Share of Increased Operating Costs (but not any amounts due Landlord
either by reason of Tenant's failure to perform any of its obligations
hereunder, or by reason of Landlord's having provided Tenant with additional
services hereunder) payable pursuant to the terms hereof shall be adjusted to
reflect the diminution of the Premises and/or the Building, as the case may be.
18.2. Rights to Award. Tenant shall have no claim against Landlord arising
out of the taking or condemnation, or arising out of the cancellation of this
Lease as a result of any such taking or condemnation, or for any portion of the
amount that may be awarded as damages as a result of any taking or condemnation,
or for the value of any unexpired portion of the Term, or for any property lost
through condemnation, and Tenant hereby assigns to Landlord all its right, title
and interest in and to any such award with regard to the Premises; provided,
however, that, in the event of a total taking, Tenant may assert any claim it
may have against the condemning authority for compensation for Tenant's Personal
Property lost thereby, loss of income, and for any relocation expenses
compensable by statute and receive such awards therefor as may be allowed in the
condemnation proceedings provided that such awards shall be made in addition to,
and stated separately from, the award made for the Building, the underlying land
and the Premises. Landlord shall have no obligation to contest any taking or
condemnation.
19. BANKRUPTCY.
19.1. Event of Bankruptcy. For purposes of this Lease, each of the
following shall be deemed an "Event of Tenant's Bankruptcy":
<PAGE> 19
(a) if Tenant becomes insolvent, as defined in the Bankruptcy
Code, or under the Insolvency Laws;
(b) the commencement of any action or proceeding for the
dissolution or liquidation of Tenant or for the appointment of
a receiver or trustee of the property of Tenant, whether
instituted by or against Tenant, if not bonded or discharged
within thirty (30) days of the date of the commencement of
such proceeding or action;
(c) if Tenant files a voluntary petition under the Bankruptcy Code
or Insolvency Laws;
(d) if there is filed an involuntary petition against Tenant as
the subject debtor under the Bankruptcy Code or Insolvency
laws, which is not dismissed within sixty (60) days of filing,
or results in issuance of an order for relief against the
debtor; and
(e) if Tenant makes or consents to an assignment of its assets, in
whole or in part, for the benefit of creditors, or to a common
law composition of creditors.
As used herein, (i) "Bankruptcy Code" means title 11 of the United States
Code, 11 U.S.C. Section 101 et. seq. as amended or any successor statute and
(ii) Insolvency Laws means the insolvency laws of any state or territory of the
United States.
19.2. Assumption by Trustee. If Tenant becomes the subject debtor in a
case pending under the Bankruptcy Code, Landlord's right to terminate this Lease
under Section 20 hereof shall be subject to the applicable rights (if any) of
the Trustee in Bankruptcy to assume or assign this Lease as then provided for in
the Bankruptcy Code. However, the Trustee in Bankruptcy must give to Landlord
and Landlord must receive proper written notice of the Trustee's assumption or
rejection of this Lease, within sixty (60) days (or such other applicable period
as is provided for in the Bankruptcy Code) after the date of the Trustee's
appointment. The failure of the Trustee to give notice of the assumption within
the period shall conclusively and irrevocably constitute the Trustee's rejection
of this Lease and waiver of any rights of the Trustee to assume or assign this
Lease. The Trustee shall not have the right to assume or assign this Lease
unless the Trustee (i) promptly and fully cures all defaults under this Lease,
(ii) promptly and fully compensates Landlord for all monetary damages incurred
as a result of such default, and (iii) provides to Landlord adequate assurance
of future performance. In the event Tenant is unable to: (i) cure its defaults,
(ii) reimburse Landlord for its monetary damages, or (iii) pay the Rent due
under this Lease on time, then Tenant hereby agrees in advance that it has not
met its burden to provide adequate assurance of future performance, and this
Lease may be terminated by Landlord in accordance with Section 20.
19.3. Tenant's Guarantor's Bankruptcy. Notwithstanding any of the other
provisions of this Lease, in the event Tenant's obligations under this Lease are
guaranteed by a guarantor, and said guarantor shall voluntarily or involuntarily
come under the jurisdiction of the Bankruptcy Code, and thereafter said
guarantor or its trustee in bankruptcy, under the authority of and pursuant to
applicable provisions thereof, shall determine to assign the guarantee
obligations of said guarantor hereunder, Tenant and its said guarantor agree
that (a) said guarantor or its trustee will provide Landlord sufficient
information enabling it to independently determine whether Landlord will incur
actual and substantial detriment by reason of such assignment, and (b) "adequate
assurance of future performance" in regard to such guarantee obligations of said
guarantor, as that term is generally defined under the Bankruptcy Code, will be
provided to Landlord by said guarantor or its trustee and its assignee as a
condition of said assignment.
20. DEFAULT PROVISIONS AND REMEDIES.
20.1. Events of Default. Each of the following shall be deemed an Event of
Default by Tenant under this Lease:
<PAGE> 20
a. failure of Tenant to pay Annual Basic Rent, Tenant's Share of
Increased Operating Costs, or any other sum required to be paid under the terms
of this Lease, including late charges, within five (5) days of the date due
hereunder;
b. failure by Tenant to perform or observe any other term, covenant,
agreement or condition of this Lease, on the part of Tenant to be performed
(other than those obligations of Tenant set forth in subsection 16.2 for which
Tenant shall be entitled to receive no prior notice, and other than the
conditions set forth in paragraphs 20.1.a, c, d, e, f and g, which shall be
governed solely by the provisions set forth herein), within ten (10) days after
notice thereof from the Landlord, unless such performance shall reasonably
require a longer period, in which case Tenant shall not be deemed in default if
Tenant commences the required performance promptly and thereafter pursues and
completes such action diligently and expeditiously and in any event within not
more than thirty (30) days;
c. the filing of a tax or mechanic's lien against any property of
Tenant which is not bonded or discharged within thirty (30) days of the date
such lien is filed;
d. abandonment of the Premises by Tenant;
e. an Event of Tenant's Bankruptcy;
f. the sale of Tenant's interest in the Premises under attachment,
execution or similar legal process; and
g. the failure of Tenant to vacate the Premises upon the expiration
of the Term, or the earlier termination thereof pursuant to the other provisions
hereof.
20.2. Remedies. Upon the occurrence of an Event of Default, Landlord,
without notice to Tenant in any instance (except where expressly provided for
below or by applicable law) may do any one or more of the following:
(a) Sell at public or private sale all or any part of the goods,
chattels, fixtures and other Tenant's Personal Property which are
or may be put into the Premises during the Term, whether exempt
or not from sale under execution or attachment (it being agreed
that said property shall at all times be bound within a lien in
favor of Landlord and shall be chargeable for all Rent and for
the fulfillment of the other covenants and agreements herein
contained) and apply the proceeds of such sale, first, to the
payment of all costs and expenses of conducting the sale or
caring for or storing said property (including all attorneys'
fees), second, toward the payment of any indebtedness, including
(without limitation) indebtedness for Annual Basic Rent, which
may be or may become due from Tenant to Landlord, and third, to
pay Tenant, on demand in writing, any surplus remaining after all
indebtedness of Tenant to Landlord has been fully paid;
(b) perform, on behalf and at the expense of Tenant, any obligation
of Tenant under this Lease which Tenant has failed to perform and
of which Landlord shall have given Tenant notice, the cost of
which performance by Landlord, together with interest thereon at
the Default Rate from the date of such expenditure, shall be
payable by Tenant to Landlord upon demand. Notwithstanding the
provisions of this clause (b) and regardless of whether an Event
of Default shall have occurred, Landlord may exercise the remedy
described in clause (b) without any notice to Tenant if Landlord,
in its good faith judgment, believes it would be materially
injured by failure to take rapid action or if the unperformed
obligation of Tenant constitutes an emergency;
<PAGE> 21
(c) elect to terminate this Lease and the tenancy created hereby by
giving notice of such election to Tenant, and reenter the
Premises, by summary proceedings or otherwise, and remove Tenant
and all other persons and property from the Premises, and store
such property in a public warehouse or elsewhere at the cost of
and for the account of Tenant without resort to legal process and
without Landlord being deemed guilty of trespass or becoming
liable for any loss or damage occasioned thereby;
(d) declare any option which Tenant may have to renew the Term or expand
the Premises to be null and void and of no further force and effect;
or
(e) exercise any other legal or equitable right or remedy which it may
have.
Any costs and expenses incurred by Landlord (including, without
limitation, reasonable attorneys' fees) in enforcing any of its rights or
remedies under this Lease shall be paid to Landlord by Tenant upon demand.
20.3. Damages. If this Lease is terminated by Landlord pursuant to Section
20.2.(c), Tenant nevertheless shall remain liable for (a) any Annual Basic Rent,
Tenant's Share of Increased Operating Costs, and damages which may be due or
sustained prior to such termination, and (b) all reasonable costs, fees and
expenses including, but not limited to, attorneys' fees, costs and expenses
incurred by Landlord in pursuit of its remedies hereunder or in renting the
Premises to others from time to time. In addition, Landlord may recover from
Tenant additional damages to compensate Landlord for loss of rent resulting from
termination of the Lease, which, at the election of Landlord, shall be either:
(i) An amount equal to the rent which, but for termination of this
Lease, would have become due during the remainder of the Term,
less the amount of rent, if any, which Landlord shall receive
during such period from others to whom the Premises may be rented
(other than any amounts received by Landlord as a result of any
failure of such other person to perform any of its obligations to
Landlord), in which case such damages shall be computed and
payable in monthly installments, in advance, on the first day of
each calendar month following termination of the Lease and
continuing until the date on which the Term would have expired
but for such termination; any suit or action brought to collect
any such damages for any month shall not in any manner prejudice
the right of Landlord to collect any damages for any subsequent
month by a similar proceeding; or
(ii) an amount equal to the present worth (as of the date of such
termination) of rent which, but for termination of this Lease,
would have become due during the remainder of the Term, in which
case such damages shall be payable to Landlord in one lump sum on
demand and shall bear interest at the Default Rate until paid.
For purposes of this clause (ii), "present worth" shall be
computed by discounting such amount to present worth at a
discount rate equal to one percentage point above the discount
rate then in effect at the Federal Reserve Bank nearest to the
location of the Property.
Damages shall be due and payable immediately upon demand by Landlord
following any termination of this Lease pursuant to Section 20.2.
If this Lease is terminated pursuant to Section 20.2., Landlord may
re-lease the Premises or any part thereof, alone or together with other
premises, for such term(s) (which may be greater or less than the period which
otherwise would have constituted the balance of the Term) and on such terms and
conditions (which may include concessions or free rent and alterations of the
Premises) as Landlord, in its sole discretion, may determine. The failure or
refusal of Landlord to re-lease the Premises or any part or parts thereof shall
not release or affect Tenant's liability for damages.
<PAGE> 22
Nothing contained in this Lease shall limit or prejudice the right of
Landlord to prove and obtain in proceedings for the termination of this Lease by
reason of bankruptcy or insolvency, an amount equal to the maximum allowed by
any statute or rule of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount be
greater, equal to, or less than the amount of the loss or damages referred to
above.
Notwithstanding anything in this Lease to the contrary, in the event state
or municipal law imposes an obligation on Landlord to mitigate damages suffered
upon Tenant's default hereunder and the consequent termination hereof and
retaking of possession of the Premises by Landlord, then and in such event,
Landlord shall use reasonable efforts to re-lease the Premises; provided,
however, Landlord shall not be required to (i) use methods or procedures other
than its usual methods and procedures for finding tenants for comparable space
in the Building; (ii) lease the Premises in preference to any other space in the
Building available for lease, regardless of when such other space became
available for lease; (iii) lease the Premises at rents lower than the rate at
which Landlord would otherwise offer such space to a third party; (iv) to make
improvements to the Premises at Landlord's expense; and (v) lease the Premises
for any purpose or use other than that specifically permitted by this Lease.
Landlord shall not be liable to Tenant for Landlord's failure to re-lease the
Premises despite the exercise of reasonable efforts pursuant to this paragraph,
and no such re-leasing shall relieve Tenant of its obligations under the terms
of this Lease, including, without limitation, the payment of rent as set forth
herein. 20.4. No Waiver. No act or omission by Landlord shall be deemed to be an
acceptance of a surrender of the Premises or a termination of Tenant's
liabilities hereunder, unless Landlord shall execute a written release of
Tenant. Tenant's liability hereunder shall not be terminated by the execution by
Landlord of any new lease for all or any portion of the Premises or the
acceptance of rent from any assignee or subtenant.
20.5. Remedies Not Exclusive. All rights and remedies of Landlord set
forth in this Lease shall be cumulative, and none shall exclude any other right
or remedy, now or hereafter allowed by or available under any statute,
ordinance, rule of court, or the common law, either at law or in equity, or
both. For the purposes of any suit brought or based hereon, this Lease shall be
construed to be a divisible contract, to the end that successive actions may be
maintained on this Lease as successive periodic sums shall mature hereunder. The
failure of Landlord to insist, in any one or more instances, upon a strict
performance of any of the covenants, terms and conditions of this Lease or to
exercise any right or option herein contained shall not be construed as a waiver
or a relinquishment for the future, of such covenant, term, condition, right or
option, but the same shall continue and remain in full force and effect unless
the contrary is expressed by Landlord in writing. The receipt by Landlord of
rents hereunder, with knowledge of the breach of any covenant hereof or the
receipt by Landlord of less than the full rent due hereunder, shall not be
deemed a waiver of such breach or of Landlord's right to receive the full rents
hereunder, and no waiver by Landlord of any provision hereof shall be deemed to
have been made unless expressed in writing and signed by Landlord.
20.6. Persistent Failure to Pay Rent. In addition to any other remedies
available to Landlord pursuant to this Lease or by law, Landlord may, at any
time throughout the Term of this Lease, terminate this Lease upon Tenant's
default on three (3) separate occasions during any twelve (12) month period
under subsection 20.1.a, regardless of whether or not such prior defaults have
been cured. Termination, pursuant to this subsection 20.6, shall be effective
upon Landlord's delivery to Tenant of a notice of termination.
21. LANDLORD'S LIEN.
21.1. Tenant hereby grants to Landlord a lien and security interest on all
property of Tenant now or hereafter placed in or upon the Premises, and such
property shall be and remain subject to such lien and security interest of
Landlord for payment of all Rent and other sums agreed to be paid by Tenant
herein. It is provided, however, the Landlord shall not have a lien which would
be superior to a lien from a
<PAGE> 23
lending institution, supplier or leasing company, if such lending institution,
supplier or leasing company has a security interest in the equipment, furniture
or other tangible personal property and which security interest has its origin
in a transaction whereby Tenant originally acquired such equipment, furniture or
other tangible personal property.
21.2. The provisions of this paragraph relating to such lien and security
interest shall constitute a security agreement under and subject to the Uniform
Commercial Code of the state where the Premises are located so that Landlord
shall have and may enforce a security interest on all property of Tenant now or
hereafter placed in or on the Premises, in addition to and cumulative of the
Landlord's liens and rights provided by law or by the other terms and provisions
of this Lease.
22. INDEMNITY.
To the maximum extent permitted by law, Tenant shall indemnify, hold
harmless and (at Landlord's option) defend Landlord, its agents, servants and
employees, and the lessor under the Development Lease, from and against all
claims, actions, losses, costs and expenses (including attorneys' and other
professional fees), judgments, settlement payments, and, whether or not reduced
to final judgment, all liabilities, damages, or fines paid, incurred or suffered
by any third parties to the extent arising directly or indirectly from (a) any
default by Tenant under the terms of this Lease, (b) the use or occupancy of the
Property by Tenant or any person claiming through or under Tenant, and/or (c)
any acts or omissions of Tenant or any contractor, agent, employee, invitee or
licensee of Tenant in or about the Property. The foregoing indemnity is in
addition to, and not in substitution for, any indemnity given by Tenant to
Landlord under Section 8.3.
23. LIMITATION ON LANDLORD LIABILITY.
The term "Landlord" as used in this Lease shall mean only the owner or the
Mortgagee or its trustees, as the case may be, then in possession of the
Property so that in the event of any transfer by Landlord of its interest in the
Property, the Landlord in possession immediately prior to such transfer shall
be, and hereby is, entirely released and discharged from all covenants,
obligations and liabilities of Landlord under this Lease accruing after such
transfer. In consideration of the benefits accruing hereunder, Tenant, for
itself, its successors and assigns, covenants and agrees that, in the event of
any actual or alleged failure, breach or default hereunder by the Landlord, and
notwithstanding anything to the contrary contained elsewhere in this Lease, the
remedies of Tenant under this Lease shall be solely and exclusively limited to
Landlord's interest in the Property.
<PAGE> 24
24. LANDLORD OBLIGATIONS.
Landlord agrees to perform all of its obligations under this Lease in a
first class manner consistent with the standards applicable to similar buildings
in the vicinity of the Building. Landlord shall be excused for the period of any
delay in the performance of any of its obligations when the delay is due to any
cause or causes beyond Landlord's control which include, without limitation,
acts of God, all labor disputes, governmental regulations or controls, civil
unrest, war, adverse weather condition, fire or other casualty, inability to
obtain any material, services, or financing unless otherwise provided for in
this Lease. Except where specifically set forth in this Lease, there shall be no
abatement, set-off or deduction of Annual Basic Rent or Tenant's Share of
Increased Operating Costs due under this Lease.
25. ASSIGNMENT AND SUBLETTING.
25.1. Prohibited Without Landlord's Consent. Tenant agrees for itself and
its permitted successors and assigns in interest hereunder that it will not (a)
assign or otherwise transfer, mortgage or otherwise encumber this Lease or any
of its rights hereunder; (b) sublet the Premises or any part thereof or permit
the occupancy or use of the Premises or any part thereof by any person other
than Tenant; and/or (c) permit the assignment or other transfer of this Lease or
any of Tenant's rights hereunder by operation of law (each of the events
referred to in the foregoing clauses (a), (b) and (c) being hereinafter referred
to as a "Transfer"), without the prior written consent of Landlord in each
instance first obtained, which consent may be given or withheld in Landlord's
sole and absolute subjective discretion, and any consent given shall not
constitute a consent to any subsequent Transfer. Any attempted Transfer without
Landlord's consent shall be null and void and shall not confer any rights upon
any purported transferee, assignee, mortgagee, sublessee, or occupant. No
Transfer, regardless of whether Landlord's consent has been granted or withheld,
shall be deemed to release Tenant from any of its obligations hereunder or to
alter, impair or release the obligations of any person guaranteeing the
obligations of Tenant hereunder. Tenant hereby indemnifies Landlord against
liability resulting from any claim made against Landlord by any assignee or
subtenant or by any broker claiming a commission in connection with the proposed
Transfer. In the event Landlord shall consent to a Transfer of this Lease, any
option which Tenant may have to renew the Term shall be null and void.
25.2. Stock Transfer. If Tenant or any Guarantor is a privately-held
corporation, then each of the following events shall be deemed a prohibited
Transfer under this Section 25 if such event results in a change in control of
Tenant or Guarantor: any transfer of Tenant's or Guarantor's issued and
outstanding capital stock; any issuance of additional capital stock; or the
redemption of any issued and outstanding stock. If Tenant or any Guarantor is a
partnership, any Transfer of any interest in the partnership or any other change
in the composition of the partnership, which results in a change in management
of Tenant or Guarantor from the person or persons managing the partnership as of
the date hereof, shall be deemed a prohibited Transfer under this Section 25.
25.3. Rents from Transfer. In the event Landlord shall consent to a
Transfer of this Lease and the amount of the rents (or other compensation) to be
paid to Tenant by any such transferee is greater than the rents required to be
paid by Tenant to Landlord pursuant to this Lease or a premium is to be paid to
Tenant for an assignment of this Lease, Tenant shall pay to Landlord any such
excess or any such premium, as the case may be, upon receipt thereof by Tenant
from such transferee.
25.4. Procedure for Obtaining Landlord's Consent.
A. In the event that, at any time or from time to time prior to or during
the Term, Tenant desires to Transfer this Lease in whole or in part, whether by
operation of law or otherwise, Tenant shall submit to Landlord for its
consideration (a) in writing, the name and address of the proposed subtenant or
assignee, a reasonably detailed statement of the proposed subtenant's or
assignee's business and reasonably detailed financial references and information
concerning the financial condition of the proposed subtenant
<PAGE> 25
or assignee, (b) a disclosure of the rents to be paid by any subtenant in excess
of the rents reserved hereunder or the premium to be paid for the assignment,
and (c) if a subletting, a description of the area of the Premises to be sublet.
Tenant agrees to pay Landlord all costs incurred by Landlord in connection with
any actual or proposed Transfer, including, without limitation, the costs of
making investigations as to the acceptability of a proposed subtenant or
assignee and legal costs incurred in connection with any requested consent.
B. Landlord's consent to an assignment of this Lease shall be effective
upon the execution by Tenant, the assignee, and Landlord of an assignment
document prepared by Landlord in which the assignee shall agree to assume,
observe, perform, and be bound by, all of Tenant's obligations under this Lease
and Tenant shall agree to remain primarily liable for such obligations.
Any consent by Landlord to a subletting of all or a portion of the
Premises shall be deemed to have been given only upon the delivery by Landlord
to Tenant of a consent document prepared and executed by Landlord expressly
consenting to such subletting.
26. HOLDING OVER.
Tenant agrees to vacate the Premises at the end of the Term, and Landlord
shall be entitled to the benefit of all summary proceedings to recover
possession of the Premises at the end of the Term. If Tenant remains in
possession of the Premises after the expiration of the Term, such action shall
not renew this Lease by operation of law and nothing herein shall be deemed as a
consent by Landlord to Tenant's remaining in the Premises. If Tenant fails to
vacate the Premises as required, Landlord may consider Tenant as either (a) a
"Tenant-at-Will" (i.e. month-to-month tenant) liable for the payment of rent at
the then market rate as determined by Landlord or (b) as a "Tenant-Holding Over"
liable for an amount equal to the actual damages incurred by Landlord as a
result of Tenant's holding over, including, without limitation, all incidental,
prospective and consequential damages and attorney's fees, but in no event shall
such amount be less than an amount equal to twice the Annual Basic Rent, and
Tenant's Share of Increased Operating Costs, reserved hereunder applicable to
the period of the holdover. In either event, all other covenants of this Lease
shall remain in full force and effect.
27. SUBORDINATION AND ATTORNMENT.
This Lease is subject and subordinate to the liens of all mortgages, deeds
of trust and other security instruments now or hereafter placed upon the
Building or the Property or any portion thereof and all ground and other
underlying leases from which Landlord's interest is derived (said mortgages,
deeds of trust, other security instruments, and ground leases being hereinafter
referred to as "Mortgages" and the mortgagees, beneficiaries, secured parties,
and ground lessors thereunder from time to time being hereinafter called
"Mortgagees"), and to any and all renewals, extensions, modifications, or
refinancings thereof, without any further act of the Tenant. If requested by
Landlord, however, Tenant shall promptly execute any certificate or other
document confirming such subordination. Tenant agrees that, if any proceedings
are brought for the foreclosure of any of the Mortgages, Tenant, if requested to
do so by the purchaser at the foreclosure sale, shall attorn to the purchaser,
recognize the purchaser as the landlord under this Lease, and make all payments
required hereunder to such new landlord without any deduction or set-off of any
kind whatsoever. Tenant waives the provisions of any law or regulation, now or
hereafter in effect, which may give, or purport to give, Tenant any right to
terminate this Lease or to alter the obligations of Tenant hereunder in the
event that any such foreclosure or termination or other proceeding is prosecuted
or completed.
Notwithstanding anything contained herein to the contrary, any Mortgagee
may at any time subordinate the lien of its Mortgages to the operation and
effect of this Lease without obtaining the Tenant's consent thereto, by giving
the Tenant written notice thereof, in which event this Lease shall be deemed to
be senior to such Mortgages without regard to the respective dates of execution
and/or recordation of such
<PAGE> 26
Mortgages and this Lease and thereafter such Mortgagee shall have the same
rights as to this Lease as it would have had were this Lease executed and
delivered before the execution of such Mortgages.
If, in connection with obtaining financing for the Building, a Mortgagee
shall request reasonable modifications in this Lease as a condition to such
financing, Tenant will not unreasonably withhold, delay or defer its consent
thereto, provided that such modifications do not materially adversely increase
the obligations of Tenant hereunder, or materially adversely affect the
leasehold interest hereby created or Tenant's use and enjoyment of the Premises,
or increase the amount of Annual Basic Rent and Tenant's Share of Increased
Operating Costs payable hereunder.
28. ESTOPPEL CERTIFICATES.
Tenant shall, without charge, at any time and from time-to-time, within
fifteen (15) days after receipt of request therefor by Landlord, execute,
acknowledge and deliver to Landlord a written estoppel certificate, in such form
as may be determined by Landlord, certifying to Landlord, Landlord's Mortgagee,
any purchaser of Landlord's interest in the Building, or any other person
designated by Landlord, as of the date of such estoppel certificate, the
following, without limitation: (a) whether Tenant is in possession of the
Premises; (b) whether this Lease is in full force and effect; (c) whether there
have been any amendments to this Lease, and if so, specifying such amendments;
(d) whether there are then existing any set-offs or defenses against the
enforcement of any rights hereunder, and if so, specifying such matters in
detail; (e) the dates, if any, to which any rent or other charges have been paid
in advance and the amount of any Security Deposit held by Landlord; (f) that
Tenant has no knowledge of any then existing defaults of Landlord under this
Lease, or if there are such defaults, specifying them in detail; (g) that Tenant
has no knowledge of any event having occurred that authorizes the termination of
this Lease by Tenant, or if such event has occurred, specifying it in detail;
and (h) the address to which notices to Tenant under this Lease should be sent.
Any such certificate may be relied upon by the person or entity to whom it is
directed or by any other person or entity who could reasonably be expected to
rely on it in the normal course of business. The failure of Tenant to execute,
acknowledge and deliver such a certificate in accordance with this Section 28
within fifteen (15) days after a request therefor by Landlord shall constitute
an acknowledgment by Tenant, which may be relied on by any person who would be
entitled to rely upon any such certificate, that such certificate as submitted
by Landlord to Tenant is true and correct.
29. PEACEFUL AND QUIET POSSESSION.
Tenant, if and so long as it pays all rents due hereunder and performs and
observes the other terms and covenants to be performed and kept by it as
provided in this Lease, shall have the peaceable and quiet possession of the
Premises during the Term free of any claims of Landlord or anyone lawfully
claiming by, through or under Landlord, subject, however, to the terms of this
Lease, and to the terms of the Development Lease, the Mortgage and the REA, and
to matters of public record existing as of the date of this Lease.
30. LANDLORD'S AND TENANT'S ACCESS TO PREMISES.
Landlord and its agents may at any reasonable time and without incurring
any liability to Tenant, other than liability arising under Section 22, enter
the Premises to inspect them or to make alterations or repairs or for any
purpose which Landlord considers necessary for the repair, operation, or
maintenance of the Building; provided, however, that in the case of an
emergency, Landlord may enter the Premises at any time. Tenant shall allow the
Premises to be exhibited by Landlord (a) at any time to any representative of a
lender or to any prospective purchaser of the Building or Landlord's interest
therein or (b) within six (6) months of the end of the Term to any persons who
may be interested in leasing the Premises.
<PAGE> 27
Subject to the provisions of Section 11 and 13, Tenant shall have access
to the Premises twenty-four (24) hours per day, seven (7) days per week.
31. RELOCATION.
Landlord shall have the right, either before or during the Term, upon not
less than thirty (30) days written notice to Tenant, to change the location of
the Premises to another mutually agreeable location within the Building or the
Business Community, if any, provided that the new location is reasonably similar
in size, utility and appearance. If Tenant is occupying the Premises when
Landlord exercises its rights hereunder, Landlord, at its expense, shall remove,
relocate and reinstall Tenant's equipment (including telephones), furniture and
fixtures in the new premises and redecorate the new premises so that they will
substantially resemble the former Premises. Landlord shall also pay Tenant's
cost of reprinting stationery and business cards. On completion of the change in
location of the Premises, the parties shall execute an amendment to this Lease
which sets forth the new description of the Premises and amendments to any other
terms of this Lease, if any, required by the relocation of the Premises.
In the event Landlord is unable to relocate the Premises to a location
which is reasonably similar in size, utility and appearance, then Tenant shall
have the right to terminate this Lease upon not less than sixty (60) days'
written notice to Landlord; provided, however, Landlord shall, within thirty
(30) days after receipt of Tenant's notice to terminate the Lease, have the
right to withdraw its demand requiring Tenant to relocate, in which event Tenant
shall remain in the Premises and this Lease shall continue in full force and
effect.
If any notice of termination is given pursuant to this Section, this Lease
and the rights and obligations of the parties hereunder shall cease as of the
date of such notice and all Rent (other than any Additional Rent due Landlord by
reason of Tenant's failure to perform any of its obligations hereunder) shall be
adjusted as of the date of such termination.
Notwithstanding the foregoing, Tenant's obligation to indemnify and hold
harmless Landlord as provided in Section 22 hereof shall survive any such
termination as to any act, omission or occurrence which took place prior to such
termination. No further documentation shall be required to effect the
termination of this Lease unless otherwise requested in writing by either party.
32. BROKERS, COMMISSIONS, ETC.
Landlord and Tenant acknowledge, represent and warrant each to the other
that, except as listed in Section 1.F., no broker or real estate agent brought
about or was involved in the making of this Lease and that no brokerage fee or
commission is due to any other party as a result of the execution of this Lease.
Each of the parties hereto agrees to indemnify and hold harmless the other
against any claim by any broker, agent or finder based upon the execution of
this Lease and predicated upon a breach of the above representation and
warranty.
33. RECORDATION.
Neither Landlord nor Tenant shall record this Lease, any amendment to this
Lease or any other memorandum of this Lease without the prior written consent of
the other party, which consent may be withheld in the sole discretion of either
party and, in the event such consent is given, the party requesting such consent
and recording shall pay all transfer taxes, recording fees and other charges in
connection with such recording. Notwithstanding the above, Tenant covenants that
if at any time any mortgagee or ground lessor relating to the financing of the
Property shall require the recordation of this Lease, or if the recordation of
this Lease shall be required by any valid governmental order, or if any
governmental authority having jurisdiction in the matter shall assess and be
entitled to collect transfer taxes, documentary stamp taxes, or both, on this
Lease, Tenant, upon the request of Landlord, shall execute such instruments,
<PAGE> 28
including a Memorandum of this Lease, as may be necessary to record this Lease,
and shall pay all recording fees, transfer taxes and documentary stamp taxes,
payable on, or in connection with, this Lease or such recordation.
34. MISCELLANEOUS.
34.1. Separability. If any term or provision of this Lease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease or the application of such
term or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
34.2. Applicable Law. This Lease shall be given effect and construed by
application of the laws of the state where the Property is located, and any
action or proceeding arising hereunder shall be brought in the courts of the
State where the Premises are located.
34.3. Authority. If Tenant is a corporation or partnership, the person
executing this Lease on behalf of Tenant represents and warrants that Tenant is
duly organized and validly existing; that this Lease has been authorized by all
necessary parties, is validly executed by an authorized officer or agent of
Tenant and is binding upon and enforceable against Tenant in accordance with its
terms.
The undersigned agent of Landlord represents and warrants that it is
authorized and empowered to enter into this Lease Agreement on behalf of the
Landlord.
34.4. No Discrimination. It is Landlord's policy to comply with all
applicable state and federal laws prohibiting discrimination in employment based
on race, age, color, sex, national origin, disability, religion, or other
protected classification. It is further intended that the Building shall be
operated so that all perspective tenants thereof, and all customers, employees,
licensees and invitees of all tenants shall have equal opportunity to obtain all
the goods, services, accommodations, advantages, facilities and privileges of
the Building without discrimination because of race, age, color, sex, national
origin, disability, or religion. To that end, Tenant shall not discriminate in
the conduct and operation of its business in the Premises against any person or
group of persons because of the race, age, color, sex, religion, national origin
or other protected classification of such person or group of persons.
34.5. Integration of Agreements. This writing is intended by the parties
as a final expression of their agreement and is a complete and exclusive
statement of its terms, and all negotiations, considerations and representations
between the parties hereto are incorporated herein. No course of prior dealings
between the parties or their agents shall be relevant or admissible to
supplement, explain, or vary any of the terms of this Lease. Acceptance of, or
acquiescence to, a course of performance rendered under this Lease or any prior
agreement between the parties or their agents shall not be relevant or
admissible to determine the meaning of any of the terms or covenants of this
Lease. Other than as specifically set forth in this Lease, no representations,
understandings or agreements have been made or relied upon in the making of this
Lease. This Lease can only be modified by a writing signed by each of the
parties hereto.
34.6. Third Party Beneficiary. Except as expressly provided elsewhere in
this Lease, nothing contained in this Lease shall be construed so as to confer
upon any other party the rights of a third party beneficiary.
34.7. Captions; Gender. The captions used in this Lease are for
convenience only and do not in any way limit or amplify the terms and provisions
hereof. As used in this Lease and where the context so requires, the singular
shall be deemed to include the plural and the masculine shall be deemed to
include the feminine and neuter, and vice versa.
<PAGE> 29
34.8. Successors and Assigns. Subject to the express provisions of this
Lease to the contrary (e.g., Section 25), the terms, provisions and covenants
contained in this Lease shall apply to, inure to the benefit of, and be binding
upon the parties hereto and their respective heirs, personal representatives,
successors and assigns.
34.9. Waiver of Jury Trial. Landlord and Tenant hereby expressly waive
trial by jury in any action or proceeding or counterclaim brought by either
party hereto against the other party on any and every matter, directly or
indirectly arising out of or with respect to this Lease, including, without
limitation, the relationship of Landlord and Tenant, the use and occupancy by
Tenant of the Premises, any statutory remedy and/or claim of injury or damage
regarding this Lease.
34.10. Joint and Several Liability. In the event that two (2) or more
persons (i.e., natural persons, corporations, partnerships, associations and
other legal entities) shall sign this Lease as Tenant, the liability of each
such party to pay all rents due hereunder and perform all the other covenants of
this Lease shall be joint and several. In the event Tenant is a general
partnership or a limited partnership with two or more general partners, the
liability of each partner, or general partner, under this Lease shall be joint
and several.
34.11. Notices. All notices, demands and requests required under this
Lease shall be in writing. All such notices, demands and requests shall be
deemed to have been properly given if sent by United States certified mail,
return receipt requested, postage prepaid, or hand delivered, or overnight
delivery, addressed to Landlord or Tenant, at the Landlord Notice Address and
Tenant Notice Address, respectively. Either party may designate a change of
address by written notice to the other party, in the manner set forth above.
Notice, demand and requests which shall be served by certified mail in the
manner aforesaid, shall be deemed to have been given three (3) days after
mailing. Notices sent by overnight delivery shall be deemed to have been given
the day after sending. Without intending to limit the generality of the
foregoing requirement that all notices, demands and requests be in writing,
there are certain provisions in this Lease where, for emphasis alone, such
requirement is reiterated.
34.12. Effective Date of this Lease. Unless otherwise expressly provided,
all terms, conditions and covenants by Tenant contained in this Lease shall be
effective as of the date first above written.
34.13. Mechanics' Liens. In the event that any mechanics' or materialmen's
liens shall at any time be filed against the Premises purporting to be for work,
labor, services or materials performed or furnished to Tenant or anyone holding
the Premises through or under Tenant, Tenant shall cause the same to be
discharged of record or bonded within thirty (30) days after the filing thereof.
If Tenant shall fail to cause such lien to be discharged or bonded within thirty
(30) days after the filing thereof, then, in addition to any other right or
remedy of Landlord, Landlord may, but shall not be obligated to, discharge the
same by paying the amount claimed to be due; and the amount so paid by Landlord,
and all costs and expenses, including reasonable attorneys' fees incurred by
Landlord in procuring the discharge of such lien, shall be due and payable by
Tenant to Landlord on the first day of the next succeeding month. Notice is
hereby given that Landlord shall not be liable for any labor or materials
furnished to Tenant upon credit and that no mechanics', materialmen's or other
liens for any such labor or materials shall attach to or affect the estate or
interest of Landlord in and to the land and improvements of which the Premises
are a part.
34.14. Waiver of Right of Redemption. Tenant hereby expressly waives (to
the extent legally permissible) for itself and all persons claiming by, through
or under it, any right of redemption or right to restore the operation of this
Lease under any present or future law in the event Tenant is dispossessed for
any proper cause, or in the event Landlord shall obtain possession of the
Premises pursuant to the terms of this Lease. Tenant understands that the
Premises are leased exclusively for business, commercial and mercantile purposes
and therefore shall not be redeemable under any provision of law.
<PAGE> 30
34.15. Mortgagee's Performance. If requested by any Mortgagee, Tenant
shall give such Mortgagee written notice of any default by Landlord under this
Lease and a reasonable opportunity to cure such default. Tenant shall accept
performance of any of Landlord's obligations hereunder by any ground lessor or
mortgagee relating to the financing of the Property.
34.16. Mortgagee's Liability. No mortgagee or ground lessor relating to
the financing of the Property, not in possession of the Premises or the
Building, shall have any liability whatsoever hereunder.
34.17. Schedules. Each writing or plat referred to herein as being
attached hereto as a schedule or exhibit is hereby made a part hereof, with the
same full force and effect as if such writing or plat were set forth in the body
of this Lease.
34.18. Time of Essence. Time shall be of the essence of this Lease with
respect to the performance by Tenant of its obligations hereunder.
34.19. Amendment. This Lease may be amended by and only by an instrument
executed and delivered by each party hereto. No amendments of this Lease entered
into by Landlord and Tenant, as aforesaid, shall impair or otherwise affect the
obligations of any guarantor of Tenant's obligations hereunder, all of which
obligations shall remain in full force and effect and pertain equally to any
such amendments, with the same full force and effect as if the substance of such
amendments was set forth in the body of this Lease.
34.20. No Conflict. As used herein, the term "interested person" means
Tenant and (if Tenant is a partnership) any partner in Tenant, and (if Tenant is
a corporation whose shares are not publicly traded) any officer, director or
shareholder of Tenant, and the term "public servant" means any elected or
appointed official or employee of the federal government, City of Phoenix, State
of Arizona, or of any board, agency or commission thereof. In order to enable
Landlord to determine whether any interested person is or has been a public
servant who may be prohibited by state, federal or local law from being an
interested person with respect to this Lease, Tenant covenants and agrees that
attached hereto as Schedule Z is a list identifying any interested person who
is, or, within the period commencing two years prior to the execution of this
Lease was, a public servant, which list sets forth the position or positions
held by any such interested person in his or her capacity as a public servant.
Tenant further warrants and covenants that (i) no interested person who is, or
within two years prior to the execution of this Lease was, a public servant has
exercised or enjoyed, or in the course of his or her duties as a public servant
may be reasonably expected to exercise or enjoy, any decision-making authority
with respect to the Overall Site, the Underlying Documents or this Lease, (ii)
no interested person is a child, brother, sister, spouse, parent, mother-in-law
or father-in-law of such a public servant, (iii) no interested person is an
employee, agent, consultant, officer, elected official or appointed official of
the City of Phoenix, who exercises or has exercised any functions or
responsibilities with respect to the Overall Site, the Underlying Documents or
this Lease,, or who is in a position to participate in a decision-making process
or gain inside information with regard to any of the same, has any personal or
financial interest or benefit from the same or has any interest in any contract,
subcontract or agreement with respect thereof, or proceeds thereunder, either
for himself or herself of those with whom he or she has family or business ties,
during his or her tenure or at any time thereafter.
34.21. Confidentiality. Tenant acknowledges and agrees that, except with
respect to certain required securities' filings and disclosures to stockholders,
the business terms of this Lease are confidential in nature and Tenant agrees
that it shall not reveal the provisions of same to any person, including,
without limitation, to clients of Tenant, except as may be required by court
order or subpoena. Any breach of this agreement shall constitute a Tenant
default under the Lease.
34.22. Parking. During the Term, Landlord shall cause the operator of the
Building's parking deck to lease to Tenant up to seventy-three (73) parking
spaces. Three (3) of said spaces will be valet
<PAGE> 31
assisted reserved spaces located in the parking garage located below the
Building and shall be leased to Tenant at the rate of Ninety-Five Dollars
($95.00) per space per month. Seventy (70) of the spaces will be located in the
Building's parking deck (located north of Two Arizona Center); Ten (10) of which
will be reserved at a rate of Seventy-Five Dollars ($75.00) per space per month
and sixty (60) of which will be non-exclusive, unreserved spaces at a rate of
Fifty-Five Dollars ($55.00) per space per month.
IN WITNESS WHEREOF, the parties hereto have executed this Lease under
their respective seals as of the day and year first above written.
ATTEST: LANDLORD:
ROUSE-PHOENIX CORPORATE CENTER
LIMITED PARTNERSHIP
By: ROUSE OFFICE MANAGEMENT OF
ARIZONA, INC., Managing Agent
__________________________________ By:_____________________________(SEAL)
Assistant Secretary Vice President
ATTEST: TENANT:
QUEPASA.COM, INC.
__________________________________ By:_____________________________(SEAL)
Secretary of Corporation President
<PAGE> 32
(4/27/99)
ARIZONA FULL-SERVICE OFFICE LEASE
ONE ARIZONA CENTER
by and between
ROUSE-PHOENIX CORPORATE CENTER LIMITED PARTNERSHIP, Landlord
by ROUSE OFFICE MANAGEMENT OF ARIZONA, INC., Managing Agent,
and
QUEPASA.COM, INC., Tenant
<PAGE> 33
(4/27/99)
SCHEDULE C
RULES AND REGULATIONS
1. Tenant shall not obstruct the Common Area, and the sidewalks,
driveways, and other public portions of the Property (herein "Public Areas") and
such Public Areas shall not be used for any purpose other than ingress and
egress to and from its Premises. Fire exits and stairways are for emergency use
only, and they shall not be used for any other purpose.
2. No awnings or other projections shall be attached to the outside
walls of the Building. No curtains, blinds, shades or screens shall be attached
to, hung in, or used in connection with any window or door of the Premises.
3. Except as otherwise provided in the Lease, no sign, insignia,
advertisement, lettering, notice or other object shall be exhibited, inscribed,
painted or affixed by Tenant on any part of the exterior or interior of the
Premises or the Building.
4. No bicycles, vehicles, animals (except seeing eye dogs), fish or birds
of any kind shall be brought into or kept in or about the Premises.
5. Nothing shall be done which would impair or interfere with any of the
HVAC, plumbing, electrical, structural components of the Building. No flammable,
combustible or explosive fluid, chemical or substance may be kept on the
Premises.
6. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by Tenant, nor shall any changes be made in locks or the
mechanism thereof. Tenant shall, upon the termination of the Lease, turn over to
Landlord all keys to stores, offices and restrooms. In the event of the loss of
any keys furnished by Landlord, Tenant shall pay to Landlord the cost of
replacement locks and Tenant hereby agrees to pay said cost to Landlord, as
Additional Rent, promptly upon demand.
7. No delivery or moving of any safes, freight, furniture, packages,
boxes, crates or any other such object shall take place between 8:30 a.m. and
5:30 p.m., Monday through Friday.
No hand trucks shall be used for such moving activities except for those
equipped with rubber tires and side guards.
8. Tenant shall not use or occupy its Premises, or permit any portion
thereof to be used or occupied for any use which constitutes a nuisance, or is
hazardous, or, in Landlord's opinion, likely to injure the reputation of a
first-class building.
9. Tenant shall turn off all lights, copying machines and other electrical
equipment when the Premises are vacant. All entrance doors in Tenant's Premises
shall be kept locked when not in use. Entrance doors shall not be left open at
any time.
10. If Tenant shall request Landlord to perform any work on the Premises
or Property, Tenant shall make such request at the management office for the
Building. Tenant shall not request employees of Landlord to perform any work or
do anything outside of their regular duties, unless under special instructions
from Landlord.
-1-
<PAGE> 34
11. Canvassing, soliciting and peddling in the Building are prohibited and
Tenant shall cooperate to prevent the same.
12. Tenant shall not cause or permit any odors of cooking or other
processes, or any unusual or objectionable odors, to emanate from its Premises
which would annoy other tenants or create a public or private nuisance. No
cooking shall be done in Tenant's Premises, except for a household microwave
oven or as is expressly permitted in the Lease.
13. No contract of any kind involving the care and maintenance of the
Premises shall be entered into by Tenant without the prior written consent of
Landlord. Further, no vending machine of any kind shall be installed in the
Building or on or about the Property without the prior written consent of
Landlord.
Landlord shall not be responsible to Tenant for any loss of property from
its Premises however occurring, or for any damage done to the effects of Tenant
by Landlord's janitors or any of its employees, or by any other person or any
other cause.
14. All electrical work must be in accordance with code and is subject to
Landlord's review and approval.
15. Landlord hereby reserves to itself any and all rights not granted to
Tenant hereunder, including, but not limited to, the following rights which are
reserved to Landlord for its purposes in operating the Building:
(a) the exclusive right to use of the name of the Building for all
purposes, except that Tenant may use the name as its business address and
for no other purpose;
(b) the right to change the name or address of the Building, without
incurring any liability to Tenant for so doing;
(c) the right to install and maintain a sign or signs on the
exterior of the Building;
(d) the exclusive right to use the roof of the Building;
(e) the right to limit the space on the directory of the Building to
be allotted to Tenant; and
(f) the right to grant anyone the right to conduct any particular
business or undertaking in the Building.
16. Tenant and its employees shall park their cars only in those portions
of the parking area designated by Landlord.
17. Tenant shall not permit undue accumulations of garbage, trash, rubbish
or any other refuse, and will keep such refuse in proper containers in the
interior of the Tenant's Premises or other places designated by the Landlord.
18. Tenant shall not conduct or permit any bankruptcy sales, unless
directed by order of a court of competent jurisdiction, or any fictitious fire
or going out of business sale.
19. Landlord shall have the right to close and securely lock the Building
during generally accepted holidays and during such other times as Landlord may,
in its sole discretion, deem advisable for the security of the Building and its
tenants. Landlord shall give Tenant twenty-four (24) hours notice before so
closing and securely locking the Building except in an emergency.
-2-
<PAGE> 35
20. Landlord reserves the right to rescind, alter, waive or add any rule
or regulation at any time prescribed for the Building when Landlord deems it
necessary or desirable for the reputation, safety, character, security, care,
appearance or interests of the Building, the preservation of good order therein,
the operation or maintenance of the Building or the equipment thereof, or the
comfort of tenants or others in the Building. No rescission, alteration, waiver
or addition of any rule or regulation with respect to one tenant shall operate
as a rescission, alteration or waiver in respect of any other tenant.
-3-
<PAGE> 36
SCHEDULE X
METHOD OF BUILDING MEASUREMENT FOR OFFICE SPACE
I. SINGLE-TENANCY FLOORS
The Rental Area of a single-tenancy floor shall be the area within the
outside walls computed by measuring from the inside surface of the window glass
to the inside surface of the opposite window glass including columns and
projections necessary to the building as well as accessory areas within and
exclusively serving only that floor, with their enclosing walls, toilets,
janitors closets, electrical closets, air-conditioning rooms and fan rooms and
telephone closets, together with eight percent (8%) of the sum so determined as
a "Common Area Factor". Rental Area will not include penetrations made by public
stairs, fire towers, public elevator shafts, flues, vents, stacks, pipe shafts
and vertical ducts.
II. DIVIDED FLOORS
The Rental Area of an individual office or a portion of a divided floor
shall be the area computed by measuring from the inside surface of the window
glass to the finished surface of the corridor side of corridor partitions and
from center to center of the partitions that separate the Premises from
adjoining Rental Areas including columns and projections necessary to the
Building together with twelve percent (12%) of the sum so determined as a
"Common Area Factor".
-1-
<PAGE> 1
[Spark KJS Letterhead]
Exhibit 10.22
TO: Victor Roldan
FROM: Luis Garcia
DATE: February 12, 1999
SUBJECT: Partnership
cc: Lionel Sosa, Kathy Sosa, Michele Ockenfais
Gracias por tu confianza en nosotros. We are very excited about our new
partnership most of all because we will be a part of building a modern day
success story. Thank you for having such confidence in us, we will not
disappoint you.
As we discussed, the following will recap the services we will provide and
attached is the first invoice that will continue on a month to month basis until
you are ready to commit to our long term contract:
- Consult on Brand positioning
- Assist in the development of a marketing plan
- Work in concert with the quepasa.com creative team on the development
of all communication messages and design of printed materials
- Develop and manage the production of TV, radio, direct mail and outdoor
advertising
- Provide guidance and supervision of qualitative and quantitative research
- Develop and implement sales promotions programs including special events,
i.e. Carnaval Miami
- Provide ongoing account management to ensure efficient and effective
management of all marketing projects, including budget management
- Provide Public Relations support on matters of corporate or marketing
initiatives
<PAGE> 2
The Agency will not mark-up production, media or other out-of-pocket expenses.
We will bill you at cost for all expenses including travel approved by you in
connection with services rendered on your behalf.
Our billing procedures will include a bill for the fee on the 1st of the month
payable by the 10th, media is billed and payable prior to the air date,
production is billed 50% upfront and 50% upon completion and all other expenses
will be billed as incurred. We will be responsible for compensating any third
party suppliers we bring in as part of our fee unless otherwise agreed.
We commit that it is our duty not to discuss any confidential information
entrusted to us by you without authorization.
This will serve as our letter of agreement until we are able to execute a
long-term contract. Thank again Victor for the opportunity to work with you
guys, this is going to be fun.
<PAGE> 3
INVOICE
Garcia Sosa, LTD
719 S. Flores
San Antonio, Tx. 78204
210-222-1591
Victor Roldan Number 1000
QUEPASA.COM Date 2/12/99
400 E. Vanburen #545 Job Number QPC99-100
Phoenix, AZ 85004 PO#
<PAGE> 4
JOB NAME: AGENCY FEE
AGENCY CONTACT: Michele Ockenfels
<TABLE>
<CAPTION>
Description AMOUNT
- -------------------------------------------------------------------------------
<S> <C>
Agency fee for the month of February, 1999 Pro-rated 2/10/99-2/28/99 $50,678
- -------------------------------------------------------------------------------
TOTAL: $50,678
</TABLE>
PAYMENT TERMS: On Receipt
28 days = 2,815.48/day
/s/ JUAN GULAN
<PAGE> 5
quepasa.com, inc.
One Arizona Center
400 E. Van Buren, Fourth Floor
Phoenix, AZ 85004
April 28, 1999
Luis Garcia
Garcia/LKS
719 South Flores
San Antonio, TX 78204
Dear Luis:
This letter confirms the agreement among quepasa.com, inc. (the "Company")
and Garcia/LKS ("Garcia") whereby the Company agrees to issue Garcia 50,000
shares of the Company's authorized but unissued common stock with a value of
$10.00 per share in exchange for a $500,000 credit from Garcia towards
advertising and marketing expenses to be applied on a pro rata basis over 24
months.
Sincerely,
quepasa.com, inc.
By: /s/ Michael A. Hubert
---------------------
Michael A. Hubert, Chief Operating Officer
<PAGE> 1
FORM OF VOTING TRUST AGREEMENT
VOTING TRUST AGREEMENT (this "Agreement"), dated as of April __, 1999,
by and between MICHAEL SILBERMAN, KEVIN DIEBALL, THE MONOLITH LIMITED
PARTNERSHIP, RICHARD WHELAN and KEITH FREDRICKSON (collectively, the
"Shareholders" and each, a "Shareholder"), and JEFFREY PETERSON (the "Voting
Trustee").
WHEREAS, the Shareholders are the record and beneficial owners and
holders of the number of shares of issued and outstanding common stock (the
"Common Stock") of quepasa.com, inc. (the "Corporation"), a Nevada corporation,
set forth on the signature pages to this Agreement (the "Shares"); and
WHEREAS, in order to promote their mutual interests, the interest of
the Corporation and the allocation of control therein, the Shareholders and the
Voting Trustee desire to enter into this Agreement upon the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the above and the mutual covenants
and promises hereinafter set forth, the parties hereto hereby agree as follows:
1. Transfer of Shares to the Voting Trustee. Each Shareholder shall,
promptly following the execution of this Agreement, transfer and deliver to the
Voting Trustee certificates representing the number of Shares now owned by each
Shareholder. All such stock certificates shall be made out or endorsed in the
name of the Voting Trustee, or accompanied by such instruments of transfer as to
enable the Voting Trustee to cause such certificates to be transferred into his
name. All certificates representing the Shares transferred and delivered to the
Voting Trustee pursuant to this Agreement shall be surrendered by the Voting
Trustee to the Corporation and canceled, and new certificates therefor shall be
issued to and held by the Voting Trustee in the name of "Jeffrey Peterson,
Voting Trustee under the Voting Trust Agreement dated as of April __, 1999." On
receipt by the Voting Trustee of certificates representing such Shares and the
transfer of the same into the name of the Voting Trustee, the Voting Trustee
shall hold the same subject to the terms of this Agreement.
2. Voting Trust Certificates.
2.1 Issuance of Certificates to the Shareholders. Upon the
receipt by the Voting Trustee of the certificates representing the Shares owned
by the Shareholders, the Voting Trustee shall issue and deliver to the
Shareholders voting trust certificates (each, a "Voting Trust Certificate" and
collectively, the "Voting Trust Certificates") in substantially the form of
Exhibit A attached hereto, representing the Shares held by the Voting Trustee
for the benefit of the Shareholders.
2.2 Lost Voting Trust Certificates. If any Voting Trust
Certificate is lost, stolen, mutilated or destroyed, the Voting Trustee, in his
discretion, may issue a duplicate of such certificate upon receipt of: (a)
evidence of such fact satisfactory to him; (b) indemnity
<PAGE> 2
satisfactory to him; (c) the existing certificate, if mutilated; and (d) his
reasonable fees and expenses in connection with the issuance of a new trust
certificate.
3. Rights and Duties of the Voting Trustee.
3.1 Right to Vote the Shares. During the term of this
Agreement the Voting Trustee shall, in his sole and absolute discretion, in
respect of any and all of the Shares held by him hereunder, possess and be
entitled to exercise the right to vote thereon for every purpose, in person or
by his nominees or proxies, to waive any Shareholder's privilege in respect
thereof, and to consent to any lawful corporate act of the Corporation, as
though absolute owner of said Shares, it being expressly agreed that no voting
right shall pass to others by or under said Voting Trust Certificates, or by or
under this Agreement, or by or under any other agreement, express or implied.
3.2 Standard of Conduct. In voting the Shares held by him
hereunder either in person or by his nominees or proxies, the Voting Trustee
shall exercise reasonable judgment and shall take such part in, or take such
action with respect to, the management of the Corporation's affairs, as he may
deem necessary or advisable. In voting upon any matters that may come before him
at any shareholder's meeting, or by consent to action without a meeting, the
Voting Trustee shall exercise like judgment, but he shall not be held liable for
any mistake in judgment or for any action taken or not taken with respect to
which he acted in good faith and which does not amount to willful misconduct on
his part.
3.3 Compensation and Reimbursement. The Voting Trustee shall
serve without compensation. The Voting Trustee shall have the right to incur and
pay such reasonable expenses and charges, and to employ and pay such agents,
attorneys, and counsel, as he may deem necessary and proper in connection with
or arising out of the discharge of his duties under this Agreement. Any such
expenses or charges incurred by the Voting Trustee shall be promptly reimbursed
by the Shareholders (pro rata based upon stock ownership) upon notice.
3.4 Conflicts of Interest. Nothing herein contained shall
disqualify the Voting Trustee or incapacitate him from serving as an officer,
director, employee, consultant or contractor of or to the Corporation or of any
Shareholder, or of any affiliate or associate of either, and in any such
capacity receiving compensation. The Voting Trustee may be a shareholder of the
Corporation and a registered holder of one or more Voting Trust Certificates.
The Voting Trustee may be financially interested in any matter or transaction to
which the Corporation, any Shareholder, or any affiliate or associate of either,
may be a party, and may contract with or be financially interested in any such
person as fully and freely as though the Voting Trustee were not the Voting
Trustee hereunder. Moreover, the Voting Trustee shall not incur any liability of
any nature whatsoever to the Shareholders in the event the Voting Trustee should
vote the Shares in a manner or with an effect advantageous to the Voting Trustee
regarding any relationship the Voting Trustee may have with the Corporation,
including that of creditor.
<PAGE> 3
4. Term of Agreement and Procedure for Termination.
4.1 Term. This Agreement shall continue in full force and
effect for a period of five years from and after the date first set forth above;
provided, however, that this Agreement shall sooner terminate upon the
occurrence of any of the following events:
(i) The death or other permanent inability of the
Voting Trustee to serve as Voting Trustee;
(ii) The termination of the Voting Trustee's
employment with the Corporation;
(iii) The dissolution, winding-up or total or partial
liquidation of the Corporation, whether voluntary or
involuntary;
(iv) The merger of the Corporation into or the
consolidation of the Corporation with another corporation, or
the transfer of all or substantially all of the assets of the
Corporation to another corporation;
(v) The sale of all the Shares hereunder by the
Shareholders to non-Shareholders; or
(vi) At any time, at the sole option and discretion
of the Voting Trustee.
Upon the occurrence of any of the above-described events, termination
of this Agreement shall not take effect until the cancellation of the then
outstanding Voting Trust Certificates and the transfer to the Shareholders of
certificates for the Shares represented thereby, in the manner provided below.
4.2 Procedure for Termination. In the event of termination of
this Agreement, the Voting Trustee shall mail written notice of such event to
the Shareholders at the addresses appearing on the transfer books of the Voting
Trustee. From the date specified in any such notice (which date shall be fixed
by the Voting Trustee), the Shareholders shall have no further rights under this
Agreement other than to receive, upon the surrender of such Voting Trust
Certificates, certificates for such Shares. Promptly thereafter, the Voting
Trustee shall cancel the Voting Trust Certificates and deliver to the
Shareholders certificates for the number of Shares represented thereby. In lieu
of delivering stock certificates to the Shareholders, or, if any Shareholder
shall fail to surrender to the Voting Trustee its Voting Trust Certificate, the
Voting Trustee may deposit with the Corporation stock certificates representing
the number of shares of Common Stock represented by the Voting Trust
Certificates then outstanding, with authority in writing to the Corporation to
deliver such stock certificates in exchange for Voting Trust Certificates
representing a like number of shares of the Common Stock of the Corporation.
Upon such deposit, all further liability of the Voting Trustee for the delivery
of such stock certificates
<PAGE> 4
and the delivery or payment of dividends upon surrender of the Voting Trust
Certificates shall cease, and the Voting Trustee shall not be required to take
any further action hereunder.
5. Notice. Any notice to or communication with the Shareholders
hereunder shall be deemed to be sufficiently given if addressed to the
Shareholders at their respective addresses set forth on the signature pages
hereto or such other addresses as the Shareholders shall from time to time
furnish in writing to the Voting Trustee and deposited in the United States
mail, with postage fully prepaid. Every notice so given shall be effective,
whether or not received, and the date of mailing shall be the date such notice
is deemed given. Any notice to the Voting Trustee hereunder may be made by
mailing the same to the Voting Trustee, with postage fully prepaid, c/o of the
Corporation, at One Arizona Center, 400 E. Van Buren, Fourth Floor, Phoenix, AZ,
85004, or at such other address as the Voting Trustee may from time to time
furnish in writing to the Shareholders.
6. Additional Shares of Common Stock. This Agreement applies to all
shares of Common Stock now owned by the Shareholders. Each Shareholder
represents and warrants that the number of Shares set forth opposite his name on
the signatures pages of this Agreement represent all the shares of Common Stock
owned by him on the date hereof. In the event that any additional Common Stock
of the Corporation is acquired by the Shareholders after the execution hereof
(the "Additional Shares"), then, in such case, upon receiving the Additional
Shares, the Shareholder shall promptly surrender same to the Voting Trustee and
the Voting Trustee shall hold such Additional Shares likewise subject to the
terms of this Agreement (in accordance with the provisions of Sections 1 and 2
hereof).
7. Dividends, Distributions and Other Payments. Until the termination
of this Agreement, each Shareholder shall be entitled to receive promptly from
the Voting Trustee payments equal to the amount of dividends (other than stock
dividends, which shall be subject to Section 6 hereof), if any, or other
distributions, if any, collected by the Voting Trustee upon the Shares standing
in the name of such Shareholder, represented by the Voting Trust Certificates
held by him, subject, however, to the terms and conditions of this Agreement.
8. Transfer of Shares. The Shares shall be freely transferable by any
Shareholder to any person other than an Affiliate (as defined below) of such
Shareholder, without the prior consent of the Voting Trustee and without any
restriction hereunder. Prior to a transfer permitted under this Section, the
Shareholder shall deliver to the Voting Trustee a Transfer Certificate, in
substantially the form attached hereto as Exhibit B, and, simultaneously
therewith, surrender to the Voting Trustee his Voting Trust Certificate.
Promptly thereafter, the Voting Trustee shall cancel the Voting Trust
Certificate and issue and deliver to the Shareholder a certificate representing
the Shares to be transferred and a new Voting Trust Certificate, in
substantially the form of Exhibit A attached hereto, representing the Shares
that are to be retained by the Shareholder, if any. Upon a transfer permitted by
this Section, neither the Voting Trustee nor the applicable Shareholder shall
have any further rights or obligations under this Agreement with respect to the
transferred Shares and such Shares shall no longer be subject to the terms and
conditions of this Agreement. "Affiliate" means any individual, partnership,
corporation, trust,
<PAGE> 5
limited liability company or other entity that directly or indirectly, through
one or more intermediaries, controls, or is controlled by, or is under common
control with, a Shareholder.
9. Effective Date. This Agreement shall become effective upon the
closing of the Corporation's initial public offering ("IPO"). In the event the
Corporation does not close its IPO on or before December 31, 1999, this
Agreement shall not become effective at any time thereafter unless re-executed
by the Voting Trustee and the Shareholders.
10. Miscellaneous.
10.1 Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties with respect to the transaction
contemplated hereby, and supersedes all prior agreements, arrangements and
understandings related to the subject matter hereof. No representation, promise,
inducement or statement of intention has been made by any of the parties hereto
not embodied in this Agreement or in the documents referred to herein, and no
party shall be bound by, or liable for, any alleged representation, promise,
inducement or statements of intention not set forth or referred to herein.
10.2 Binding Effect. All of the terms, representations,
warranties, covenants, and conditions herein shall be binding upon, and inure to
the benefit of, and be enforceable by, the parties hereto, and their respective
successors and assigns.
10.3 Waiver. This Agreement may not be amended, modified,
superseded or canceled, nor may any of the terms, representations, warranties,
covenants, or conditions hereof be waived, except by a written instrument
executed by the party against whom such amendment, modification, supersedure,
cancellation or waiver is charged. The failure of any party at this time or
times to require performance of any provisions hereof shall in no manner affect
the right at a later time to enforce the same. No waiver by any part of any
condition, or of any breach of any term, covenant, or condition contained
herein, in any one or more instances, shall be deemed to be, or construed as, a
further or continuing waiver of any such condition or breach or wavier of any
other condition or of any breach of any other term, covenant, or condition.
10.4 Construction. The captions and headings contained herein
are for convenient reference only, and shall not in any way affect the meaning
or interpretation of this Agreement.
10.5 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
10.6 Severability. In the event that any provision hereof is
determined to be illegal or unenforceable, such determination shall not affect
the validity or enforceability of the remaining provisions hereof, all of which
shall remain in full force and effect.
<PAGE> 6
10.7 Further Documents. The parties each hereby covenant and
agree that, from time to time, after the date hereof, at a reasonable request of
any party, and without further consideration, they will execute and deliver such
other documents and take such other action as may be reasonably required to
carry out in all respects the transactions contemplated and intended by this
Agreement.
10.8 Gender and Tense. As used in this Agreement, the
masculine, feminine and neuter gender, and the singular or plural number shall
each be deemed to include the other or others whether the context so indicates.
10.9 Time. Time is of the essence in this Agreement.
10.10 Parties in Interest. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third persons to any
party to this Agreement, nor shall any provision give any third person any right
of subrogation or action over or against any party to this Agreement.
10.11 Amendment. This Agreement may only be amended with the
written agreement of all the Shareholders and the Voting Trustee.
10.12 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
VOTING TRUSTEE:
JEFFREY PETERSON
-------------------------------------------
One Arizona Center
400 E. Van Buren, Fourth Floor
Phoenix, AZ 85004
SHAREHOLDERS:
MICHAEL SILBERMAN
-------------------------------------------
Number of Shares:
KEVIN DIEBALL
------------------------------------------
Number of Shares:
THE MONOLITH LIMITED PARTNERSHIP
By: WGM CORPORATION, its General
Partner
By: -----------------------------
Name: William G. Maris
Title: President
Number of Shares:
<PAGE> 8
RICHARD WHELAN
--------------------------------
Number of Shares:
KEITH FREDRICKSON
--------------------------------
Number of Shares:
<PAGE> 9
EXHIBIT A
VOTING TRUST CERTIFICATE FOR
SHARES OF COMMON STOCK OF
quepasa.com, inc.
This certifies that _________________________ is the registered
beneficial owner (the "Beneficiary") of __________ shares of the common stock,
par value $_____ per share (the "Shares"), of quepasa.com, inc., a Nevada
corporation (the "Corporation"), and that such shares have been transferred to
and are held and owned of record by Jeffrey Peterson(the "Voting Trustee"), as
Voting Trustee pursuant to the Voting Trust Agreement dated as of April __, 1999
(the "Agreement") between the Voting Trustee and the shareholders of the
Corporation named therein.
Under the terms of the Agreement, the Voting Trustee possesses the
right to vote the above-mentioned shares of common stock as the absolute legal
owner thereof and the holder of this Voting Trust Certificate possesses no
voting rights in such shares.
Subject to compliance with applicable federal and state securities
laws, rules and regulations, and the Agreement, the Shares represented by this
Voting Trust Certificate may be transferred by the Beneficiary. Prior to a
permitted transfer of Shares, the Beneficiary shall deliver to the Voting
Trustee a Transfer Certificate, in substantially the form attached as Exhibit B
to the Agreement, and, simultaneously therewith, surrender to the Voting Trustee
his Voting Trust Certificate. Promptly thereafter, the Voting Trustee shall
cancel the Voting Trust Certificate and issue and deliver to the Beneficiary a
certificate representing the Shares to be transferred and a new Voting Trust
Certificate representing the Shares that are to be retained by the Beneficiary,
if any.
DATED this _____ day of April, 1999.
____________________________, as
Voting Trustee under the Agreement
<PAGE> 10
EXHIBIT B
TRANSFER CERTIFICATE FOR
SHARES OF COMMON STOCK OF
quepasa.com, inc.
This certifies that _______________________, the registered beneficial
owner (the "Beneficiary") of __________ shares of the common stock, par value
$.001 per share (the "Shares"), of quepasa.com, inc., a Nevada corporation (the
"Corporation"), is transferring _______ Shares that are subject to the Voting
Trust Agreement dated as of April __, 1999 (the "Agreement") between Jeffrey
Peterson (the "Voting Trustee") and the shareholders of the Corporation named
therein.
The Beneficiary has attached herewith his Voting Trust Certificate
representing ____ Shares of the Corporation beneficially owned by him.
The Beneficiary hereby directs the Voting Trustee to cancel the
Beneficiary's Voting Trust Certificate and issue and deliver to the Beneficiary
a certificate representing _____ Shares to be transferred. [The Voting Trustee
shall thereafter issue and deliver to the Beneficiary a new Voting Trust
Certificate representing the remaining ____ Shares held by the Voting Trustee
for the benefit of Beneficiary.] Upon the consummation of the transfer
contemplated hereby, neither the Voting Trustee nor the Beneficiary shall have
any further rights or obligations under the Agreement with respect to the
transferred Shares and such Shares shall no longer be subject to the terms,
representations, warranties, conditions and covenants of the Agreement. [The
Shares retained by the Beneficiary and represented by the new Voting Trust
Certificate shall continue to be subject to the terms, representations,
warranties, conditions and covenants of the Agreement.]
DATED this ___ day of _________, ____.
BENEFICIARY:
____________________________
Name: ______________________
<PAGE> 1
JEFFREY S. PETERSON
QUEPASA.COM, INC.
400 EAST VAN BUREN, FOURTH FLOOR
PHOENIX, ARIZONA 85004
March 9, 1999
quepasa.com, inc.
400 East Van Buren, Fourth Floor
Phoenix, Arizona 85004
Dear Sirs:
This letter confirms my agreement to loan quepasa.com, inc. (the
"Company") up to $3 million from time to time prior to the completion of the
Company's contemplated public offering upon the request of the Company to be
used for working capital. Each loan shall bear interest at 12% per annum for the
first four months and 14% per annum thereafter. Each loan shall mature on the
two year anniversary of the making of such loan and shall otherwise bear the
same terms as the Company's $2 million loans from The Monolith Limited
Partnership.
Very truly yours,
/s/ Jeffrey S. Peterson
----------------------------
Jeffrey S. Peterson
Accepted and Agreed to
as of the date written above
QUEPASA.COM, INC.
By: /s/ Michael A. Hubert
--------------------------
Michael A. Hubert
Chief Operating Officer
<PAGE> 1
Exhibit 10.26
MEMORANDUM OF AGREEMENT
This Memorandum of Agreement (the "Agreement") is entered into
this 27th day of April, 1999 by and between Telemundo Network Group LLC, a
California limited liability company, ("Telemundo") and quepasa.com, inc., a
Nevada corporation ("quepasa"), with reference to the following:
WHEREAS, quepasa is a Spanish-language computer internet
portal and search engine with unique capabilities relating to the creation and
maintenance of web sites directed to the Hispanic population; and
WHEREAS, Telemundo is one of the largest U.S. Spanish-language
television networks and creators of content designed to appeal to the Hispanic
population, and Telemundo desires to create and maintain its own web site.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties agree as follows:
1. Upon execution of this Agreement, quepasa agrees to issue
Telemundo 600,000 of its authorized but unissued shares of Common Stock (the
"Shares") equal to 6.2 percent (6.2%) of its currently outstanding shares of
Common Stock. For purposes of this Agreement, the parties agree that the Shares
are being valued at $10 each. The certificate representing the Shares shall
contain a customary legend reflecting that the Shares have been acquired for
investment purposes and that transfer is restricted under the Securities Act of
1933, as amended, (the "Act").
2. Upon execution of this Agreement, quepasa agrees to issue
Telemundo a Common Stock Purchase Warrant (the "Warrant") to purchase 1,000,000
of its authorized but unissued shares of Common Stock (the "Warrant Shares")
equal to 10.3 percent (10.3%) of its currently outstanding shares of Common
Stock. The Warrant shall be exercisable, in whole or in part, beginning
immediately following the effectiveness of the proposed initial public offering
of quepasa Common Stock (the "IPO") and the Warrant shall expire two (2) years
from the date it first becomes exercisable. The Warrant exercise price shall be
<PAGE> 2
equal to 120 percent (120%) of the IPO offering price to the public. The Warrant
agreement and the certificate representing the Warrant Shares shall contain a
customary legend reflecting that the securities have been acquired for
investment purposes and that transfer is restricted under the Act. Beginning six
(6) months after the IPO, Telemundo shall be entitled to registration rights to
have the Warrant and the Warrant Shares registered for sale under the Act within
thirty (30) days after giving written notice to quepasa on two (2) separate
occasions, and shall be entitled to unlimited piggyback registration rights with
respect to the Warrant and the Warrant Shares. Upon issuance hereunder, the
Warrant shall contain customary proportionate antidilution protection with
respect to all issuances by quepasa of Common Stock or securities convertible
into Common Stock except with respect to (i) the IPO, including any warrants
issued to an underwriter, and (ii) issuances of options under quepasa's 1998
Stock Option Plan, as amended. In addition upon exercise of the Warrant,
Telemundo may elect to (a) pay the exercise price in cash, (b) pay the exercise
price by having Warrant Shares otherwise deliverable upon exercise of the
Warrant withheld based upon the trading price of quepasa Common Stock, or (c)
deliver to quepasa previously acquired shares of quepasa Common Stock having a
value (without regard to whether the transfer of such shares is restricted under
the Act) equal to the exercise price.
3. Upon the latter to occur of (a) completion of the IPO or (b)
expiration of the 26-week advertising campaign which will commence on or about
August 1999, Telemundo shall make available to quepasa a $5 million credit for
advertising on the Telemundo network. Such credit may be expended at the rate of
$1 million per year spread over a 5 year term. The placement of such advertising
shall be determined by Telemundo in the exercise of its good faith business
judgment and in consultation with quepasa, provided that no more than 60% shall
be placed on a run of the schedule basis and no less than 40% shall be placed on
a program specific or product integration/program content basis. The value of
all placed advertising or equivalent shall be determined at Telemundo's then
prevailing rates.
4. The parties acknowledge that quepasa has heretofore
purchased advertising in conjunction with a 26-week advertising campaign which
will expire on or about August 1999. Promptly upon expiration of that campaign,
quepasa will purchase an additional $1 million of advertising time spread per
industry
2
<PAGE> 3
custom over the following 26-week period at then prevailing rates on the
Telemundo network, payment on commencement of the campaign.
5. Telemundo has advised quepasa of its intent to develop a
web site and quepasa agrees to provide its resources to the extent required in
order to design, develop and build Telemundo's website according to
specifications to be provided by Telemundo. This undertaking to develop and
build such website and in order to complete same on or before July 1, 1999 is
additional consideration for the securities issued to Telemundo under Sections 1
and 2 above. The parties shall agree on milestone deliverables and schedules for
the development of the website, and quepasa shall exercise best efforts in order
to comply with same. quepasa shall maintain and provide technical support and
enhance and refresh the site from time to time as requested by Telemundo for a
term of five (5) years commencing on the date of launch of the website.
Any materials not provided by Telemundo and utilized by
quepasa shall be owned by quepasa and utilized for the benefit of Telemundo,
subject to a perpetual license for use to Telemundo and free access thereto;
provided, however, any materials which are created uniquely for Telemundo shall
be owned by Telemundo. Telemundo will have the right to approve any
sub-contractors to be engaged by quepasa in connection with the design and
development of the Telemundo website.
6. The parties agree that they shall each link and cross
promote the other's website on their own websites, and each shall be considered
an anchor tenant on the other's website. For purposes hereof, an anchor tenant
shall mean that each party shall receive banner advertising on the home page of
the other party's website. Each party shall be exclusive in its class for a
period of six (6) months from the date of the IPO, i.e., quepasa shall not
accept any banner advertising from any other Spanish-language television
broadcaster and Telemundo shall not accept banner advertising from any other
Spanish language search engine, provided, in the event of a breach of this
exclusivity by either party, the other party's sole remedy shall be to elect to
terminate the exclusivity granted pursuant to this sentence. Banners for the
other party are to appear on each home page and, in addition, ads and pointers
will appear across other related website areas; premier placement shall appear
in each party's internet print ad campaigns, if any, and front screen pop-up
advertising for all advertisers will appear
3
<PAGE> 4
immediately upon logging on to the respective parties home page.
7. Telemundo will provide to quepasa and quepasa shall include
in its website certain content determined by Telemundo, which may include
programming information, news and sports. Responsibility for the incorporation
of the content on the website shall be with quepasa. Such content will, however,
be the property of Telemundo, and to the extent that same is provided to
quepasa, it will be provided pursuant to a gratis license, the details of which
shall be specified in the more detailed agreements contemplated hereby.
8. Immediately upon execution of this Agreement, quepasa
agrees to elect Alan Sokol as a member of its Board of Directors and in that
regard agrees to maintain director and officer liability insurance in amounts
reasonably satisfactory to Telemundo.
9. In the event the IPO is not completed within sixty (60)
days of the date of this Agreement at an initial offering price (based upon the
current capital structure of quepasa) of at least $10.00 per share, Telemundo
shall have an option during the thirty (30) days following the sixty (60) day
period to rescind this Agreement and return the Shares and the Warrant to
quepasa and thereafter, neither party to this Agreement shall have any rights or
obligations hereunder, except that quepasa's obligations under Sections 4 and 11
shall remain in full force and effect, notwithstanding the rescission.
10. quepasa agrees that prior to any filings with the
Securities and Exchange Commission (the "SEC") relating to the IPO, Telemundo
and its attorneys shall be entitled to review all disclosures relating to
Telemundo and this Agreement, and quepasa agrees to reflect any modifications to
such disclosures reasonably requested by Telemundo. quepasa agrees, however,
that Telemundo shall have no responsibility for any disclosures made in any of
said filings.
11. quepasa agrees to indemnify and hold harmless Telemundo,
its officers,directors, agents and attorneys and any persons controlling
Telemundo within the meaning of Section 15 of the Act against any and all
losses,claims, damages or liabilities, joint or several, to which they or any of
them may become subject under the Act or any other statute or at common law and
to reimburse persons indemnified as above for any legal or other expenses
(including the cost of
4
<PAGE> 5
any investigation and preparation) incurred by them in connection with any
litigation, whether or not resulting in any liability, but only insofar as such
losses, claims, damages, liabilities and litigation arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereto with respect to
the IPO or any application or other document filed by quepasa or its
underwriters in order to qualify share of Common Stock under the securities laws
of the states where filings were made, if any, or 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, all as of the date when
the Registration Statement or such amendment, as the case may be, becomes
effective, or any untrue statement or alleged untrue statement of a material
fact contained in the Prospectus (as amended or supplemented if quepasa shall
have filed with the Securities and Exchange Commission any amendments thereof or
supplements thereto), or the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
12. Upon a default, as defined below, by either party to this
Agreement, without prejudice to its rights and remedies at law and in equity,
the non-defaulting party shall have no further obligations or liability under
this Agreement. A default is defined as (i) a breach of this Agreement by a
party which is not remedied by the defaulting party within ten (10) business
days after receiving written notice from the non-defaulting party setting forth
the specific default or (ii) the filing of a voluntary petition in bankruptcy,
the consent to the filing of a bankruptcy petition, the filing of a petition by
or against a party under the Federal Bankruptcy Code, any assignment for the
benefit of creditors, application for, or consent to, the appointment of any
receiver, trustee or custodian or similar officer or the entry into an agreement
of composition with its creditors.
13. All press releases, trade releases or other public
announcements with respect to the transactions contemplated herein shall be
jointly prepared by quepasa and Telemundo. Other than with respect to press
releases announcing the entering into of this Agreement and in filings with the
SEC, each party agrees that it will not, and its employees, agents or
representatives will not, discuss or otherwise disclose the terms of this
Agreement (including its existence) or any arrangement or other understanding
with any other party other than representatives
5
<PAGE> 6
of the other party required to know such information in connection with the
transactions contemplated herein, except to the extent such disclosure is
required by law; provided, however, that prior to disclosing any confidential
information as may be required by law, the party producing or directing the
production of such information will use all reasonable efforts to provide the
other party hereto with notice of such disclosure and a reasonable opportunity
to limit or contest such disclosure.
14. Each party hereto shall pay its own expenses in connection
with the transaction contemplated herein.
15. Upon execution of this Agreement, the parties agree to use
their best efforts to prepare and enter into more detailed agreements in
customary form reflecting the contents of this Memorandum of Agreement. In the
event that the parties are unable to agree on any terms or conditions not
specifically set forth herein, the parties agree to negotiate in good faith to
seek resolution consistent with the customs and practices of the industry.
Failure to reach agreement shall not invalidate this Agreement, and either party
may seek resolution by submitting all open issues to arbitration before the
American Arbitration Association in Los Angeles, California. Costs of such
arbitration are to be shared equally between the parties.
16. Notices required or permitted to be given hereunder shall
be sufficient if in writing and delivered or deposited in the mail, postage
prepaid, certified mail, return receipt requested, addressed to quepasa or
Telemundo, at their respective principal places of business. All notices
hereunder shall be effective: (a) five (5) days after deposit in the mail; or
(b) upon delivery, if delivered in person, by commercial express service or by
facsimile transmission.
17. This Agreement contains the entire agreement and
understanding by and between the parties hereto with respect to the subject
matter of this Agreement, and no representations, promises, agreements or
understandings, written or oral, not contained herein shall be of any force or
effect. No change or modification of this Agreement shall be valid or binding
unless it is in writing and signed by the parties intended to be bound.
18. In the event any dispute or controversy arising out of
this
6
<PAGE> 7
Agreement (other than as covered under Section 15 above) cannot be settled
by the parties hereto, such controversy or dispute, at the election of either
party hereto, by written notice to the other, shall be submitted to arbitration
before the American Arbitration Association in Los Angeles, California, and for
this purpose the parties each hereby expressly consent to such arbitration and
such place. The costs of the arbitration and the arbitrators, including
attorneys' fees of the parties, shall be borne by the non-prevailing party, as
determined by the arbitrators.
19. This Agreement shall be governed in all respects whether
as to validity, construction, capacity, performance or otherwise by the laws of
the State of California applicable to agreements to be entered into and
performed therein.
Telemundo Network Group LLC
By: /s/ Cary Meadow
----------------------------
SVP
quepasa.com, inc.
By: /s/ Jeffrey Peterson
-----------------------------
CEO
7
<PAGE> 1
EX 10.27
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE THIS WARRANT CAN BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE UNDERLYING SECURITIES MAY
NOT BE SOLD, TRANSFERRED, OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT, UNLESS SUCH REGISTRATION IS NOT THEN REQUIRED.
QUEPASA.COM, INC.
COMMON STOCK PURCHASE WARRANT
Warrant No. __________
THIS CERTIFIES THAT, for value received, Telemundo Network Group LLC, a
California limited liability company ("Telemundo"), or its successors and
permitted assigns (the "Holder") is entitled to subscribe for and purchase from
QUEPASA.COM, INC., a Nevada corporation with an address at One Arizona Center,
400 East Van Buren, 4th Floor, Phoenix, Arizona 85004 (the "Company"), at any
time from and after Midnight (Phoenix, Arizona time) on the closing date of the
Company's initial public offering (the "IPO") of its common stock, $.001 par
value per share (the "Common Stock"), and prior to 5:00 p.m. (Phoenix, Arizona
time) on the second anniversary of the closing date of the IPO (the "Exercise
Period"), 1,000,000 shares of Common Stock at a purchase price per share equal
to 120% of the public offering price of Common Stock in the IPO (the "Purchase
Price", as adjusted in accordance with this Warrant), subject, however, to the
provisions and upon the terms and conditions set forth in this Warrant.
1. Exercise; Issuance of Certificates; Payment for Shares. The rights
represented by this Warrant may be exercised by the Holder, in whole or in part,
at any time or from time to time during the Exercise Period, upon presentation
and surrender of this Warrant to the Company, at its principal office as set
forth on the first page of this Warrant, with a duly executed subscription (in
the form attached hereto) and accompanied by payment of the Purchase Price for
each share of Common Stock purchased. Such payment shall be made in cash or by
wire transfer. Notwithstanding the foregoing provisions requiring payment in
cash or by wire transfer, the Holder may from time to time at the Holder's
option pay the Purchase Price or any portion thereof by surrendering to the
Company, in lieu of such cash payment, (i) shares of Common Stock
<PAGE> 2
having an aggregate Common Stock Market Value equal to such Purchase Price (or
portion thereof) on the Exercise Date, as defined below or (ii) the right of the
Holder to receive a number of shares of Common Stock having an aggregate Rights
Market Value, as defined below, equal to such Purchase Price (a portion
thereof), on the Exercise Date (a "Cashless Exercise"). For purposes of the
foregoing, the "Common Stock Market Value" of a share of Common Stock as of the
Exercise Date means the closing price on the trading day preceding such date
with respect to the Common Stock on a national securities exchange or the Nasdaq
National Market or Nasdaq SmallCap Market, as the case may be. The closing price
shall be: (i) the last sale price of shares of the Common Stock on such trading
day or, if no such sale takes place on such date, the average of the closing bid
and asked prices thereof on such date, in each case as officially reported by
the principal exchange on which the Common Stock is then listed or admitted to
trading or by the Nasdaq Stock Market; or (ii) if no shares of Common Stock are
then listed or admitted to trading on any national securities exchange or the
Nasdaq National Market or the Nasdaq SmallCap Market, the average of the
reported closing bid and asked prices thereof on such date in the
over-the-counter market as shown on the National Association of Securities
Dealers automated quotation system. The Cashless Exercise rights of the Holder
shall be of no force or effect unless the Common Stock is then listed, admitted
to trading, or reported. The Common Stock Market Value shall not be reduced
because of the existence of limitations on transfer under the Act, as defined
herein. If the Holder pays the Purchase Price or any portion thereof by
surrendering to the Company rights to receive shares of Common Stock, the
"Rights Market Value" on the Exercise Date shall be equal to the number of
rights to purchase a whole share of Common Stock times the Common Stock Market
Value minus the amount payable to the Company to exercise such right.
The shares of Common Stock purchased hereunder shall be deemed to have
been issued to the Holder as of the close of business on the date on which this
Warrant shall have been surrendered to the Company, along with the subscription
and full payment, whether by cash, wire transfer or Cashless Exercise, for the
shares purchased (the "Exercise Date"). Certificates for the shares so purchased
and, unless this Warrant shall have expired, a new Warrant representing the
number of shares of Common Stock, if any, with respect to which this Warrant
shall not then have been exercised, shall be delivered to the Holder within a
reasonable time, and in any event within 30 days, after the Holder has complied
with the provisions of this Section 1.
2. Restrictions on Transfer of Warrant. The Holder may not sell, assign
pledge, hypothecate or otherwise transfer any rights under this Warrant to any
person other than (a) any affiliate of Holder; (b) any successor to the business
of Holder; or (c) any transferee who receives this Warrant by operation of law
as a result of the death or dissolution of any Holder permitted by this Section
2.
3. Reservation of Shares. The Company covenants and agrees that all
securities that it may issue upon the exercise of the rights represented by this
Warrant will, upon issuance, be fully paid and nonassessable and free from all
taxes, liens and charges. The Company further agrees that at all such times
there shall be authorized and reserved for issuance upon exercise of this
Warrant such number of shares of Common Stock, or other securities, as shall be
required for issuance on full exercise of this Warrant.
4. Exchange, Assignment, or Loss of Warrant.
(a) This Warrant is exchangeable, without expense other than
as provided in this Section 4, at the option of the Holder, upon presentation
and surrender hereof to the Company, for other Warrants of different
denominations entitling the holder(s) thereof to purchase in the aggregate the
same number of shares of Common Stock purchasable hereunder.
2
<PAGE> 3
(b) This Warrant may not be sold, transferred, assigned, or
hypothecated except as permitted under Section 2 herein and except in compliance
with Federal and state securities laws. Any permitted transfer shall be made by
surrender of this Warrant to the Company, together with a duly executed
assignment (in the form of the assignment attached to this Warrant) and funds
sufficient to pay any transfer tax, whereupon the Company shall, without charge,
execute and deliver a new Warrant or Warrants in the name(s) of the assignee(s)
named in such instrument of assignment, and this Warrant shall be canceled. Any
transferee of this Warrant, by acceptance thereof, agrees to be bound by the
terms of this Warrant, with the same force and effect as if a signatory thereto.
(c) Subject to (b) above, this Warrant may be divided or
combined with other Warrants that carry the same rights upon presentation and
surrender of this Warrant at the office of the Company together with a written
notice, signed by the Holder, specifying the names and denominations in which
new Warrants are to be issued.
(d) The Company will execute and deliver a new Warrant of like
tenor and date upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction, or mutilation of this Warrant, and (i) in the case of
loss, theft, or destruction, upon receipt by the Company of indemnity
satisfactory to the Company, or (ii) in the case of mutilation, upon
presentation and surrender of this Warrant.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity.
The rights of the Holder are limited to those expressed in the Warrant.
6. Adjustment and Other Events.
(a) If the Company shall, after April 14, 1999, declare any
dividend or other distribution upon its outstanding Common Stock payable in
Common Stock or shall subdivide its outstanding shares of Common Stock into a
greater number of shares, then the number of shares of Common Stock that may
thereafter be purchased upon the exercise of the rights represented by this
Warrant must be increased in proportion to the increase through such dividend,
distribution, or subdivision, and the Purchase Price must be decreased in such
proportion. If the Company shall at any time combine the outstanding shares of
its Common Stock into a smaller number of shares, the number of shares of Common
Stock that may thereafter be purchased upon the exercise of the rights
represented hereby will be decreased in proportion to the decrease through such
combination, and the Purchase Price will be increased in such proportion.
(b) If, after April 14, 1999, there shall occur (i) any
reclassification, capital reorganization, or other change of outstanding Common
Stock of the Company (other than a change described or referred to in Subsection
6(a)), or (ii) any consolidation or merger of the Company with or into another
corporation or other entity (other than a consolidation or merger in which the
Company is the continuing corporation and that does not result in any
reclassification,
3
<PAGE> 4
capital reorganization or other change of the shares of Common Stock issuable
upon exercise of this Warrant), or (iii) a sale or conveyance to a third party
of all or substantially all of the Company's assets as an entirety, then and in
such event the terms of this Warrant will be deemed to be appropriately
adjusted, and the Company will cause effective provision to be made, so that the
Holder shall have the right thereafter, by exercising this Warrant, to purchase
the kind and amount of shares of stock and other securities and property, if any
receivable upon such reclassification, capital reorganization, or other change,
consolidation, merger, sale or conveyance that the Holder would have received
had this Warrant been exercised in full immediately prior to such event.
(c) If, after April 14, 1999, the Company shall at any time or
from time to time (i) distribute (otherwise than as a dividend in cash or in
Common Stock or in securities convertible into or exchangeable for Common Stock)
to the holders of Common Stock (or grant any rights to such holders to acquire)
assets, including stock or other securities of the Company (or the right to
acquire the same) or any subsidiary, without any consideration paid or to be
paid by such holders or for a consideration paid less than the fair market value
of such assets as reasonably and objectively determined by the Board of
Directors of the Company (other than the issuance of options or shares upon the
exercise of options granted under any stock option plan pursuant to which
options may be granted to officers, employees, directors or consultants of the
Company), or (ii) declare a distribution, right or dividend upon the Common
Stock in cash or assets other than shares of Common Stock, then the Company
shall reserve, and the Holder of this Warrant shall thereafter upon exercise of
this Warrant be entitled to receive, for each share of Common Stock purchasable
hereunder on the record date established by the Company for the determination of
holders of Common Stock entitled to receive such distribution, right or dividend
(or if no such record date shall have been established, on the date of such
distribution, grant of such right or payment of such dividend), (i) the amount
of such assets that would have been distributable to, or as to which such right
would have been granted to, the Holder hereof or (ii) the amount of such
dividend (to the extent above-stated) that the Holder would have received, had
the Holder been a holder of the number of shares of Common Stock purchasable
under this Warrant on such record (or other) date. Such entitlement by the
Holder shall be without increase in (except in respect for the consideration, if
any, paid for such assets by the holders of Common Stock) the then current
Purchase Price.
(d) If: (i) there shall be an event requiring an adjustment as
provided in subsections 6(a) or 6(b); (ii) the Company shall make a distribution
that may come within subsection 6(c); (iii) the Company shall offer for
subscription pro rata to the holders of its Common Stock any additional shares
of stock of any class, or other rights; or (iv) there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Company; then, in any
one or more of such cases, the Company shall give to the Holder (1) at least
twenty days' prior written notice of the date on which the books of the Company
shall close or a record shall be taken for such dividend, distribution or
subscription rights, or for determining rights to vote in respect of any merger,
consolidation, reorganization or reclassification, and (2) in the case of any
such merger, consolidation, reorganization or reclassification at least twenty
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause and to the extent applicable
shall specify (A) in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be entitled thereto,
and (B) when the holders of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such merger,
consolidation, reorganization, liquidation or winding up, as the case may be.
Upon the happening of an event requiring adjustment of the Purchase Price or the
4
<PAGE> 5
kind or amount of securities or property purchasable hereunder, the Company
shall forthwith give notice to the Holder, which notice shall be accompanied by
a certificate of the Company, stating the adjusted Purchase Price and the
adjusted number of shares of Common Stock purchasable or the kind and amount of
any such securities or property purchasable upon exercise of this Warrant, as
the case may be, and setting forth in reasonable detail the method of
calculation and the facts upon which the calculation is based.
(e) No fractional shares of Common Stock or script
representing fractional shares of Common Stock shall be issued upon the exercise
of this Warrant, and the Company shall have no obligation for any cash payment
with respect thereto. If a fractional share shall result from adjustments in the
number of shares of Common Stock purchasable hereunder, the number of shares of
Common Stock purchasable hereunder shall, on an aggregate basis taking into
account all prior adjustments, be rounded up to the next whole number.
(f) Irrespective of any adjustment or change in the Purchase
Price or the number of shares of Common Stock or other securities actually
purchasable under this Warrant, this Warrant may continue to express the
Purchase Price and the number of shares of Common Stock purchasable hereunder as
such price and number of shares were expressed on this Warrant when initially
issued.
7. Registration Rights Under the Securities Act of 1933.
(a) Optional Registrations. If during the period commencing on
the six month anniversary of the closing date of the IPO and prior to the fifth
anniversary of the closing date of the IPO, (the "Registration Period") the
Company shall determine to register any shares of its Common Stock (or
securities convertible into or exchangeable or exercisable for shares of the
Common Stock or any class of common stock into which the Common Stock has
theretofore been converted or for which the Common Stock has been exchanged)
under the Securities Act of 1933, as amended (the "Act") (whether in connection
with a public offering of securities by the Company (a "primary offering"), a
public offering of securities by security holders (a "secondary offering"), or
both), but not in connection with a registration effected solely to implement an
employee benefit plan or a transaction to which Rule 145 or any other similar
rule of the Securities and Exchange Commission (the "Commission") under the Act
is applicable or a registration on Forms S-4, S-8 or any form substituted
therefor, the Company will promptly give written notice thereof to the Holders
of Registrable Securities (as defined in Subsection 7(c) below) then
outstanding. In connection with any such registration, the Company will use its
best efforts to effect the registration under the Act of all Registrable
Securities which such Holders may request in a writing delivered to the Company
within 15 days after the written notice given by the Company pursuant to Section
10 hereof; provided, however, that in the case of the registration of shares of
Common Stock by the Company in connection with an underwritten public offering,
if the managing underwriter determines that a limitation on the number of shares
to be underwritten is required, the managing underwriter may (subject to the
allocation priority set forth below) exclude from such registration and
underwriting some or all of the Registrable Securities which would otherwise be
underwritten pursuant to the notice described herein. The Company shall advise
all
5
<PAGE> 6
Holders of Registrable Securities promptly after such determination by the
managing underwriter, and the number of shares of securities that are entitled
to be included in the registration and underwriting (other than those to be sold
for the account of the Company) shall be allocated among Holders of Registrable
Securities and other security holders (excluding directors and officers of the
Company), if any, who have registration rights with respect to the securities
they desire to have registered in proportion, as nearly as practicable, to their
respective holdings of securities of the Company. All expenses of the
registration and offering (including transfer taxes on shares being sold by the
Holders and the fees and disbursements of one law firm acting as counsel to the
Holders) shall be borne by the Company, except that the Holders shall bear all
underwriting discounts and selling commissions attributable to their Registrable
being registered. Without in any way limiting the types of registrations to
which this paragraph 7(a) shall apply, in the event that the Company shall
effect a shelf registration under Rule 415 promulgated under the Act, or any
other similar rule or regulation ("Rule 415"), the Company shall take all
necessary action, including, without limitation, the filing of post-effective
amendments, to permit the Holders to include their shares in such registration
in accordance with the terms of this Subsection 7(a).
(b) Demand Registration. If on any two occasions during the
Registration Period, one or more of the Holders holding at least 60% of the
Registrable Securities then held by all of the Holders shall notify the Company
in writing (the "Demand Notice") that he or they intend to offer or cause to be
offered for public sale all or any portion of his or their Registrable
Securities (the "Minimum"), the Company will notify all of the Holders of
Registrable Securities who would be entitled to notice of a proposed
registration under Subsection 7(a) above of its receipt of such notification
from such Holder or Holders. Upon the written request of any such Holder
delivered to the Company within 15 days after delivery by the Company of such
notification pursuant to Section 10 hereof, the Company will include such
Holder's shares in registration. The Company agrees to file a registration
statement with the Commission within 30 days of receipt by the Company of the
Demand Notice with respect to such of the Registrable Securities as may be
requested by any Holders to be registered under the Act in accordance with the
terms of this Subsection 7(b), which registration may be under any form of
registration statement eligible for use by the Company for such purpose, and
shall use its best efforts to have such registration statement declared
effective as soon as practicable. All expenses of the registration and offering
(including transfer taxes on shares being sold by the Holders and the fees and
disbursements of one law firm acting as counsel to the Holders) shall be borne
by the Company, except that the Holders shall bear the underwriting discounts
and selling commissions attributable to their Registrable Securities being
registered. If the Company shall furnish to the Holders requesting a
registration statement under this Subsection 7(b) a certificate signed by the
President of the Company stating that, in the good faith judgment of the Board
of Directors, it would not be in the best interests of the Company and its
stockholders generally for such registration statement to be filed, the Company
shall have the right to defer such filing for a period of not more than 90 days
after the receipt of the request for registration; provided, however, that the
Company may not utilize this right to defer more than once. The Company shall
not be required to cause a registration statement requested pursuant to this
Subsection 7(b) to become effective prior to 90 days following the effective
date of a registration statement initiated by the Company, if the Demand Notice
has been received by the Company subsequent to the
6
<PAGE> 7
giving of written notice by the Company, made in good faith, to the Holders of
Registrable Securities to the effect that the Company is commencing to prepare a
Company-initiated registration statement (other than a registration effected
solely to implement an employee benefit plan or a transaction to which Rule 145
or any other similar rule of the Commission under the Securities Act is
applicable); provided, however, that the Company shall use its best efforts to
achieve such effectiveness promptly following such 90-day period if the request
pursuant to this Subsection 7(b) has been made prior to the expiration of such
90-day period. If so requested by any Holder in connection with a registration
under this paragraph, the Company will take such steps as are required to
register such Holder's Registrable Securities for sale on a delayed or
continuous basis. The Company will take such steps as are required to keep any
registration statement under this Subsection 7(b) effective until the earlier
of: (i) 270 days after the effective date of any such registration statement; or
(ii) the sale of all of the Registrable Securities registered thereunder. The
obligation of the Company hereunder shall be deemed satisfied only when a
registration statement covering all shares of Registrable Securities specified
in notices received as aforesaid shall have become effective and, if the method
of disposition is a firm commitment underwritten public offering, all such
shares have been sold pursuant thereto. In connection with such a firm
commitment underwriting, the Company shall have the right to include in the
registration statement therefor shares of Common Stock to be offered and sold
for the account of the Company and other security holders of the Company;
provided, however, that no Registrable Shares shall be excluded from such
registration and underwriting by reason of the inclusion of any securities for
the Company's account or for the account of other securityholders. Any deferral
of the filing or effectiveness of a registration statement pursuant to this
Subsection 7(b) shall extend, by a period equal to the number of days of all
such deferrals, the period during which the Holders of Registrable Securities
shall be entitled to demand registration under this Subsection 7(b).
If the method of disposition is an underwritten public
offering, the Company may designate the managing underwriter of such offering,
subject to approval of the holders of a majority of the Registrable Securities
to be sold in such offering, which approval shall not be unreasonably withheld
or delayed.
In connection with any registration statement which pertains
to Registrable Securities, the selling Holders shall (i) enter into any
reasonable underwriting agreement required by the proposed underwriter for the
selling Holders, if any, and (ii) immediately notify the Company, at any time
when a prospectus relating to the Holder's Registrable Securities is required to
be delivered under the Act, of the happening of any event relating to
information respecting such Holder as a result of which the prospectus which
forms a part of such registration statement contains an untrue statement of a
material fact or omits any material fact necessary to make the statements
therein not misleading.
(c) Registrable Securities. For the purposes of this Section
7, the term "Registrable Securities" shall mean this Warrant or any Common Stock
purchasable upon exercise of this Warrant or any Warrants issued in replacement
hereof, and any other capital stock or securities issued or issuable with
respect to the Common Stock issued or issuable upon the exercise of this Warrant
or any Warrants issued in replacement hereof.
7
<PAGE> 8
(d) Further Obligations of the Company. Whenever under the
preceding subsections of this Section 7 the Company is required hereunder to
register any Registrable Securities, it agrees that it shall also do the
following:
(i) Use its best efforts to diligently prepare and
file with the Commission a registration statement and such amendments and
supplements to said registration statement and the prospectus used in connection
therewith as may be necessary to keep said registration statement effective and
to comply with the provisions of the Act with respect to the sale of securities
covered by said registration statement for the period necessary to complete the
proposed public offering;
(ii) Furnish to each selling Holder of Registrable
Securities such copies of each preliminary and final prospectus and such other
documents as such Holder may reasonably request to facilitate the public
offering of his Registrable Securities;
(iii) Enter into any reasonable underwriting
agreement, including reasonable and customary indemnification provisions,
required by the proposed underwriter, if any, for the selling Holders;
(iv) Use its best efforts to register or qualify the
securities covered by said registration statement under the securities or
blue-sky laws of such jurisdictions as any selling Holder may reasonably request
if such registration or qualification is necessary in the judgment of the
Company's counsel, provided that the Company shall not be required to register
or qualify the securities in any jurisdictions which require it to subject
itself to general service of process therein:
(v) Immediately notify each of the selling Holders,
at any time when a prospectus relating to his Registrable Securities is required
to be delivered under the Act, of the happening of any event as a result of
which such prospectus contains an untrue statement of a material fact or omits
any material fact necessary to make the statements therein not misleading, and,
at the request of any such selling Holder, prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(vi) Cause all such Registrable Securities to be
listed on or included in each securities exchange or quotation system on which
similar securities issued by the Company are then listed;
(vii) Comply with all applicable rules and
regulations of the Commission and make generally available to its security
holders, in each case as soon as practicable, an earnings statement of the
Company which will satisfy the provisions of Section 11(a) of the Securities
Act; and
(viii) Obtain and furnish to each of the selling
Holders, immediately prior to the effectiveness of the registration statement
(and, in the case of an underwritten offering, at the
8
<PAGE> 9
time of delivery of any Registrable Securities sold pursuant thereto), a cold
comfort letter from the Company' s independent public accountants in customary
form and covering such matters of the type customarily covered by cold comfort
letters as the holders of a majority of the Registrable Securities being sold
reasonably request.
(e) Indemnification. Incident to any registration statement
referred to in this Section 7, and subject to applicable law, the Company will
indemnify and hold harmless, each Holder of Registrable Securities (including
its partners, directors, officers, employees and agents) so registered, and each
person who controls any of them within the meaning of Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the "Exchange Act"), from and against any
and all losses, claims, damages, expenses and liabilities, joint or several
(including any investigation, legal and other expenses incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claim asserted), to which they, or any of them, may become subject under the
Act, the Exchange Act or otherwise, insofar as such losses claims damages or
liabilities arise out of or are based on (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement
(including any related preliminary or definitive prospectus, or any amendment or
supplement to such registration statement or prospectus), (ii) any omission or
alleged omission to state in such document a material fact required to be stated
in it or necessary to make the statements in it not misleading, or (iii) any
violation by the Company of the Securities Act, any state securities or blue sky
laws or any rule or regulation thereunder in connection with such registration.
The indemnity agreement of the Company contained in this Subsection 7(e) shall
not apply to amounts paid in settlement of any loss, claim, damage, expense or
liability if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld). Nor shall the Company be
liable to any person for any loss, claim, damage, expense or liability arising
from any written information such person furnishes to the Company expressly for
use in connection with a registration statement or from the person's failure to
deliver, at the time required by the Act, a final or amended prospectus that
corrects any actual or alleged untrue statement or omission in any preliminary
prospectus. With respect to any untrue statement or omission or alleged untrue
statement or omission in the information furnished in writing to the Company by
such Holder expressly for use in such registration statement, such Holder will
indemnify and hold harmless each underwriter, the Company (including its
directors, officers, employees and agents), each other Holder of Registrable
Securities (including its respective partners directors, officers, employees and
agents) so registered, and each person who controls any of them within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, expenses and liabilities,
joint or several, to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise to the same extent provided in the
immediately preceding sentence. In no event, however, shall the liability of a
Holder for indemnification under this Subsection 7(e) exceed the proceeds
received by such Holder from its sale of Registrable Securities under such
registration statement.
(f) Notice and Defense. Promptly after any indemnified party
under Subsection 7(e) receives notice of the commencement of any action
(including any governmental action), such indemnified party shall, if it intends
to make a claim against any indemnifying party under
9
<PAGE> 10
Subsection 7(e), deliver to the indemnifying party a written notice describing
the action. The indemnifying party shall have the right to assume the defense
thereof with counsel mutually satisfactory to the parties. An indemnified party
shall have the right to retain its own counsel, at the indemnifying party's
expense, if an actual or potential conflict of interest prevents representations
of such indemnified party by the counsel retained by the indemnifying party. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under Subsection 7(e) to the extent of such prejudice.
8. Transfer to Comply with the Securities Act of 1933.
(a) This Warrant and the shares of Common Stock or any other
security issued or issuable upon exercise of this Warrant may not be offered or
sold except in compliance with the Act and then only against receipt of an
agreement of such person to whom such offer or sale is made to comply with the
provisions of this Section 8 with respect to any resale or other disposition of
such securities; except that no such agreement shall be required from any person
purchasing shares of Common Stock pursuant to a registration statement effective
under the Act or an exemption from such registration under Rule 144 under the
Act or any similar rule.
(b) The Company may cause a legend in substantially the form
set forth on the first page of this Warrant to be placed on each Warrant and
certificate representing shares of Common Stock, any Common Stock Warrant or any
other security issued or issuable upon exercise of this Warrant, unless counsel
for the Company is of the opinion as to any such certificate that such legend is
unnecessary.
9. Applicable Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Nevada.
10. Notice. All notices and other communications provided for herein
shall be in writing and telecopied or mailed to the intended recipient to the
following addresses: (i) if to the Holder, to Telemundo Network Group LLC, 2425
Olympic Blvd., Suite 4050 West, Santa Monica, California 90404; and (ii) if to
the Company, at its address appearing on page 1 of this Warrant. The Holder and
the Company may change its address for delivery of notice to such other address
as may be designated therefor by written notice to the other hereunder. All such
communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
11. Survival. The various rights and obligations of the Holder and of
the Company as set forth in Sections 7 and 8 herein shall survive the exercise
and surrender of this Warrant.
12. Successors and Assigns. All the covenants and provisions of this
Warrant shall bind and inure to the benefit of the Holder and the Company and
their respective successors and assigns.
13. Descriptive Headings. The descriptive headings of the several
Sections of this Warrant are inserted for convenience only and do not constitute
a part of this Warrant.
10
<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by its officer duly authorized.
DATED: April 14, 1999.
QUEPASA.COM, INC.
By: /s/ Jeffrey S. Peterson
------------------------------
Jeffrey S. Peterson,
Chief Executive Officer
11
<PAGE> 12
ASSIGNMENT
(to be executed only upon assignment of the Warrant)
FOR VALUE RECEIVED, the undersigned assigns and transfers to the
Assignee named below all of the rights of the undersigned under the attached
Warrant, with respect to the number of shares of Common Stock of QUEPASA.COM,
INC., a Nevada corporation (the "Company") set forth below:
<TABLE>
<CAPTION>
Name Number
of Assignee Address of Shares
----------- ------- ---------
<S> <C> <C>
</TABLE>
The undersigned does hereby irrevocably constitute and appoint
________________________ as Attorney-in-fact to transfer such right on the books
of the Company, with full power of substitution.
Dated: , 1999.
---------------------
-------------------------------------
By:
----------------------------------
Its:
---------------------------------
12
<PAGE> 13
SUBSCRIPTION
(To be executed only upon exercise of Warrant)
quepasa.com, inc.
One Arizona Center
400 East Van Buren, 4th Floor
Phoenix, Arizona 85004
The undersigned hereby elects to purchase, pursuant to the provisions
of the within Warrant held by the undersigned, _________ shares of Common Stock.
(Check Appropriate Box)
[ ] Payment of the Purchase Price per share accompanies this Subscription.
[ ] Pursuant to Section 1 of the within Warrant, the undersigned hereby
surrenders the right to receive ____ shares of Common Stock to which
this exercise relates, in payment of the Purchase Price for all shares
of Common Stock to which this exercise relates.
[ ] Pursuant to Section 1 of the within Warrant, the undersigned hereby
surrenders ____ shares of Common Stock of the Company in payment of the
Purchase Price for ____ shares of Common Stock to which this exercise
relates.
DATED:
-----------------------
-----------------------------------
By:
--------------------------------
Its:
-------------------------------
13
<PAGE> 1
[ARIZONA DIAMONDBACKS LOGO]
April 6, 1999
Jeffrey S. Peterson
President, CEO
QUEPASA.COM
One Arizona Center
400 E. Van Buren
Phoenix, AZ 85004
Dear Jeff-.
This letter agreement will serve to confirm our understanding regarding the key
points and commitments which will be included in a formal contract between
Quepasa.com and the Arizona Diamondbacks. Though broad, this letter agreement
will be binding in nature until the formal contract is executed.
The following are elements included in your sponsorship of the Arizona
Diamondbacks and- Bank One Ballpark:
Term - One (1) season commencing April 6, 1999 and ending
December 31, 1999.
Investment - 1999 $1,500,000
- $500,000 to due upon execution of this letter
agreement and $1,000,000 to be billed on July 1,
1999.
Logo Rights - Quepasa.com will have use of Diamondbacks name and
logo for approved marketing and promotional uses.
SIGNAGE - Quepasa.com will receive the following signage
elements. Exact dimensions, descriptions and
illustrations will appear in the formal contract:
- One (1) 25' x 25' out of town gameboard location
BANK LINE BALLPARK 401 E. JEFFERSON STREET PHOENIX, ARIZONA 85004
P.O. BOX 2095 PHOENIX, ARIZONA 85001 602-462-6500 * FAX 602-472-6600
<PAGE> 2
- One (1) 6' x 20' lineup board location
- Pending sale of at least one other location.
$75,000 rebate if not installed by July 23, 1999.
- One (1) main scoreboard rotator location
- One (1) fascia rotator location-
- One (1) home plate rotator location
- Logo placement on all cupholders in Bank One
Ballpark (excluding the Infiniti Diamond Level).
Television - Quepasa.com will receive the following
television elements on all seventy five (75)
televised games on KTVK Channel 3:
- Two (2):30 spots in-game
- Opening or closing billboards
- One (1) television feature/game
- One (1) :30 spot during weekly television
show (32 total shows running Sundays at 4:30pm)
Radio - Quepasa.com will receive the
following radio elements for a
minimum of 162 games broadcast
on KTAR 620 AM:
- Two (2):30 in GAME SPOTS
- Opening or closing billboards
- One (1) :30 spot during weekly half hour
"Talk to the Diamondbacks" show (32
total shows running Fridays at 12:30pm)
Post Season - Should the Diamondbacks
advance to post season play and
local radio and television
coverage is possible, Quepasa.com
agrees to purchase above spots at
a rate of $2,420/spot for in game
television and $605/spot for
in-game radio.
Spanish Television - Quepasa.com will receive the following for a
minimum of 20 broadcasts on Telemundo
Channel 64:
<PAGE> 3
Four (4) :30 in-game spots
opening or closing billboards
One (1) feature/game
Spanish ,Radio - Quepasa.com will receive the following for a
minimum of 91 broadcasts on KPHX 1480am:
- Four (4):30 in-game spots
- Opening or closing billboards
- One (1) feature/game
Promotion - Presenting sponsor of the
Quepasa.com stage located in the main
plaza of Bank One Ballpark.
- Presenting sponsor of the " quepasa crew" in
ballpark entertainment team.
Video Feature - One (1) in-game video
feature/game on the main scoreboard
Jumbotron color video board.
Print - Quepasa.com will receive the following
print elements:
- One (1) half page, four color
advertisement in the game
program/team magazine.
- One (1) half page, four color advertisement in
the Diamondbacks Mensual de los Diamondbacks
hispanic magazine.
Quepasa.com Night - Quepasa.com and the team will jointly
select one (1) game to be designated as
"Quepasa.com Night." Included in this night
are the following elements:
- Quepasa.com premium will be given away
to a minimum of 10,000 fans in attendance.
The item given away will be at the expense
of the Quepasa.com
<PAGE> 4
- A representative of Quepasa.com will have
the opportunity to throw out the ceremonial
first pitch."
Use of one (1) party suite.
Internet - Sponsorship of the Game
Day/Scoreboard Section or other
mutually agreed upon section of
azdiamondbacks.com.
Road Trip - Quepasa.com will have two (2)
people accompany team on a road
trip. Airfare, hotel, ground
transportation and game tickets
will be provided by the team.
Luxury Suite - One (1) luxury suite at Bank One
Ballpark for the entire 1999 season.
Season Tickets - Four (4) lower level season tickets.
Parking - Two (2) parking passes in the Bank One
Ballpark garage.
Arizona Baseball Club - Two (2) Arizona Baseball Club
memberships.
* * * * * * *
Jeff, if the above components meet with your approval, please sign in the
designated space below and fax to me at (602) 462-6666. We expect a formal
contract to be ready within 30 days and will forward a copy to you as soon as we
have it.
Sincerely,
/s/ Scott Brubaker
- ----------------------------
Scott Brubaker
Sr. Vice President, Sales & Marketing
<PAGE> 5
Accepted and Agreed:
/s/ Jeffrey S. Peterson /s/ Scott Brubaker
- ------------------------------------ -------------------------------------
Jeffrey S. Peterson, President & CEO Scott Brubaker, Sr. Vice President
Quepasa.com of Sales and Marketing
Arizona Diamondbacks
4-15-99 4-7-99
- ------------------------------------ -------------------------------------
Date Date
<PAGE> 1
Ex. 10.29
April 14,1999
Mr. Victor Roldan
QuePasa.com
1 Arizona Center
400 E. Van Buren
Phoenix, AZ 85004
This letter will confirm the terms you and I have discussed under which Miami
Herald Online would propose to provide promotional and content management
services to QuePasa.com. This letter is intended as a non-binding expression of
intent only.
I. NEWS CHANNELS
Miami Herald Online will develop your English- and Spanish-language news
channels. We see several components to this project, some of which should be the
responsibility of Miami Herald Online and some of which are the responsibility
of QuePasa.com:
1. Content
- QuePasa.com will negotiate for and license wire feeds for the
QuePasa.com news channels. We know you have done some of this
already. Costs to be borne by QuePasa.com.
- We will supplement that content with news from El Nuevo Herald
and translated material from The Miami Herald, the Knight
Ridder national reporting staff and other Knight Ridder
newspapers (for example, technology coverage from the San Jose
Mercury News and automotive news from the Detroit Free Press).
- We believe it will take 2-3 months to set up the staff and
technology necessary to operate these news channels (more
details below). During the interim, we would allow QuePasa.com
to frame parts (or the entirety) of the El Nuevo Herald
Digital and Miami Herald sites to serve as your news channels.
2. Technology
- As agreed, we will output the content for the channels in a
structured format that you can deliver using existing
QuePasa.com technology.
- We will need to devote some resources (programming hours) at
our location to configure our systems to deliver content to
you in the proper form.
- Our ability to deliver the content to you in a structured form
requires the purchase of content management tools for Miami
Herald Online. We have chosen our preferred vendor for these
tools but still need to work through the details and make the
purchase. This is one of the reasons that we will need 2-3
months to operate your news channels.
- Miami Herald Online will purchase the hardware and software
necessary to serve our needs in Miami; QuePasa.com will be
responsible for purchase of any additional tools needed to
serve the QuePasa.com news channels from Phoenix (or other
location of your choice). As of now, it is your and our belief
that you will not need to purchase any additional hardware or
software.
3. Staffing
- Miami Herald Online will provide the editorial staff who will
produce the two (English and Spanish) news channels for
QuePasa.com.
- At the end of the term of our agreement, QuePasa.com will have
the option of continuing to contract with Miami Herald Online
to produce the news channels, or may choose to take over the
functions. By that time, you will have the necessary
technology and workflow experience to operate the news
channels effectively and efficiently. If you choose to operate
the news channels yourselves, our recommendation is that we
proceed as follows:
<PAGE> 2
- Approximately 90 days before the transfer of responsibilities,
Miami Herald Online and QuePasa.com jointly recruit and select
1-2 new QuePasa.com editorial staff members who will work in
Miami for an agreed-upon period to learn our systems.
- You will establish appropriate technology and workflow systems
in Phoenix to duplicate the functionality of our systems in
Miami.
- We will commit to sending members of our team to Phoenix for
up to 3 months to coach, train and manage the transition.
QuePasa.com will be responsible for travel and lodging costs.
- QuePasa.com will agree not to hire Miami Herald Online
employees for at least one full year after their departure
from our company.
4. Branding
- The QuePasa.com news channels will be co-branded as Miami
Herald/El Nuevo Herald. Possible language might be: "Powered
by Miami Herald Online."
- All content from The Miami Herald, El Nuevo Herald, other
Knight Ridder papers or the Knight Ridder network will be
marked clearly with the source of the content and the
appropriate copyright language.
II. WEB SEARCH
Miami Herald Online will designate QuePasa.com the preferred search engine of El
Nuevo Herald Digital. We will provide a text input box and search button for
QuePasa.com on the El Nuevo Herald Digital site. QuePasa.com will be the only
search engine with a text input box on the home page of El Nuevo Herald Digital.
We feel it is important to the credibility of our site to also allow people to
access other search engines as well. Therefore, the search results pages should
include links to other Spanish-language search engines such as AltaVista,
Yupi.com and Yahoo en espanol.
III. BANNER EXCHANGE
Miami Herald Online will provide QuePasa.com with 200,000 banner impressions per
month on our network of sites. This is a value of $6,000/month (at $30 CPM).
QuePasa.com will give Miami Herald Online the banner position on the top of
search results for up to 10 keywords of our choice.
IV. FINANCIAL CONSIDERATIONS
1. Establishment and operation of news channel ....... $35,000/Month
This includes the addition of editorial staff to serve the QuePasa.com channels,
the costs of programming associated with setting up the channels and the
provision of translation services. QuePasa.com is responsible for the costs of
licensing additional wire feeds and for purchase of hardware and software needed
for its news channels.
2. Promotion and advertising ....... $25,000/Month
This includes the banner impressions outlined above, plus the exclusive
promotion of QuePasa.com searches from the homepage of El Nuevo Herald Digital.
If, after four months of implementation, QuePasa.com is not receiving at least
1,000 user sessions per day from the text input box on the El Nuevo Herald front
page, the payment for promotion and advertising will be reduced to $15,000 per
month.
V. TERM
One year for each component. We expect the promotion/advertising component to
begin before the content management component.
<PAGE> 3
VI. DEFINITIVE AGREEMENT
A final agreement between Miami Herald Online and QuePasa.com will be embodied
in a definitive agreement, executed by both parties, that contains terms and
conditions consistent with the scope and nature of the relationships described
in this letter. Both parties understand that a definitive agreement is
contingent upon good faith negotiation by both parties and upon approval by
Knight Ridder Inc. and the publisher of the Miami Herald Publishing Co. The
definitive agreement will be subject to review and approval by legal counsel for
both parties. The matters set forth in this letter do not constitute and shall
not give rise to any legally binding obligations on the part of either of the
parties, but are intended to set forth for the parties' convenience certain
preliminary business terms and conditions for the completion and execution of an
agreement. The reference or references to any specific term or condition in this
letter shall not preclude subsequent negotiations or changes regarding these or
any other terms or conditions.
MIAMI HERALD PUBLISHING CO. QUE PASA.COM
Signature: /s/ Richard E. Gordon Signature: /s/ Victor H. Roldan
Name: Richard E. Gordon Name: Victor H. Roldan
Title: Director of New Media Title: Vice President
Date: 4/14/99 Date: 4/14/99
<PAGE> 1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT entered into as of the 23rd
day of April, 1999, by and among QUEPASA.COM, INC., a Nevada corporation (the
"Company") and JEFFREY S. PETERSON ("Peterson").
RECITALS
A. The Company, formerly known as Internet Century, Inc., and Peterson
entered into an Employment Agreement dated November 1, 1998, an Amendment of
Employment Agreement dated January 21, 1999 and a Second Amendment of Employment
Agreement dated March 9, 1999 (collectively, the "Employment Agreement").
B. The Company is contemplating an initial public offering of its
common stock and the Company and Peterson desire to amend and restate the
Employment Agreement in connection therewith.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree that the Employment Agreement is hereby amended and restated as follows:
1. EMPLOYMENT. The Company hereby employs Peterson and Peterson hereby
accepts employment with the Company as its Chief Executive Officer upon the
terms and conditions hereinafter set forth. Peterson's employment shall not be
deemed an "at will" employment.
2. DUTIES. Peterson will serve the Company as its Chief Executive
Officer and will faithfully and diligently perform the services and functions
relating to such office and position or otherwise reasonably incident to such
office and position, provided that all such services and functions will be
reasonable and within Peterson's areas of expertise. Peterson's specific duties
shall include those related to (i) oversight of all phases of the Company's
operations, (ii) coordination of the Company's strategic planning and (iii) such
other duties as the Company may reasonably direct. Peterson will, during the
term of this Agreement (or any extension thereof), devote his time, attention
and skills and best efforts as a full time employee to the promotion of the
business of the Company.
3. TERM. This Agreement and Peterson's employment shall commence on the
first day of November, 1998 (the "Effective Date"), and shall continue for a
term of four years ("Initial Term") unless terminated earlier in accordance with
this Agreement. The term of this Agreement may be extended by agreement among
the Company and Peterson.
4. COMPENSATION. As compensation for the services rendered to the
Company under this Agreement commencing on the Effective Date, Peterson will be
paid a base salary of $150,000 per year payable in accordance with the then
current payroll policies of the Company or as otherwise agreed to by the parties
(the "Salary"). At any time and from time to time, the Salary may be increased
if so determined by the Board of Directors of the Company (the "Board") after a
review of Peterson's performance of this duties hereunder.
<PAGE> 2
5. TERMINATION. This Agreement will terminate upon the occurrence of
any of the following events:
a. The death of Peterson;
b. The "Total Disability" (as hereinafter defined) of Peterson;
c. Written notice to Peterson from the Company of termination for
"Cause" (as hereinafter defined);
d. The voluntary termination of this Agreement by Peterson upon
30 days prior written notice;
e. The later of four years from the Effective Date of this
Agreement or the date to which this Agreement is extended in
accordance with Section 3 above; or
"Total Disability" means physical or mental disability, or both,
determined to be (or reasonably expected to be, based upon then available
medical information) of not less than twelve months duration or more where
Peterson is unable to reasonably perform the duties he was performing for the
Company immediately prior to such disability. The determination shall rest upon
the opinion of the physician regularly attending Peterson. If the Company
disagrees with said physician's opinion, the Company may engage at their own
expense a physician to examine the Peterson, and Peterson hereby consents to
such examination and to waive, if applicable any privilege between the physician
and Peterson that may arise as a result of said examination. If after
conferring, the two physicians cannot concur on a final opinion, they shall
choose a third consulting physician whose opinion shall control. The expense of
the third consulting physician shall be borne equally by the Peterson and the
Company.
"Cause" means (i) Peterson has failed to substantially perform his
duties as reasonably determined by the Board, (ii) Peterson engages in poor
performance that is not cured within thirty days after counseling by the
Company, (iii) Peterson has failed to comply with the reasonable directives and
policies of the Board, or (iv) Peterson breaches his fiduciary duty to the
Company or commits any dishonest, unethical, fraudulent, or felonious act in
respect to Peterson's duties to the Company.
6. STOCK OPTIONS. Peterson shall be granted options to purchase up to
1,750,000 shares of the Company's common stock (the "Options") pursuant to the
Company's 1998 Stock Option Plan to be vested and exercisable in accordance with
the terms of the 1998 Stock Option Plan, except that 50,000 Options shall be
exercisable at $1.50 per share and vest immediately on the Effective Date,
1,500,000 Options shall be exercisable at $8.00 per share and vest immediately
on the Effective Date and 200,000 Options shall be exercisable at $12.00 and
vest on April 25, 2000. The exercise of all Options hereunder shall not be
contingent upon Peterson being employed by the Company. Further, the Company
agrees to register the Options and the underlying shares on Form S-8 within 180
days of the effective date of any initial public offering of the Company's
securities.
7. LOAN. The Company will loan to Peterson $100,000 (the "Loan") on the
Effective Date. The Loan shall be evidenced by a promissory note (the "Note")
with interest payable at 10% per annum and with all principal and accrued but
unpaid interest due one year from the Effective Date, if not sooner paid. The
Company agrees that if Peterson has been employed by the Company for six
continuous months from
2
<PAGE> 3
the Effective Date, 100% of the principal balance and accrued but unpaid
interest shall be forgiven by the Company and the Note evidencing the Loan shall
be canceled and deemed paid in full.
8. TERMINATION PAYMENT. It is agreed that (i) if Peterson's employment
by the Company is terminated without "Cause" or (ii) if his duties and
responsibilities are materially changed by the Company and Peterson voluntarily
terminates his employment due to such change in duties or responsibilities, the
Company shall pay Peterson severance of $500,000 immediately upon the occurrence
of either 8(i) or 8(ii) above, together with the amount due for the remaining
portion of the term of this Agreement. Alternatively, if Peterson's employment
terminates due to "Total Disability," the Company will be obligated to pay
Peterson the sum of $150,000.
9. BENEFITS. Peterson shall be entitled to receive any benefits,
including health insurance, life insurance, automobile allowance, vacation time,
etc., which are offered to other Company executives.
10. EXPENSES. Peterson is authorized to incur reasonable expenses for
promoting the business of the Company, including expenses for entertainment,
travel and similar items. The Company shall reimburse Peterson for all such
expenses on the presentation by Peterson of itemized accounts of such
expenditures in accordance with guidelines set forth by the Company and the
Internal Revenue Service.
11. NON-COMPETITION AND CONFIDENTIALITY.
a. Non-Competition. The Company and Peterson acknowledge and
agree that Peterson's services are of a special and unusual character which have
a unique value to the Company, the loss of which cannot be adequately
compensated by damages in an action at law and if used in competition with the
Company, could cause serious harm to the Company. Accordingly, Peterson agrees
that during the term of this Agreement and for a period of two years after the
termination of this employment by the Company, irrespective of the reason for
such termination, Peterson will not (1) enter into any agreement with or
directly or indirectly solicit or attempt to solicit any employee or other
representatives of the Company for the purpose of causing them to leave the
Company to take employment with any other business entity, or (2) compete,
directly or indirectly, with the Company in any way and that Peterson will not
act as an officer, director, employee, consultant, shareholder, lender or agent
of any entity engaged in any business of the same nature as, or in competition
with, the business in which the Company is now engaged, was engaged during
Peterson's employment or is engaged at the time of Peterson's termination of
employment, except for the ownership of less than 5% of the outstanding capital
stock of a publicly traded company.
b. Confidentiality.
(1) Peterson acknowledges that in Peterson's
employment hereunder, Peterson will be making use of, acquiring and adding to
the Company's trade secrets and its confidential and proprietary information of
a special and unique nature and value relating to such matters as, but not
limited to, the Company's business operations, internal structure, financial
affairs, programs, software systems, procedures, manuals, confidential reports,
lists of clients and prospective clients and sales and marketing methods, as
well as the amount, nature and type of services, equipment and methods used and
preferred by the Company's clients and the fees paid by such clients, all of
which shall be deemed to be confidential information. Peterson acknowledges that
such confidential information has been and will continue to be of central
importance to the business of the Company and that disclosure of it to or its
use by others could cause substantial loss to the Company. In consideration of
employment by the Company, Peterson agrees that
3
<PAGE> 4
during the Initial Term and any renewal term of this Agreement and upon and
after leaving the employ of the Company for any reason whatsoever, Peterson
shall not, for any purpose whatsoever, directly or indirectly, divulge or
disclose to any person or entity any of such confidential information which was
obtained by Peterson as a result of the Peterson's employment with the Company
or any trade secrets of the Company, but shall hold all of the same confidential
and inviolate.
(2) All contracts, agreements, financial books,
records, instruments and documents; client lists; memoranda; data; reports;
programs; software, tapes; Rolodexes; telephone and address books; letters;
research; card decks; listings; programming; and any other instruments, records
or documents relating or pertaining to clients serviced by the Company or
Peterson, the services rendered by Peterson, or the business of the Company
(collectively, the "Records") shall at all times be and remain the property of
the Company. Upon termination of this Agreement and Peterson's employment under
this Agreement for any reason whatsoever, Peterson shall return to the Company
all Records (whether furnished by the Company or prepared by Peterson), and
Peterson shall neither make nor retain any copies of any of such Records after
such termination.
(3) All inventions and other creations, whether or
not patentable or copyrightable, and all ideas, reports and other creative
works, including, without limitation, computer programs, manuals and related
materials, made or conceived in whole or in part by Peterson while employed by
the Company and within one year thereafter, which relate in any manner
whatsoever to the business, existing or proposed, of the Company or any other
business or research or development effort in which the Company or any of its
subsidiaries or affiliates engages during Peterson's employment by the Company
will be disclosed promptly by Peterson to the Company and shall be the sole and
exclusive property of the Company. All copyrightable works created by Peterson
and covered by this Section 11b(3) shall be deemed to be works for hire.
Peterson shall cooperate with the Company in patenting or copyrighting all such
inventions, ideas, reports and other creative works, shall execute, acknowledge,
seal and deliver all documents tendered by the Company to evidence its ownership
thereof through the world, and shall cooperate with the Company obtaining,
defending and enforcing its rights therein.
c. Enforceability. In the event of the breach of the covenants
contained in this Section 11, it is understood that damages will be difficult to
ascertain and the Company may petition a court of law or equity for injunctive
relief in addition to any other relief which the Company may have under the law,
this Agreement or any other agreement executed in connection herewith. In
connection with the bringing of any legal or equitable action for the
enforcement of this Agreement, the Company shall be entitled to recover, whether
the Company seeks equitable relief, and regardless of what relief is afforded,
such reasonable attorneys' fees and expenses as the Company may incur in
prosecution of the Company's claim for breach hereof.
It is hereby agreed that the provisions of this Section 11 are separate
and independent from the other provisions of this Agreement, that these
provisions are specifically enforceable by the Company notwithstanding any claim
by Peterson that the Company has violated or breached this Agreement or any
claim that Peterson is entitled to any offset or compensation.
To induce the Company to enter into this Agreement, Peterson represents
and warrants to the Company that Section 11 of this Agreement is enforceable by
the Company in accordance with its terms.
4
<PAGE> 5
The parties hereto agree that to the extent that any provision or
portion of Section 11 of this Agreement shall be held, found or deemed to be
unreasonable, unlawful or unenforceable by a court of competent jurisdiction,
then any such provision or portion thereof shall be deemed to be modified to the
extent necessary in order that any such provision or portion thereof shall be
legally enforceable to the fullest extent permitted by applicable law; and the
parties hereto do further agree that any court of competent jurisdiction shall,
and the parties hereto do hereby expressly authorize, request and empower any
court of competent jurisdiction to, enforce any such provision or portion
thereof or to modify any such provision or portion thereof in order that any
such provision or portion thereof shall be enforced by such court to the fullest
extent permitted by applicable law.
12. WAIVER OF BREACH. The waiver by any party hereto of a breach of any
provision of this Agreement will not operate or be construed as a waiver of any
subsequent breach by any party.
13. NOTICES. Any notices, consents, demands, request, approvals and
other communications to be given under this Agreement by either party to the
other will be deemed to have been duly given if given in writing and personally
delivered, faxed or if sent by mail, registered or certified, postage prepaid
with return receipt requested, as follows:
If to the Company: quepasa.com, inc.
One Arizona Center
400 E. Van Buren, Suite 400
Phoenix, AZ 85004
If to Peterson: Jeffrey S. Peterson
One Arizona Center
400 E. Van Buren, Suite 400
Phoenix, AZ 85004
Notices delivered personally will be deemed communicated as of actual
receipt, notices by fax shall be deemed delivered when such notices are faxed to
recipient's fax number and notices by mail shall be deemed delivered when
mailed.
14. ENTIRE AGREEMENT. This Agreement and the agreements contemplated
hereby constitute the entire agreement of the parties regarding the subject
matter hereof, and supersede all prior agreements and understanding, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof.
15. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
this Agreement, such provision will be fully severable and this Agreement will
be construed and enforced as if such illegal, invalid or unenforceable provision
never comprised a part hereof; and the remaining provisions hereof will remain
in full force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom. Furthermore, in lieu of
such illegal, invalid or unenforceable provision, there will be added
automatically, as part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
5
<PAGE> 6
Exhibit 10.30
16. GOVERNING LAW. To the extent permitted by applicable law, this
Agreement and the rights and obligations of the parties will be governed by and
construed and enforced exclusively in accordance with the substantive laws (but
not the rules governing conflicts of laws) of the State of Arizona and the State
of Arizona shall have exclusive jurisdiction regarding any legal actions
relating to this Agreement.
17. CAPTIONS. The captions in this Agreement are for convenience of
reference only and will not limit or otherwise affect any of the terms or
provisions hereof.
18. GENDER AND NUMBER. When the context requires, the gender of all
words used herein will include the masculine, feminine and neuter, and the
number of all words will include the singular and plural.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
THE COMPANY:
quepasa.com, inc., a Nevada corporation
By:/s/ Michael A. Hubert
-----------------------------------------
Michael A. Hubert, Chief Operating Officer
PETERSON:
/s/ Jeffrey S. Peterson
--------------------------------------------
6
<PAGE> 1
Exhibit 10.31
AGREEMENT BETWEEN FOX SPORTS AMERICAS U.S. L.P. AND QUEPASA.COM, INC.
This Agreement (the "Agreement") is entered into effective April 5, 1999
between Fox Sports Americas U.S. L.P., a Delaware limited partnership to be
converted to Fox Sports World Espanol LLC, a Delaware limited liability company
("Fox"), and Quepasa.com, Inc., a Nevada corporation ("Quepasa"), relating to
the establishment and operation of an Internet web site related to the Copa
America soccer tournament and the exchange of advertising and promotional
considerations as set forth below.
RECITALS
A. Fox owns and operates Fox Sports World Espanol ("FSWE"), a
Spanish-language, sports-related television programming service distributed
throughout the United States of America. A third party owns and operates
fswe.com, an Internet web site (the "FSWE Site") that provides sports
information in English and Spanish. Fox represents that it has the right to use
the registered and unregistered trademark(s), service mark(s), logos and trade
name(s) listed on Exhibit A (collectively, the "Fox Marks") in connection with
FSWE.
B. Quepasa owns and operates an Internet web site, "Quepasa.com" (the
"Quepasa Home Page"), which provides English- and Spanish-language information
and acts as a portal to the World Wide Web for visitors to the Quepasa Home
Page. In connection with these activities, Quepasa has adopted and is using
certain registered and unregistered trademark(s), service mark(s), logo(s) and
trade name(s) listed on Exhibit B (collectively, the "Quepasa Marks").
C. The parties wish to establish and operate an Internet web site,
"copaameric1999.com" (the "Event Web Site"), related to the Copa America 1999,
a soccer tournament that is scheduled to take place June 29 - July 18, 1999 (the
"Copa America") (a schedule of the Copa America is attached hereto as Exhibit
C).
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, the parties agree as follows:
1. TERM
The term of this Agreement commenced effective April 5, 1999 and will
continue through December 31, 1999 (the "Term"), unless earlier terminated by
Fox in accordance with Section 5 below. Upon Quepasa's acceptance of the Year
2000 Plan (as defined in Section 2.5 below), the Term will be extended for one
year, until December 31, 2000.
<PAGE> 2
2. QUEPASA RIGHTS
2.1 QUEPASA RIGHTS DURING THE TERM. Fox plans to:
2.1.1 Make available matches of the Copa America on pay-per-view
television ("Copa Pay-Per-View"). In each Copa Pay-Per-View match, Quepasa will
be entitled to:
(A) present the opening and closing billboard;
(B) two (2) on-screen displays of the Quepasa Logo, of three
continuous minutes each, next to or near the game clock (one display
during each half); and
(C) one (1) on-air mention (including graphic) after the conclusion
of each match directing viewers to the Event Web Site for the Copa
Pay-Per-View broadcast schedule and complete Copa America coverage.
2.1.2 Telecast all other matches of the Copa America on FSWE
(including one (1) semi-final match and the championship match). In each Copa
America match telecast live on FSWE, Quepasa will be entitled to:
(A) air two (2) 30-second commercial announcements, which
announcements shall be produced by and provided to Fox by Quepasa,
and subject to approval by Fox;
(B) present the opening and closing billboard;
(C) two (2) on-screen displays of the Quepasa Logo, of three
continuous minutes each, next to or near the game clock (one display
during each half); and
(D) two (2) on-air mentions (including graphic) after the conclusion
of each match directing viewers to the Event Web Site for the FSWE
broadcast schedule and complete Copa America coverage.
2.1.3 Replay all matches of the Copa America on FWSE after the
Tournament's conclusion. In each Copa America match telecast delayed on FSWE,
Quepasa will be entitled to:
(A) air two (2) 30-second commercial announcements, which
announcements shall be produced by and provided to Fox by Quepasa,
and subject to approval by Fox;
<PAGE> 3
(B) present the opening and closing billboard;
(C) two (2) on-screen displays of the Quepasa Logo, of three
continuous minutes each, next to or near the game clock (one display
during each half); and
(D) one (1) on-air mention (including graphic) after the conclusion
of each match directing viewers to the Event Web Site for the FSWE
broadcast schedule and complete Copa America coverage.
2.1.4 On or about June 15, 1999, provide a Spanish-language preview
guide of the Copa America (the "Preview Guide") for placement on the Event Web
Site. The Preview Guide will include, as Fox deems appropriate, historical
information about the Copa America, a team-by-team overview of the 1999
participants and bios of key players. The Preview Guide and any updates thereto
will be delivered to Quepasa via e-mail to the following address:
[email protected].
2.1.5 Provide a total of fifty-four (54) Spanish-language match
preview and summary articles for placement on the Event Web Site in connection
with the matches played during the Copa America (the "Match Articles"). Fox will
also provide two (2) Spanish-language general Copa America updates (the "Copa
America Updates"), one each on July 8 and 15, 1999. The Match Articles and Copa
America Updates shall average no fewer than 300 words each, and will be
delivered each day during the Copa America via e-mail to the following address:
[email protected]
2.1.6 Furnish a cash prize in the amount of US$10,000.00 and
merchandise prizes as selected by Fox in its sole discretion in connection with
the contest currently designated "Copa America 1999 Consumer Sweepstakes
Presented by Fox Sports World Espanol and Quepasa.com" (the "Copa Promotion
#1"). In connection with the Copa Promotion #1 Fox will:
(A) create a promotional announcement, including the Quepasa Logo,
which will direct viewers to enter the Copa Promotion #1 (the "Copa
Promotion #1 Announcement"). The Copa Promotion #1 Announcement
shall be aired a minimum of 200 times between May 15, 1999 and July
1, 1999 on either FSWE or Fox Sports World as determined by Fox in
its sole discretion;
(B) place print advertisements, including the Quepasa Logo,
announcing the Copa Promotion #1 (the "Copa Promotion #1
Advertisements"). During the period beginning June 21, 1999 and
ending July 18, 1999, Fox will place one (1) weekly Copa Promotion
#1 Advertisement in the sports sections of each of the following
newspapers: "La Opinion" (Los Angeles, California); "Nuevo Mundo"
(San Jose, California); "Nuevo Herald" (Miami, Florida); "El Diario"
(New York, New
<PAGE> 4
York); "La Semana" (Houston, Texas); "El Periodico" (San Antonio,
Texas) and "Exito" (Chicago, Illinois); and
(C) administer the registration of the contest, processing of all
entries, selection of winners and awarding of prizes.
2.1.7 Furnish a cash prize in the amount of US$25,000.00 and
merchandise prizes as selected by Fox in connection with the contest currently
designated "Copa America 1999 Challenge Presented by Fox Sports World Espanol
and Quepasa.com" (the "Copa Promotion #2"). In connection with the Copa
Promotion #2 Fox will:
(A) create a promotional announcement, including the Quepasa Logo,
which will direct viewers to visit the Event Web Site to enter the
Copa Promotion #2 (the "Copa Promotion #2 Announcement"). The Copa
Promotion #2 Announcement shall be aired a minimum of 200 times
between May 15, 1999 and July 1, 1999 on either FSWE or Fox Sports
World as determined by Fox in its sole discretion; and
(B) administer the registration of the contest and the awarding of
prizes.
2.1.8 Furnish to its affiliates for distribution to targeted
Hispanic communities at least 600,000 printed promotional pieces (which may
include doorhangers and/or other collateral materials) promoting the Copa
Pay-Per-View matches, which will include the Quepasa Logo.
2.1.9 Integrate a Quepasa-sponsored feature entitled "El Minuto Copa
America" (the "Feature") into the "Fox Sports Noticias" program on each of the
fifteen (15) match days during the Copa America.
2.2 ADDITIONAL MEDIA ELEMENTS. Fox also will make available to Quepasa:
2.2.1 One (1) 30-second commercial announcement each day in "Fox
Sports Noticias" on FSWE for 39 consecutive weeks beginning on April 19, 1999.
2.2.2 Two (2) 30-second commercial announcements during FSWE's
weekly telecasts of South American Soccer for 39 weeks beginning on April 19,
1999, during which telecasts Quepasa will be entitled to:
(A) present the opening and closing billboards in each match; and
(B) two (2) on-screen displays of the Quepasa Logo next to or near
the game clock for a total of six (6) minutes of on-screen time per
match (three minutes during each half).
<PAGE> 5
2.3 WIRE SERVICE CONTENT. Fox will reimburse Quepasa for up to US$7,500.00
of its out-of-pocket costs of acquiring Spanish-language Copa America news and
real-time scoring updates from a wire service that is unrelated to Quepasa, upon
the submission by Quepasa of an invoice therefor accompanied by appropriate
evidence of payment acceptable to Fox.
2.4 YEAR 2000 PLAN. Fox may, at its option, on or before October 15, 1999,
deliver to Quepasa a proposal for additional advertising and promotional
considerations for the calendar year 2000 similar to that provided by the
parties during the Term (the "Year 2000 Plan"). Within ten days of receipt of
the Year 2000 Plan, Quepasa will notify Fox of its acceptance or rejection of
the Year 2000 Plan. If Quepasa accepts the Year 2000 Plan, the parties will
operate pursuant to the Year 2000 Plan on and after January 1, 2000.
2.5 SPONSORSHIP CATEGORY EXCLUSIVITY. During the Term, Quepasa will be the
only Internet search engine or portal that will have the right to advertise on
FSWE in the United States of America. To the extent that, at any time during the
Term, Fox controls the placement of advertising on the FSWE Site, Fox will give
Quepasa the right to match any offer received by Fox from the owner of any other
Internet search engine or portal for advertising placement on the FSWE Site,
which right shall be exercised by Quepasa within 48 hours after having received
written notice from Fox of any such offer. Any failure by Quepasa to respond to
such notice shall be deemed a refusal to match.
3. QUEPASA RESPONSIBILITIES
3.1 FEE/PAYMENTS. Quepasa shall pay to Fox a total net fee of
US$424,983.00 (US$499,980.00 less 15% agency commission) (the "Fee"). The Fee
shall be paid in four (4) equal installments of US$106,245.75, which shall each
be due on the following dates: (a) May 1, 1999; (b) July 1, 1999; (c) September
1, 1999; and November 1, 1999. All amounts payable pursuant to this Agreement
will be payable in U.S. dollars at the payee's address for notices, without any
deductions whatsoever, including for taxes, withholding, funds transfer fees or
commissions. Any amount payable pursuant to this Agreement that is not paid when
due will bear interest at the rate of 18% per annum (or, if lower, the maximum
rate permitted by applicable law) from the date it first became due. Failure to
strictly comply with any or all of the above payment terms shall constitute a
material breach of this Agreement, the payment shall immediately be deemed past
due, and Fox shall have the immediate right, in its sole discretion, to
terminate this Agreement and/or revoke the sponsorship category exclusivity
granted under Section 2.5 above.
3.2 OBLIGATIONS DURING THE TERM. Throughout the Term Quepasa will:
3.2.1 Provide Fox with a first-position link from the Event Web Site
and
<PAGE> 6
from the sports section of the Quepasa Home Page to the FSWE Site or another Fox
Internet web site designated by Fox from time to time. The Quepasa Home Page
link shall be maintained throughout the Term.
3.2.2 Administer the Copa Promotion #2 on the Event Web Site in
accordance with the Official Rules (which will be provided by Fox), including
the processing of all contest entries (the Copa Promotion #2 shall be void in
the state of Florida), tracking and daily reporting of participant standings and
timely determination of all contest winners.
3.2.3 Provide prominent banner advertisement placement for the FSWE
Site or another Internet web site designated by Fox on the Quepasa Home Page
throughout the Term.
3.2.4 Enter into an agreement with an appropriate wire feed news
agency, on terms standard in that industry, for the provision of
Spanish-language Copa America news and real-time scoring updates for inclusion
on the Event Web Site.
3.2.5 Develop and administer the Event Web Site, including but not
limited to:
(A) conduct end-to-end design, programming and technological
development of the Event Web Site, and provide all required
technical and personnel expertise, including deploying all required
hardware, software and data connectivity elements to manage, produce
and host the Event Web Site;
(B) obtain Fox's prior written approval with respect to the design
and content of the Event Web Site. Quepasa agrees to remove material
from the Event Web Site which Fox objects to for any legitimate
business purpose, provided that such objection is made in writing or
e-mail by Fox;
(C) regularly remove any errors or "bugs" from the Event Web Site
and related elements to ensure error-free functioning on a
consistent basis;
(D) provide technical and design maintenance and repair for the
Event Web Site;
(E) at no additional cost to Fox, provide Fox with daily written
traffic reports with respect to the Event Web Site;
(F) update the Event Web Site no less frequently than three (3)
times each 24 hours;
(G) manage and maintain any and all special events on the Event Web
<PAGE> 7
Site, including, without limitation, the Copa Promotion #2;
(H) refrain from linking the Event Web Site to any other Internet
web page or site (other than the site designated by Fox) without
Fox's prior written consent;
(I) insert and integrate advertising into the Event Web Site,
subject to Fox's approval;
(J) insure that no advertising of liquor or tobacco products is
included on the Event Web Site;
(K) insure that the Event Web Site includes conditions of use
standard in the industry, warnings against use of proprietary
material and appropriate trademark and copyright notices;
(L) maintain sufficient server and telecommunications capacity so
that the Event Web Site is consistently linked to the Internet by a
dedicated T1 or better connection, is capable of functioning in
conjunction with a variety of web browsers, has consistent function
and appearance among the pages of the site and is technically
capable of accommodating at least five (5) million visits per hour;
and
(M) insure that the Event Web Site does not contain any illegal,
indecent, obscene, pornographic or defamatory material or any
material that would violate the intellectual property rights of
others.
4. USE OF TRADEMARKS; OWNERSHIP OF INTELLECTUAL PROPERTY. For the purposes
of this Section 4, the Quepasa Marks and the Fox Marks are collectively called
the "Licensed Marks."
4.1 FOX LICENSE. Fox grants to Quepasa the non-exclusive right to use the
Fox Marks during the Term solely in connection with the activities described in
this Agreement, including links from the Event Web Site and the sports section
of the Quepasa Home Page to the Internet web sites designated by Fox. Quepasa
will set forth any trademark notice that Fox may require in connection with
Quepasa's use of the Fox Marks hereunder. Quepasa will use the marks throughout
the Term in compliance with the quality standards and specifications of which
Fox gives Quepasa notice.
4.2 QUEPASA LICENSE. Quepasa grants to Fox the non-exclusive right to use
the Quepasa Marks during the Term solely in connection with the activities
described in this Agreement, including telecasts of Copa America matches and
links from the FSWE Site to the Event Web Site. Fox will set forth any trademark
notice that Quepasa may require in connection with Fox's use of the Quepasa
Marks hereunder. Fox will use the marks throughout the Term in compliance with
the quality standards and specifications
<PAGE> 8
of which Quepasa gives Fox notice.
4.3 RESERVATION OF RIGHTS. Each party acknowledges the other's exclusive
right, title and interest in and to such party's trade and service marks, all
goodwill associated therewith and all rights relating thereto, and will not at
any time do or cause to be done any act or thing contesting or in any way
impairing or tending to impair any part of the Licensed Marks, or the owner's
rights in and to such marks. Any use of the Licensed Marks under this Agreement
will inure to the benefit of the owner. Each party will notify the other if it
becomes aware of any third-party use which might infringe on any of the Licensed
Marks. The owner of the infringed mark may then decide, in its sole discretion,
whether to pursue any available remedy against that third party, and the other
party will cooperate with the owner in any such action at the owner's expense.
4.4 APPROVAL OF USE; TERMINATION OF APPROVAL. Prior to any proposed use of
the Licensed Marks under this Agreement, the party wishing to use the Licensed
Marks belonging to the other will submit to the owner for approval all Internet
web pages, labels, advertising, promotional material and other material
(collectively the "Materials") on or in which any Licensed Mark would appear in
any form (whether alone or in combination with any other material). The owner of
the Licensed Mark will, within ten days after receipt of the Materials, notify
the requesting party of the owner's approval or disapproval of such use. If
disapproved, the owner will provide a description of what can be done, if
anything, to gain approval of any disapproved Material. The disapproved
Materials will be resubmitted to the owner of the Licensed Mark for approval
prior to any use. Once specific Materials, including any and all Licensed Marks
or similar marks, have been approved for a specific use by the owner of such
Licensed Mark, the other party thereafter may continue to use such Material
(unless such approval is thereafter specifically withdrawn by the owner, in its
sole discretion), during the Term in accordance with the terms of the approval
granted. Any failure to strictly comply with the provisions of this Section
shall be deemed a material breach of the Agreement.
4.5 PROHIBITION AGAINST REGISTRATION OR USE OF SIMILAR TRADEMARKS. Quepasa
shall not attempt to register any trademark, service mark or trade name which is
the same as, which contains or which is confusingly similar to or likely to be
confused with any of the Fox Marks ("Similar Marks") without the prior written
consent of Fox. To the extent Fox so consents, such Similar Mark shall be deemed
a Licensed Mark. Quepasa hereby acknowledges and agrees that any trademark,
service mark, logo or trade name that includes the word "Fox" or is a colorable
imitation of any of Fox's trademarks, service marks or logos shall be considered
a Similar Mark.
4.6 OWNERSHIP OF CONTENT. Except as specifically provided in this
Agreement, Fox retains all rights, including copyright and trademark, in and to
the Event Web Site and telecast content supplied by it pursuant to this
Agreement in all forms and media.
<PAGE> 9
5. TERMINATION
5.1 A party may terminate this Agreement (except for the obligation to pay
any fees, other sums or other consideration past due hereunder and obligations
of indemnification contained herein) at any time (i) if the other party
materially breaches this Agreement or any representation or warranty contained
herein and such breach is not cured within ten (10) days after the non-breaching
party gives notice of such breach or (ii) if the other party files any petition
in bankruptcy or insolvency or any such petition is filed against it and is not
dismissed within 60 days after such filing. Each party will give notice to the
other promptly if any event giving the other party the right to terminate this
Agreement is expected to occur or occurs.
5.2 If any rule, law or judicial or administrative order or decision
imposes limitations or restrictions relating to the Event Web Site or the
parties' obligations under this Agreement which, in Fox's opinion, makes it
illegal, inherently unprofitable or otherwise commercially impractical to
continue its performance under this Agreement, Fox may terminate this Agreement
upon ten (10) days' notice to Quepasa specifying such order, rule, law or
decision.
5.3 If an Event of Force Majeure (as defined in Section 10) materially
affecting Quepasa's performance of its obligations under this Agreement
continues for ten (10) or more consecutive days or thirty (30) days in the
aggregate, Fox may terminate this Agreement upon notice to Quepasa.
5.4 Upon termination of this Agreement, each party will immediately cease
use of the Licensed Marks of the other, and will, at the owner's option, return
or destroy all Materials containing the Licensed Marks of the other.
6. CONFIDENTIALITY; NONDISCLOSURE
Except as otherwise required by law, the terms and conditions of this
Agreement are to be held in strict confidence by Fox and Quepasa except to the
extent the parties' employees, officers, director, partners and agents need to
know such information for accounting, legal or reporting purposes or for
purposes of performing the party's obligations under this Agreement. Each party
will inform the persons to whom it discloses any such information of the
confidential nature of such information and will be responsible to the other
party for any improper disclosure thereof.
7. REPRESENTATIONS AND WARRANTIES
7.1 AUTHORITY. Quepasa represents, warrants and covenants to Fox that it
has all requisite rights and corporate or partnership power and authority to
enter into and perform this Agreement, that it is duly organized under the laws
of its jurisdiction of
<PAGE> 10
formation, has taken all necessary action to authorize the execution, delivery
and performance of this Agreement and this Agreement does not and will not
violate any provision of its constituent or governing documents or applicable
law or regulation or any material contract or other agreement to which it is a
party or by which it is bound.
7.2 NO ENCUMBRANCES AGAINST THE CONTENT. Quepasa represents, warrants and
covenants to Fox that there are, and will be, no claims, liens, encumbrances or
third party rights of any nature in, on or to any of the Quepasa Marks or the
content provided by Quepasa pursuant to this Agreement.
7.3 CLEARANCES; TRADEMARK, COPYRIGHT VIOLATIONS. Quepasa represents,
warrants and covenants to Fox that (i) Quepasa will obtain all licenses,
consents and permissions necessary for use of the content of the Event Web Site,
including the performance and use of any music included in such content, and
(ii) the content provided by Quepasa for inclusion on the Event Web Site
(including, without limitation, any still photographs or rolling video) or other
Fox programming services, including the sound and music synchronized therewith,
will not violate or infringe upon the trademark, trade name, copyright, patent,
literary, dramatic, music, artistic, persona, private, civil or property right,
right of privacy, or any other right of any person or entity or constitute a
libel or slander of any person or entity, and will not contain any unlawful
material.
7.4 ADVERTISING AND SPONSORSHIP MATERIAL. Each party represents, warrants
and covenants to the other that the advertising and sponsorship material it
supplies pursuant to this Agreement will not infringe any right of any other
person or entity or violate any applicable law.
7.5 LEGAL COMPLIANCE. Quepasa represents and warrants to Fox that it has
complied, and has caused its employees and agents to comply, with all laws and
regulations that are applicable to it in connection with the Event Web Site and
the transactions contemplated by this Agreement, and covenants that it will
continue to so comply and cause its employees and agents to so comply throughout
the Term. Quepasa shall ensure that the Event Web Site is created, maintained
and operated in accordance with all applicable laws, regulations and rules.
8. YEAR 2000 PREPARATIONS
If the Term continues beyond December 31, 1999, Quepasa will ensure that
all components, systems, software, equipment, facilities and other items related
to the Event Web Site are Year 2000 Ready in advance of that date. "Year 2000
Ready" means that the Event Web Site will be designed to be used prior to,
during and after the calendar year 2000, and that the Event Web Site will
operate properly at all levels, including microcode, firmware, application
programs, user interfaces, files and databases, during each such time period
without error or interruption.
<PAGE> 11
9. INDEMNITY
Quepasa will indemnify and hold harmless Fox and each of its officers,
directors, employees and agents from and against any and all liabilities,
damages, losses, claims and expenses, including reasonable attorney's fees and
expenses and costs of investigation ("Damages"), resulting from or arising out
of (i) any infringement of any third party intellectual property right or any
defamation, libel, slander or invasion of privacy caused by the programming
content provided for the Event Web Site by Quepasa, (ii) any breach of any
representation or warranty of Quepasa herein or (iii) any breach of any
agreement or covenant to be performed by Quepasa hereunder. In no event will Fox
be liable to Quepasa for any lost profits or special or consequential damages of
any type, whether foreseeable or unforeseeable.
10. FORCE MAJEURE
Notwithstanding anything herein contained to the contrary, Fox will not be
liable to Quepasa because of any failure by Fox to perform its obligations
hereunder, or any delay in performance, to the extent such failure is caused by
any event beyond its reasonable control, including but not limited to fire,
earthquake, flood, epidemic, accident, explosion, casualty, labor controversy
(including, without limitation, any strike or lockout), riot, civil disturbance,
act of a public enemy, embargo, war, act of God, governmental action or
inaction, the issuance of any executive or judicial order, failure or delay of
any transportation agency, breakdown or technical failure of equipment
(including, without limitation, satellites), which reasonably could not have
been avoided, cancellation of any Copa America match or withdrawal of any team
from the Copa America, any failure, without Fox's fault, to obtain material,
transportation, power or any other essential thing required for its performance
of this Agreement (an "Event of Force Majeure").
11. GENERAL PROVISIONS
11.1 TAXES. Quepasa acknowledges and agrees that Fox shall not pay, nor be
responsible for, any and all taxes (including but not limited to withholding and
value-added taxes), levies and charges (however denominated) imposed, levied or
assessed, whether now in effect or hereafter enacted, with respect of the Event
Web Site, any materials relating thereto, the distribution of the content of the
Event Web Site or any right or privilege to use the same, and any receipts,
fees, charges, monies or other sums received or payable in connection with the
exhibition and/or exploitation thereof whether or not billed to, or demanded of,
Quepasa or Fox.
11.2 ASSIGNABILITY. Fox may assign this Agreement, or all or any part of
its rights or obligations hereunder, to any affiliate. Quepasa may not assign
this Agreement or any of its rights or obligations hereunder to any person or
entity without the prior written consent of Fox. This Agreement will inure to
the benefit of each party and such party's successors and permitted assigns.
<PAGE> 12
11.3 NO PARTNERSHIP; NO THIRD PARTY BENEFICIARIES. Nothing contained in
this letter shall create any partnership or joint venture between the parties.
Neither party will hold itself out as having authority contrary to the terms of
this paragraph, and neither party will be or become liable to any third party by
any representation, act or omission of the other party contrary to the
provisions hereof. This Agreement is not for the benefit of any third party and
will not be deemed to give any right or remedy to any such party whether
referred to herein or not.
11.4 NO CONTINUING WAIVER. No waiver by either party of any breach hereof
will be deemed a waiver of any preceding, continuing or succeeding breach of the
same or any other provision hereof. Any waiver must be in writing and executed
by the party whose rights are waived.
11.5 NO EXCLUSIVITY. The relationship between Fox and Quepasa is
non-exclusive and, except as specifically provided herein, each party may engage
in similar businesses in any part of the world alone or with others.
11.6 GOVERNING LAW; JURISDICTION. This Agreement and all matters
collateral hereto will be governed by the laws of the State of California,
U.S.A. applicable to contracts made and fully performed therein, without giving
effect to any conflict of laws principles. Any legal proceeding relating to this
Agreement will be instituted and prosecuted solely in, and each party hereby
irrevocably submits to the exclusive jurisdiction of, the state and federal
courts located in the County of Los Angeles, State of California, U.S.A. unless
such an action or proceeding is required to be brought in another court to
obtain subject matter jurisdiction over the matter in controversy. The parties
agree that any such action or proceeding also may be brought, or a judgment
enforced, against such party wherever any assets of such party are located.
Quepasa hereby irrevocably designates, constitutes and appoints the Secretary of
State of California as its agent in the State of California upon whom all
summons, notices, pleadings and processes in any action or proceedings against
Quepasa may be served. Each of the parties hereby irrevocably waives any
objection that it may have now or hereafter to the laying of the venue of any
such action or proceeding in the manner provided in this paragraph.
11.7 NOTICES. All notices, requests, demands and other communications
given pursuant to this Agreement must be in writing and will be deemed to have
been duly given (a) if telescoped, when transmitted, as evidenced by a
transmission report containing confirmation of the time of such transmission and
number of pages sent, (b) if mailed by certified mail, when received, as
evidenced by the acknowledgment of receipt issued with respect thereto by the
applicable postal authorities, and (c) if delivered by hand or overnight
courier, when received, as evidenced by the signed acknowledgment of the person
to whom such notice or communication was addressed or such person's agent.
<PAGE> 13
All notices to Fox will be addressed as follows:
Fox Sports Americas U.S. L.P.
10000 Santa Monica Blvd.
Suite 333
Los Angeles, CA 90067
Attn: Donna Reid, General Counsel and Vice President of
Business and Legal Affairs
Facsimile: (310) 229-5660
All notices to Quepasa will be addressed as follows:
Quepasa.com
One Arizona Center
400 E. Van Buren
Phoenix, AZ 85004
Attn: Victor Roldan
Facsimile: (602) 716-0200
11.8 ENTIRE AGREEMENT. This Agreement supersedes and cancels all prior
negotiations, understandings and agreements between the parties and contains all
of the terms agreed to by the parties with respect to the subject matter hereof.
No amendment will be valid unless in writing and executed by both parties.
Executed April 26th, 1999.
FOX SPORTS AMERICAS U.S. L.P. QUEPASA.COM, INC.
By: /s/ Dan Casey By: /s/ Jeffrey Peterson
_______________________________ _____________________________________
Title: VPGM Title: CEO
____________________________ _________________________________
<PAGE> 14
EXHIBIT A
THE FOX MARKS
FOX SPORTS WORLD
ESPANOL (Design) SN 75-614598 Filed 12/31/98
FOX SPORTS Reg. No. 2,220,625 Reg. 01/26/99
FOX SPORTS Reg. No. 2,219,078 Reg. 01/19/99
<PAGE> 15
EXHIBIT B
THE QUEPASA MARKS
Quepasa!com Ser. No. 75/614319 Filed 12/31/98, USPTO
Quepasa.com Logo _______________ ______________________
<PAGE> 16
EXHIBIT C
COPA AMERICA '99 TOURNAMENT SCHEDULE*
<TABLE>
<CAPTION>
DATE DAY MATCH PST EST TELECAST
- ---- --- ----- --- --- --------
<S> <C> <C> <C> <C> <C>
June 29 Tuesday Peru vs. Japan 2:30P 5:30P PPV
Paraguay vs. Bolivia 5:00P 8:00P FSWE
June 30 Wednesday Chile vs. Mexico 2:30P 5:30P PPV
Brazil vs. Venezuela 4:30P 7:30P FSWE
July 1 Thursday Uruguay vs. Colombia 3:00P 6:00P PPV
Argentina vs. Ecuador 5:00P 8:00P PPV
July 2 Friday Peru vs. Bolivia 3:00P 6:00P PPV
Paraguay vs. Japan 5:00P 8:00P FSWE
July 3 Saturday Brazil vs. Mexico 11:00A 2:00P PPV
Chile vs. Venezuela 1:00P 4:00P FSWE
July 4 Sunday Uruguay vs. Ecuador 11:00A 2:00P PPV
Argentina vs. Colombia 1:00P 4:00P PPV
July 5 Monday Japan vs. Bolivia 3:00P 6:00P FSWE
Paraguay vs. Peru 5:00P 8:00P PPV
July 6 Tuesday Mexico vs. Venezuela 2:30P 5:30P PPV
Brazil vs. Chile 4:30P 7:30P PPV
July 7 Wednesday Colombia vs. Ecuador 3:00P 6:00P PPV
Argentina vs. Uruguay 5:00P 8:00P PPV
QUARTER-FINALS
July 10 Saturday 2nd Group A vs. 2nd Group B 11:00A 2:00P PPV
1st A vs. 2nd Best 3rd 3:30P 6:30P FSWE
July 11 Sunday 1st C vs. Best 3rd 10:30A 1:30P PPV
1st B vs. 2nd C 1:00P 4:00P PPV
SEMIFINALS
July 13 Tuesday Winner B vs. Winner C 5:00P 8:00P PPV
July 14 Wednesday Winner A vs. Winner 4:30P 7:30P FSWE
THIRD PLACE
</TABLE>
<PAGE> 17
<TABLE>
<S> <C> <C> <C> <C> <C>
July 17 Saturday Loser E vs. Loser F 11:00A 2:00P FSWE
CHAMPIONSHIP FINAL
July 18 Sunday Winner E vs. Winner F 1:00P 4:00P FSWE
</TABLE>
<TABLE>
<CAPTION>
GROUP A GROUP B GROUP C
- ------- ------- -------
<S> <C> <C>
Paraguay Brazil Argentina
Peru Chile Uruguay
Japan Mexico Colombia
Bolivia Venezuela Ecuador
</TABLE>
*Schedule Subject to Change
<PAGE> 1
AMENDMENT OF EMPLOYMENT AGREEMENT
This Amendment of Employment Agreement is entered into as of the 7th day of
April, 1999, by and between QUEPASA.COM, INC., a Nevada corporation (the
"Company"), and JUAN GALAN("Galan").
Explanatory Statements
A. The Company and Galan entered into an Employment Agreement dated as of
January 29, 1999 (the "Employment Agreement") whereby the Company employed
Galan.
B. The Company and Galan desire to amend and modify certain terms and
conditions of the Employment Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Employment Agreement is hereby amended and modified
as follows:
1. Section numbered 7, "Stock Options" is to read as follows:
"7. STOCK OPTIONS. Specifically subject to Section 10c herein, Galan
shall be granted options to purchase 100,000 shares of the Company's
Common Stock (the "Stock Options") exercisable at $8.00 per share, with
50,000 Stock Options to vest upon the Effective Date, 25,000 Stock
Options to vest and be exercisable one (1) year from the Effective Date
and the remaining 25,000 Stock Options to vest and be exercisable two
(2) years from the Effective Date. In the event that Galan's employment
with the Company is terminated for any reason other than for "Cause",
any Stock Options that have not previously vested shall immediately vest
and become exercisable. The Stock Options granted herein shall not be
subject to the $100,000 Limitation as defined and set forth in Article
VII of the Company's 1998 Stock Option Plan.
2. Any and all other terms and conditions of the Employment Agreement not
amended or modified herein shall remain the same and in full force and
effect.
Company:
QUEPASA.COM, INC.
By: /s/ JEFFREY PETERSON
------------------------------------
Jeffrey Peterson, Chief Executive
Officer
Galan:
By: /s/ JUAN GALAN
------------------------------------
Juan Galan
0
<PAGE> 1
quepasa.com, inc.
AMENDED AND RESTATED
1998 STOCK OPTION PLAN
AMENDED AND RESTATED 1998 STOCK OPTION PLAN (the "Plan") of quepasa.com, inc., a
Nevada corporation (the "Company"), dated as of the 26th day of April, 1999.
WHEREAS, the Company, formerly known as Internet Century, Inc., adopted
the 1998 Stock Option Plan (the "1998 Plan") to award and incentivize its
employees, officers, directors and consultants by allowing such individuals to
acquire an ownership interest in the Company; and
WHEREAS, the Company deems it to be in the best interests of the
Company and its stockholders to amend and restate the 1998 Plan upon the terms
and subject to the conditions set forth herein.
Article I. Establishment and Purpose
1.1 Establishment. The Company hereby establishes a stock option plan
for employees, officers, directors and consultants to acquire a proprietary
interest in the Company. It is intended that certain of the options issued under
the Plan shall constitute "Incentive Stock Options" within the meaning of
section 422A of the Internal Revenue Code ("Code") and that other options issued
under the Plan shall constitute "Nonstatutory Options" under the Code. The
Committee shall determine which Options are to be Incentive Stock Options and
which are to be Nonstatutory Options and shall enter into option agreements with
recipients accordingly.
1.2 Purpose. The purpose of the Plan is to enhance the Company's
stockholder value and financial performance by attracting, retaining and
motivating the Company's officers, directors, employees and consultants and to
encourage stock ownership by such individuals by providing them with a means to
acquire a proprietary interest in the Company's success through stock ownership.
Article II. Definitions
2.1 Definitions. Whenever used herein, the following capitalized terms
shall have the meanings set forth below, unless the context clearly requires
otherwise.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Compensation Committee or such other
committee of the Board as the Board may designate to administer the
Plan or, if for any reason the Board has not designated such a
committee, the Board.
(d) "Company" means quepasa.com, inc., a Nevada corporation.
<PAGE> 2
(e) "Consultant" means any person or entity, including an officer or
director of the Company who provides services (other than as an
Employee) to the Company.
(f) "Date of Exercise" means the date the Company receives notice, from
an Optionee, of the exercise of an Option pursuant to Section 8.1 of
the Plan. Such notice shall indicate the number of shares of Stock the
Optionee intends to exercise.
(g) "Employee" means any person, including an officer or director of
the Company, who is employed by the Company.
(h) "Exercise Price" shall have the meaning set forth in Section 7.4 of
the Plan.
(i) "Fair Market Value" means the fair market value of Stock upon which
an Option is granted under the Plan.
(j) "Incentive Stock Option" means an Option granted under the Plan
which is intended to qualify as an "incentive stock option" within the
meaning of section 422A of the Code.
(k) "Nonemployee Director" means a member of the Board who is not an
employee of the Company at the time an Option is granted hereunder.
(l) "Nonstatutory Option" means an Option granted under the Plan which
is not intended to qualify as an Incentive Stock Option within the
meaning of section 422A of the Code. Nonstatutory Options may be
granted at such times and subject to such restrictions as the Board
shall determine without conforming to the statutory rules of section
422A of the Code applicable to Incentive Stock Options.
(m) "Option" means the right, granted under the Plan, to purchase Stock
(as hereinafter defined) of the Company at the option price for a
specified period of time. For purposes of this Plan, an Option may be
either an Incentive Stock Option or a Nonstatutory Option.
(n) "Optionee" means an Employee, Consultant or Nonemployee Director
holding an Option under the Plan.
(o) "Parent Corporation" shall have the meaning set forth in section
425(e) of the Code with the Company being treated as the employer
corporation for purposes of this definition.
(p) "Participant" means any Employee, Consultant or Nonemployee
Director who has been selected to participate in the Plan by the
Committee.
2
<PAGE> 3
(q) "Stock" means the $.001 par value common stock of the Company.
Article III. Eligibility and Participation
3.1 Eligibility and Participation. All Employees are eligible to
participate in this Plan and receive Incentive Stock Options and/or Nonstatutory
Options hereunder. All Consultants and Nonemployee Directors are eligible to
participate in this Plan and receive Nonstatutory Options hereunder.
Participants in the Plan shall be selected by the Committee from among those
Employees, Consultants and Nonemployee Directors who, in the opinion of the
Committee, are in a position to contribute materially to the Company's continued
growth and development and to its long-term financial success.
Article IV. Administration
4.1 Administration.
The Plan shall be administered by the Committee which shall consist of
not less than three members of the Board. The Committee shall have full power
and authority, subject to the limitations of the Plan and any limitations
imposed by the Board, to construe, interpret and administer the Plan and to make
determinations which shall be final, conclusive and binding upon all persons,
including, without limitation, the Company, its stockholders, directors,
officers, consultants, employees and any persons having any interests in any
Options which may be granted under the Plan. The Committee shall have the full
power and authority to provide, by resolution, for the creation and issuance of
any such Option, to fix the terms upon which, the time or times at or within
which, and the price or prices at which any Stock may be purchased from the
Company upon the exercise of Options, which terms, time or times and price or
prices shall, in every case, be set forth or incorporated by reference in the
instrument or instruments evidencing such Option, which at all times shall be
consistent with the terms and conditions of the Plan.
The Board may from time to time remove members from or add members to
the Committee. Subject to the provisions of Section 12.1 hereof, the Board may
amend, modify and terminate the Plan at any time. Further, the Board may
terminate the Committee at any time. Vacancies on the Committee, however caused,
shall be filled by the Board. The Committee shall select one of its members as
Chairman, and shall hold meetings at such times and places as the Chairman may
determine. Except as otherwise contained herein, a majority of the Committee at
which a quorum is present, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts of the
Committee. A quorum shall consist of a majority of the members of the Committee.
4.2 Special Provisions for Grants to Officers or Directors. Rule 16b-3
under the Securities
3
<PAGE> 4
and Exchange Act of 1934 (the "Act") provides that the grant of a stock option
to a director or officer of a company subject to the Act will be exempt from the
provisions of section 16(b) of the Act if the conditions set forth in said Rule
are satisfied. Unless otherwise specified by the Committee, grants of Options
hereunder to individuals who are officers or directors of the Company shall be
made in a manner that satisfies the conditions of Rule 16b-3 of the Act.
Article V. Stock Subject to the Plan
5.1 Number. The total number of shares of Stock hereby made available
and reserved for issuance under the Plan shall be 6,000,000, subject to
adjustment as provided in section 5.3. The total number of shares of Stock may
be authorized but unissued shares of Stock, or shares acquired by purchase as
directed by the Committee from time to time in its discretion, to be used for
issuance upon exercise of Options granted hereunder.
5.2 Unused Stock. If an Option shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares of Stock subject
thereto shall (unless the Plan shall have terminated) become available for
re-issuance under the Plan.
5.3 Adjustment in Capitalization. In the event of any change in the
outstanding shares of Stock by reason of a stock dividend or split,
recapitalization, reclassification or other similar corporate change, the
aggregate number of shares of Stock set forth in section 5.1 shall be
appropriately adjusted by the Committee to reflect such change. The Committee's
determination shall be conclusive; provided, however, that fractional shares
shall be rounded to the nearest whole share. In any such case, the number and
kind of shares of Stock that are subject to any Option (including any Option
outstanding after termination of employment) and the Option price per share
shall be proportionately and appropriately adjusted without any change in the
aggregate Option price to be paid therefor upon exercise of the Option.
Article VI. Duration of the Plan
6.1 Duration of the Plan. The Plan shall be in effect until September
30, 2008 unless extended by the Company's stockholders. Any Options outstanding
at the end of said period shall remain in effect in accordance with their terms.
The Plan shall terminate before the end of said period if all Stock subject to
the Plan has been purchased pursuant to the exercise of Options granted under
the Plan.
Article VII. Terms of Stock Options
7.1 Grant of Options. Subject to section 5.1, Options may be granted to
Participants at any time and from time to time as determined by the Committee or
the Board; provided, however, that Consultants and Nonemployee Directors may
receive only Nonstatutory Options, and may not receive Incentive Stock Options.
The Committee or the Board shall have complete discretion in
4
<PAGE> 5
determining the number of Options granted to each Optionee. In making such
determinations, the Committee or the Board may take into account the nature of
services rendered by such Participants, their present and potential
contributions to the Company, and such other factors as the Committee or the
Board in its discretion shall deem relevant. The Committee or the Board also
shall determine whether an Option is to be an Incentive Stock Option or a
Nonstatutory Option.
The Committee or the Board is expressly given the authority to issue
amended or replacement Options with respect to shares of Stock subject to an
Option previously granted hereunder. An amended Option amends the terms of an
Option previously granted (including an extension of the terms of such Option)
and thereby supersedes the previous Option. A replacement Option is similar to a
new Option granted hereunder except that it provides that it shall be forfeited
to the extent that a previously granted Option is exercised, or except that its
issuance is conditioned upon the termination of a previously granted Option.
7.2 No Tandem Options. Where an Option granted under the Plan is
intended to be an Incentive Stock Option, the Option shall not contain terms
pursuant to which the exercise of the Option would affect the Optionee's right
to exercise another Option, or vice versa, such that the Option intended to be
an Incentive Stock Option would be deemed a tandem stock option within the
meaning of the regulations under section 422A of the Code.
7.3 Option Agreement; Terms and Conditions to Apply Unless Otherwise
Specified. Each Option shall be evidenced by an Option agreement ("Option
Agreement") that includes the non-transferability provisions required by section
10.2 hereof and specifies: (i) whether the Option is an Incentive Stock Option
or a Nonstatutory Option; (ii) the Exercise Price (as hereinafter defined) of
the Option; (iii) the term (duration) of the Option; (iv) the number of shares
of Stock to which the Option applies; (v) any vesting or exercisability
restrictions which the Committee or the Board may impose; and (vi) any other
terms or conditions which the Committee may impose. All such terms and
conditions shall be determined by the Committee.
If not otherwise specified in the Option Agreement, the following terms
and conditions shall apply to Options granted to Participants under the Plan:
(a) Term. The Option shall be exercisable to purchase Stock for a
period of ten years from the date of grant, as evidenced by the
effective date of the Option Agreement.
(b) Exercise of Option. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and
conditions as the Committee shall in each instance determine, which
need not be the same for all Optionees. Unless an Option is terminated
as provided hereunder, an Optionee may exercise his or her Option for
up to, but not in excess of, the number of shares of Stock subject to
the Option specified below, based on the Optionee's number of years of
continuous
5
<PAGE> 6
service to the Company from the date on which the Option is granted. In
the case of an Optionee who is an Employee, continuous service shall
mean continuous employment with the Company; in the case of an Optionee
who is a Consultant, continuous service shall mean the continuous
provision of consulting services to the Company; and in the case of an
Optionee who is a Nonemployee Director, continuous service shall mean
the continuous service as a director of the Company. In applying said
limitations, the amount of shares, if any, previously purchased by the
Optionee under the Option shall be counted in determining the amount of
shares the Optionee can purchase at any time. The Optionee may exercise
his Option in the following amounts:
(i) After one year of continuous service to the Company, the
Optionee may purchase up to 33.3% of the shares of Stock
subject to the Option;
(ii) After two years of continuous service to the Company, the
Optionee may purchase up to 66.6% of the shares of Stock
subject to the Option;
(iii) After three years of continuous service to the Company,
the Optionee may purchase all shares of Stock subject to the
Option.
All Option Agreements shall incorporate the provisions of the Plan by
reference, with certain provisions to apply depending upon whether the Option
Agreement applies to an Incentive Stock Option or to a Nonstatutory Option.
7.4 Exercise Price. The exercise price per share for each Option
granted under the Plan shall be set forth in the Option Agreement (the "Exercise
Price"). No Stock Option granted pursuant to this Plan shall have an Exercise
Price that is less than the Fair Market Value of the Stock on the date the
Option is granted.
7.5 Term of Options. Each Option shall expire at such time as the
Committee shall determine, provided, however, that no Option shall be
exercisable later than ten years from the date of its grant.
7.6 Payment. Payment for all shares of Stock shall be made at the time
that an Option, or any part thereof, is exercised, and no shares shall be issued
until full payment therefor has been made. Payment shall be made (i) in United
States dollars in cash or by certified funds; (ii) by delivery of shares of
Stock with an aggregate net value equal to the Exercise Price; or (iii) by
delivery of Options with an aggregate net value (i.e., the aggregate value of
the Stock subject to such Options less the aggregate Exercise Price of such
options) equal to the Exercise Price; or (iv) by a combination of (i), (ii)
and/or (iii) above. If the Optionee delivers shares of Stock or Options as
6
<PAGE> 7
payment of the Exercise Price upon exercise of an Option, the Committee shall
determine acceptable methods for tendering such Stock or Options by the Optionee
and may impose such limitations and prohibitions on the use of Stock or Options
for such purposes as it deems appropriate. Any Option tendered as payment of the
Exercise Price shall be canceled by the Company upon receipt.
Article VIII. Written Notice, Issuance of
Stock Certificates, Stockholder Privileges
8.1 Written Notice. An Optionee wishing to exercise an Option shall
deliver written notice and full payment of the Exercise Price to the Company, in
the form and manner prescribed by the Committee. Until the certificates for the
Stock represented by an exercised Option are issued to an Optionee, such
Optionee shall have none of the rights of a holder of Stock. No Stock shall be
delivered upon any exercise of an Option until the requirements of all
applicable laws, rules and regulations have, in the opinion of the Company's
counsel, been satisfied. Under normal circumstances, certificates for Stock to
be delivered upon exercise of an Option shall be delivered within thirty days
following exercise of an Option.
Article IX. Termination of Employment or Services
Except as otherwise expressly specified by the Committee for
Nonstatutory Options, all Options granted under this Plan shall be subject to
the following termination provisions:
9.1 Death. If an Optionee's employment in the case of an Employee,
provision of services as a consultant, in the case of a Consultant or provision
of services as a director, in the case of a Nonemployee Director, terminates by
reason of death, the Option may thereafter be exercised at any time prior to the
expiration date of the Option or within twelve months after the date of such
death, whichever period is the shorter, by the person or persons entitled to do
so under the Optionee's will or, if the Optionee shall fail to make a
testamentary disposition of an Option or shall die intestate, the Optionee's
legal representative or representatives. The Option shall be exercisable only to
the extent that such Option was exercisable as of the date of Optionee's death.
9.2 Termination Other Than For Cause or Due to Death. In the event of
an Optionee's termination of employment, in the case of an Employee, termination
of the provision of services as a consultant or a director, in the case of a
Consultant or a Nonemployee Director, respectively, other than by reason of
death, the Optionee may exercise such portion of his or her Option as was
exercisable by such Optionee at the date of such termination (the "Termination
Date") at any time within three months following the Termination Date; provided,
however, that where the Optionee is an Employee, and is terminated due to
disability within the meaning of Code section 422A, he or she may exercise such
portion of his or her Option as was exercisable on the Termination Date within
one year following such Termination Date. In any event, the Option cannot be
exercised after the expiration of the term of the Option. Options not exercised
within the applicable period specified above shall terminate.
7
<PAGE> 8
In the case of an Employee, a change of duties or position within the
Company shall not be considered a termination of employment for purposes of the
Plan. The Option Agreement may contain such provisions as the Committee shall
approve with reference to the effect of approved leaves of absence upon
termination of employment.
9.3 Termination "for Cause". In the event of an Optionee's termination
of employment, in the case of an Employee, or termination of the provision of
services as a consultant or a director, in the case of a Consultant or a
Nonemployee Director, respectively, which termination is by the Company "for
cause" (as defined below), any Option or Options held by him under the Plan, to
the extent not exercised before such termination, shall forthwith terminate. For
purposes of the Plan, "for cause" shall mean the termination of an Optionee's
position with the Company because of such Participant's (a) willful misfeasance,
willful waste of corporate assets, gross negligence or (b) willful engagement
and dishonest or illegal conduct that is demonstrably injurious to the Company.
Article X. Rights of Optionees
10.1 Service. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Employee's employment, or any
Consultant's or Nonemployee Director's services, at any time, nor confer upon
any Employee any right to continue in the employ of the Company, or upon any
Consultant or Nonemployee Director any right to continue to provide services to
the Company.
10.2 Non-transferability. Except as otherwise specified by the
Committee for Nonstatutory Options, Options granted under this Plan shall be
nontransferable by the Optionee, other than by will or the laws of descent and
distribution, and shall be exercisable during the Optionee's lifetime only by
the Optionee.
Article XI. Optionee-Employee's
Transfer or Leave of Absence
11.1 Optionee-Employee's Transfer or Leave of Absence. For purposes of
the Plan:
(a) A transfer of an Optionee who is an Employee within the Company; or
(b) A leave of absence for such an Optionee (i) which is duly
authorized in writing by the Company, and (ii) in the event the
Optionee holds an Incentive Stock Option, which qualifies under the
applicable regulations under the Code which apply in the case of
Incentive Stock Options,
shall not be deemed a termination of employment. However, under no circumstances
may an Optionee exercise an Option during any leave of absence, unless
authorized by the Committee.
8
<PAGE> 9
Article XII. Amendment, Modification
and Termination of the Plan
12.1 Amendment, Modification, and Termination of the Plan. The Board
may at any time terminate, and from time to time amend or modify the Plan;
provided, however, that no amendment that requires stockholder approval in order
for the Plan to continue to comply with Section 16(m) of the Code or any
applicable listing requirement shall be effective unless same shall be approved
by the requisite vote of the stockholders of the Company. No amendment,
modification or termination of the Plan shall in any manner adversely affect any
outstanding Option under the Plan without the consent of the Optionee holding
the Option.
Article XIII. Acquisition, Merger and Liquidation
13.1 Acquisition. In the event that an Acquisition occurs with respect
to the Company, the Company shall have the option, but not the obligation, to
cancel any Options outstanding as of the effective date of Acquisition, whether
or not such Options are then exercisable, in return for payment to the Optionees
of an amount equal to a reasonable estimate of an amount (the "Spread") equal to
the difference between the net amount per share of Stock payable in the
Acquisition, or as a result of the Acquisition, less the exercise price of the
Option. In estimating the Spread, appropriate adjustments to give effect to the
existence of the Options shall be made, such as deeming the Options to have been
exercised, with the Company receiving the exercise price payable thereunder, and
treating the shares receivable upon exercise of the Options as being outstanding
in determining the net amount per share. For purposes of this section, an
"Acquisition" shall mean any transaction in which substantially all of the
Company's assets are acquired or in which a "controlling amount" of the
Company's outstanding shares are acquired, in each case by a single person or
entity or an affiliated group of persons and/or entities. For purposes of this
section, a "controlling amount" shall mean more than 50% of the issued and
outstanding shares of Stock of the Company. The Company shall have such an
option regardless of how the Acquisition is effectuated, whether by direct
purchase, through a merger or similar corporate transaction, or otherwise. In
cases where the Acquisition consists of the acquisition of assets of the
Company, the net amount per share shall be calculated on the basis of the net
amount receivable with respect to shares upon a distribution and liquidation by
the Company after giving effect to expenses and charges, including but not
limited to taxes, payable by the Company before the liquidation can be
completed.
Where the Company does not exercise its option under this section 13.1,
the remaining provisions of this Article XIII shall apply, to the extent
applicable.
13.2 Merger or Consolidation. Subject to any required action by the
stockholders, if the Company shall be the surviving corporation in any merger or
consolidation, any Option granted hereunder shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to the
Option would have been entitled in such merger or consolidation.
9
<PAGE> 10
13.3 Other Transactions. A dissolution or a liquidation of the Company
or a merger and consolidation in which the Company is not the surviving
corporation shall cause every Option outstanding hereunder to terminate as of
the effective date of such dissolution, liquidation, merger or consolidation.
However, the Optionee shall either (i) be offered a firm commitment whereby the
resulting or surviving corporation in a merger or consolidation will tender to
the Optionee an option (the "Substitute Option") to purchase its shares on terms
and conditions both as to number of shares and otherwise, which will
substantially preserve to the Optionee the rights and benefits of the Option
outstanding hereunder granted by the Company, or (ii) have the right immediately
prior to such dissolution, liquidation, merger, or consolidation to exercise any
unexercised Options whether or not then exercisable, subject to the provisions
of this Plan. The Committee shall have absolute and uncontrolled discretion to
determine whether the Optionee has been offered a firm commitment and whether
the tendered Substitute Option will substantially preserve to the Optionee the
rights and benefits of the Option granted hereunder. In any event, any
Substitute Option for an Incentive Stock Option shall comply with the
requirements of Code section 425(a).
Article XIV. Securities Registration
14.1 Securities Registration. In the event that the Company shall deem
it necessary or desirable to register under the Securities Act of 1933, as
amended (the "Securities Act"), or any other applicable statute, any Options or
any Stock with respect to which an Option may be or shall have been granted or
exercised, or to qualify any such Options or Stock under the Securities Act, or
any other statute, then the Optionee shall cooperate with the Company and take
such action as is necessary to permit registration or qualification of such
Options or Stock.
Unless the Company has determined that the following representation is
unnecessary, each person exercising an Option under the Plan may be required by
the Company, as a condition to the issuance of the shares pursuant to exercise
of the Option, to make a representation in writing that (a) the Optionee is
acquiring such shares for his own account for investment and not with a view to,
or for sale in connection with, the distribution of any part thereof and (b)
before any transfer in connection with the resale of such shares, the Optionee
will obtain the written opinion of counsel for the Company, or other counsel
acceptable to the Company, that such shares may be transferred. The Company may
also require that the certificates representing such shares contain legends
reflecting the foregoing.
Article XV. Tax Withholding
15.1 Tax Withholding. Whenever shares of Stock are to be issued in
satisfaction of Options exercised under the Plan, the Company shall have the
power to require the recipient of the Stock to remit to the Company an amount
sufficient to satisfy federal, state and local withholding tax requirements.
10
<PAGE> 11
Article XVI. Indemnification
16.1 Indemnification. To the extent permitted by law, each person who
is or shall have been a member of the Committee shall be indemnified and held
harmless by the Company against and from any loss, cost, liability, or expense
that may be imposed upon or reasonably incurred by such member in connection
with or resulting from any claim, action, suit, or proceeding to which such
member may be a party or in which such member may be involved by reason of any
action taken or failure to act under the Plan and against and from any and all
amounts paid in settlement thereof, with the Company's approval, or paid in
satisfaction of judgment in any such action, suit or proceeding against such
member, provided such member shall give the Company an opportunity, at its own
expense, to handle and defend the same before such member undertakes to handle
and defend it on such member's own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's articles of incorporation
or bylaws, as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
Article XVII. Requirements of Law
17.1 Requirements of Law. The granting of Options and the issuance of
shares of Stock upon the exercise of an Option shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
17.2 Governing Law. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of Nevada.
Article XVIII. Effective Date of Plan
18.1 Effective Date. The Plan shall be effective as of November 1,
1998, the date of the 1998 Plan's adoption by the Company's stockholders.
Article XIX. Compliance with Code
19.1 Compliance with Code. Incentive Stock Options granted hereunder
are intended to qualify as Incentive Stock Options under Code section 422A. If
any provision of this Plan is susceptible to more than one interpretation, such
interpretation shall be given thereto as is consistent with Incentive Stock
Options granted under this Plan being treated as Incentive Stock Options under
the Code.
Article XX. No Obligation to Exercise Option
20.1 No Obligation to Exercise. The granting of an Option shall impose
no obligation upon the Optionee to exercise such Option.
11
<PAGE> 12
IN WITNESS WHEREOF, as of the date first written above.
quepasa.com, inc.
By: /s/ Jeffrey S. Peterson
--------------------------------------------
Jeffrey S. Peterson, Chief Executive Officer
12
<PAGE> 13
quepasa.com, inc.
STOCK OPTION AGREEMENT
UNDER THE AMENDED AND RESTATED 1998 STOCK OPTION PLAN
Stock Option Agreement ("Agreement") between quepasa.com, inc. (the "Company")
and ______________ (the "Optionee"), dated as of _____________ (the "Effective
Date").
The Company hereby grants to the Optionee an option (the "Option") to
purchase __________ shares of the Company's $.001 par value common stock
("Stock") under the quepasa.com, inc. Amended and Restated 1998 Stock Option
Plan (the "Plan") upon the following terms and conditions:
1. Purchase Price. The purchase price of the Stock shall be _____ per
share, which is not less than the fair market value of the Stock on the
Effective Date.
2. Option. The Option shall be an [an/a Incentive Stock
Option/Nonstatutory Option], as defined in the Plan.
3. Period of Exercise. The Option will expire ten years from the
Effective Date. Subject to the provisions of Section 6 hereof, the Option may be
exercised only while the Optionee is actively employed by, or providing services
to, the Company.
4. Exercise of Option. The Option may be exercised for up to, but not
in excess of, the amounts of shares subject to the Option specified below, based
on the Optionee's number of years of continuous service to the Company from the
date hereof. In applying the following limitations, the amount of shares, if
any, previously purchased by the Optionee during the applicable period shall be
counted in determining the amount of shares the Optionee can purchase at any
time in accordance with said limitations. The Optionee may exercise the Option
in the following amounts and in accordance with the conditions set forth in
paragraph 7.3 of the Plan:
(1) After one year of continuous service to the Company, the
Optionee may purchase up to 33.3% of the shares of Stock subject to
the Option;
(2) After two years of continuous service to the Company, the
Optionee may purchase up to 66.6% of the shares of Stock subject to
the Option;
(3) After three years of continuous service to the Company, the
Optionee may purchase all shares of Stock subject to the Option.
The Option may not be exercised for less than fifty shares at any time
unless the number of shares purchased is the total number purchasable at the
time under the Option.
5. Transferability. The Option is not transferable except by will or
the laws of descent
<PAGE> 14
and distribution and may be exercised during the lifetime of the Optionee only
by him or her.
6. Termination of Employment or Services. In the event the employment
of, or provision of services by, the Optionee is terminated by the Company, the
Option may be exercised (to the extent exercisable at the date of such
termination) by the Optionee within three months after the date of termination;
provided, however, that:
(a) If the Optionee is terminated because he or she is disabled within
the meaning of Internal Revenue Code section 422A, the Optionee shall
have one year to exercise the Option (to the extent exercisable at the
date of the Optionee's termination).
(b) If the Optionee dies, the Option may be exercised (to the extent
exercisable by the Optionee at the date of his or her death) by such
Optionee's legal representative or by a person who acquired the right
to exercise such option by bequest or inheritance or by reason of the
death of the Optionee, but the Option must be exercised within one year
after the date of the Optionee's death.
(c) If the Optionee is terminated "for cause" (as defined in Section
9.3 of the Plan), the Option shall terminate immediately.
(d) In no event (including death of the Optionee) may this Option be
exercised more than ten years from the date hereof.
7. No Guarantee. This Agreement shall in no way restrict the right of
the Company to terminate the Optionee as an Employee, Consultant or Nonemployee
Director (as such terms are defined in Section 2.1 of the Plan) of the Company
at any time.
8. Investment Representation; Legend. The Optionee (and any other
purchaser under paragraphs 6(a) or 6(b) hereof) represents and agrees that all
shares of Stock purchased under this Agreement will be purchased for investment
purposes only and not with a view to distribution or resale. The Company may
require that an appropriate legend be set forth on the face of any certificate
issued under this Agreement, indicating that transfer of the Stock is
restricted, and may place an appropriate stop transfer order with the Company's
transfer agent with respect to the Stock.
9. Method of Exercise. The Option may be exercised, subject to the
terms and conditions of this Agreement, by written notice to the Company. The
notice shall be in the form attached to this Agreement and shall be accompanied
by full payment of the Exercise Price in accordance with the provisions of
Section 7.6 of the Plan. If the Optionee delivers shares of Stock or Options as
payment of the Exercise Price upon exercise of an Option, the Committee shall
determine acceptable methods for tendering such Stock or Options by the Optionee
and may impose such limitations and prohibitions on the use of Stock or Options
for such purposes as it deems appropriate. In the event of an exercise under the
terms of paragraphs 6(a) or 6(b) hereof,
<PAGE> 15
appropriate proof of the right to exercise the Option shall be delivered to the
Company. The Company will issue and deliver certificates representing the number
of shares purchased under the Option, registered in the name of the Optionee (or
other purchaser under paragraph 6 hereof) as soon as practicable after receipt
of the notice.
10. Withholding. In any case where withholding is required or advisable
under federal, state or local law in connection with any exercise of the Option
by the Optionee hereunder, the Company is authorized to withhold appropriate
amounts from amounts payable to the Optionee, or may require the Optionee to
remit to the Company an amount equal to such appropriate amounts.
11. Incorporation of Plan. This Agreement is made pursuant to the
provisions of the Plan, which Plan is incorporated herein by this reference.
Terms used herein shall have the meaning employed in the Plan, unless the
context clearly requires otherwise. In the event of a conflict between the
provisions of the Plan and the provisions of this Agreement, the provisions of
the Plan shall govern.
quepasa.com, inc.,:
By:
------------------------------------
Name:
Title:
AGREED AND ACCEPTED:
Optionee:
- ----------------------------
Name:
<PAGE> 16
quepasa.com, inc.
NOTICE OF EXERCISE OF STOCK OPTION ISSUED
UNDER THE AMENDED AND RESTATED 1998 STOCK OPTION PLAN
To: Compensation Committee
quepasa.com, inc.
One Arizona Center
400 E. Van Buren, Suite 400
Phoenix, AZ 85004
I hereby exercise my Option dated ___________________ to purchase
_____________ shares of $.001 par value common stock of the Company at the
Exercise Price of $______ per share.
I represent to you that I am acquiring these shares for investment
purposes and not with a view to any distribution thereof. I understand that my
stock certificate may bear an appropriate legend restricting the transfer of my
shares and that a stock transfer order may be placed with the Company's transfer
agent with respect to such shares.
I request that my shares be issued in my name as follows:
------------------------------------------------------------
(Print your name in the form in which you
wish to have the shares registered)
------------------------------------------------------------
(Social Security Number)
------------------------------------------------------------
(Street and Number)
------------------------------------------------------------
(City) (State) (Zip Code)
Dated: , .
------------------- --------
Signature:
---------------------------------------
<PAGE> 1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT entered into as of the 26th day of April, 1999, by
and among quepasa.com, inc., a Nevada corporation (the "Company") and GARY L.
TRUJILLO ("Trujillo").
1. EMPLOYMENT. The Company hereby employs Trujillo and Trujillo hereby
accepts employment with the Company as its President upon the terms and
conditions hereinafter set forth. Trujillo's employment shall not be deemed an
"at will" employment.
2. DUTIES. Trujillo will serve the Company as its President and will
faithfully and diligently perform the services and functions as mutually agreed
to in writing, relating to such office and position or otherwise reasonably
incident to such office and position, provided that all such services and
functions will be reasonable and within Trujillo's areas of expertise.
Trujillo's specific duties shall include those related to (i) coordination of
the Company's operations and planning, (ii) development of the Company's
strategic relationships and (iii) such other duties as the Company may
reasonably direct. Trujillo will, during the term of this Agreement (or any
extension thereof), devote his time, attention, skills and best efforts as a
full-time employee to the promotion of the business of the Company. For purposes
of this agreement, full-time is defined as an average of forty hours per week.
3. TERM. This Agreement and Trujillo's employment shall commence on
April 26, 1999 (the "Effective Date"), and shall continue for a term of four
years ("Initial Term") unless terminated earlier in accordance with this
Agreement. The term of this Agreement may be extended by agreement among the
Company and Trujillo.
4. COMPENSATION. As compensation for the services rendered to the
Company under this Agreement commencing on the Effective Date, Trujillo will be
paid a base salary of $125,000 per year payable in accordance with the then
current payroll policies of the Company or as otherwise agreed to by the parties
(the "Salary"). At any time and from time to time, the Salary may be increased
or decreased if so determined by the Board of Directors of the Company (the
"Board") after a review of Trujillo's performance of his duties hereunder.
Trujillo will also receive as compensation under this Agreement 100,000 shares
(the "Shares") of the Company's $.001 par value common stock ("Common Stock"),
50,000 shares of which shall be issued by the Company and 50,000 shares of which
shall be transferred from Jeffrey S. Peterson, the Company's Chief Executive
Officer. In the event Trujillo's employment with the Company is terminated on or
before April 26, 2000 for "Cause" (as hereinafter defined) or by voluntary
termination of this Agreement by Trujillo, then the 50,000 Shares shall be sold
by Trujillo to the Company at the greater of $10.00 per share or the fair market
value of the Shares at the time of termination. In any event, the Company agrees
that Trujillo will retain a minimum of 50,000 Shares as compensation for his
participation in, and assistance with, the Company's initial public offering
(the "IPO") prior to the Effective Date of this Agreement.
5. TERMINATION. This Agreement will terminate upon the occurrence of
any of the following events:
a. The death of Trujillo;
b. The "Total Disability" (as hereinafter defined) of Trujillo;
c. Written notice to Trujillo from the Company of termination for
"Cause" (as
<PAGE> 2
hereinafter defined);
d. The voluntary termination of this Agreement by Trujillo upon
30 days prior written notice; or
e. The later of four years from the Effective Date of this
Agreement or the date to which this Agreement is extended in
accordance with Section 3 above.
"Total Disability" means physical or mental disability, or both,
determined to be (or reasonably expected to be, based upon then available
medical information) of not less than twelve months duration or more where
Trujillo is unable to reasonably perform the duties he was performing for the
Company immediately prior to such disability. The determination shall rest upon
the opinion of the physician regularly attending Trujillo. If the Company
disagrees with said physician's opinion, the Company may engage at their own
expense a physician to examine the Trujillo, and Trujillo hereby consents to
such examination and to waive, if applicable any privilege between the physician
and Trujillo that may arise as a result of said examination. If after
conferring, the two physicians cannot concur on a final opinion, they shall
choose a third consulting physician whose opinion shall control. The expense of
the third consulting physician shall be borne equally by the Trujillo and the
Company.
"Cause" means (i) Trujillo has failed to substantially perform his
duties in accordance with Section 2 hereof as reasonably determined by the
Board, (ii) Trujillo has failed to comply with the reasonable directives and
policies of the Board, and such conduct is not cured within thirty days after
counseling by the Company or (iii) Trujillo breaches his fiduciary duty to the
Company or commits any dishonest, unethical, fraudulent, or felonious act in
respect to Trujillo's duties to the Company.
6. STOCK OPTIONS. Trujillo shall be granted options to purchase up to
350,000 shares of Common Stock (the "Options") pursuant to the Company's Amended
and Restated 1998 Stock Option Plan (the "Plan") at $10.00 per share, all of
which Options shall vest and be exercisable on the Effective Date.
Notwithstanding anything to the contrary contained herein, the Options shall be
subject to the terms and conditions of the Plan.
Trujillo acknowledges that the Company is in the process of completing
its IPO and that as part of the IPO Trujillo may be required to lock up the
Shares and the Common Stock underlying the Options for a period not to exceed
six months from the effective date of the IPO. Accordingly, Trujillo agrees to
execute any agreement necessary to lock up the Shares and the Common Stock
underlying the Options.
7. LOAN. The Company will loan to Trujillo $100,000 (the "Loan") on the
Effective Date. The Loan shall be evidenced by a promissory note (the "Note")
with interest payable at 10% per annum and with all principal and accrued but
unpaid interest due one year from the Effective Date, if not sooner paid. The
Company agrees that if Trujillo has been employed by the Company for six
continuous months from the Effective Date, 50% of the principal balance and
accrued but unpaid interest shall be forgiven by the Company, and if Trujillo
has been employed by the Company for 12 continuous months from the Effective
Date, the remaining 50% of the principal balance and accrued but unpaid interest
shall be forgiven by the Company, and the Note evidencing the Loan shall be
canceled and deemed paid in full.
8. BENEFITS. Trujillo shall be entitled to receive benefits which are
offered to other Company executives, including, but not limited to, health
insurance, life insurance and vacation time.
<PAGE> 3
9. EXPENSES. Trujillo is authorized to incur reasonable expenses as he
deems necessary and appropriate for promoting the business of the Company,
including expenses for entertainment, travel and similar items. The Company
shall reimburse Trujillo for all such expenses on the presentation by Trujillo
of itemized accounts of such expenditures in accordance with guidelines set
forth by the Company and the Internal Revenue Service.
10. NON-COMPETITION AND CONFIDENTIALITY.
a. Non-Competition. The Company and Trujillo acknowledge and
agree that Trujillo's services are of a special and unusual character which have
a unique value to the Company, the loss of which cannot be adequately
compensated by damages in an action at law and if used in competition with the
Company, could cause serious harm to the Company. Accordingly, Trujillo agrees
that for a period of two years after the termination of his employment by the
Company, irrespective of the reason for such termination, Trujillo will not (1)
enter into any agreement with or directly or indirectly solicit or attempt to
solicit any employee or other representatives of the Company, with the exception
of Michele Vahsen, for the purpose of causing them to leave the Company to take
employment with any other business entity, or (2) compete, directly or
indirectly, with the Company in any way and that Trujillo will not act as an
officer, director, employee, consultant, lender or agent of any entity engaged
in any business of the same nature as, or in competition with, the business in
which the Company is engaged as of the Effective Date of this Agreement.
b. Confidentiality.
(1) Trujillo acknowledges that in Trujillo's
employment hereunder, Trujillo will be making use of, acquiring and adding to
the Company's trade secrets and its confidential and proprietary information of
a special and unique nature and value relating to such matters as, but not
limited to, the Company's business operations, internal structure, financial
affairs, programs, software systems, procedures, manuals, confidential reports,
lists of clients and prospective clients and sales and marketing methods, as
well as the amount, nature and type of services, equipment and methods used and
preferred by the Company's clients and the fees paid by such clients, all of
which shall be deemed to be confidential information. Trujillo acknowledges that
such confidential information has been and will continue to be of central
importance to the business of the Company and that disclosure of it to or its
use by others could cause substantial loss to the Company. In consideration of
employment by the Company, Trujillo agrees that during the Initial Term and any
renewal term of this Agreement and upon and after leaving the employ of the
Company for any reason whatsoever, Trujillo shall not, for any purpose
whatsoever, directly or indirectly, divulge or disclose to any person or entity
any of such confidential information which was obtained by Trujillo as a result
of the Trujillo's employment with the Company or any trade secrets of the
Company, but shall hold all of the same confidential and inviolate. The Company
acknowledges and agrees that Trujillo has in his possession an extensive contact
list and that such list will remain Trujillo's personal property and not become
the property of the Company.
(2) All contracts, agreements, financial books,
records, instruments and documents; client lists; memoranda; data; reports;
programs; software, tapes; Rolodexes; telephone and address books; letters;
research; card decks; listings; programming; and any other instruments, records
or documents relating or pertaining to clients serviced by the Company or
Trujillo, the services rendered by Trujillo, or the business of the Company
(collectively, the "Records") shall at all times be and remain the property of
the Company. Upon termination of this Agreement and Trujillo's employment under
this
<PAGE> 4
Agreement for any reason whatsoever, Trujillo shall return to the Company all
Records (whether furnished by the Company or prepared by Trujillo), and Trujillo
shall neither make nor retain any copies of any of such Records after such
termination.
(3) All inventions and other creations, whether or
not patentable or copyrightable, and all ideas, reports and other creative
works, including, without limitation, computer programs, manuals and related
materials, made or conceived in whole or in part by Trujillo while employed by
the Company and within one year thereafter, which relate in any manner
whatsoever to the business, existing or proposed, of the Company or any other
business or research or development effort in which the Company or any of its
subsidiaries or affiliates engages during Trujillo's employment by the Company
will be disclosed promptly by Trujillo to the Company and shall be the sole and
exclusive property of the Company. All copyrightable works created by Trujillo
and covered by this Section 10b(3) shall be deemed to be works for hire.
Trujillo shall cooperate with the Company in patenting or copyrighting all such
inventions, ideas, reports and other creative works, shall execute, acknowledge,
seal and deliver all documents tendered by the Company to evidence its ownership
thereof through the world, and shall cooperate with the Company obtaining,
defending and enforcing its rights therein.
c. Certain Claims Upon Termination. Trujillo understands that
if within one year prior to the termination of Trujillo's employment with the
Company, Trujillo has either (i) committed an act of theft, dishonesty, gross
dereliction of duty, fraud, embezzlement, misappropriation, or breach of
fiduciary duty against the Company or any other act of comparable misconduct
against the Company; or (ii) breached any of his obligations under this
Agreement, then the Company shall have the right to purchase any or all shares
of Common Stock of the Company owned by Trujillo at the time of such termination
for a purchase price equal to the amount that Trujillo paid for such shares,
together with interest thereon at a rate of 10% per annum. If the Company
desires to exercise such right, it shall notify Trujillo within 60 days after
the date of such termination and Trujillo shall tender the shares being
purchased by the Company at the time and place designated in such notice from
the Company upon receipt of the purchase price for such shares. If Trujillo
fails to tender such shares, the shares shall be deemed to be canceled as of the
date the Company tenders payment of the purchase price thereof.
d. Enforceability. In the event of the breach of the covenants
contained in this Section 10, it is understood that damages will be difficult to
ascertain and the Company may petition a court of law or equity for injunctive
relief in addition to any other relief which the Company may have under the law,
this Agreement or any other agreement executed in connection herewith. In
connection with the bringing of any legal or equitable action for the
enforcement of this Agreement, the Company shall be entitled to recover, whether
the Company seeks equitable relief, and regardless of what relief is afforded,
such reasonable attorneys' fees and expenses as the Company may incur in
prosecution of the Company's claim for breach hereof.
It is hereby agreed that the provisions of this Section 10 are separate
and independent from the other provisions of this Agreement, that these
provisions are specifically enforceable by the Company notwithstanding any claim
by Trujillo that the Company has violated or breached this Agreement or any
claim that Trujillo is entitled to any offset or compensation.
To induce the Company to enter into this Agreement, Trujillo represents
and warrants to the Company that Section 10 of this Agreement is enforceable by
the Company in accordance with its terms.
The parties hereto agree that to the extent that any provision or
portion of Section 10 of this
<PAGE> 5
Agreement shall be held, found or deemed to be unreasonable, unlawful or
unenforceable by a court of competent jurisdiction, then any such provision or
portion thereof shall be deemed to be modified to the extent necessary in order
that any such provision or portion thereof shall be legally enforceable to the
fullest extent permitted by applicable law; and the parties hereto do further
agree that any court of competent jurisdiction shall, and the parties hereto do
hereby expressly authorize, request and empower any court of competent
jurisdiction to, enforce any such provision or portion thereof or to modify any
such provision or portion thereof in order that any such provision or portion
thereof shall be enforced by such court to the fullest extent permitted by
applicable law.
11. WAIVER OF BREACH. The waiver by any party hereto of a breach of any
provision of this Agreement will not operate or be construed as a waiver of any
subsequent breach by any party.
12. NOTICES. Any notices, consents, demands, request, approvals and
other communications to be given under this Agreement by either party to the
other will be deemed to have been duly given if given in writing and personally
delivered, faxed or if sent by mail, registered or certified, postage prepaid
with return receipt requested, as follows:
If to the Company: quepasa.com, inc.
One Arizona Center
400 E. Van Buren, Suite 400
Phoenix, AZ 85004
If to Trujillo: Gary L. Trujillo
6850 N. Central Avenue
Phoenix, AZ 85012
Notices delivered personally will be deemed communicated as of actual
receipt, notices by fax shall be deemed delivered when such notices are faxed to
recipient's fax number and notices by mail shall be deemed delivered when
mailed.
13. ENTIRE AGREEMENT. This Agreement and the agreements contemplated
hereby constitute the entire agreement of the parties regarding the subject
matter hereof, and supersede all prior
<PAGE> 6
agreements and understanding, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof.
14. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
this Agreement, such provision will be fully severable and this Agreement will
be construed and enforced as if such illegal, invalid or unenforceable provision
never comprised a part hereof; and the remaining provisions hereof will remain
in full force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom. Furthermore, in lieu of
such illegal, invalid or unenforceable provision, there will be added
automatically, as part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
15. GOVERNING LAW. To the extent permitted by applicable law, this
Agreement and the rights and obligations of the parties will be governed by and
construed and enforced exclusively in accordance with the substantive laws (but
not the rules governing conflicts of laws) of the State of Arizona and the State
of Arizona shall have exclusive jurisdiction regarding any legal actions
relating to this Agreement.
16. CAPTIONS. The captions in this Agreement are for convenience of
reference only and will not limit or otherwise affect any of the terms or
provisions hereof.
17. GENDER AND NUMBER. When the context requires, the gender of all
words used herein will include the masculine, feminine and neuter, and the
number of all words will include the singular and plural.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which will
constitute one and the same instrument.
19. ACKNOWLEDGMENT OF VENTURE CAPITAL AND OTHER INVESTMENT ACTIVITIES.
The Company acknowledges that Trujillo currently engages in venture capital and
other investment activities independent of Trujillo's employment with the
Company. The Company hereby agrees that Trujillo will continue to have the right
to invest and commit reasonable amounts of time to such activities while
employed with the Company; provided, however that such activities are not in
direct competition with the Company and do not otherwise conflict with the terms
of Section 10 of this Agreement. Furthermore, the Company acknowledges that
Trujillo is a significant investor in and/or a member of the board of directors
for the following companies: Blue Cross & Blue Shield of Arizona, Wells Fargo &
Co. AZ (Advisory Board), Corella Electric Wire & Cable Inc., Corella-Trujillo
Group, Southwest Harvard Group Companies, JOSE LLC, SERI Construction LLC,
SERI/HighPoint LLC, World Wide Wireless LLC, and Pennoyer Asset Management. The
Company acknowledges that Trujillo is currently involved in the following
investment activities and that none of such activities will detract from
Trujillo's ability to perform his duties as defined in Section 2 of this
Agreement nor violate the terms of Section 10 of this Agreement:
- Hispanic direct mail media advertising;
- Hispanic recording studios;
- Hispanic telephone communication company; and
- Hispanic Parking Company of America.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
THE COMPANY:
quepasa.com, inc., a Nevada corporation
By: /s/ Jeffrey Peterson
---------------------------------------------
Jeffrey Peterson, Chief Executive Officer
TRUJILLO:
/s/ Gary L. Trujillo
---------------------------------------------
Gary L. Trujillo
<PAGE> 1
Exhibit 23.07
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-74201 of quepasa.com, inc. of our report dated February 17, 1999 appearing
in the Prospectus, which is part of such Registration Statement, and to the
reference to us under the heading "Experts" in such Prospectus.
/s/ Ehrhardt Keefe Steiner & Hottman, PC
----------------------------------------
Ehrhardt Keefe Steiner & Hottman, PC
Denver, Colorado
April 28, 1999
