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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 27, 1999
COMMISSION FILE NO.333-84945
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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AMENDMENT NO. 1 TO FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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QUEST NET CORP.
(Exact Name of Registrant As Specified In Its Charter)
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Florida [4813] 84-1331134
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(State of Incorporation) Primary Standard Industrial IRS Employer I.D.
(Classification Code Number) Number)
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2999 NE 191st Street, PH-8
Aventura, Florida 33180
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(Address, including zip code,
and telephone number, including area code of
registrant's principal executive offices)
Camilo Pereira, Chairman QUEST NET CORP.
2999 NE 191ST STREET, PH-8
AVENTURA, FLORIDA 33180
(305) 935-1080
(Name, address and telephone number of Agent for Service)
Please send a copy of all communications to:
Rebecca J. Del Medico, Esq.
2999 NE 191ST STREET, PH-8
AVENTURA, FLORIDA 33180
(305) 935-1080
(561) 734-9785
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time, at the discretion of the selling shareholder 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. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of 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. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF SECURITIES BEING REGISTERED AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
REGISTERED OFFERING PRICE PER AGGREGATE REGISTRATION FEE
SHARE (1) OFFERING PRICE(1)
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COMMON STOCK, $.0 PAR VALUE 1,700,000 $3.50 $5,950,000 $1,654.10
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TOTAL (4) 1,700,000 $3.50 $5,950,000 $1,654.10
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) of the Securities Act of 1933, as amended, on the basis of the
closing trade price of our common stock on the NASDAQ Electronic Bulletin Board
on August 24, 1999.
(2) Pursuant to Rule 416 promulgated under the Securities Act of 1933, as
amended, this Registration Statement also covers such indeterminable additional
shares of common stock as may be issuable, to prevent dilution resulting from
Stock splits, or stock dividends.
(3) The amount being registered is the Company's good faith estimate, based on
the fluctuation in the price of the Company's Common stock during the 90 days
immediately preceding the filing of this Registration Statement, of the shares
required to be issued pursuant to the terms of the Subscription Agreement, and
is subject to adjustment and could be materially less than such estimated amount
depending upon factors that cannot be predicted by us at this time, including,
among others, the future market price of the common stock. This presentation is
not intended to constitute a prediction as to the future market price of the
common stock or as to the number of shares of common stock, which, will be
required to be issued pursuant to the Registration Rights Agreement
(4) The sum of $1,654.10 was paid in connection with the filing of the initial
Registration Statement.
We hereby amend this Registration Statement on such date or dates as may be
necessary to delay its effective date until we file a further amendment which
specifically states that this Registration Statement shall become effective in
accordance with Section 8(A) of the Securities Act Of 1933 or until this
Registration Statement shall become effective on such date as the Commission may
determine.
ii
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QUEST NET CORP.
CROSS REFERENCE SHEET
Form SB-2 Item Numbers and Caption Heading in Prospectus
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1. Front of the Registration Statement and
Outside Front Cover of Prospectus......................................Cover Page of Form SB-2 and of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus...........................................................Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information and Risk Factors...................................Prospectus Summary, Selected Financial
Information and Risk Factors
4. Use of Proceeds........................................................Not Applicable
5. Determination of Offering Price........................................Cover page of Prospectus and Selling Security
Holders
6. Dilution...............................................................Not Applicable
7. Selling Security Holders...............................................Selling Security Holders
8. Plan of Distribution...................................................Cover Page of Prospectus, Selling Security Holders
and Plan of Distribution
9. Legal Proceedings......................................................Business-Legal Proceedings
10. Directors, Executive Officers, Promoters, and Control Persons Management
11. Security Ownership of Certain Beneficial Owners and Management ........Principal Stockholders
12. Description of Securities. ............................................Description of Securities
13. Interest of Named Experts and Counsel..................................Legal Matters and Experts
14. Disclosure of Commission Position on Indemnification for Securities
Act Liabilities......................................................Indemnification of Officers and Directors
15. Organization Within Last Five Years ...................................Business
16. Description of Business................................................Business
17. Management's Discussion and Analysis or Plan of Operation. ............Management's Discussion and Analysis or Plan of
Operation.
18. Description of Property. ..............................................Business-Property
19. Certain Relationships and Related Transactions. .......................Certain Transactions
20. Market for Common Equity and Related Stockholder Matters. .............Market Price of Securities
21. Executive Compensation. ...............................................Management-Executive Compensation
22. Financial Statements. .................................................Financial Statements
23. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure ................................................Not Applicable
24. Indemnification of Directors and Officers. ............................Part II
25. Other Expenses of Issuance and Distribution............................Part II
26. Recent Sales of Unregistered Securities. ..............................Part II
27. Exhibits...............................................................Part II
28. Undertakings ..........................................................Part II
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SUBJECT TO COMPLETION, DATED ________________1999
The information in this Prospectus is not complete and may be changed. We may
complete or amend this Prospectus without notice. These securities may not be
sold until the registration statement filed with the Securities and Exchange
Commission is effective. This Prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
PROSPECTUS
QUEST NET CORP.
[LOGO]
1,700,000 SHARES OF COMMON STOCK
This Prospectus ("Prospectus") relates to an aggregate of 1,700,000 shares of
our common stock. Quest Net Corp. and unless otherwise noted, its wholly owned
subsidiaries IPQuest Corp., Quest Wireless Corp., Globalbot Corp., QuesTel Corp.
and Quest Fiber Corp. are is referred to in this Prospectus as the "Company,
our, we or us".
James, LLC., who is referred to as the "Selling Security Holder", is selling up
to 1,700,000 shares of common. There will be no general offering of shares to
the public by us. We will not receive any of the proceeds from the sale of
common stock by the Selling Security Holders. All expenses of registration
incurred in connection with this offering are being borne by us, but all selling
and other expenses will be borne by the Selling Security Holders. No underwriter
is being used.
The Shares offered will be sold from time to time at the then prevailing market
prices, at prices relating to prevailing market prices or at negotiated prices.
The common stock is traded on the OTC Bulletin Board under the symbol "QNET". On
August 24, 1999, the closing bid and asked price of the common stock as reported
on the OTC Bulletin Board was $4.25 and $3.75 respectively.
The Shares have not been registered for sale by us or by the Selling Security
Holders under the securities laws of any state as of the date of this
Prospectus. Brokers or dealers effecting transactions in the Shares should
confirm the registration of the Shares under the securities laws of the States
in which transactions occur or the existence of any exemption from registration.
The Selling Security Holder, or any broker-dealer who may participate in sales
of the common stock covered hereby may use this Prospectus.
Investing in the common stock involves a high degree of risk. You should invest
in the common stock only if you can afford to lose your entire investment. We
urge you to read the "Risk Factors" section beginning on page 3, along with this
Prospectus before you make your investment decision.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
QUEST NET CORP.
2999 NE 191ST STREET, PH-8
AVENTURA, FLORIDA 33180
(305) 935-1080
THE DATE OF THIS PROSPECTUS IS ________, 1999
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PROSPECTUS SUMMARY
This brief summary highlights selected information from the Prospectus. It does
not contain all of the information that is important to you. We urge you to read
the entire Prospectus before considering investing in any common stock of our
Company. See Appendix A for the definitions of certain terms used in this
Prospectus.
THE COMPANY
We were incorporated in the State of Colorado in November 1995, under the name
A.P. Sales Inc. Our proposed business was to engage in the purchasing,
reconditioning, selling, moving, and repairing of office equipment and
furniture, including, primarily, filing and storage cabinets, and workstations.
Until July of 1998, our operations were primarily organizational in nature or
related to raising capital.
In July 1998, we acquired certain of the assets of Pact Communication Group,
Inc. ("Pact"), a privately held Florida corporation. The assets that were
purchased were related to Pact's Internet provider business. The purchase price
for the assets was the issuance of 2,000,000 shares of our common stock. We then
changed our name to Quest Net Corp. and in December 1998 domesticated in the
State of Florida.
After the acquisition of Pact's assets, we became a provider of Internet system
and network management solutions for enterprises with mission-critical Internet
operation, including server hosting, Internet connectivity, collaborative
management, and Internet technology services.
We are a provider of secure, full-service global Internet and Intranet broadband
digital networking solutions for businesses and individuals. We have an a high
bandwidth low-delay connection to the Internet Web (referred to as an ATM),
offer dedicated high speed Internet access, metropolitan and wide area network
data transport services, including virtual private networks, to several
commercial and industrial clients and other ISPs (Internet Service Providers)
and wireless Internet connection at a speed of up to 16 Mbps to a distance of 20
miles on a license free spectrum. We believe that we offer one of the fastest
and cleanest routing systems for the transfer and delivery of voice, video, and
data streams at several speed ranges. The solutions provided by us include
co-location, hosting, dedicated and wireless Internet connectivity, content,
e-commerce, and search engine services. We anticipate that in the future we will
be able to provide discounted long distance services and offshore optical fiber
capacity.
We provide or will provide these services through five subsidiaries, each with
its own market and customer base. We sell dial-up and dedicated Internet access
services through IPQuest Corp. and wireless Internet services through Quest
Wireless Corp. It also provides Internet content, e-commerce (electronic
commerce), and search engine development through Globalbot Corp. and its wholly
owned subsidiary Wings Online, Inc., and will provide long distance phone
services through QuesTel Corp. In addition, we plan to provide optical fiber
capacity to the islands in the Caribbean Sea, including Cuba, through Quest
Fiber Corp. For more information regarding our business, our finances and the
risk associated with a purchase of our common stock, see " Business",
""Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Risk Factors",
Our executive offices are located at 2999 NE 191st Street, PH-8, Aventura,
Florida 33180. Our telephone number is (305) 935-1080
THE OFFERING
Securities Offered by Selling
Security Holders
Common Stock(1) 1,700,000
EQUITY SECURITIES OUTSTANDING
Common Stock(2), ......... 22,205,522
Preferred Shares(3) ......... -0-
Warrants(4) ......... 47,000
Options(4) ......... 87,999
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1 The amount being registered is our good faith estimate, based on the
fluctuation in the price of our Common stock during the 90 days immediately
preceding the filing of this Registration Statement, of the shares required
to be issued pursuant to the terms of the Subscription Agreement
2 Does not include warrants to purchase 47,000 shares and options to purchase
87,999 shares.
3 We redeemed the 100,000 shares of Preferred in July 1999, at a redemption
price of $10.00 per share.
4 The options were issued in connection with Employment Agreements, grants to
our Board of Directors and grants to our consultants. The exercise price of
the options range from $6.00 to $7.25 per share. The warrants were issued to
private placement investors, their attorneys and consultants and are
exercisable at $9.40 per share.
2
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TRADING SYMBOL QNET
USE OF PROCEEDS We will not receive any proceeds from the
sale of common stock by the Selling Security
Holders.
RISK FACTORS An investment in the securities
offered hereby involves a high degree of
risk. You should review carefully and
consider the factors described in "Risk
Factors".
RISK FACTORS
In making an investment decision, prospective purchasers should carefully
consider the following factors. Also see "Management's Discussion And Analysis
Of Financial Condition And Results Of Operations".
BECAUSE WE HAVE A LIMITED OPERATING HISTORY, IT IS DIFFICULT TO EVALUATE OUR
BUSINESS AND PROSPECTS We have had a limited history of operations. From our
inception in November 1995 until July 1998, we conducted very limited
operations. In July 1998, after our acquisition of certain assets of Pact, we
began to provide Internet services. At June 30, 1999, we had an accumulated
deficit of approximately 8,019,883 after discounts and dividends. From inception
to June 30, 1999, we generated revenues of approximately $1,070,198 and incurred
operating expenses of $ 9,085,240. See "Financial Statements". As a new
business, we are subject to all of the substantial risks inherent in the
commencement of a new business enterprise. These include, but are not limited
to, unexpected product development, marketing and customer support problems,
increased competition and lack of credibility with customers and suppliers.
There can be no assurance that we will be able to achieve market acceptance or
that we will be able to generate the necessary revenues or prove to be
profitable. Additionally, we have minimal business history that investors can
analyze to help them decide whether or not to invest in us. Any investment in us
should be considered a high-risk investment because investors will be placing
their funds at risk in an unseasoned development stage company with unforeseen
costs, expenses and problems often experienced by development stage companies.
Potential investors should be aware of the difficulties encountered by any new
enterprise in its early stages particularly companies in new and rapidly
evolving markets such as online commerce and the Internet. Set forth below is a
brief summary of risks, expenses, and problems frequently encountered by
companies such as Quest Net Corp.:
(i) Our inability to develop, maintain and/or increase levels of traffic on
our Internet sites; our inability to attract or retain customers; our
inability to generate significant Web-based revenue from our Customers;
our failure to anticipate and adapt to a developing market; and the
level of use of the Internet and online services for the purchase of
consumer products and in general.
(ii) Our ability to upgrade and develop competitive systems and
infrastructures and ability to attract new personnel in a timely and
effective manner; the inability to effectively manage rapidly expanding
operations; the level of traffic on our Web site; the failure of our
servers and networking systems to efficiently handle our Web traffic;
technical difficulties and system downtime or Internet brownouts; and
the amount and timing of operating costs and capital expenditures
relating to expansion of our business, operations and infrastructure.
(iii) The introduction and development of different or more extensive
electronic-commerce networks by direct and indirect competitors,
particularly in light of the fact that most of such competitors are
much larger and have greater financial, technical, and marketing
resources than we do.
(iv) Governmental regulation and general economic conditions and economic
conditions specific to the Internet and the online commerce industry.
3
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To address these risks we must, among other things, develop, maintain and
increase our customer base, continue to develop and upgrade our technology,
respond to competitive developments, and attract, retain and motivate qualified
personnel. There can be no assurance we will be successful in addressing such
risks, and any failure to do so could have a material adverse effect on our
business, results of operations and financial condition. For more information
about the Company, and its financial condition, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations", "Business", and
"Financial Statements".
WE MUST MANAGE OUR POTENTIAL GROWTH
We are currently experiencing a period of significant growth. If we cannot
manage our growth effectively, we may not be able to coordinate the activities
of our technical, accounting, finance, marketing, sales staff, and our business
could be harmed. We intend to expand our wireless network throughout Florida and
into other states, hire additional staff, expand existing offices and open new
offices. As part of this growth, we will have to implement new operational
procedures and controls to train and manage our employees and to expand and
coordinate the operations of our various subsidiaries. If we acquire new
businesses, we will also need to integrate new operations, technologies and
personnel. If we cannot manage the growth of our network, staff, offices, and
business generally, our business could be harmed.
We may not be able to successfully integrate our acquisitions. Acquisitions and
business combinations entail numerous operational risks, including: (i)
difficulty in the assimilation of acquired operations, technologies or products;
(ii) diversion of management's attention from other business operations; (iii)
risks of entering markets in which we have limited or no experience; and (iv)
potential loss of key employees of acquired businesses.
We will need more working capital to expand our operations. If we raise
additional capital by issuing equity or convertible debt securities, the
percentage ownership of our then-current stockholders will be reduced, and such
securities may have rights, preferences, or privileges senior to those of our
current stockholders. Additionally, we may not be able to obtain additional
financing on favorable terms, or at all. If adequate capital were not available
on acceptable terms, our ability to expand, take advantage of unanticipated
opportunities, develop or enhance services or otherwise respond to competitive
pressures would be significantly limited. This limitation could harm our
business. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" for a discussion of our
working capital and capital expenditures.
IF USE OF THE INTERNET DOES NOT GROW, OUR BUSINESS COULD BE HARMED Our success
is highly dependent upon continued growth in the use of the Internet generally.
Internet use by consumers is in an early stage of development, and market
acceptance of the Internet as a medium for content, advertising and electronic
commerce is highly uncertain. A number of factors may inhibit the growth of
Internet usage, including: (i) inadequate network infrastructure; (ii) security
concerns; (iii) inconsistent quality of service, and (iv) limited availability
of cost-effective, high-speed access.
If these or any other factors cause use of the Internet to slow or decline, our
results of operations could be adversely affected.
ACCEPTANCE AND EFFECTIVENESS OF INTERNET ADVERTISING AND ELECTRONIC COMMERCE IS
UNPROVEN Our success is highly dependent on an increase in the use of the
Internet in general and somewhat dependent on an increase in the use of the
Internet for advertising and electronic commerce. If the use of the Internet
does not continue to increase, our business may be severely harmed.
The Internet advertising market is new and rapidly evolving, and the
effectiveness of Internet advertising cannot be accurately measured. As a
result, demand and market acceptance for Internet advertising is uncertain and
may not increase as necessary for our business to grow or succeed. Many
advertisers have little or no experience using the Internet for advertising
purposes. The adoption of Internet advertising, particularly by companies that
have historically relied on traditional media, requires the acceptance of a new
way of conducting business, exchanging information and advertising products and
services. Potential advertisers may believe Internet advertising to be
undesirable or less effective for promoting their products and services relative
to traditional advertising media. If the Internet advertising market fails to
develop or develops more slowly than we expect, our business could be harmed.
Moreover, "filter" software programs that limit or prevent advertising from
being delivered to an Internet user's computer are commonly available.
Widespread use of this software could adversely affect the commercial viability
of Internet advertising and our business.
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OUR DATA CENTERS AND THE NETWORKS ON WHICH WE RELY ARE SENSITIVE TO HARM FROM
HUMAN FACTIONS AND NATURAL DISASTERS. ANY RESULTING DISRUPTION COULD
SIGNIFICANTLY DAMAGE OUR BUSINESS AND REPUTATION. Our reputation for providing
reliable service largely depends on the performance and security of our data
centers equipment and the network infrastructure on which we rely. In addition,
our customers often maintain confidential information on our servers. However,
our data centers, equipment and networks, and our customers' information are
subject to damage and unauthorized access from human error and tampering,
breaches of security, natural disasters, power loss, capacity limitations,
software defects, telecommunications failures, intentional acts of vandalism,
including computer viruses, and other factors that have caused, and will
continue to cause, interruptions in service or reduced capacity for our
customers, and could potentially jeopardize the security of our customers'
confidential information such as credit card and bank account numbers. Despite
precautions we have taken and plan to take, the occurrence of a security breach,
a natural disaster, interruption in service or other unanticipated problems
could seriously damage our business and reputation and cause us to lose
customers. Additionally, the time and expense required to eliminate computer
viruses and alleviate other security problems could be significant and could
impair our service quality. In the event of any resulting harm to customers, we
could be held liable for damages. Awards for such damages might exceed our
$1,000,000 liability insurance policy by an unknown but significant amount and
could seriously harm our business.
We could not provide adequate service to our customers if we were unable to
secure sufficient network capacity to meet our future needs on reasonable terms
or at all.
We must continue to expand and adapt our network arrangements to accommodate an
increasing amount of data traffic and changing customers' requirements. We have
entered into a two-year network services agreement with Qwest Internet
Solutions, Inc. ("Qwest") to provide us with certain network transit capacity
which we believe to be adequate for our capacity requirements until such time as
we complete our own backbone and wireless systems, of which there can be no
assurance. This Agreement terminates July 2001. However, if our future network
capacity requirements exceed the capacity Qwest has committed to provide to us,
we may have to pay higher prices for such additional network capacity or such
capacity might not be available at all. Our failure to achieve or maintain high
capacity data transmission could negatively impact service levels to our
existing customers and limit our ability to attract new customers, which would
harm our business.
At present, our business, in large part, depends on Internet network access
services we receive from others. Any disruption of these services or their
inability to maintain their peering relationships could be costly and harmful to
our business.
The Internet is composed of many ISPs that operate their own networks and
interconnect with other ISPs at various peering points. Peering relationships
are arrangements that permit ISPs to exchange traffic with one another without
having to pay for the cost of transit services. Peering relationships are a
competitive factor that allows some Internet companies to provide faster data
transmission than others. We believe Qwest's tier-one status and numerous
peering relationships enable it to provide us faster data transmission than many
other ISPs provide. If Qwest fails to adapt its network infrastructure to meet
industry requirements for peering or loses its peering relationships for any
other reason, then our transmission rates could be reduced, resulting in a
decrease in service quality we provide to our customers.
WE ARE DEPENDENT ON OUR SUPPLIERS
We rely on third-party networks, local telephone companies, and other companies
to provide data communications capacity. Although management feels alternative
telecommunications facilities could be found in a timely manner, any disruption
of these services could harm our business and have an adverse effect on our
operating results.
THE "GOING CONCERN" QUALIFICATION ON THE REPORT OF OUR INDEPENDENT ACCOUNTANTS
MAY REDUCE OUR ABILITY TO RAISE ADDITIONAL FINANCING. The report of our
independent accountants on our June 30, 1999 consolidated Financial Statements
contains an explanatory paragraph regarding our ability to continue as a going
concern. Our independent accountants cited our history of operating losses,
limited operating history and negative cash flow from operations, which raised
substantial doubt as to our ability to continue as a going concern. This "going
concern" qualification may reduce our ability to raise additional financing.
WE COULD LOSE REVENUES AND OUR REPUTATION MAY BE DAMAGED IF OUR SYSTEMS OR THOSE
OF OUR CUSTOMERS OR OUR SUPPLIERS ARE NOT YEAR 2000 COMPLIANT. The "Year 2000"
issue concerns the potential exposures related to the automated generation of
business and financial misinformation resulting from the application of computer
programs which have been written using two digits, rather than four, to define
the applicable year of business transactions.
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We established a program during 1998 to ensure that, to the extent reasonably
possible, all systems are or will be Year 2000 compliant prior to the end of
1999. The Year 2000 Program ("Y2K Program"), designed with the assistance of an
outside consultant, consists of five phases: (i) inventory of systems,
equipment, software and hardware including those of significant third-party
suppliers and customers (the "Systems"), (ii) analysis of the Systems to
determine compliance or non-compliance, (iii) remediation and contingency plan
development, (iv) remediation, and (v) testing and remediation of affected
Systems.
The failure to correct a Year 2000 problem could result in the interruption or
failure of certain normal business activities or operations. We believe that the
most reasonably likely worst-case scenario would be as a result of third party
services. Specifically we are dependent on a number of third party vendors to
provide network services. A significant Year 2000-related disruption of these
network services could cause customers to consider seeking alternate service
providers or cause a significant burden on customer service and technical
support. We are not presently aware of any vendor related Year 2000 issue that
is likely to result in any disruption of this type. Although there is inherent
uncertainty in the Year 2000 issue, wet expect that as we progress in our Y2K
Program, the level of uncertainty about the impact of the Year 2000 issue will
be reduced significantly. See "Business-Year 2000".
THE PRICE OF OUR COMMON STOCK IS HIGHLY VOLATILE.
The price of our common stock and Internet and Telecommunication stock in
general, is highly volatile. During the period from July 10, 1998 to July 30,
1999 the bid and ask price of our common stock has ranged from a high of $30.71
to a low of $.43. Following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against such a company. If similar litigation were instituted against
us, it could result in substantial costs and a diversion of our management's
attention and resources, which could have an adverse effect on our business. The
volatile fluctuations of the market price are based on (1) the number of shares
in the market at the time as well as the number of shares we may be required to
issue in the future, compared to the market demand for our shares; (2) our
performance and meeting expectations of our performance, including the
development and commercialization of our products and proposed products; and (3)
general economic and market conditions.
Our stock is currently traded on the OTC Bulletin Board. We will apply for
listing on the NASDAQ SmallCap Market as soon as we comply with the $4.00
minimum bid requirement. The trading of our common stock on the NASDAQ SmallCap
Market is conditioned upon us meeting certain quantitative criteria related to
the market price of the common stock, net tangible assets, market
capitalization, and certain other quantitative and non-quantitative requirements
established by such stock market. We currently meet the initial listing criteria
except for the $4.00 minimum bid price. To maintain eligibility for trading on
the NASDAQ Small-Cap Market, among other requirements, we are required to have
net tangible assets in excess of $4,000,000 and have a minimum bid price of $3
per share for initial inclusion and then maintain a bid price of $ 1 per share.
Our failure to meet such requirements could result in the de-listing of the
common stock from trading on the NASDAQ SmallCap Market. If, however, we did not
meet the requirements of the NASDAQ SmallCap Market, trading of the common stock
would continue to be conducted on an electronic bulletin board (OTC BB)
established for securities that do not meet the NASDAQ listing requirements or
in what is commonly referred to as the "pink sheets." Our failure to be listed
or to maintain listing on the NASDAQ SmallCap may restrict investors' interest
in the common stock and materially adversely affect the trading market and
prices for the common stock and our ability to issue additional securities or to
secure additional financing. Also see "Risk Factors".
WE ARE SUBJECT TO PENNY STOCK REGULATIONS AND RESTRICTIONS The Securities
Exchange Commission (the "Commission") has adopted regulations, which generally
define Penny Stocks to be an Equity Security that has a market price less than
$5.00 per share or an exercise price of less than $5.00 per share, subject to
certain exemptions. As of August 24, 1999, the closing trade price of our common
stock was $3.50 per share and therefore is designated as a "penny stock."
pursuant to the rules under the Securities Exchange Act of 1934, as amended.
Such a designation requires any broker or dealer selling such securities to
disclose certain information concerning the transaction, obtain a written
agreement from the purchaser, and determine that the purchaser is reasonably
suitable to purchase such securities. These rules may restrict the ability of
Broker / Dealers to sell our common stock and may affect the ability of
Investors to sell their shares. The issuance of large amounts of common stock
upon conversion and the subsequent sale of such shares may further depress the
price of the common stock. In addition, since each new issuance of common stock
dilutes existing shareholders, the issuance of substantial additional shares may
effectuate a change of control of the Company. Moreover, since our common stock
is traded on the NASDAQ over-the-counter bulletin board market, investors may
find it difficult to dispose of or obtain accurate quotations as to the value of
our common stock. See "Market Price of Securities".
WE HAVE A SUBSTANTIAL AMOUNT OF STOCK THAT WILL BECOME AVAILABLE FOR RESALE
UNDER RULE 144 We have issued and outstanding 22,205,522 shares of common stock
of which 19,813,562 shares are "restricted securities" as that term is defined
under Rule 144 promulgated under the Securities Act. Future sales of such shares
made under
6
<PAGE>
Rule 144 may have an adverse effect on the then prevailing market price of the
common stock and adversely affect our ability to obtain future financing in the
capital markets and may create a potential market overhang
OUR ARTICLES OF INCORPORATION ALLOW AUTHORIZATION AND DISCRETIONARY ISSUANCE OF
PREFERRED STOCK/BARRIERS TO TAKEOVER Our Articles of Incorporation authorize the
issuance of "blank check" preferred stock with such designations, rights, and
preferences as the Board of Directors may determine from time to time.
Accordingly, the board of directors is empowered, without stockholder approval,
to designate and issue additional series of preferred stock with dividend,
liquidation, conversion, voting or other rights, including the right to issue
convertible securities with no limitations on conversion, which could adversely
affect the voting power or other rights of the holders of our common stock,
substantially dilute the common shareholder's interest and depress the price of
our common stock. In addition, issuance of the preferred stock could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company. We have, in the past, issued
Convertible Preferred Stock without a limit on the number of shares that can be
issued upon conversion and may continue to do so in the future. See "Description
of Securities"
REGULATORY AND LEGAL UNCERTAINTIES COULD HAVE SIGNIFICANT COSTS OR OTHERWISE
HARM OUR BUSINESS. The law in the United States relating to the liability of
on-line and Internet service providers for information disseminated through
their systems remains largely unsettled. It may also take years to determine
whether and how existing laws, such as those governing intellectual property,
privacy, libel, and taxation, apply to the Internet. The growth and development
of the market for on-line commerce may also prompt calls for more stringent
consumer protection laws that may impose additional burdens on companies
conducting business on-line. The application of existing laws or promulgation of
new laws could require us to expend substantial resources to comply with such
laws or discontinue certain service offerings. Increased attention to liability
issues could also divert management attention, result in unanticipated expenses,
and harm our business. Regulation of the Internet may also harm our customers'
businesses, which could lead to reduced demand for our services. At present
there are few government laws or regulations that would adversely effect our
Internet business, however there can be no assurance that the government will
not enact laws that that address issues including user privacy, pricing, and the
characteristics and quality of products and services. An increase in regulation
or the application of existing laws to the Internet could significantly increase
our costs of operations and harm our business. For example, the Communications
Decency Act of 1996 sought to prohibit the transmission of certain types of
information and content over the Web. Additionally, several telecommunications
companies have petitioned the Federal Communications Commission to regulate
Internet service providers and online service providers in a manner similar to
long distance telephone carriers and to impose access fees on these companies.
Imposition of access fees could increase the cost of transmitting data over the
Internet.
We are subject to applicable provisions of Federal and state securities laws as
well as to regulations normally incident to business operations (e.g.,
telemarketing regulation, occupational safety and health acts, workmen's
compensation statutes, unemployment insurance legislation and income tax and
social security related regulations). Although we will make every effort to
comply with applicable laws and regulations, we can provide no assurance of our
ability to do so, nor can we predict the effect of these laws and regulations on
our proposed activities.
In addition, we will need the approval of the Foreign Asset Control, the Federal
Communications Commission, the State and Commerce Department and the Cuban
government in order to complete our proposed Project Unidad. Although we are
confident that there is no violation of the Cuban Democratic Act in our
proposal, as Internet traffic is already widely available between the United
States and Cuba, we cannot begin construction until such time as permission has
been secured and the proper licenses have been obtained from both governments.
Although no assurances can be given, we believe that we will be able to comply
with all requirements in order to complete this project.
Our business plan contemplates future international operations but there are
numerous risks and uncertainties in offering services outside of the United
States.
We intend to expand into international markets. We cannot be sure that we will
be able to successfully sell our services or adequately maintain operations
outside the United States. In addition, there are certain risks inherent in
conducting business internationally. These include:
Unexpected changes in regulatory requirements;
Ability to secure and maintain the necessary physical and
telecommunications infrastructure;
Challenges in staffing and managing foreign operations; and
7
<PAGE>
Employment laws and practices in foreign countries.
Any of these could adversely affect our international operations. Furthermore,
some foreign governments have enforced laws and regulations on content
distributed over the Internet that are more restrictive than those currently in
place in the United States. Any one or more of these factors could adversely
affect our contemplated future international operations and, consequently, our
business.
We may be unable to protect our intellectual property rights or to continue
using intellectual property that we license from others.
We rely on a combination of copyright, trademark, service mark, and trade secret
laws and contractual restrictions to establish and protect certain of our
proprietary rights. We have no patented technology that would bar competitors
from our market. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and use our data or
technology.
THE UNCERTAINTY ASSOCIATED WITH UNPROVEN BUSINESS MODELS
Since Quest Net's business model is relatively new and unproven, we may not be
able to anticipate and adapt to a developing market, or may be unable to manage
its network infrastructure (including server, hardware and software) to handle
its Internet traffic, or to effectively manage its rapidly expanding operations.
THE COMPANY HAS LIMITED MARKETING AND SALES CAPABILITY. Because of our limited
working capital in the past, we have not had the resources to develop a
marketing and sales force. In order to increase our revenues, we will have to
develop a marketing and sales force with technical expertise and marketing
capability. There can be no assurance that we will be able to establish such
sales force or that we will be successful in gaining market acceptance for our
services. There can be no assurance that we will be able to obtain and retain a
qualified Director of Sales, further develop our sales force or obtain and
retain qualified sales personnel on acceptable terms, if at all or that any of
our proposed marketing schedules or plans can or will be met. To the extent that
we arrange with third parties to market our services, the success of such
products may depend on the efforts of such third parties See "Business-Sales and
Marketing".
DEPENDENCE ON QUALIFIED PERSONNEL.
Due to the specialized nature of our business, we are highly dependent upon our
ability to attract and retain qualified technical and managerial personnel.
Therefore we have entered into employment agreements with certain of our
executive officers. The loss of the services of existing personnel, especially
Mr. Pereira, our president, as well as the failure to recruit key technical and
managerial personnel in a timely manner would be detrimental and could have an
adverse impact upon our business affairs or finances. Our anticipated growth and
expansion into areas and activities requiring additional expertise, such as
marketing, will require the additional of new management personnel. Competition
for qualified personnel is intense and there can be no assurance that we will be
able to continue to attract and retain qualified personnel necessary for the
development of its business. See "Management".
OUR EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS, TOGETHER, MAY BE
ABLE TO EFFECTIVELY EXERCISE CONTROL OVER ALL MATTERS SUBMITTED TO A VOTE OF
STOCKHOLDERS. Our executive officers, directors, and principal stockholders
beneficially owned, in the aggregate, approximately 79.9% of our outstanding
shares of common stock. In addition, relatives of the executive officers,
directors, and principals own approximately 4.5% of the outstanding shares of
common stock and most likely would vote their shares with such officers,
directors, and principal stockholders. These stockholders, if acting together,
will be able to effectively control most matters requiring approval by our
stockholders. The voting power of these stockholders under certain circumstances
could have the effect of delaying or preventing a change in control of Quest Net
Corp.
ANTI-TAKEOVER MEASURES IN OUR CERTIFICATE OF INCORPORATION COULD ADVERSELY
AFFECT THE VOTING POWER OF THE HOLDERS OF THE COMMON STOCK. Our Certificate of
Incorporation authorizes anti-takeover measures like the authority to issue
"blank check" preferred stock. Those measures could have the effect of delaying,
deterring, or preventing a change in control without any action by the
shareholders. In addition, issuance of preferred stock, without shareholder
approval, on such terms as the board of directors may determine, could adversely
affect the voting power of the holders of the common stock, including the loss
of voting control to others. See "Description of Securities".
8
<PAGE>
THIS PROSPECTUS INCLUDES FORWARD-LOOKING STATEMENTS, WHICH COULD DIFFER FROM
ACTUAL FUTURE RESULTS. Some of the information in this Prospectus may contain
forward-looking statements. Such statements can be identified by the use of
forward-looking terminology such as "may," "will," "expect", "anticipate",
"continue", or other similar words. These statements discuss future
expectations, contain projections of results of operations or of financial
condition, or state other "forward-looking" information.
Examples of forward-looking statements include discussions relating to:
Plans to expand our existing wireless operations;
Plans to enter the international optical fiber market;
Introductions of new products and services;
Estimates of market sizes and addressable markets for our services and
products;
Anticipated revenues from designated markets during 1999 and later
years;
Statements regarding the Year 2000 issue; and
We wish to caution you that all the forward-looking statements contained in this
Prospectus are only estimates and predictions. Our actual results could differ
materially from those anticipated in the forward-looking statements due to
risks, uncertainties, or actual events differing from the assumptions underlying
these statements. Such risks, uncertainties, and assumptions include, but are
not limited to, those discussed in this Prospectus.
NO PAYMENT OF DIVIDENDS IN FORESEEABLE FUTURE
Although we declared a three-for- one stock dividend in December 1998, we do not
intend to pay dividends on our common stock in the foreseeable future. Our board
of directors does not intend to declare any dividends in the foreseeable future,
but intends to retain all earnings, if any, for use in our business operations.
As a result, the return on your investment in us will depend upon any
appreciation in the market price of the common stock. The holders of common
stock are entitled to receive dividends when, as and if declared by the board of
directors out of funds legally available for dividend payments. The payment of
dividends, if any, in the future is within the discretion of our board of
directors and will depend upon our earnings, capital requirements and financial
condition, and other relevant factors. See "Business-Dividend Policy".
CAPITALIZATION
The following table shows our capitalization at June 30, 1999.
June 30, 1999
-------------
Notes Payable -0-
Long Term Debt -0-
Capitalized lease obligations -0-
Stockholders' Equity
Common Stock --no par value, authorized
50,000,000, issued and outstanding;
22,045,500, 47,000 warrants $7,191 12,442,327
Preferred Stock -- no par value,
authorized 5,000,000 shares issued and
outstanding at June 30, 1999 100,0001
Additional Paid in Capital -0-
Accumulated Deficit $(8,019,883)
Total Stockholders' Equity $ 4,422,444
- ---------------
1 The Preferred Shares were redeemed in July 1999 at a redemption price of
$10.00 per share.
9
<PAGE>
SELECTED FINANCIAL INFORMATION
The following selected financial information is derived from the Financial
Statements appearing elsewhere in this Prospectus and should be read be read in
conjunction with the Financial Statements and Notes. Financial Information is
for the period from June 30, 1998 to June 30,1999.
<TABLE>
<CAPTION>
Year Ended June 30
----------------------------------------------
1998 1999
----------------------------------------------
<S> <C> <C>
Selected Income Statement Data:
Net Revenues...........................................................$ 1,070,198 -0-
Income (Loss) from Operations..........................................$(8,015,042) $(4,761
Income (Loss) before Income Taxes and
Extraordinary Item...................................................$(8,012,419) $(4,761
Net Income (Loss) per Share
Basic................................................................$ (0.71) $ (0.02)
Diluted..............................................................$ (0.71) $ (0.02)
Shares Used for Computing Net Loss Per Share
Basic................................................................ 11,351,263 240,000
Diluted.............................................................. 11,351,263 240,000
</TABLE>
Selected Balance Sheet Data:
June 30, 1999
-------------
Cash..............................................$3,298,289
Total Current Assets..............................$3,340,804
Total Assets......................................$5,675,143
Current Liabilities...............................$1,252,699
Stockholders' Equity (1)..........................$4,422,444
- --------------------
1 Gives effect to the 10 to 1 reverse stock split in October 1998 and the 3 for
1 stock dividend in January 1999.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following information should be read in conjunction with our Financial
Statements and Notes, included elsewhere in this Prospectus.
Overview
We provide Internet system and network management solutions for enterprises with
mission-critical Internet operations, including server hosting, Internet
connectivity, collaborative management, and Internet technology services.
We earn revenue primarily from subscriptions from our customers for Internet
connection and access. Subscription fees among our Internet service providers
vary between $19.95 and $150.00 per month, depending upon the type of service
each customer selects. Customers generally pay us directly on a per-service
basis for these services.
From time to time we have generated revenue from the sale of internet-related
software and the subsequent modifications to the software.
Or costs and expenses primarily fall into the following categories:
>> Telecommunications and operations;
>> Employee stock compensation plans;
>> Sales and marketing;
>> General and administrative;
>> Amortization and depreciation.
Our telecommunications and operating expenses consist of our cost of
telecommunications, including the cost of local telephone lines and costs
of leased lines connecting the Internet and our operations centers. We expect
these expenses to increase over time to support our growing subscriber base.
Our operating expenses also include employee salaries and benefits, equipment
costs, office rent and utilities and customer service and technical support
costs. We expect customer service and support expenses to increase over time to
support new and existing subscribers.
Our sales and marketing expenses to date have been minimal due to the start of
our operations. We expect those expenses to increase as we implement our
business plan in the coming year. We anticipate those expenses to include
advertising and commissions and bonuses paid to our sales and marketing
personnel. We also anticipate hiring additional sales and marketing personnel to
assist us in our rapid growth plans.
Our employee stock compensation plans consist of restricted common stock awards
and options. We have utilized our restricted stock as an incentive to attract
and keep qualified experienced key personnel. We plan to look at certain
employment agreements currently in place to determine the need, if any for
modification. We also plan to develop an employee stock compensation/option plan
that will attract new employees, retain current employees, and will not be
disproportionate to our income from operations.
Our general and administrative expenses consist primarily of administrative
staff and related benefits. We expect our general and administrative costs to
increase to support our growth.
Our amortization expense primarily relates to the amortization of goodwill and a
non-compete agreement acquired in our purchase of a e-commerce provider and
certain equipment and licenses related to our proposed plans to offer Internet
kiosks. Amortization expense is based on our best estimate of the useful lives
of the intangible assets.
Our depreciation expense primarily relates to our equipment and is based on the
estimated useful lives of the assets ranging from three to five years using the
straight-line method for the equipment. Depreciation expense is expected to
increase as we place in service equipment already purchased and as we acquire
additional equipment to support our intended growth.
We made an acquisition of an e-commerce provider, which has been accounted for
using the purchase method of accounting. As a result, the amount by which the
fair value of the consideration we paid in the acquisition exceeded the fair
value of the net tangible assets we bought of $3,372. We allocated the excess of
$331,628 to the non-compete agreement, which was acquired as part of the
purchase. The non-compete agreement will be amortized over the life of the
agreement, which is three years.
Reverse Split
Unless otherwise stated, all share and per share information contained in this
prospectus gives retroactive effect to a 1-for-10 reverse split of all
outstanding shares of our common stock on October 16, 1998.
Common Stock Dividend
We issued a stock dividend to shareholders of record on January 6, 1999 giving
three shares of our common stock for every one share held. The dividend of
15,525,081 shares was greater than twenty five percent of our pre-dividend
outstanding shares; therefore it was accounted for as a forward three for one
split.
11
<PAGE>
RESULTS OF OPERATIONS
Twelve Months Ended June 30, 1999 and June 30, 1998.
- ----------------------------------------------------
The discussion of our historical results set forth below addresses our
historical results of operations and annual conditions as shown on our
Consolidated Financial Statements for the fiscal year ended June 30, 1999, as
compared to the fiscal year ended June 30, 1998. However, this information is
not necessarily indicative of our operating results since we had no significant
operations until July 1998, when we purchased the assets of Pact Communication
Group, Inc. and began our Internet operations.
Revenue
For the year ended June 30, 1999, we had $136,361 of revenue consisting
primarily of subscriber revenues received for Internet access and Internet
related services and revenues from our sale, installation and modifications of
software to one customer totaling $933,837, resulting in total revenues from
continuing operations of $1,070,198. We had no revenues from continuing
operations for the year ended June 30, 1998.
Expenses and Net Loss from Operations
Stock based compensation for the year ended June 30, 1999 increased to
$6,109,110 form $-0- for the period ended June 30, 1998. The increase was
primarily due to common stock issued to our executive officers pursuant to their
employment agreements and performance bonuses.
Bad debt expense for the year ended June 30, 1999 increased to $893,095 from
$-0- for the period ended June 30, 1998. The increase was primarily due to
software sales to one customer who is in default of the Software Sales Agreement
with respect to the payment provisions of the Agreement.
Salaries expense for the year ended June 30, 1999 increased to $383,160 from
$-0- for the period ended June 30, 1998. The increase was due to the hiring of
employees and commencing our start-up activities and operations.
General and Administrative expenses consist primarily of office and equipment
rent, costs associated with operating our offices, such as telephones, utilities
and supplies, insurance and professional fees, such as legal, accounting and
consulting. These expenses increased to $634,861 for the year ended June 30,
1999 as compared to $4,761 for the year ended June 30, 1998, primarily as a
result of our start-up activities and beginning minimal operations
Depreciation and amortization for the year ended June 30, 1999 increased to
$313,367 from $-0- for the period ended June 30, 1998. The increase was due to
our placing in service equipment acquired during the year and intangible assets
acquired in our purchase of Wings Online, Inc.
Loss of disposal of assets for the year ended June 30, 1999 increased to $56,559
from $-0- for the year ended June 30, 1998, primarily as a result of our
replacing equipment acquired at June 30, 1998, which was not placed in service
with new equipment acquired during the year ended June 30, 1999.
These activities resulted in a net loss for the year ended June 30, 1999 of
$8,012,419
Liquidity and Capital Resources
Since our inception, we have relied principally upon the proceeds of private
equity financings to fund our working capital requirements and capital
expenditures. We have generated only minimal revenues from operations to date.
During the year ended June 30, 1999, we offered and sold 1,039,248 shares of
our common stock for total cash proceeds of $925,000, equipment valued at 42,400
and consulting services valued at $32,600. We paid a total of $2,950 in cash for
legal fees related to the cost of the offering and issued an additional 24,000
shares of our comm. Stock for other costs of the offering valued at 15,000.
In July 1998, we issued 60, 000 shares of our $10.00 stated value convertible
preferred stock in exchange for software. The 60,000 preferred shares were
converted in November 1998 for 300,000 shares of our common stock. The
conversion rate of $2.00 per share was based on 80% of the three-day average bid
price for the common stock prior to the date of conversion.
In December 1998, we issued 100,000 share of our $10.00 stated valued
convertible redeemable preferred stock and 2,607,666 of our common stock to one
shareholder in exchange for computer equipment valued at the fair valued of the
equipment of $1,724,520. In July 1999, we redeemed our preferred stock at its
stated value of $1,000,000. In February 1999, we acquired all of the outstanding
12
<PAGE>
stock of Wing Online, Inc. for $335,000. The purchase price was paid in $135,000
cash and 29,326 shares of our common stock valued at $200,000. To date, Wings
Online has generated positive cash flows from operations.
In May of 1999, we sold to one accredited investor, 910,747 shares of our common
stock for gross proceeds of $5,000,000 less $350,000 in offering costs,
resulting in net proceeds of $4,650,000.
At June 30, 1999 we had cash on hand of $3,298,289. We believe we have
sufficient liquidity to meet our near-term obligations and to continue with our
proposed operations. If we are unable to generate and sustain positive cash flow
from our operations and if we incur penalties and interest due to our inability
to register certain shares, our liquidity and our planned rate of growth will be
adversely affected.
Although; we cannot accurately predict the precise timing of our future capital,
we estimate that we will need to expend approximately $1,000,000 on our wireless
expansion to Tampa Florida, $500,000 for T-3 lines and $700,000 in equipment. In
addition, our present operating costs are approximately $60,000 per month. If
the United States and Cuban government approve Project Unidad (the installation
of undersea cable to Cuba), we estimate that the cost of the project will be
approximately $11,000,000 over a two-year period. We have received preliminary
indications of interest to finance this project. However, if and when the time
comes to begin Project Unidad, we may not be able to get financing or if we do,
it may not be on terms favorable to the Company.
We are in the planning stages of an additional $5,000,000 equity offering which
may be dilutive to our existing shareholders. We are also negotiating operating
and/or capital leases, which may involve pledging some or all of our assets and
may contain restrictive covenants with respect to raising future capita and
other financial and operational matters.
If we are unable to obtain necessary additional capital, we may be required to
change our proposed business plan and decrease our planned operations, which
would have a material adverse effect upon our business, financial condition, or
results of operations.
BUSINESS
EXPLANATION AND BACKGROUND OF THE INTERNET
The Internet is a collection of computer networks connecting millions of public
and private computers around the world. In its formative stages over a span of
20 years, the Internet was used by government agencies and academic institutions
to exchange information, publish research, and transfer e-mail. It was only in
1991 that the U.S. government opened the Internet to private enterprise. That
was the same year that Tim Berners-Lee at CERN Labs in Geneva developed the
World Wide Web ("www"), which made the graphical presentation of information on
the Internet possible. Since then, a number of factors, including the
proliferation of communication-enabled personal computers, the availability of
intuitive graphical user interface software and the wide accessibility of an
increasingly robust network infrastructure have combined to allow users to
easily access the Internet. This, in turn, produced rapid growth in the number
of both commercial and personal Internet users. In 1994, Netscape and America
Online still had fewer than one million subscribers. Only in 1995 did the Web
begin to capture the attention of a significant portion of the general public
and of the media.
In its early days the Web was used to provide information in a relatively
passive way. This has been referred to as publishing "electronic brochures".
Eventually, many sites became more interactive, allowing searches and retrieval
from extensive databases. While the interactive capabilities of the Web made
purchasing items technically possible, concerns about the security of
transmitting credit card information over public data channels inhibited the
growth of online commerce. Only in the past 18 to 24 months has electronic
commerce begun to find acceptance among consumers. While the credit card and
banking industries are continuing to work on solutions to the security
weaknesses of the Internet, a growing percentage of the public has grown
comfortable purchasing online using the available Secure Socket Layer ("SSL")
technology.
Within the past year, growth has been dramatic. In its Internet survey, Nielsen
found a "startling increase" in Web users actively shopping on the Internet.
That survey found that 39% of all Web Users had searched for product information
online prior to making a purchase, compared to only 19% last year. More
importantly, the number of Web users who actually purchased a product on line
reached 20 million. In a January 1998 special report prepared by Ernst & Young
and the National Retail Federation, the authors found that 32% of consumers with
online access have purchased products or services on the Internet. Twice that
amount (64%) research products online and later buy them through traditional
13
<PAGE>
channels. Other research by Nielsen indicates that long-time Internet users are
more than twice as likely to purchase as newcomers. This indicates that Internet
commerce should increase rapidly as people gain experience using the Web.
The emergence of the Web, the graphical, multimedia environment of the Internet,
has resulted in the development of the Internet as a new mass communication
medium. The ease and speed of publishing, distributing and communicating text,
graphics, audio and video over the Internet has led to a proliferation of
Internet-based services, including chat rooms, online magazines, news feeds,
interactive games and a wealth of educational and entertainment information, as
well as the development of online communities. In addition, by eliminating many
of the costs involved in executing routine commercial transactions, such as
simple banking services and retail purchases, the Internet is rapidly providing
individuals and organizations with a new medium for conducting business.
The table below defines the number of worldwide Internet users in 1998 by
continent.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1998 Worldwide Internet Users
-----------------------------
Continent Number of Users
--------- ---------------
(Millions)
<S> <C>
North America 79,000
Europe 23,000
Asia/Pacific Rim 15,000
South America 2,000
Africa 1,000
Middle East 541
------------
Total 121,000
- -----------------------------------------------------------------------------------------------------
</TABLE>
According to International Data Corporation, the total number of worldwide
Internet users in the year 2002 will approximate 320 million, reflecting over a
two and one-half fold user increase over the next 5 years.
Morgan Stanley Research estimates that demand for online and Internet services
will closely follow personal computer (PC) penetration within the home and
office. PC penetration recently reached a rate of nearly one-third of all United
States households. This penetration rate is similar to the household TV
penetration level in the early 1960s and is expected to increase to a level
close to the current TV household penetration level of 98% within the next 10 to
20 years.
This estimate projections that the use of the Internet will continue to grow as
it continues to provide more and more of the functions now provided by mail,
telephone and television, performed in a more cost and time-effective manner.
THE INTERNET INDUSTRY
Our business operations are dependent on the Internet. According to a Nielsen
Media Research survey released in September 1997, 58 million adults are using
the Internet in the United States and Canada with over one half of this number
on line during the 24 hours prior to the survey. A new Nielsen Study released in
June 1998 reported that this number has now reached 79 million, representing a
growth rate of 36.2 percent.
The Nielsen study revealed that the number of people buying products and
services via the Web has hit 20 million. The number of Web shoppers, i.e.,
people checking out or comparing products and services on the Web, is now 48
million, representing a 37 percent increase that is roughly in line with the
overall Internet population growth. The number of people making purchases via
the Web has doubled. Using results from a January 1997 study as a baseline, this
amounts to a robust compounded rate of 2.5 percent a month through June of 1998.
In that same 18-month period, the number of on-line buyers increased even more
dramatically. From January 1997 to September 1997, the number of on-line buyers
grew at a rate of 3.5 percent per month. From September through June 1998, the
growth in on-line buyers accelerated to 8 percent per month. Nielsen advises
that, while technological innovations have definitely broken through, they are
generally transparent to the user. The dramatic increase in on-line purchasing
is primarily attributed to people realizing how quick and easy it is to shop on
the Web. This is the impact of branding, word-of-mouth and consumer trust.
The Nielsen Report also highlighted some of the demographics centered on the
Internet population in the United States and Canada. These include:
o More than 50 percent of Internet users fall with the age population
between 16 and 34. This approximates 40 million people.
o The number of people of age 50 or greater represents 17 percent of
Internet users, or 13 million persons.
o Approximately 43 percent of Internet users, or 34 million persons, are
women.
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o Most on-line shoppers (69 percent) and purchasers (71 percent) are men.
Morgan Stanley's High Technology Group projects that by the year 2000, there
will be 150 million people with Internet access worldwide. They believe that
this may be conservative, since there are already 230 million PCs in the world.
Sales of PCs have exceeded those of television sets every year since 1996.
The actual and forecasted growth of Internet use from 1997 through 2002 is
displayed in the following table.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Worldwide Internet Population
(Millions)
Av. Annual Growth Rate
1997 2002
---- ----
<S> <C> <C> <C>
(`97-`02)
US Internet users 38.7 135.9 23.3%
Worldwide Web users 68.7 319.8 29.2%
Source: Industry Standard Magazine, July 10, 1998
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Although there can be no assurances, as the table indicates, the Internet should
continue its growth as a communications, research, entertainment, and commercial
medium into the 21st century.
INTERNET MARKET SECTORS
The table below highlights the different sectors of the Internet market in the
United States and values each.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Market Sectors Market Size
-------------- -----------
($ Millions)
1998 2002
---- ----
<S> <C> <C>
Connection (Access) Services $4,333 $12,348
E-Commerce - Goods and Services- 14,000 268,817
Advertising 940 7,700
Fiber Optic Cable (Worldwide) 6,480 13,437
Internet Wireless Services (U.S.) 30,000 74,650
Community Developers 816 1,692
Content Providers 338 701
Commercial Software 5,230 10,845
----- ------
Total $62,137 $390,190
Source: IDC, The Global Market for Internet Usage and Commerce, June 1998; the Oaktree Group.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Although no assurances can be given, as the table indicates, sales to the
Internet market are predicted to increase over six-fold during the next 5 years.
Of the eight market segments listed above, we participate in all except
Commercial Software Development. Our target markets are defined below. There can
be no assurance that we will be able to enter into or compete in the target
markets or be able to obtain any market share
The Internet Connection (Access) Market
- ---------------------------------------
The market for Internet connection services was estimated at $4.3 billion in
1998 and is forecast to nearly triple by the year 2002 to over $12 billion.
Connection services are needed by both business and residential customers,
including vendors and consumers, so they can hook up to the Internet and
participate in the other services available through this interactive medium,
such as web hosting, advertising and e-commerce. U.S. Internet usage is
estimated at over 70 million in 1998 and is forecast to grow to nearly 136
million by the year 2002.
According to International Data Corporation (IDC), a market research company,
growth in Internet access is a universal phenomenon and not limited to the U. S.
High Internet activity was found in homes in certain Asia-Pacific countries,
where access often costs more and fewer PCs are equipped with modems. For
instance, Japan had a higher utilization rate than the U.S., with more than 18%
of households with PCs were using them to access the Internet. Hong Kong's
utilization rate was also high, with 12% of PC households accessing the
Internet. This is the same percentage-accessing rate as in the U.S. in 1995.
ICD's study also revealed a substantial amount of commerce being conducted on
the Internet, both within and beyond the U.S. borders. In Western Europe, 34% of
households accessing the Internet said they used the Internet to purchase goods
and services. In Japan, the number of persons engaged in commerce over the
Internet was 17%; and for the rest of Asia it was also 17%. By contrast, the
percentage of U.S. households accessing the Internet that used it for purchasing
goods and services was 22%. The table below lists the percentage of universal
households with PCs that access the Internet.
15
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
Universal Internet Usage by PC Households
-----------------------------------------
Country Percent of PC Households
-------- ------------------------
<S> <C> <C>
U.S. 16.0%
U.K. 9.5
France 6.5
Germany 11.7
Italy 5.8
Japan 18.4
Australia 8.9
Hong Kong 11.7
Singapore 7.0
South Korea 6.3
Taiwan 10.3
Source: International Data Corporation
----------------------------------------------------------------------------------------------------------
</TABLE>
The Internet Advertising Market
- -------------------------------
The Internet Advertising Bureau (IAB) announced that in the first Quarter 1998
spending on advertising reached $351 million, an increase of 27% over the first
Quarter of 1997, and the eighth consecutive quarter of positive growth.
According to the report, a trend is developing toward a traditional media model
for Internet advertising, with computer and consumer-related advertising leading
the way. This market is new and rapidly evolving. Many companies now consider
the Internet an integral component of the overall media mix and view a strong
presence on the Internet as key to their overall branding. Use of the Internet
by consumers is growing at an enormous rate. The consumer online and Internet
service industry is now in its second stage of evolution that is embracing both
consumers and businesses. Morgan Stanley Research and CommerceNet estimates that
the number of global Internet users exceeds 120 million, will grow to
approximately 152 million by the year 2000, and will reach nearly 320 million by
2002.
The Internet Wireless Market
- ----------------------------
Today's telecommunications ("telecom") systems deliver voice, video, and data
via a variety of wired and wireless methods. Annual global spending on telecom,
already at $726 billion, is expected to grow to $1 trillion by 2001. There are
more than 68.3 million wireless phone users in the U.S., representing a market
penetration of about 17%. Revenues derived from this "wireless umbrella" over
the U.S. amounts to approximately $30 billion in 1998. There are approximately
180 million wireless customers worldwide, which is only a 3% market penetration.
That leaves a lot of room for growth.
One major trend in today's market is the conversion of cellular networks to
digital, which allows asynchronous data transmission required by today's
computers. In fact, data communications, driven by the Internet, are replacing
voice communications. Today's networks already carry as much fax and data
traffic as they do voice traffic. By 2001, some analysts believe that 90% of all
traffic carried on telecommunications network will be data-driven. However,
phone networks were designed to handle voice, not data, and thus fiber optic
networks incorporating the latest data transfer technologies are poised to serve
this new traffic.
For areas that are too remote to install fiber optic cable lines, wireless LANs
(Local Area Networks) have been developed and are taking their rightful place in
the Internet market. As computers become, smaller, more powerful, and more
mobile, people are no longer tethered to one location. Offices, work areas, and
service locations are continuously changing and the available connectivity and
Internet access capabilities need to parallel this change. The Oaktree
Consulting Group forecasts that the current $ 30 billion U.S. market will grow
to $74.6 billion by the year 2002, amounting to an average annual growth rate of
25.5%.
The Fiber Optics Market
- -----------------------
Fiber Optics is the art of transmitting light and optical images through
transparent fibers, either clear plastic or glass. This technology offers myriad
advantages to copper-based cable, which has been used extensively to date for
transmission purposes. One major advantage is the creation of higher bandwidth
that makes possible the transmission of high capacity images over the Internet.
According to Pioneer Consulting, the worldwide market for fiber optic cable in
1996 was approximately $5.9 billion, reached $6.5 billion in 1998, and is
forecast to grow to over $13 billion by the year 2002. The development of
high-speed backbone technologies such as ATM and Gigabit Ethernet, that require
ever-increasing bandwidth, is driving the growth of this market.
The advantages of optical fiber as a communications medium has been recognized
since the technology was introduced in the mid-1970s, but the cost of the
optical fiber and the associated electronics prevented its deployment until the
16
<PAGE>
mid-1980s when single-mode fiber optic systems began to be installed in the long
distance transmission facilities of the telephone companies. Essentially, all
terrestrial and submarine communications systems now use fiber optic cables and,
as the economics continue to improve and the demand for bandwidth continues to
increase, fiber optic cable will be used in more and more applications. Thus,
the increasing use of fiber optics transmission facilities in communications
networks is well established.
As use of the Internet continues to become a major tool of commerce, and as
world economies continue to grow and U.S. trade and communications are initiated
with under-developed and otherwise strategically isolated nations, we recognize
an opportunity to bring fiber optic capabilities to Cuba and to the tourist rich
islands of the Caribbean. To this end we are in the process of implementing the
strategy described in its "Project Unidad", which is a high capacity (up to
OC-192 or 10 Gbps), fiber optic communications network connecting Cuba's major
population centers with the U.S. and the world. See "Business-Project Unidad".
The E-Commerce Market
- ---------------------
Shopping is rapidly increasing as a common activity among Internet users.
According to PC Meter, which tracks the web surfing habits of a sample of about
9,000 to 10,000 households, the percentage of its sample that visits
shopping-specific sites had been rising. In February 1997, shopping-specific
sites as a category had a reach (defined as the percentage of user sample that
visited a shopping- related site) of 31% among U.S.-based consumers surveyed,
and ranked eighth among the 12 most used categories of web service. In terms of
percentage growth in one year, only travel (93%) saw a greater increase than
shopping (54%). In a June 1998 report, IDC Consulting estimates that the Global
Market for Internet commerce topped $14 billion in 1998, forecast to grow to
$268.8 billion by 2002. In a 1997 report, Morgan Stanley forecasted the 2002
e-commerce market in the U.S. to be at least $112 billion or 42% of the
worldwide market. It based this forecast on the assumption that the e-commerce
market will continue to grow at nearly 24% per year, the percentage of web users
making online purchases will grow from 20% to 45%, and the average annual
spending will grow from $250 today to nearly $800. By way of comparison, average
annual spending per mail order customer was approximately $1,000 in 1997.
As the total number of web users increases, and as consumers become more
comfortable shopping over the Internet, we believe that there will be tremendous
opportunities for Internet retail companies with the products that satisfy
consumer needs and the know-how to manage online selling and distribution
systems.
The Long-Distance Telecom Market
- --------------------------------
In the U.S., local calling revenue was $96.6 billion in 1997. Long distance
revenue amounted to $92.7 billion in the same year and is estimated at $102
billion in 1998. Future growth rates are forecast at 10%. The defining feature
of today's telecom market is change, spurred by technological advances and
deregulation.
Today, about 94% of all U.S. households have telephone service. With the
dissolution of AT&T's national monopoly in 1982, a new era of competition began,
one with cheaper rates, sophisticated pricing management, and barrage of
telemarketing tactics. Mega-mergers have now become the norm in this industry,
as competitors buy their customers through acquisition rather than build new
networks. In 1996, these mergers totaled $77 billion. In 1998, the MCI-WorldCom
merger alone was valued at $37 billion. This deal highlights how a formerly
obscure company such as WorldCom, which started life in 1983 as a cut-rate
long-distance carrier called LDDS, can grow into a dangerous rival through
acquisitions. WorldCom has acquired approximately 40 competitors over the years.
The marriage of MCI to WorldCom created the third largest U.S.
telecommunications company, behind AT&T and Sprint.
A developing trend in the long distance phone market is the reselling of long
distance services bought, under high volume contracts and at deeply discounted
rates from major telecommunications carriers such as those mentioned above.
These services are resold to commercial customers too small to receive the
discounts directly from the major firms. The resellers operating in this area of
long distance activity (both regional, national and international) are high
growth companies with incomes between $10 million and $100 million, are
experiencing double digit growth rates, and are lean staffed. We plan to enter
this market through our Questel division.
HISTORICAL OVERVIEW OF OUR COMPANY
We were incorporated in the State of Colorado in November 1995, under the name
A.P. Sales Inc. Our proposed business was to engage in the purchasing,
reconditioning, selling, moving, and repairing of office equipment and
furniture, including, primarily, filing and storage cabinets, and workstations.
Until July of 1998, our operations were primarily organizational in nature or
related to raising capital.
17
<PAGE>
In July 1998, we acquired certain of the assets of Pact Communication Group,
Inc. ("Pact"), a privately held Florida corporation. The assets that were
purchased were related to Pact's Internet provider business and valued at
$125,274. The purchase price for the assets was the issuance of 2,000,000 shares
of our common stock. We then changed our name to Quest Net Corp. and, in
December 1998, domesticated in the State of Florida.
After the acquisition of Pact's assets, we became a provider of Internet system
and network management solutions for enterprises with mission-critical Internet
operation, including sever hosting, Internet connectivity, collaborative
management and Internet technology services.
We utilize our proprietary technology and equipment to provide a total solution
for Internet connections to commercial entities, most of which provide some form
of Internet value-added service to others and to individuals. We accomplish this
through a wholesale business model in which we do not offer consulting services
and systems integration, but only provide bulk dial-up Internet access, and
dedicated Internet access.
We are a provider of secure, full-service global Internet and Intranet broadband
digital networking solutions for businesses and individuals. We have a
high-speed low delay connection (referred to as an ATM) and several backup
connections to the Internet. We offer dedicated high speed Internet access,
metropolitan and wide area network data transport services, including virtual
private networks, to several commercial clients and other ISPs (Internet Service
Providers) and wireless Internet connection at a speed of up to 16 Mbps to a
distance of 20 miles on a license free spectrum. We believe that we offer one of
the fastest and cleanest routing systems for the transfer and delivery of voice,
video, and data streams at several speed ranges. The solutions provided by us
include co-location, hosting, dedicated and wireless Internet connectivity,
content, electronic commerce (e-commerce), and search engine services. We
anticipate that in the future we will be able to provide discounted long
distance services and offshore optical fiber capacity.
We provide or will provide these services through five subsidiaries, each with
its own market and customer base. We sell dial-up and dedicated Internet access
services through IPQuest Corp. and wireless Internet services through Quest
Wireless Corp. We also provide Internet content, e-commerce and search engine
development through Globalbot Corp. and will provide long distance phone
services through QuesTel Corp. In addition, we plan to provide optical fiber
capacity to the islands in the Caribbean Sea, including Cuba, through Quest
Fiber Corp. Our operating structure is depicted in the figure below.
<TABLE>
<CAPTION>
[GRAPHIC HERE]
Quest's Operating Structure
Quest Net Corp.
<S> <C> <C> <C> <C>
IP Quest Corp. Globalbot Questel Corp. Quest Wireless Corp. Quest Fiber Copr.
Dial-up Services Fiber Optic
Web Hosting Services Services
Dedicated Services Advertising Services Long Distance Wireless Internet
Search Engine Services Services Services
Content Services
E-Commerce Services
Wings Online
E-Commerce Services
</TABLE>
Until July 1999, when we terminated our agreement, we serviced our dial-up
customers nationwide through more than 228 points of presence (POPs) that were
provided through contractual agreements with PSINet. In September 1998 and
February 1999, we entered into two four- year contract with World Com Network
Services ("World Com") to provide us with certain network transit capacity to
make the long distance metropolitan area connection to MAE (Metropolitan Area
Exchange) in Dallas, Texas and San Jose, Puerto Rico. Due to lack of bandwidth
World Com was unable to timely provide the services and the contract was
terminated in July 1999.
After an intense review of our operations, revenues and costs, we decided that
our operations were to wide-spread and that were expending substantial
management, sales and marketing efforts and money to service, maintain and
market to customers in large a geographic area. In June 1999, we decided to
streamline our operations and curtail our expenses by concentrating our efforts
on providing and marketing our services in Florida, with gradual managed growth
to other areas.
18
<PAGE>
In July 1999, we entered into a two-year Internet Access Service Agreement with
Qwest to provide us with certain network transit capacity, which we believe to
be adequate for our capacity requirements. The Qwest agreement will provide us
with additional bandwidth connectivity to the Internet.
In June 1999, we signed an agreement with Wireless Inc. ("Wireless"), a leader
in wireless networking, for wireless access equipment and installation valued at
$2.5 million. We will use the equipment to initially expand our wireless network
from Homestead to Jupiter, Florida. Once installation is completed, this
equipment will provide our customers with high-speed wireless Internet
connections utilizing Wireless's WaveNet(R) IP 2458, point-to-multipoint,
wireless access routers. The WaveNet IPs will be deployed off a wireless
backbone that Wireless and Quest Net have partnered together to build. The
second stage will be to deploy the network on the entire East Coast of Florida
and eventually the entire state of Florida. Installation of the WaveNet IP 2458
central units has begun and we anticipate completion within one year. We believe
that the future of dedicated services is in wireless technology. Wireless
technology provides innovative, high-quality solutions for local connectivity
and allows us to provide leading-edge technology to our customer base.
In May 1999, we acquired certain assets of AVX, Inc ("AVX"), valued at $300,000
in exchange for an aggregate of 39,894 shares of our common stock. AVX is a
Virginia based manufacturer and developer of "axcess" Internet enabled kiosk
systems. The assets that were acquired consisted of kiosk systems, a video
studio, digital cameras, software licenses, magnetic insertion card readers,
electronic equipment, and computers.
In May 1999, the Board of Directors, with Mr. Pereira abstaining, approved the
purchase of 49% of the authorized but unissued common stock of Quest Net Corp.
SA (PTY) LTD., a South African Internet company, for $4,000,000 to be paid in
our restricted common stock. The shares will be valued at market as of the date
of the closing of the transaction. Mr. Pereira owns 40% of Quest Net Corp. SA
(PTY) LTD. Quest Net Corp. SA (PTY) LTD holds a 51% interest in Web Solutions, a
South African Web page designer and developer and a Value Added Networks license
issued by the South African Telecommunications Regulatory Agency. Because we are
purchasing our interest with common stock, we cannot enter into a letter of
intent until we receive approval of the South African government.
In April 1998, we entered into a three- year contract with e.spire
Communications, Inc. ("e.spire") to purchase PRI's in Florida. Presently we are
operating six lines. Customers call into our POP located in Aventura Florida,
via one of six PRI's provided by e.spire, they will then be routed to the
Internet via a DS3 dedicated Internet connection, which is provided by Bell
South.
In April 1999, we were chosen to host the new Volkswagen Press Room Website and
Intranet. The Press Room will be used facilitate communication between these
Volkswagen managers that are spread all over the world and will enable the users
to have instant access to "the tools of their trade. Web Solutions and Johan
Wagner, the South African PR manager for Audi, conceived this Website.
In March 1999, we completed our first completely hi-tech, wired, and wireless
Internet Voice and Data Smart Building at the Concord Center II of Aventura
Florida, which houses our corporate headquarters. The Concord Center II is the
first building that we have equipped with advanced communications technology
such as fiber optics, maximum bandwidth, and other leading edge
telecommunication services. The City of Aventura was the first client to take
advantage of our new Smart Building. We offer up to 16 Mbps of Internet access,
up to 20 miles from the Smart Building.
In March 1999, we were going to acquire a 40% interest in Web Solutions, a South
African Web page designer and developer. We were unable to consummate the
purchase due to our inability to obtain financing at that time and the Web
Solutions declined our offer of issuing stock for the purchase price. After we
declined the purchase, Mr. Pereira, our president purchased the interest through
his South African company, Quest Net Corp. SA (PTY) LTD. See "Certain
Transactions".
In February and March 1999, we acquired three industry-specific, e-commerce
sites, namely, Wings Online, Inc., who's principle asset is an aircraft
e-commerce site, Boats Online, a boat marketplace and resource center, and Cars
Online an automobile market place. These were acquired for an aggregate of
30,826 shares of our common stock and an aggregate of $142,000 in cash payments.
In January 1999, we received notice from the Federal Communications Commission
of approval of our FCC Section 214 Application granting us the authority to
provide domestic and international long distance telecommunications services to
both residential and commercial customers in the United States.
In December 1998, we purchased certain types of Internet provider equipment and
certain domains and sites from Grupo Internet Latinoamericano, S.A. ("Grupo").
19
<PAGE>
At the time the purchase was made Grupo was an unaffiliated third party. The
aggregate purchase price for the assets was $2,042,000. We paid the purchase
price by the issuance of 2,607,660 shares of common stock and 100,000 shares of
redeemable convertible preferred stock. The face value of the preferred stock
was $10 per share. In July 1999, we redeemed the preferred stock at a redemption
price of $10.00 per share. See "Certain Transactions" and "Principal
Stockholders".
In July 1998, we purchased software for the encryption of on-line credit card
processing, on-line casino transactions, on-line stock brokerage transactions,
and encrypted financial transaction from Simplex Ltda., an unaffiliated third
party, for $600,000. The purchase price was paid by the issuance of 60,000
shares of our redeemable preferred stock with a face value of $10.00 per share.
The preferred stock was converted into 111,000 shares of our common stock at a
conversion price of $5.380 per share. The conversion price was equal to the
5-day average bid price of our common stock at the date of conversion.
We are not currently a reporting company under the Securities and Exchange Ace
of 1934, as amended and therefore we have not filed any reports with the
Securities and Exchange Commission. Upon effectiveness of the Registration
Statement of which this Prospectus is a part, we intend to register under the
Exchange Act, and to furnish to our security holders annual reports containing
audited financial statements reported on by independent auditors, and quarterly
reports containing unaudited financial information for the first three quarters
of each fiscal year by electronic delivery on our Website at www.ipquest.com.
OUR BUSINESS
We utilize our proprietary technology and equipment to provide a total solution
for Internet connections to primarily commercial entities, most of which provide
some form of Internet value-added service to others. We accomplish this through
a wholesale business model in which we do not offer consulting services or
systems integration, but only provide bulk dial-up Internet access and dedicated
Internet access.
We also provide dedicated high speed Internet access, metropolitan and wide area
network data transportation services, including virtual private networks, to
several commercial clients and other Internet service providers (ISPs). In
addition, we offer Wireless Internet Connection services at a speed of up to 16
Mbps to a distance of 20 miles on a license free spectrum. As an added service,
we set RNAPs (Regional Network Access Points) at our points of presence (POP)
location. ISPs), Internet Presence Providers (IPPs), and others can connect to a
port on our Fast Ethernet switch, (for free or for a nominal fee) and peer with
other local and regional providers there. Peering is an arrangement to exchange
data at no additional cost. In this scenario, local providers save money on
bandwidth while we benefit by increasing the number of managed interconnections.
Until July 1999, when we terminated our agreement, we serviced our dial-up
customers nationwide through more than 228 POPs that were provided through
contractual agreements with PSINet. In September 1998 and February 1999, we
entered into two four-year contracts with MCI World Com to provide us with
certain network transit capacity at a cost of approximately $30,000 per month,
to make the long distance metropolitan area connection to Tier 1 Internet
providers. WorldCom was unable to timely provide a DS3 switch in order to
commence the services and the contract was terminated in July 1999.
After an intense review of our operations, revenues and costs, we decided that
our operations were to wide-spread and that were expending substantial
management, sales and marketing efforts and money to service, maintain and
market to customers in large a geographic area. In June 1999, we decided to
streamline our operations and curtail our expenses by concentrating our efforts
on providing and marketing our services in Florida, with gradual managed growth
to other areas.
Although we are currently focusing on expanding our wireless operations
throughout Florida, we intend to expand our connection abilities nationwide by
the year 2002. Our objective is to shape and lead the global market for in total
solution for Internet connections. We intend to achieve this goal through a
strategy focused on:
Expanding our premier Web site hosting capabilities;
Addressing industry-specific customer needs;
Developing next generation service offerings;
expanding our wireless operations throughout Florida and eventually
nationwide;
expanding our capabilities through selective strategic alliances and
acquisitions; and
entering the international optical fiber market using Cuba as our
entry point.
20
<PAGE>
OUR SERVICES
Our services fall into five main classifications: Connection or Access Services,
Content Services, Optical Fiber Services, Internet Wireless Services and
Advertising Services, each serving a different market and a different customer
base.
Internet Connection (Access) Services
- -------------------------------------
Connection services to the Internet are provided through our IPQuest and Quest
Wireless divisions. This is currently our core business. The Internet connection
or access market comprises Internet Service Providers (ISPs), Internet Presence
Providers (IPPs), Internet Content Providers (ICPs) and large corporations,
organizations and small office home office. ("SOHO"), up to a T-3 (45 Mbps)
connection level. The Internet connection services afforded to this customer
base include dial-up, hosting, and co-location services.
Pricing for dial-up services are described in the following table.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Dial-Up Service Pricing Structure
Service Type Price Per Month Terms
------------ --------------- -----
<S> <C> <C>
U.S. Customers $19.95 Monthly
International 22.95 Monthly
Dial-up
Dial on Demand (ETRN) 49.95 Monthly
Dedicated V90 150.00 Monthly
Dedicated ISDN
64K 200.00 Local Loop & Installation
128K 325.00 Local Loop & Installation
T1 Frame (56K) 150.00 Local Loop & Installation
T1 Frame (1.5 Mb/s) 895.00 2 Year Contract, Local Loop & Install
995.00 1 Year Contract, Local Loop & Install
Wireless (3.0 Mbps) 995.00 Installation
-------------------------------------------------------------------------------
</TABLE>
Hosting Services
- ----------------
Quest Net provides technical support while giving the end user the fastest
possible connection to the Internet through T1 and T3 connections. We also
provide the latest in cutting edge marketing for customized Web sites, including
a complete Internet Commerce Solution (ICS). We will work with their customer's
in-house resources and will handle everything from setup to a search engine
registration to provide the customer a Web presence with a minimum of effort.
Quest Net offers its customers three pricing options to accommodate multiple
customer needs and budgets as described in the following table.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Hosting Services
Pricing Structure
-----------------
Service Type Price Per Month Terms
------------ --------------- -----
<S> <C> <C>
Value Plan $24.99 Set-up @ $39.99
E-Commerce Plan 49.95 Set-up @ $99.00
Co-Location Plan 99.00 Port Fee Set-up @ $500.00
----------------------------------------------------------------------------------------------------
</TABLE>
Each plan is individually described below.
Value Plan This plan is designed to attract individuals and small
business entities and offers the following:
o Includes the first 2,500 Mb, plus 3 cents per Mb thereafter.
o 10 Mb of disk space.
o 2E-mail accounts (POP3).
o Account control panel via Web.
o Unlimited FTP updates.
o Choice of UNIX or Windows NT hosting.
o Microsoft Front Page support.
o Telenet access to the server (UNIX hosting).
o Personal CGI Directory for personalized scripts.
o Site counter as well as detailed statistics.
o E-mail forwarding, auto responders, and vacation reply.
o Domain name registration. InterNIC fees are additional.
21
<PAGE>
Commerce Plan This plan is designed to attract companies selling products and
services on the Internet and offers the following:
o Includes the first 5,000 Mb, plus 3 cents per Mb thereafter.
o Storage Limit: 100 MB (Extra storage at $0.40/Mb/Month).
o 10 E-mail accounts (POP3)
o Secure Socket Layer (SSL) for credit card transactions.
o Shopping Card application, fully configurable.
o SQL support for database applications.
o Database utilities such as search engine, guest books, feedback
forms, mailing lists, and mass E-mail conferencing.
o Domain name registration (www.customersname.com). InterNIC fees
are additional.
Co-Location Plan This plan is designed to attract companies or individual
business entities running their own servers and offers the following:
o Includes the first 1,000 Mb, plus 3 cents per Mb thereafter.
o Connect into a 100 Mbps network.
o 10 IPs per server (Extra IP available at $9.99/Month).
o Server available for lease for an extra $69.00 per month.
Dedicated Line Services Dedicated lines consist of anything over 64K of
dedicated connection that stay on continuously. These lines may be either
wireless or hard-wired with point-to-point connectivity.
Internet Wireless Services
- --------------------------
Quest Net offers Internet wireless services through its Quest Wireless Division.
These services are designed to meet the expanding needs of local area
network/wide area network (LAN/WAN) users that include:
o Need for mobility and anytime, anywhere computing.
o Configuration flexibility for moves, add-ons or changes.
o Quick implementation.
o Lower cost.
To meet these needs, our Internet wireless services are designed to replace or
complement wired networks, are ideal for providing network access in areas
difficult or impossible to wire, allow mobile applications to work with
traditional wired LAN applications, and are non-invasive and aesthetic. In
short, they are the only LAN solution for true mobile devices, simultaneously
providing both mobility and Internet connectivity. Quest Wireless markets its
wireless services primarily to owners of existing commercial and residential
properties as well as to new property developers. We will provide the equipment
needed for the wireless connections at a reduced cost to the developers, which
will give them a state-of-the art, value-added item to attract tenants and will
increase their bottom-line profits because they will receive compensation based
on a percent of their tenants Internet usage. We will also take advantage of the
need for this technology by marketing it to small businesses and larger
corporations that require a fast and reliable access to the Internet but would
rather not have the expense of hard wiring and maintenance or the connection
setup delays. The figure below is a simple schematic visualizing a wireless
system compared to a conventional wired backbone.
22
<PAGE>
Wireless Backbone
[GRAPHIC HERE]
Wired Backbone
Wireless LANs connect at a fraction of the cost of dedicated leased lines with
no need for extra telephone lines. This characteristic makes them suitable for a
variety of applications including:
o Hard to wire architectural structures including heritage/old buildings,
asbestos containing buildings, marble-walled buildings, and full
conduits.
o Temporary connectivity needs such as on-site training facilities, audit
teams and task forces, trade shows and demonstrations, temporary offices
and short-term rentals.
o Disaster recovery applications such as crisis management and LAN backup
capabilities in case of cable failure.
o Outdoor applications linking two or more buildings on a university campus
or buildings within a city.
The advantages that Quest Wireless provides to the above applications include:
o Cost effective and non-invasive connectivity through most types of
physical barriers.
o Undisturbed, ongoing business activities.
o Reusable set-ups that can be moved to the next project/location with
minimal effort.
o The ability to move people and offices around without rewiring
o Immediate network installation at the new location
o More Cost effective than a dedicated leased line.
o Faster than 64Kbps or T1 lines.
The effective distance of the LAN depends on the antenna, power (amp), and
environment. Quest Net's wireless products connect at a speed of up to 11Mbps to
a distance of 20 miles on a license-free spectrum.
In June 1999, we signed an agreement with Wireless Inc. ("Wireless"), a leader
in wireless networking, for wireless access equipment and installation valued at
$2.5 million. We will use the equipment to initially expand our wireless network
from Homestead to Jupiter, Florida. Once installation is completed, this
equipment will provide our customers with high-speed Internet connections
utilizing Wireless's WaveNet(R) IP 2458, point-to-multipoint, wireless access
routers. The WaveNet IPs will be deployed off a wireless backbone that Wireless
and Quest Net have partnered together to build. The second stage will be to
deploy the network on the entire East Coast of Florida and eventually the entire
state of Florida. Installation of the WaveNet IP 2458 central units has begun
and we expect it to be completed within one year. We believe that the future of
dedicated services is in wireless technology. Wireless technology provides
innovative, high-quality solutions for local connectivity and allows us provide
leading-edge technology to our customer base.
We are currently focused on the Florida market for our connection services.
According to a nationwide Internet usage survey commissioned by CommerceNet, the
industry consortium for electronic commerce, of the top 12 states in the United
States, Florida was the fastest growing Internet state in 1997 based on the
number of Internet users in each state. Although California was still the number
one leading state in terms of total Internet users, with 6.4 million individuals
over the age of 16, Florida's Internet population is estimated to have grown by
72%, from 1.7 million to nearly 3 million users, or six times the national
average of 12 percent.
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In order to develop and implement our expansion strategy, we entered into a
three-year contract with e.spire to purchase PRI's in Florida, a two-year
Internet Access Service Agreement with Qwest to provide us with certain network
transit capacity and an agreement with Bell South to provide us with dedicated
Internet access. We also signed an agreement with Wireless, for wireless
access equipment and installation for expansion of our wireless network from
Homestead to Jupiter, Florida. Once installation is completed, this equipment
will provide our customers with high-speed Internet connections. The second
stage will be to deploy the network on the entire East Coast of Florida and
eventually the entire state of Florida. Installation of the WaveNet IP 2458
central units has begun and is expected to be completed within one year.
We believe that the Qwest agreement will allow us to build on and establish a
presence in areas that build on Qwest's infrastructure. This will allow us to
integrate our wireless infrastructure with conventional fiber networks across
Florida. The agreement provide for scalable bandwidth that could meet our
clients' needs well into the next century. We are planning major expansion
efforts throughout Florida and plan to establish a presence in several major
metropolitan cities, including Jacksonville, Tampa, Orlando, and Sarasota. This
will allow us to build a wireless infrastructure throughout the area that will
provide the business community with dedicated high-speed wireless connections at
a fraction of the cost of conventional dedicated services.
We believe that this new expansion plan, combined with backbone development
already underway on the east coast, will provide us with the framework and
foundation to be a dominant force for dedicated services to the business
community Florida.
E-Commerce Services
- -------------------
We offer the following e-commerce services to its customers through our
Globalbot division:
o Search Engine Services
o List Engines for Specific Markets
We have recently launched our GlobalBot division, which will develop and operate
dedicated search engines and also offer Web site platforms for e-commerce
transactions. We believe that current search engines are clogged up and have
lost their focus and that dedicated search engines will bring order to the
present chaotic collection of multimedia and resources on the Internet. The
Internet was not designed to support and organize publications and the accurate
retrieval of information, as a library would. Our search engines are designed to
organize the Net's storehouse of information (books, newsprint, raw scientific
data, menus, meeting minutes, advertisements, video and audio recordings,
transcripts or interactive conversations) in a manner similar to a traditional
library.
A search engine, which combines a librarian's skill with the computer's ability
to automate and index information, is vital to the future of Internet use for
generating extraordinary advertising revenue. A dedicated search engine that can
facilitate automated indexing much like a human indexer will be able to retrieve
specific information based on author names, length of document, subject matter
and date of publication, allowing the user efficient access to the specific
information he is seeking. Once the user has found that specific information
site, the user becomes a captive audience for those vendors selling products
related to that specific topic. Herein lies a tremendous opportunity to generate
advertising revenues.
In February and March 1999, we acquired three industry-specific, e-commerce
sites, namely, Wings Online, an aircraft e-commerce sites, Boats Online, a boat
marketplace and resource center, and Cars Online an automobile market place.
Wings Online is used by users wishing to purchase airplanes, in need of aviation
services for financing or insurance, those searching for parts and accessories,
or those seeking employment in the aviation industry. Wings Online normally
charges $25 per month per listing for a two-month listing. The charge to dealers
is a flat rate of $25 until the item listed is sold.
The Boats Online and Cars Online sites are currently less developed than that of
Wings Online, but we believe they are equivalent in the potential to generate
listing and advertising revenues. We are converting both of these sites to the
same streamlined, user-friendly format as used by Wings Online and will apply a
similar pricing structure.
We have recently completed the acquisition of the e-commerce sites, Yachts
Online and Motor Bikes Online. These sites will follow the same format as our
other e-commerce sites.
Search Engine Advertising Services
- ----------------------------------
The participating community attracted by a search engine is a prime marketing
audience for vendors selling products and services into the market that the
search engine serves. We are beginning to develop a Web advertising sales
organization that will educate, advise, and guide advertisers on optimizing
their Web advertising purchases. Its specialized services and technology will
enable advertisers to target the mass audience of Web consumers or tailor an
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advertising strategy for specific affinity groups or for consumers possessing
certain demographic traits or requesting information relevant to certain
advertisers. Search engine advertisements are of two types, General Banner and
Targeted, which are described and priced as follows:
o General Banner The average rate for Banner advertising is $50
per month, which is currently in place on all of Globalbot's
e-commerce sites. However, we will soon implement a new
pricing structure starting at 2 1/2 cents per exposure. We
believe that more revenue can be generated with this policy
than a flat monthly rate.
o Targeted Targeted advertising is "key word" driven and can be
more expensive than banner advertising depending on the key
word selected. For example, an insurance company can have its
advertisement shown in specific area code or zip code
territories, the codes being the key words selected. Prices
here range from 3 cents to 8 cents per exposure, depending on
the key word or words selected, averaging about 5 cents per
exposure.
Both types of advertising will be subject-specific and will appear on the Web
window that summarizes the seekers' search results. The typical advertiser
targeted by the us for our Web site advertising will be large corporations or
organizations that currently advertise nationally in print, radio, television or
electronic media, as well as local advertisers looking for exposure in specific
geographic areas.
PROPOSED EXPANSION PLAN
The following is our proposed plan to expand our business operations over the
next several years. This plan is contingent on several including but not limited
to financing of the projects, governmental approval when necessary and retaining
additional competent personnel. There can be no assurances that we will be able
to implement this expansion or that once implemented it will be successful.
Internet Kiosk Services
- -----------------------
In May 1999, we acquired certain assets of AVX, Inc ("AVX"), valued at $300,000
in exchange for an aggregate of 39,894 shares of our common stock. AVX is a
Virginia based manufacturer and developer of "axcess" Internet enabled kiosk
systems. The assets that were acquired consisted of kiosk systems, a video
studio, digital cameras, software licenses, magnetic insertion card readers,
electronic equipment, and computers.
The Kiosk Internet Systems will offer Internet access to people without the need
for a large capital investment and will also supply Internet access to people
who are traveling. We plan to position Kiosk Internet Systems initially in
Florida, expanding to other parts of the United States and eventually South
Africa and Europe. Our initial placement target market will be airports, hotels,
train stations, universities, and other easily accessible public areas. The
Kiosk Internet Systems will operate in the same manner as public fax machines
located in airports and stores. The user will insert a credit card, which will
enable him or her to connect to the Internet. Initially we plan to offer free
e-mail access via our Kiosk Internet Systems to users. We will pay the
establishment that hosts the Kiosk Internet System 20% of the revenues generated
at the establishment. We plan to place 20 Kiosk Internet Systems in universities
throughout Florida in the next three months.
South African Market
- --------------------
We have identified South Africa as an untapped telecommunications and Internet
market with a great potential to generate revenues. We believe that with the
growing political maturity in South Africa, the demand for easily accessible in
formation is increasing. We intend to position ourselves to provide
telecommunications and Internet services to take advantage of this growing
demand.
March 1999, we were going to acquire a 40% interest in Web Solutions, a South
African Web page designer, and developer. We were unable to consummate the
purchase due to our inability to obtain financing at that time and the Web
Solutions declined our offer of issuing stock for the purchase price. After we
declined the purchase, Mr. Pereira, our president purchased the interest through
his South African company Quest Net Corp. SA (PTY) LTD.
In May 1999, the Board of Directors, with Mr. Pereira abstaining, approved the
purchase of 49% of the authorized but unissued common stock of Quest Net Corp.
SA (PTY) LTD., a South African Internet company, for $4,000,000 to be paid in
our restricted common stock. The shares will be valued at market as of the date
of the closing of the transaction. Quest Net Corp. SA (PTY) LTD is majority
owned by Mr. Pereira. Because we are purchasing our interest with common stock
we cannot enter into a letter of intent until we receive approval of the South
African government.
We will be seeking other acquisitions and strategic partners South Africa as the
opportunity arises.
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Optical Fiber Network Services
- ------------------------------
We plan to enter the international optical fiber market using Cuba area as a
starting point. Through our Quest Fiber Division, we will implement our optical
fiber strategy as defined in its "Project Unidad" proposal.
Project Unidad will be a high capacity (up to OC-192 or 10 Gbps), fiber optic
communication network connecting Cuba's major population center with the United
State and the world. It will use state-of-the-art optical amplification and be
plow-buried from shore station to 4,900 ft. to avoid external aggressions. A
collapsed Synchronous Optical Network (SONET) ring will provide equipment
redundancy. A SONET is a standard way to interconnect high-speed traffic from
multiple vendors This installation will have a minimum service life of 25 years.
There is currently no fiber optic cable connecting Cuba with the U.S. and the
rest of the world. When Project Unidad is constructed, fiber optic capacity will
immediately multiply by fifty times the amount of the current copper capacity by
adding shore-based electronic equipment. The total design capacity for this
project is 10 Gigabytes (Gbps) or enough to carry 129,024 simultaneous voice or
data calls.
It is estimated that the overall cost of the project will be approximately
$11,000,000 and will be completed within one year from the date of the approval
by the proper governmental agencies and securing financing for the project, of
which no assurance can be given. A feasibility study has been completed by
SETWAVE Communications, a New Jersey based firm that specializes in management
and design of Fiber Optics undersea cable. SETWAVE has also been awarded the
management contract for the construction and installation of the cable.
In June 1999, our President, Camilo Pereira, received a license from the United
States Department of the Treasury to travel to Cuba to discuss Project Unidad
with Cuban officials. The licensed travel is for discussion of the project only.
We will not be able to conclude any negotiations or begin construction until
such time as permission has been obtained from both the United States and Cuban
Government.
The Project Unidad system is being designed primarily for data and will only
carry Internet and data traffic. Therefore we will not be involved in settlement
of telephone tariffs, which is a point of contention between the United States
and Cuba. After preliminary contact with the Office of Foreign Asset Control,
the Federal Communications Commission and State and Commerce Department, we are
confident that there is no violation of the Cuban Democratic Act in our
proposal, as Internet traffic is already widely available between the United
States and Cuba. We will not begin construction until such time as permission
has been secured and the proper licenses have been obtained from both
governments. Although no assurances can be given, we believe that we will be
able to comply with all requirements in order to complete this project.
Conceptually, Project Unidad will use submarine and terrestrial connections to
extend high capacity fiber optics to Havana and all other major cities in Cuba.
The main connection point in the U.S. will be Key West, Florida. Havana is
targeted as the first interconnection point in Cuba. This is the communications
equivalent of an Interstate Highway system that will enable the deployment of
new, bandwidth-hungry communication applications such as fast Ethernet, ISDN,
video conferencing, and telemedicine and distance education. The figure below is
a visual representation of Project Unidad's proposed network.
[GRAPHIC HERE]
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The Cuban Market
Cuba is the largest Caribbean Sea country, larger that nearly all of the islands
within the Caribbean Sea area combined, and, with 11 million citizens, has
nearly one-third of the combined populations. The Republic of Cuba is nearly as
large as the State of Pennsylvania, approximately as long as the State of
Florida, and has the same size population as the State of Illinois. If Cuba were
a state within the United States, it would rank seventh in population.
The average literacy rate in this country is 95.7% nearly equally balanced
between male and female genders. All citizens age 15 and over can read and
write. We believe that Cuba's segmented age structure and high literacy rate
indicates a need for high bandwidth-demanding enterprises such as the Internet.
The table on the following page illustrates this point.
Cuba's economy, estimated at a $16.2 billion GDP in 1996 and growing at an
estimated real growth rate of 7.8%, is in a state of recovery as Cuba begins to
open its doors to trade and communication with the rest of the world and as the
U.S. relaxes its embargo on Cuban trade. Export earnings in 1996 rose an
estimated 40% to $2.1 billion, largely on the strength of increased sugar
shipments to Russia and higher nickel production through a joint venture with a
Canadian firm. With the economic recovery, imports rose for the second straight
year, growing by an estimated 26% to $3.5 billion. Cuba's international trading
partners include Russia, Canada, and China.
Cuba's labor force comprised 4.7 million in 1990 (latest available), with 30% of
this population working in services and government, 22% in industry, 20% in
agriculture, 11% in commerce, 10% in construction, and 7% in transportation and
communications. This economically active population translates to a per capita
GDP or purchasing power parity of $1,480.
In the area of communications, Cuba's telephone system is among the world's
least developed networks. There are only 229,000 telephones for 11 million
people, connected internationally in the Atlantic Ocean region by one
Intersputnik satellite. Data describing the domestic network is currently not
available.
According to a 1993 estimate, Cuba has 2.14 million radios and three radio
broadcast and short-wave stations. There are also 58 domestic television
broadcast stations serving this population.
The above referenced data indicates a tremendous telecommunications need and
opportunity in Cuba.
As a comparison, Taiwan, once an agricultural-based, low labor cost economy with
a GDP of $4.2 billion and a per capita GDP of $196 in 1954, is now an
international hub of industry and services valued at $224 billion. Taiwan has
twice the population, a 10% lower literacy rate, and a per capita GDP four times
that of Cuba. Since Taiwan is an open market, exports (valued at $85 billion in
1993) account for nearly forty percent of its GDP. Education has been identified
as a key success factor in this country's economic turn around. Market research
reports that 10.3% of all computer-owning households in Taiwan access the
Internet.
The economic success seen in Taiwan and other Asian nations bodes well for the
future of other industrialized countries with highly educated and trained
populations such as Cuba that are yet to participate in the capitalist world.
Taken in total, Cuba's economic, social, and demographic characteristics
indicate a country capable of tremendous growth, once U.S. trade and other
embargo problems have been resolved. Resolution is now in process in the U.S.
Congress and will probably escalate as pressure is brought to bear from the
large Cuban business population now residing in South Florida. Despite its
current limited trading capabilities, Cuba has a per capita GDP of nearly $1,500
and a literacy rate of over 95%, all boding well for the country's future
potential.
Long-Distance Telecom Services
- ------------------------------
In the US, local calling revenue was $96.6 billion in 1997. Long distance
revenue came to $92.7 billion in the same year and is estimated at $102 billion
in 1998. Future growth rates are forecast at 10%. The defining feature of
today's telecom market is change, spurred by technological advances and
deregulation.
We plan to enter the long distance telecom service market before the end of June
30, 2000. The Federal Communications Commission has recently accepted our
application for a cable-landing license. This license authorizes us to:
o Transfer control of or assign the authorization of a carrier.
o Be a facilities-based carrier.
o Resell the switched services of other common carriers to provide
international switched telecommunications services between the
United States and international points.
o Resell the private line services of other common carriers to
provide:
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(1) Non-interconnected international private line services the United
States and international points, and/or (2) Switched services to a
country for which the Commission has authorized the provision of
switched services over private lines or (3) To exceed the 25 percent
foreign ownership benchmark under Section 310(b)(4) of the
Communications Act.
We plan to provide domestic and international long distance telecommunications
services to both residential and commercial customers in the United States.
Although we will not be a facilities-based provider in this market, we will
serve as a less expensive alternative to larger major providers. We believe that
we can offer customers long distance services having the same quality and
convenience as the major carriers. Our operations will consist of leasing
transmission lines from long distance carriers at a volume discount and
reselling the long distance services to customers.
SALES AND MARKETING
Overview
- --------
Because of our limited working capital in the past, we have not had the
resources to develop a marketing and sales force. In order to increase our
revenues, we will have to develop a marketing and sales force with technical
expertise and marketing capability
The market for our services is new and rapidly growing. In developing our sales
and marketing strategies we are focused on attracting users for our connection
services, placement of our Internet Kiosk Systems and advertisers for our search
engine advertising services. We believe that the principal competitive factors
for companies seeking to attract users for its Internet connection services are
line quality, speed of connection, quality customer service, and demographic
focus. In addition, we believe that advertisers will more likely advertise on
sites that have (i) a large amount of Web traffic, (ii) reached critical
mass,(iii) a multi-functional Web site, (iv) brand recognition, user affinity
and loyalty,(v) a broad demographic range, (vi) an ability to deliver targeted
audiences, (vii) open access for visitors and (viii) a proven effective
We have recently hired an outside marketing consultant who is developing our
customer base through an active sales and marketing campaign, primarily centered
on building relationships with small businesses for connection services,
especially wireless connectivity, and developing an Internet community of loyal
search engine users that will serve as a captive audience for both banner and
targeted advertising. At present, we are concentrating our efforts in Florida
region, but anticipate expanding geographically over the next few years.
Customer Base
- -------------
Our primary target markets comprise small businesses that resell connectivity
services in some value-added way, small corporate entities and marketers who
wish an effective banner or targeted Internet advertising medium.
We are planning major expansion efforts throughout Florida and plan to establish
a presence in several major metropolitan cities, including Jacksonville, Tampa,
Orlando, and Sarasota. In light of the reorganization of our operations in order
to concentrate on Florida operations we have reduced our customer base from
approximately 200 to 57 customers, 45 of which are dialup customers and 12 of
which are hosting accounts. We have also reduced our operating costs accordingly
by not having to service customers nationwide at this time. We believe that our
new operational plan will provide manageable growth in our client base in
relatively a short time. We can devote our resources and marketing efforts to a
limited area, Florida and expand to other areas at a slower regulated pace once
our organization and resources grow.
Sales Strategy
- --------------
We rely primarily on direct sales to generate new customers and to maintain
relationships with existing customers. At present, we have two in-house and one
outside sales representative. As our capacity and operations grow we will be
hiring a Vice President of Marketing and a Vice President of Sales to build a
quality in-house direct sales force. Our sales effort will focus mainly on the
commercial sector, selling voice, data and enhanced telecommunications services
to business customers.
Marketing Strategy
- ------------------
We plan to utilize a variety of marketing techniques to generate awareness and
inquiries.
Telemarketing. We plan to contract with a national telemarketing firm
to enlist twelve telemarketers at a charge of $30 per hour to sell its
products and services by phone. We estimate that one telemarketer can
contact three potential customers per hour, with one of every three
contacts resulting in a sale. Each telemarketer will work 2,000 hours
per year, making 6,000 contacts during that time, of which 2,000 are
anticipated to be sales.
Direct Mail. We plan to conduct a direct mail campaign targeting
potential customers in new geographic areas in a six to twelve week
cycle. We will employ appropriate and creative printing and mailing
services. The promotional materials will be produced in the most cost
effective manner without sacrificing quality. We also plan direct mail
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campaigns for existing territories to stimulate incremental usage by
new and existing customers and to build awareness, especially for our
"bundled" services program. We also plan to establish an in-bound
telesales customer service department designed to supplement our direct
mail marketing strategy. Once established, customer service
representatives will be available 24 hours a day, 7 days a week to
answer marketing inquiries generated by our marketing campaigns, as
well as supporting existing customers.
Magazine/Professional Journal/Newspaper Advertisement. We plan to
advertise in major telecommunications and Internet magazines throughout
the country using postcard inserts and other mail-in techniques to
foster inquiries and to solicit sales.
Trade Shows. Trade shows are a critical component for generating
awareness because of their popularity among Internet users. Thousands
of enthusiasts who surf the Net attend trade shows each year, as well
as vendors and product manufacturers. We plan to participate in several
annual local shows and events, as well one national show starting in
fiscal year 2000. We plan to have a booth that is staffed with our
business development, technical, and sales people. In addition, we will
host a hospitality suite. Attending trade shows also gives sales people
the opportunity to gather competitor information and keep current
regarding industry needs and trends. We estimate that the cost of
exhibiting at a national trade show ranges from $20,000 to $30,000 and
the cost of exhibiting at a local trade show is between $1,000 and
$2,000.
Sponsorships. We also plan to sponsor Internet programs at local
universities. In one program being developed, we will underwrite
Internet connection services for local universities so that its
students can access the Net in the university's computer room. We will
distribute promotional literature to the students describing our
products and services, and also detailing similar for-fee services that
the students can purchase for home or business use. These sponsorships
are at a minimal cost to us and provide an excellent means of good
public relations.
Other We have a website (www.ipquest.com) where information about our
services and us can be obtained. Users can also E-mail a request for
contact by one of our sales representative. Interested parties can also
call a toll-free number (800-952-6638) and request informational
literature to be sent to them
Public Relations
- ----------------
We have retained a public relations firm to assist us in gaining attention from
the media and establishing a brand identity for Quest Net. Most of the public
relations activities will be focused on trade press, primarily those catering to
the telecommunications industry. We estimate that the cost of public relations
will be $1,500 per month We also periodically distribute press releases,
regarding our new acquisitions and agreements and describing our services.
EXPANSION STRATEGY
Our expansion strategy primarily consists of the following steps:
>> Add wireless connectivity through the State of Florida by fiscal year
2000.
>> Increase usage of services through "bundling".
>> Develop a diverse Web community around its search engine site.
>> Establish a customer base of vendors to advertise on its search engine
sites.
>> Enter the long distance telephone backbone market nationwide.
>> Provide Optical Fiber capacity to the islands of the Caribbean Sea.
>> Introduce new products and services.
Wireless connectivity throughout Florida
In June 1999, we signed an agreement with Wireless for wireless access equipment
and installation valued at $2.5 million. We will use the equipment to initially
expand our wireless network from Homestead to Jupiter, Florida.
Once installation is completed, we will be able to provide our customers with
high-speed Internet connections utilizing Wireless's WaveNet(R) IP 2458,
point-to-multipoint, wireless access routers. The WaveNet IPs will be deployed
off a wireless backbone that Wireless and Quest Net have partnered together to
build. The second stage will be to deploy the network on the entire East Coast
of Florida and eventually the entire state of Florida. Installation of the
WaveNet IP 2458 central units has begun and we expect it to be completed within
one year.
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We believe that the future of dedicated services is in wireless technology.
Wireless technology provides innovative, high-quality solutions for local
connectivity and allows us provide leading-edge technology to our customer base.
Increase Usage of Services Through "Bundling
We intend to motivate our current and prospective customers to use our services
by bundling our basic Internet connection services with its other services such
as long distance telephone and wireless services. We believe that if we are
successful in our bundling efforts we can increase revenue per customer and
decrease customer attrition. We also believe that such bundling will be
attractive to small businesses seeking to obtain a variety of services from one
provider.
Develop a Diverse Web Community Around Its Search Engine Sites
Search engines are usually subject specific and, as such, tend to create an
affinity environment. We have already established and overall affinity group for
transportation, divided into categories such as airplanes, boats, cars, and
motorbikes. We plan to expand this strategy to other categories of specific high
value items of interest to large groups of individuals. For example, a
"collectors" site may comprise sports memorabilia, and rare coins, stamps,
books, and records.
Develop Strategic Marketing Relationships
We intend to continue to develop strategic marketing relationships with entities
such as software developers and equipment manufacturers and retail outlets to
expand distribution of its basic Internet connection services as well as long
distance services.
Expand Through Acquisition
We operate in a highly fragmented segment of the Internet. This environment
provides opportunities for a company of our size and capabilities to acquire
similar smaller firms providing complementary services. Acquisition is a popular
mechanism for building a diverse customer base through purchase, a grass-roots
approach, which entails a large increase in overhead.
Introduce New Products and Services
Our objective is to eventually become the leading provider of Internet system
and management solutions nationwide. We realizes that in order to do so, we must
be innovative in our product design and capabilities and must continually
develop new collaborative management services, and establish strategic
relationships with leading technology developers and distribution alliances with
content developers, system integrators, system vendors, consulting companies and
ISPs.
COMPETITION
As with all markets growing at double-digit rates, competitors for these
potential revenues are numerous and formidable. We compete in five markets, each
having its own growth potential, expectations, customer base, and competitors.
Some of these competitors may be affiliated with major international players
and, as a result, are well financed and may present a formidable challenge. See
"Risk Factors-Business Competition". Our potential competitors in its
individual markets are as follows:
Internet Access Services
We are Tier 1 Internet backbone operator. Our competitors in this category
include AEGIS, Dearborn, MI; @Home Network, Redwood City, Ca; AT&T, Basking
Ridge, NJ; CAIS Internet, McLean, VA; Concentric Network Corp., Cupertino, CA;
and Fiber Network Solutions, Columbus, OH, among others.
Wireless Services
Our competitors in this category include Intelligent Information, Inc.
(Stamford, CT), DataLink Systems Corp. (Canada), Geoworks, Silverlake
Communications, Inc., Ikon Office Solutions, Unwired Planet, Inc. (Redwood
Shores, CA), RTS Wireless, Fuzion Wireless Communications (Boca Raton, FL), and
TekNow (Phoenix, AZ). We believe that we have several advantages over these
competitors, including:
o As one of the first license radio spectrum service providers, we
enjoy a time-to-market advantage and are therefore well positioned
to capture a large percentage of early adopters, which are
generally among the heaviest users. We believe we are the only
free radio spectrum service provider currently offering commercial
services.
o The broad scope of our footprint enables us to offer wireless
broad services targeting much of the United States addressable
business market.
o Our network management operational support system provides
24-hour, seven-days-a-week network monitoring and management.
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Internet Advertising Market
We have entered a new and rapidly evolving market comprised of members, users,
and Internet advertising customers. Competition in this market includes The
Globe.Com, Tripod and GeoCities, which recently agreed to be acquired by Yahoo!.
We believe that we can successfully compete in attracting advertising customers
by focusing on niche community groups surrounding its search engine sites. We
will continue to acquire search engines in upscale markets that can deliver a
select audience to potential advertisers in these markets.
Long Distance Services
In this market, we plan to sell long distance connection services, either by
providing a "dial-around" access number or by being the customer's primary
carrier. In some instances, we may resell excess capacity purchased from major
carriers in local markets. We will compete with all long distance connection
services, including but not limited to Sprint, AT&T and MCI. The leading United
States provider in the resale market is Telco Communications Group, a subsidiary
of Excel Communications, Chantilly, VA. Other noteworthy competitors include
VarTec Group Long Distance, Inc. Ft. Lauderdale, FL., STAR Telecommunications,
Inc., Santa Barbara, CA., and Startec Global Communications, Inc., Bethesda, MD.
Optical Fiber Market
As a provider of offshore Optical Fiber capacity to the areas of the Caribbean,
we will compete with one major international company, Global Crossing Holdings
Ltd., and specifically Global Crossing's Atlantic Crossing division. However, we
believe the cable route we have chosen is more direct and will be less costly
than that envisioned by Global Crossing. Also, Cuba does not appear to be one of
Global Crossing's connection sites. We will also compete with providers of
satellite connections for this geographic location's telecommunications
business.
We have taken into account all areas of competition when planning our business
strategy. We plan to compete by attracting and retaining a quality customer base
using financial incentives combined with high customer service standards. In
addition, we are focused on attracting and retaining new advertising customers,
responding to competitive developments, developing and extending its brand,
continuing to form and maintain relationships with strategic partners. We also
realize that in order to compete we will need to attract, motivate and retain
qualified personnel, continuously develop and upgrade our technologies and
rapidly commercialize our services incorporating these technologies.
Year 2000
The "Year 2000" issue concerns the potential exposures related to the automated
generation of business and financial misinformation resulting from the
application of computer programs which have been written using two digits,
rather than four, to define the applicable year of business transactions.
We established a program during 1998 to ensure that, to the extent reasonably
possible, all systems are or will be Year 2000 compliant prior to the end of
1999. The Year 2000 Program ("Y2K Program"), designed with the assistance of an
outside consultant, consists of five phases: (i) inventory of systems,
equipment, software and hardware including those of significant third-party
suppliers and customers (the "Systems"), (ii) analysis of the Systems to
determine compliance or non-compliance, (iii) remediation and contingency plan
development, (iv) remediation, and (v) testing of affected Systems.
A team consisting of our staff from Information Technology, Finance and
Operations has been established as the Y2K Readiness Team. With the assistance
of our outside consultant, the team has designed an aggressive schedule to
identify Systems requiring compliance upgrades and a timetable for performance
and testing of the affected Systems. In addition, the Y2K Program calls for
validation of compliance by significant Company suppliers and customers.
Once identified, detailed remediation steps will be scheduled to ensure that
internal Systems and significant external suppliers and customers meet Y2K
compatibility requirements, or that sufficient contingency plans are in place.
Our assessment is approaching final completion. An inventory of computing,
communication and facility Systems has been prepared and validated. Significant
suppliers, including Competitive Local Exchange Carriers (CLEC), have also been
identified for validation. We have completed the inventory our Systems and a
majority of the analysis phase for these Systems. We anticipate that we will
complete the analysis phases for these Systems during the early part of the
second quarter of 1999. The Y2K Program calls for the completion of all phases
for the Systems by the end of the second quarter of 1999.
We have performed a technical review of significant third party suppliers and
customers and, if available, have surveyed the public Year 2000 statements
issued by them. Additionally, we have sent inquiry letters to certain third
31
<PAGE>
party suppliers and customers requesting information regarding their
vulnerability to Year 2000 issues. We intend to pursue appropriate responses to
these inquiries and evaluate the responses it receives to determine if alternate
business actions will be necessary.
Should any systems, significant customers or suppliers be determined to have
questionable remediation potential, the Y2K Committee will establish a
contingency plan to address the at-risk area. This will be decided during the
analysis phase of the overall project now underway. We are unable at this time
to determine what contingency plans, if any, should be implemented. As we
progresses through the Y2K Program and identifies specific risk areas, we intend
to timely implement appropriate remedial actions and contingency plans. See
"Risk Factors- We Could Lose Revenues And Our Reputation May Be Damaged If Our
Systems Or Those Of Our Customers Or Our Suppliers Are Not Year 2000 Compliant.
PROPERTY
We currently lease our offices located at 2999 NE 191st Street, PH-8 , Aventura,
Florida 33180. In January 1999, we signed a five-year lease for 3,000 square
feet of corporate office space at a base rent of $2,980 per month plus common
area maintenance costs. In December 1998 and March 1999 we leased two additional
offices at a base rent of $1,028.50 and $2,887.17 per month plus common area
maintenance fees. The additional space houses our Internet operations and
provides additional office space for employees. These leases expire five years
from their date of commencement. Our telephone number is (305) 935-1080.
LEGAL PROCEEDINGS
In April 1999, we filed a lawsuit in the Circuit Court of the 17th Judicial
Circuit in and for Broward County, Florida against Secure Transaction
International Corp.("STIC"), its subsidiaries and principals, the accounting
firm of Margolis, Fink & Wichrowski, Barry A Fink, C.P.A., P.A., Mark V.
Wichrowski, C.P.A. and Barry A. Fink and Mark Wichrowski, individually, alleging
violation of the Florida securities laws, negligent misrepresentations, breach
of contract payment of accounts, and conversion. The lawsuit stems from several
contracts entered into with STIC and its subsidiaries for bandwidth, consulting
services and software. As payment for the services STIC and its subsidiaries
issued redeemable preferred stock that was convertible into STIC common stock.
We provided the services as required and the appropriate amount of convertible
stock was not redeemed or converted. The amount due us under these various
agreements is approximately $867,842. We have also alleged that the Financial
Statements provided, negligently misrepresented the financial condition of STIC
and its subsidiaries. We have asked the court for rescission, compensatory
damages, attorneys' fees, costs, and expenses. The defendants file a motion to
dismiss, which was denied. The defendants have filed or are in the process of
filing an answer to our complaint. The lawsuit is in the discovery stage. At
present, we are unable to predict the outcome this lawsuit.
On December 10, 1998, we filed a lawsuit in the United States District Court for
the Southern District of Florida against PSINet, alleging fraud,
misrepresentation, and breach of contract. This lawsuit stems from PSINET's
inability to provide us with the services we contracted for. We have asked the
court for damages including compensatory, consequential, incidental and special
damages in excess of $15,000, plus interest, costs, disbursements, and
attorney's fees. PSI filed a counterclaim in February 1999, for $80,0000
alleging that we are the alter ego of Pact and that Pact owes them $80,000 for
services rendered. PSI also filed a motion to dismiss the fraud count, which was
granted. On August 25, 1999, we entered into a Settlement Agreement and Mutual
Release with PSINet, Inc. for the dismissal of this lawsuit. The Agreement
provides that for the payment of $20,000 to the Company, less any sums the
Company owes PSINet, the return of any PSINet equipment that the Company has in
its possession, and the assignment to the Company of approximately $80,000 in
debt owned to PSINet by Pact. The Company has agreed to use commercially
reasonable efforts to obtain from Pact and return to PSINet all PSINet equipment
in Pact's possession.
In January 1999, Herman Henin, a shareholder of Pact, filed a lawsuit against us
in Circuit Court of the 17th Judicial Circuit in and for Broward County,
Florida. Mr. Henin has alleged that he did not receive a proper distribution of
Quest shares from Pact after our acquisition of certain of the assets of Pact,
which we paid for in common stock and which was subsequently distributed by Pact
to its shareholders and that, somehow, we are responsible. Mr. Henin has
demanded that we issue him the additional shares that Pact allegedly did not
issue plus the dividend for those shares. We filed a motion to dismiss/for more
definite statement. On July 29, 1999, the motion to dismiss was granted, Mr.
Henin was grated 20 days to amend his complaint. On August 14, 1999, Mr. Henin
filed an Amended Complaint alleging that the transaction between the Company and
Pact was a "de facto merger" and that the Company assumed all of Pact's
liabilities. On August 17, 1999, we filed a Motion To Dismiss/Strike on the
grounds that the Amended Complaint failed to state a claim, upon which relief
could be granted, for alleging immaterial and impertinent matters, and for
failure to join an indispensable party (Pact). We contend that a "de facto
merger" never took place and that the Asset Purchase and Sale Agreement
specifically states that the transaction was not a "de facto merger" and that we
did not assume any debts, liabilities or obligations of Pact. As of August 25,
1999, there has been no hearing scheduled on the Motion to Dismiss. At present
we are unable to predict the outcome of this lawsuit, however if the lawsuit is
not dismissed, we intend to vigorously defend it.
32
<PAGE>
MANAGEMENT
The following table sets forth certain information concerning our directors and
executive officers:
<TABLE>
<CAPTION>
Name Age Term Position
- ---- --- ---- --------
<S> <C> <C> <C>
Camilo Pereira 39 1999-2000 Chairman of the Board, Chief Executive
and Financial Officer and President
Maxine Pereira 34 1999-2000 Executive Vice-President, and
Director.
David Block 32 1999-2000 Director
Lauri Fitz-Pegado 43 1999-2000 Director
Victor Coppola 56 1999-2000 Director
</TABLE>
Our Directors hold office until the next annual meeting of shareholders and the
election and qualification of their successors. Officers serve at the discretion
of the board.
Camilo Pereira, President, Chief Executive Officer (CEO) and Chairman of the
- ----------------------------------------------------------------------------
Board of Directors
- ------------------
Mr. Pereira has been our Chief Operating Officer Since July 1998 and has served
as our President since January 1999. Mr. Pereira was Chief Operating Officer of
PACT Communications Inc. since its inception in September 1996 and served as
President of that company from February 1998 until A.P. Sales, Inc.(n/k/a Quest
Net Corp.) purchased certain of Pact's assets in July 1998. Mr. Pereira `s
employment contract was part of the asset purchase. He has served as Quest Net's
CEO and Board Chairman ever since. From 1988 to 1989, Mr. Pereira developed and
owned a successful 12-unit chain of restaurants in Johannesburg, South Africa.
While there in 1989, he founded a small food equipment company out of need to
obtain certain kitchen equipment for the restaurant. This endeavor was so
successful that in its last year, it generated sales of over $600,000. Due to
the unstable political situation in South Africa at the time, Mr. Pereira sold
the restaurant chain and relocated the food equipment business to the United
States under the name CaterQuip. CaterQuip is still an active company located in
Hong Kong, which manufactures and markets food equipment in Italy, England, the
United States and several other countries.
From 1986 to 1987, Mr. Pereira attended Tadmor College in Jerusalem, Israel and
received a Bachelor of Arts Degree in Hotel Administration. In 1987 he became a
certified Rooms Division Executive by Michigan State University, a program
sponsored by The Education Institute of the American Hotel and Motel
Association. As part of his management activity in several hotel chains, Mr.
Pereira designed and implemented computer software for use in the hospitality
industry. Mr. Pereira also has several patents registered with the U.S. Patent
Office for a food processor, grill scraper, fryers and a livestock branding
iron. In November 1996, due to the heavy financial burden of sustaining PACT
Communications, Inc., Mr. Pereira filed a personal bankruptcy action under
Chapter 7 in the United States Bankruptcy Court for the Southern District of
Florida. An order of discharge was entered on February 18, 1997.
Mr. Pereira began his professional career in the service of the government of
his native state of Goias, Brazil. During his employment there, he built
friendships and relationships with several high level members of the Brazilian
and other national governments, some of which have remained strong to date. Mr.
Pereira believes that these relationships are facilitating contact with several
government agencies that are important to the growth of Quest Net.
From 1981 to 1984, Mr. Pereira served in the Israeli Defense Force (IDF) and was
a spokesperson for the Israeli Consulate in Philadelphia. Mr. Pereira was
decorated by the IDF for service during the Lebanon War of 1982.
Mr. Pereira is the husband of Maxine Pereira.
Maxine Pereira, Vice President and Director
- -------------------------------------------
Maxine Pereira has been our Vice President since July 1998. From 1997 to January
1998 she was President of Pact. In 1996, she assisted in the founding of PACT
Communications. From 1991 to 1996 Ms. Pereira was Vice President of Caterquip.
Mrs. Pereira is a graduate of Port Elizabeth College in South Africa where she
studied Public Relation, Marketing and Cosmetology. She developed her marketing
skills during her career in cosmetology, where, as a consultant, she coordinated
events to launch new products onto the market for several companies. Ms. Pereira
is the wife of Camilo Pereira.
David J. Block, Esq., Outside Director
- --------------------------------------
David Block has been a director of the Company since July 1998. From March 1997
to present, Mr. Block has been employed by H. Hertner Associates, a Miami Lakes,
Florida recruiting firm, as a legal recruiter. From May 1996 to March 1997, he
was an attorney with the law office of Singer & Block, which was located in
Miami, Florida. From October 1994 to January 1996 he was a Supervising Attorney
for the United States Small Business Administration, in their Florida and
California offices delivering agency relief to disaster victims of Hurricanes
Andrew, Erin, Opal and the Northridge earthquakes. Mr. Block is a 1992 graduate
of the University of Miami School of Law, where he served as Vice President of
Entertainment and Sports Law Society from 1999-1991. Mr. Block is a member of
the Florida Bar. Mr. Block's affiliations within the legal community provide him
with insight into the ever-changing legal market.
33
<PAGE>
The Honorable Lauri J. Fitz-Pegado, Outside Director
- ----------------------------------------------------
Lauri Fitz-Pegado has been a director of the Company since January 1999 Since
May 1997, she has served as Vice President of Global Gateway Management for
Iridium, LLC., a $5 billion wireless global mobile personal communications
system based on a technology that utilizes satellites to facilitate, coordinate
and manage activities between Iridium and its gateway investors. From 1993 to
May 1997, she was Assistant Secretary and Director General United States and
Foreign Commercial Service for the Department of Commerce and served as a
special advisor to the Secretary of Commerce and the International Trade
Administration on issues and projects including national export strategy and
regional commercial initiatives involving Mexico, APEC/ASEAN, Middle East, South
Africa and Latin America.
Ms. Fitz-Pegado brings strong national and international experience in the areas
of telecommunications, radio and TV media, and trade and commerce Ms.
Fitz-Pegado also directed and managed the International Public Affairs Division
of Hill and Knowlton Public Affairs Worldwide where she supervised and managed
client interests, both foreign and domestic, provided strategic counsel, and
handled media and government relations. Her earlier professional experience
includes several Foreign Service and U. S. Embassy positions where she served as
U.S. medial liaison (radio and television) with Mexico, and the Dominican
Republic. She is a member of numerous prestigious professional organizations
including the Council on Foreign Relations, The Women's Forum in Washington,
Women in International Trade, Ronald H. Brown Foundation Advisory Board, and the
Commercial Space Transportation Advisory Committee of the Federal Aviation
Administration.
Ms. Fitz-Pegado received a Masters Degree in International Affairs from Johns
Hopkins University, and a Bachelor of Arts cum Laude from Vassar College. She is
fluent in Spanish and Portuguese.
Victor V. Coppola, Outside Director
- -----------------------------------
Victor Coppola has been a director of the Company since January 1999. From 1998
to present Mr. Coppola has been Chief Executive Officer of P.I. Associates, a
management development firm located in Delray Beach, Florida. From 1996 to 1997,
Mr. Coppola was President of C & C Consulting, a compensation, merger and
acquisition search fir located in Bryn Mawr, Pennsylvania. From 1995 to 1996, he
was Executive Vice President for the Mid Atlantic Region, for Right Management,
a human resource-consulting firm located in Philadelphia, Pennsylvania. From
1968 to 1995, Mr. Coppola was employed by Coopers & Lybrand, now Price
Waterhouse Coopers ("C&L"), where he held several high level positions,
including National Chairman of Middle Market Business Services, partner-in
- -charge of the Middle Market Group of its Philadelphia, Pennsylvania office. Mr.
Coppola's experience spans many industries including manufacturing,
merchandising, conglomerates, real estate and communications. He has also been
responsible for or a participant in auditing, tax and management consulting
engagements for national and international operations of multi-unit companies,
as well as special engagements in acquisitions, investment analysis, financial
projections and operational audits.
Mr. Coppola was chosen by C&L to be part of a select four-man team responsible
for developing a program to train C&L personnel as specialists in serving
entrepreneurial, growth-oriented businesses; i.e., companies needing more than
conventional auditing services. This effort resulted in the creation of C&L's
National Middle Market Business Services Group, which is now on of the focal
points of C&L's practice. He has also co-authored the Coopers and Lybrand Guide
to Growing Your Business, which offers both new entrepreneurs and experienced
business owners the financial and operating advice and techniques to flourish in
an increasingly competitive market.
He has served as a member of the Board of Directors of Leadership, Inc.,
University City Science Center, Ben Franklin Technology Center and the Greater
Philadelphia Economic Development Coalition. He is also a member of the
Securities and Exchange Commission's Executive Committee on Small Business
Capital formation and has served on several SEC panels. He has also written a
regular column about growing businesses for the Philadelphia Business Journal,
and has been an invited speaker at the Inc. 500 and Growth Company conferences,
participated in SEC panels and has given numerous presentations pertinent to
emerging growth companies. Mr. Coppola received a Bachelor of Science in Finance
from Long Island University.
Compensation of Directors
In March 1999, outside directors received options to purchase an aggregate of
5,000 shares of our common stock at $6.00 per share. The options vest in two
equal increments of 2,500 shares 6 months and 12 months from the date of grant
as long as the holders are members of the Board of Directors at the time the
options vest. Any options not vested will terminate upon resignation or
termination from the Board. The options will be exercisable at any time after
vesting and for a period of two years there after. In January 1999, before the
present board was appointed, we awarded directors an aggregate of 6,667 shares
of common stock.
34
<PAGE>
Limited Liability of Directors
Provisions included in our certificate of incorporation, as amended, protect our
directors against personal liability for monetary damages from breaches of their
duty of care. As a result, our directors will not be liable for monetary damages
from negligence and gross negligence in the performance of their duties. They
remain liable for monetary damages for any breach of their duty of loyalty to
us, and our stockholders, as well as acts or omissions not made in good faith or
which involve intentional misconduct or a knowing violation of law and for
transactions from which a director derives improper personal benefit. The
liability of our directors under federal or applicable state securities laws is
also unaffected. We carry officers and directors' liability insurance in the
amount of $1,000,000.
While our directors have protection from awards of monetary damages for breaches
of the duty of care, that does not eliminate their duty of care. Equitable
remedies, such as an injunction or rescission based upon a director's breach of
the duty of care, are still available.
Management Compensation
- -----------------------
<TABLE>
<CAPTION>
SUMMARY OF COMPENSATION TABLE
Annual Compensation Long-Term Compensation
------------------- ----------------------
Name & Principal
Position Year Salary Other Annual Restricted Securities/Underlying
Compensation(3) Stock Awards Option/SARs (1)(2)
- ------------------------- ------- ---------------------------- --------------- --------------------------
<S> <C> <C> <C> <C> <C>
Camilo Pereira, CEO and 1999 $125,000 N/A $440,625 1,310,698
Director 1 2
- ------------------------- ------- ---------------------------- --------------- --------------------------
- ------------------------- ------- ---------------------------- --------------- --------------------------
Maxine Pereira 1 3 1999 $48,000 N/A $154,675 N/A
- ------------------------- ------- ---------------------------- --------------- --------------------------
</TABLE>
1. Camilo Pereira and Maxine Pereira became officers of the Company in July
1998.
2. Does not include 150,000 shares granted to Mr. Pereira as of July 1,
1999. The value of these shares is $975,00. The number of shares
actually issued was 135,022. The remaining shares were cancelled as
payment of $97,360 is advances to Mr. Pereira.
3. Does not include 1,250 shares granted to Ms. Pereira for her services
as a Director. Also does not include 25, 000 shares to be granted to Ms.
Pereira as of July 1, 1999. The value of these shares is $168,750.
Employment Agreements
- ---------------------
We entered into five-year employment agreements with Camilo Pereira and Maxine
Pereira that expire March 20, 2003 and July 1, 2003, respectively. Pursuant to
the terms of the employment agreements, base annual salaries, after giving
effect to cost of living adjustments, are as follows: Camilo Pereira $125,000;
Maxine Pereira $48,000. Each employment agreement provides for health insurance,
vacations, and related benefits, and a cost of living adjustment.
Ms. Pereira's agreement provides for the issuance of 50,000 shares of common
stock on each anniversary date of her employment, to be paid pro rata every six
months. Mr. Pereira's agreement provides for the issuance of 300,000 shares of
our common stock on each anniversary date of his employment, to be paid pro rata
every six months, and a performance bonus. The bonus will be in the form of an
option to purchase one share of common stock for every $100 of earning assts
generated by us prior to and after September 9, 1998. The options are
exercisable at $.012 per share, calculated after every quarterly audit and
exercisable for up to five years from the date of issuance. As of June 30,1999,
Mr. Pereira earned and exercised options to purchase 1,310,693 shares of common
stock. See "Certain Transactions".
The following table sets forth certain information with regard to the
Options/SAR granted to Management for the fiscal year ended June 31, 1999.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No. of Securities %of Total Options Exercise or Market Price
Underlying Options Granted to Employees Base Price On Date of Expiration
Name Granted In Fiscal Year ($/Share) Grant Date
- -------------- ---------------- -------------------- ----------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Camilo 1,310,693 97.4% $.12 $2.75 Exercised
Pereira (1)
- -------------- ---------------- -------------------- ----------------- ----------- --------------
</TABLE>
35
<PAGE>
Stock Option Plans
- ------------------
We intend to establish a new stock and option plan and present it for
shareholder approval at its next annual meeting.
CERTAIN TRANSACTIONS
Camilo Pereira and. Maxine Pereira are husband and wife. Further, Camilo Pereira
and Maxine Pereira are each "Control Persons" as a result of their control of a
majority voting power of our outstanding stock. Both parties disclaim, however,
any beneficial interest or ownership in the shares owned by the other party.
Camilo Pereira receives a performance bonus. The bonus is in the form of an
option to purchase one share of common stock for every $100 of earning assets
generated by us prior to and after September 9, 1998. The options are
exercisable at $.012 per share, calculated after every quarterly audit and
exercisable for up to five years from the date of issuance. As of June 30, 1999,
Mr. Pereira earned and exercised options to purchase 1,310,698 shares of common
stock. See "Management- Compensation".
In March 1999, we were going to acquire a 40% interest in Web Solutions, a South
African Web page designer, and developer. We were unable to consummate the
purchase due to our inability to obtain financing at that time and the Web
Solutions declined our offer of issuing stock for the purchase price. After we
declined the purchase, Mr. Pereira, our president purchased the interest through
his South African company Quest Net Corp. SA (PTY) LTD. In May 1999, the Board
of Directors, with Mr. Pereira abstaining, approved the purchase of 49% of the
authorized but unissued common stock of Quest Net Corp. SA (PTY) LTD., a South
African Internet company, for $4,000,000 to be paid in our restricted common
stock. The shares will be valued at market as of the date of the closing of the
transaction. Quest Net Corp. SA (PTY) LTD is majority owned by Mr. Pereira.
Because we are purchasing our interest with common stock, we cannot enter into a
letter of intent until we receive approval of the South African government.
In March 1999, we issued 100,000 shares to Maxine Pereira, an officer of the
Company, pursuant to her employment agreement. The agreement called for the
issuance of 25,000 shares on January 1, 1999. The Company neglected to timely
issue the shares and therefore the shares were not issued at the time of the
stock dividend. The Board of Director authorized the issuance of the additional
75,000 shares that would have been issued to Ms. Pereira pursuant to the
dividend if the Company had performed its obligations under the employment
agreement in a timely manner.
In January 1999, we issued a total of 101,333 shares of our common stock for to
David Plant, the father of Maxine Pereira and father-in-law of Camilo Pereira,
officers and directors of the Company, for consulting services rendered. The
consulting services were valued at $7,600. In addition, in March 1999 Mr. Plant
was paid a consulting fee of $35,000 in connection with Project Unidad.
In December 1998, we acquired certain assets of Grupo Internet Latinoamericano
valued at $2,042,000 in exchange for an aggregate of 100,000 shares of our
redeemable preferred stock and 2,607,660 shares of our common stock. At the time
of the transaction, Grupo Internet Latinoamericano was an unaffiliated third
party. The Company redeemed the redeemable convertible preferred shares in July
1999, at a redemption price of $10.00 per share. At the time of the redemption,
Grupo Internet Latinoamericano owned 49.2% of the outstanding common stock.
During the year ended June 30, 1999, Camilo Pereira, an officer and director of
the Company and another entity owned by Mr. Pereira, paid on behalf of the
Company certain expenses totaling $103,976. Mr. Pereira also advances $35,000 to
the Company for working capital. We repaid $29,725 to the President and issued a
seven and half percent note payable to Mr. Pereira for the remaining $109,899.
We repaid the note and accrued interest of $3,241 for a total of $113,140.
Mr. Pereira also advanced the Company an additional $105,000 in exchange for a
promissory note. We repaid the note within sixty days of issuance and did not
accrue any interest.
From time to time during the year ended June 30, 1999, the Company paid certain
expenses related to ventures Mr. Pereira is associated with, but have no
relative business purpose to the Company. The amounts totaled $97,360 and have
been deducted from amounts accrued and payable to Mr. Pereira pursuant to his
employment agreement by decreasing the shares to be issued to Mr. Pereira in
connection with his employment agreement by 14,978 shares valued at $97,360.
36
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of our common stock as
August 24, 1999 as to (a) each person known to us who beneficially owns more
than 5% of the outstanding shares of our common stock; (b) each current director
executive officer; and (c) all of our executive officers and directors as a
group.
The actual number of shares of Common stock held by Camilo Pereira and Maxine
Pereira are 6,666,810 and 136,000 shares respectively. Both Camilo Pereira and
Maxine Pereira specifically disclaim any beneficial interest in each other's
shares
<TABLE>
<CAPTION>
Name and Address Number of Shares Owned % of Outstanding
of Beneficial Owner Beneficially (1)(2) Shares of Common Stock
- ------------------- ------------------- ----------------------
<S> <C> <C>
Camilo Pereira 17,732,088 (3) 79.9%
2999 NE 191st Street, PH-8
Aventura, Florida 33180
Maxine Pereira 6,817,788 30.7%
2999 NE 191st Street,. PH-8
Aventura, Florida 33180
Grupo Internet Latinoamericano, S.A 10,929,278 49.2%
P.O. Box 3174
Road Town, Tortola
British Virgin Islands
Simplex LTDA 1,200,000 5.4%
Rua P-25 No. 774
Setor dos Funcionarios
Goiania Gois 74.000 Brazil
All officers and directors 17,743,191 (5) 79.9%
as a group (5) persons)
</TABLE>
(1) Except as indicated in the footnotes to this table, based on
information provided by such persons, the persons named in the table
above have sole voting power and investment power with respect to all
shares of common stock shown beneficially owned by them.
(2) Percentage of ownership is based on 22,205,522 shares of common stock
outstanding as of August 24, 1999, plus each person's options that are
exercisable within 60 days. Shares of common stock subject to stock
options that are exercisable within 60 days of August 24, 1999 are
deemed outstanding for computing the percentage of that person and the
group.
(3) Includes 136,000 shares owned by the wife of Camilo Pereira, Maxine
Pereira, of which he disclaims beneficial ownership. Also include the
10,929,278 shares owned by Grupo Internet Latinoamericano, S.A. which
are subject to a proxy held by Mr. Pereira
(4) Includes 6,681,788 shares owned by the husband of Maxine Pereira,
Camilo Pereira, of which she disclaims beneficial ownership.
(5) Includes include the 10,929,278 shares owned by Grupo Internet
Latinoamericano, S.A. which are subject to a proxy held by Mr. Pereira.
MARKET PRICE OF SECURITIES
Our common stock is traded on the NASDAQ over-the-counter bulletin board market
under the symbol QNET. There has been trading in our common stock since July 10,
1998. The following table sets forth, for each of the fiscal periods indicated,
the high/ask and low/bid trade prices for the common stock, as reported on the
OTC Bulletin Board. These per share quotations reflect inter-dealer prices in
the over-the-counter market without real mark-up, markdown, or commissions and
may not necessarily represent actual transactions.
QUARTER ENDING HIGH/ASK LOW/BID
FISCAL YEAR 1998
September 1998 $ 5.25 $ .6875
December 1998 $19.00 $ .43
March 1999 $30.71 $ 4.75
June 1999 $13.75 $ 3.50
On August 24, 1999, the closing trade price of the common stock as reported on
the OTC Bulletin Board was $3.50. As of such date, there were approximately 281
holders of record of our common stock.
37
<PAGE>
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 16, 1998, the shareholders approved a 10 to 1 reverse split. For
every 10 shares held by a shareholder the shareholder received one share.
DESCRIPTION OF SECURITIES
Our Articles of Incorporation, as amended authorizes us to issue up to
50,000,000 shares of common stock, no par value per share and 5,000,000 shares
of Preferred Stock, no par value. As of the date of this Prospectus we have
issued and outstanding 22,205,522 shares of common stock and no shares of
Preferred stock. In October 1998, the shareholders approved a 10 to 1 reverse
split. For every 10 shares held by a shareholder the shareholder received one
share.
In January 1999, the Board of Directors approved a three for one stock dividend.
For every one share of common stock held by a shareholder they received three
shares.
COMMON STOCK
Holders of the common stock are entitled to one vote for each share in the
election of directors and in all other matters to be voted on by the
shareholders. There is no cumulative voting in the election of directors.
Holders of common stock are entitled to receive such dividends as may be
declared from time to time by our Board of Directors out of funds legally
available thereof and, in the event of liquidation, dissolution or winding up of
the Company, to share ratably in all assets remaining after payment of
liabilities. The holders of common stock have no preemptive or conversion
rights, and are not subject to further calls or assessments. There are no
redemption or sinking fund provisions applicable to the common stock. The rights
of the holders of the common stock are subject to any rights that may be fixed
for holders of Preferred Stock. All of the outstanding shares of common stock
are fully paid and non-assessable.
PREFERRED STOCK
Our Articles of Incorporation authorize the issuance of "blank check" preferred
stock with such designations, rights, and preferences as the board of directors
may determine, from time to time. This means that the board of directors can,
without stockholder approval, designate and issue additional series of preferred
stock with dividend, liquidation, conversion, voting, or other rights, including
the right to issue convertible securities with no limitations on conversion.
This power could adversely affect the voting power or other rights of the
holders of our common stock, substantially dilute the common shareholders'
interest, and depress the price of our common stock.
DIVIDEND POLICY
It is the current policy of the Board of Directors to retain any earnings to
provide for the growth of the Company. Consequently, no cash dividends are
expected to be paid on the Company's common stock in the foreseeable future.
SELLING SECURITY HOLDERS
In accordance with our obligations to the Selling Security Holder contained in
the Registration Rights Agreement, we have registered for sale by the Selling
Security Holder, pursuant to this Prospectus, 1,700,000 shares of common stock
owned by or to be issued to the Selling Security Holder. The Selling Security is
James LLC., a Cayman Island corporation whose address is c/o Citco Trustees
(Cayman) LTD., Corporate Centre, West, Bay Road, Po Box 31106 SMB, Grand Cayman,
Cayman Islands, BWI. CTC Corporation LTD is the sole director of and has voting
control over James LLC. Michael Francombe is a director of CTC Corporation LTD.
Under the terms of a registration statement between the Company and James LLC.,
if the average of the closing bid prices of the Common Stock as reported by
Bloomberg, LP for the sixty (60) consecutive trading days following but not
including the date the Registration Statement is deemed effective is less than
125% of the Purchase Price, then the Company is required to issue to the Selling
Security Holder, at no cost to the Selling Security Holder, within 5 business
days of receipt of written notice from the Selling Security Holder, additional
shares of Common Stock equal to the difference between (i) the Aggregate
Purchase Price divided by 80% of the Current Market Price and (ii) the Total
Number of Shares.
38
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Example: Aggregate Purchase Price = $5,000,000
Purchase Price (80% of $7.00) = $5.60
125% of Purchase Price = $7.00
Current Market Price = $6.00
80% of Current Market Price = $4.80
Total Number of Shares = 892,857 (5,000,000 divided by $5.60)
Additional Shares = 148,810 ($5,000,000 divided by $4.80) = 1,041,667 - 892,857
</TABLE>
Due to the fluctuation in the price of the Company's Common Stock during the
past 60 days, the Company's good faith estimate of the number of shares that
will be required to be issued in connection with the Subscription Agreement is
1,700,000 shares. In the event that additional shares will be required to be
issued, the Company will file a new or amended registration statement to cover
the additional shares. Any shares that are not issued will be deregistered. As
of August 24, 1999. we would be required to issue a total of 1,785,715 shares in
accordance with the terms of the Subscription Agreement. Presently, James LLC.
holds a total of 910,747 shares. CTC Corporation LTD does not hold any of our
securities.
If the Registration Statement is not declared effective within 120 day from June
3, 1999, the Company is required to pay, as liquidated damages, 1.0% of the
principal amount of the Shares, and 2.0% of the principal amount of the Shares
for each 30-day period, or portion thereof that registration is not declared
effective after 150 calendar days.
No officer, director or affiliate of James LLC. or CTC Corporation LTD is or has
been an officer, director, or employee of ours during the past three years, or
had any other relationship with us during such period, other than as an
investor. The 1,700,000 shares of common stock being sold pursuant to this
Prospectus represent the total beneficial holdings of the Selling Security
Holder.
All of the common stock held by the Selling Security Holders is being offered
for sale pursuant to this Prospectus for its accounts. Accordingly, it is
anticipated that the Selling Security Holder, after completion of the Offering,
will not hold any shares of our common stock.
PLAN OF DISTRIBUTION
The Registration Statement of which this Prospectus is a part has been filed in
connection with the registration rights included in Subscription Agreement
between the Selling Security Holder and us.
The Shares may be offered and sold from time to time by the Selling Security
Holder. The Selling Security Holder will act independently of the Company in
making decisions with respect to the timing, manner, and size of each sale. Such
sale may be made on the OTC Bulletin Board or otherwise, at prices and on terms
then prevailing or at prices related to the then market price, or in negotiated
transactions. The Shares may be sold by one or more of the following methods:
(a) a block trade in which the broker-dealer engaged by the Selling Security
Holder will attempt to sell Shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction; (b) purchases
by the broker-dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; and (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers. To the best of our
knowledge, the Selling Security Holder has not, as of the date hereof, entered
into any arrangement with a broker or dealer for the sale of shares through a
block trade, special offering, or secondary distribution of a purchase by a
broker-dealer. In effecting sales, broker-dealers engaged by the Selling
Security Holder may arrange for other broker-dealers to participate.
Broker-dealers may receive commissions or discounts from the Selling Security
Holder in amounts to be negotiated.
In offering the Shares, the Selling Security Holder and any broker-dealers who
execute sales for the Selling Security Holder may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with such sales, and any
profits realized by the Selling Security Holder and the compensation of such
broker-dealer may be deemed to be underwriting discounts and commissions.
We have advised the Selling Security Holder that during the time they are
engaged in distribution of the securities covered by this Prospectus, they must
comply with Rule 10b-5 and Regulation M under the Exchange Act and Pursuant
thereto: (i) each must not engage in any stabilization activity in connection
with the Company's securities; (ii) each must furnish each broker through which
securities covered by this Prospectus may be offered the number of copies of
this Prospectus which are required by each broker; and (iii) each must not bid
for or purchase any securities of the Company or attempt to induce any person to
purchase any of the Company's securities other than as permitted under the
Exchange Act Release 34-38067 (December 20, 1996) have been advised that they
39
<PAGE>
must coordinate their sales under this Prospectus with each other and the
Company for purposes of Regulation M.
The Shares are being offered on a continuous basis pursuant to Rule 415 under
the Securities Act of 1933, as amended This offering will terminate on the
earlier of (a) the date on which such Selling Security Holder's shares may be
resold pursuant to Rule 144 under the Securities Act; or (b) the date on which
all Shares offered hereby have been sold by the Selling Security Holder. There
can be no assurance that the Selling Security Holder will sell any or all of the
shares of common stock offered hereby.
The Selling Security Holder and any broker-dealers participating in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of the 1933 Act, and any commissions or discounts paid or given to any such
broker-dealer may be regarded as underwriting commissions or discounts under the
1933 Act.
INTERESTS OF NAMED EXPERTS AND COUNSEL
Certain legal matters in connection with the securities being offered hereby
will be passed upon for the Company by Rebecca J. Del Medico, Esq., Counsel for
the Company. Ms. Del Medico currently owns approximately 96,000 shares of common
stock of the Company.
EXPERTS
The consolidated audited Financial Statements of Quest Net Corp. incorporated by
referenced herein have been examined by Cordovano and Harvey, P.C., independent
certified public accountants, for the periods and to the extent set forth in
their report and are incorporated herein in reliance upon such report of said
firm given under their authority as experts in accounting and auditing.
The report of Cordovano and Harvey P.C. covering the June 30, 1999, Financial
Statements contains an explanatory paragraph that states that Quest Net Corp.
has incurred significant operating losses since inception, has a limited
operating history, and has a negative cash flow from operations, which raises
substantial doubt about its ability to continue as a going concern. The
Financial Statements do not include any adjustments that might result from the
outcome of this uncertainty.
LEGAL MATTERS
Rebecca J. Del Medico, Esq. Counsel for the Company, will pass upon the validity
of the issuance of the Shares for the Company.
40
<PAGE>
<TABLE>
<CAPTION>
QUEST NET CORP
--------------
(A Development Stage Company)
Page
----
<S> <C>
Independent auditors' report...............................................................................F-2
Balance sheet as of June 30, 1999..........................................................................F-3
Consolidated statements of operations, for the years ended June 30, 1999 and 1998,
and for the period November 28, 1995 (inception) through June 30, 1999 (unaudited).......................F-4
Consolidated statements of shareholders' equity
for the period November 28, 1995 (inception) through June 30, 1999 (unaudited)...........................F-5
Consolidated statements of cash flows, for the years ended June 30, 1999 and 1998,
and for the period November 28, 1995 (inception) through June 30, 1999 (unaudited).......................F-7
Notes to consolidated financial statements.................................................................F-8
</TABLE>
F-1
<PAGE>
To the Board of Directors and Shareholders
Quest Net Corp. and Subsidiaries
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Quest Net Corp.
and subsidiaries (a Florida corporation in the development stage) as of June 30,
1999 and the related consolidated statements of operations, shareholders' equity
and cash flows for the years ended June 30, 1999 and 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Quest Net Corp. and
subsidiaries, as of June 30, 1999 and 1998 and the results of their operations
and cash flows for the years ended June 30, 1999 and 1998, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As shown in the accompanying
consolidated financial statements, the Company incurred a net loss of $8,019,883
during the period from November 28, 1995 (inception) through June 30, 1999,
negative cash flows from operations and has a limited operating history. These
and other factors discussed in Note A to the consolidated financial statements
raise a substantial doubt about the ability of the Company to continue as a
going concern. Management's plans in regard to those matters are also described
in Note A. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Pro forma financial information provided in Note G giving effect to the
Company's acquisition of Wings Online, Inc. is on an unaudited basis.
Cordovano and Harvey, P.C.
Denver, Colorado
July 10, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
QUEST NET CORP.
---------------
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
<S> <C>
ASSETS
CURRENT ASSETS
Cash......................................................................................$.3,298,289
Accounts receivable, net of $867,842 allowance ................................................11,084
Accounts receivable, other......................................................................2,276
Prepaid expenses...............................................................................29,155
---------------
TOTAL CURRENT ASSETS 3,340,804
PROPERTY AND EQUIPMENT, net of
accumulated depreciation of $266,159 (Note C)..............................................1,329,364
PROPERTY NOT IN SERVICE (Note C)....................................................................434,144
INTANGIBLE ASSETS, net of
accumulated amortization of $41,453 (Note A).................................................501,031
DEPOSITS.............................................................................................69,800
---------------
$ 5,675,143
===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, trade......................................................................$.44,114
Accrued compensation (Note E)...............................................................1,118,265
Accrued expenses...............................................................................25,506
Accrued payroll taxes..........................................................................64,814
---------------
TOTAL CURRENT LIABILITIES 1,252,699
---------------
COMMITMENTS (Note H)......................................................................................-
SHAREHOLDERS' EQUITY
Preferred stock, no par value; 5,000,000 shares authorized;
-0- shares issued and outstanding, respectively..................................................-
Common stock, no par value; 50,000,000 shares authorized;
22,045,500 shares issued and outstanding ................................................12,435,136
47,000 outstanding common stock warrants......................................................7,191
Deficit accumulated during development stage...............................................(8,019,883)
---------------
TOTAL SHAREHOLDERS' EQUITY 4,422,444
---------------
$ 5,675,143
===============
See accompanying notes to the consolidated financial statements
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
QUEST NET CORP.
---------------
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
November 28,
1995
(inception)
For the Years Ended June 30, Through June 30,
1999 1998 1999
------------- ----------- ----------------
(Unaudited)
<S> <C> <C> <C>
REVENUES
Internet related services...................................... $ 136,361 $ - $ 136,361
OTHER:
Software sales and development (Note H)...................... 933,837 - 933,837
------------ ----------- ------------
TOTAL REVENUES 1,070,198 - 1,070,198
------------ ----------- ------------
COSTS AND EXPENSES
Cost of internet related services............................. 95,088 - 95,088
Cost of revenues - software sales and development............. 600,000 - 600,000
Stock based compensation...................................... 6,109,110 - 6,109,110
Bad debt expense.............................................. 893,095 - 893,095
Salaries and bonuses.......................................... 383,160 - 383,160
General and administrative.................................... 634,861 4,761 642,325
Depreciation and amortization................................. 313,367 - 313,367
Loss on disposal of assets.................................... 56,559 - 56,559
------------ ----------- ------------
TOTAL OPERATING EXPENSES 9,085,240 4,761 9,092,704
------------ ----------- ------------
OPERATING LOSS (8,015,042) (4,761) (8,022,506)
NON-OPERATING INCOME (EXPENSE)
Interest expense.............................................. (5,943) - (5,943)
Interest income............................................... 8,566 - 8,566
------------ ----------- ------------
NET LOSS BEFORE INCOME TAXES $ (8,012,419) $ (4,761) $ (8,019,883)
INCOME TAXES (NOTE F)
Current tax benefit........................................... 1,348,598 678 1,349,662
Deferred tax expense.......................................... (1,348,598) (678) (1,349,662)
------------ ----------- ------------
NET LOSS $ (8,012,419) $ (4,761) $ (8,019,883)
============ =========== ============
NET LOSS PER SHARE:
Basic......................................................... $ (0.71) $ (0.02)
============ ===========
Diluted....................................................... $ (0.71) $ (0.02)
============ ===========
SHARES USED FOR COMPUTING NET LOSS PER SHARE:
Basic......................................................... 11,351,263 240,000
============ ===========
Diluted....................................................... 11,351,263 240,000
============ ===========
</TABLE>
See accompanying notes to the consolidated financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
QUEST NET CORP.
---------------
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
From November 28, 1998 (inception) through June 30, 1999 (Unaudited)
Preferred Stock Common Stock
Shares Amount Shares Amount Warrants
------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C>
Balance, November 28, 1995 (inception)........................ - $ - - $ - $ -
Net loss for the period ended June 30, 1996................... - - - - -
---------- ---------- ---------- ------------ --------
BALANCE, June 30, 1996 - - - - -
July 3, 1996, shares issued for cash (Note B)................. 300,000 3,000 - - -
September 4, 1996, shares issued for cash..................... - - 240,007 * 1,200 -
Net loss for the year ended June 30, 1997..................... - - - - -
---------- ---------- ---------- ------------ --------
BALANCE, June 30, 1997 300,000 3,000 240,007 * 1,200 -
June 15, 1998, cancellation of preferred stock................ (300,000) (3,000) - 3,000 -
June 16, 1998, capital contributed by officer................. - - - 70 -
June 30, 1998, shares issued in asset acquisition (Note D).... - - 200,000 * 125,274 -
Net loss for the year ended June 30, 1998..................... - - - - -
---------- ---------- ---------- ------------ --------
BALANCE, June 30, 1998 - - 440,007 * 129,544 -
July 27, 1998 shares issued for software purchase (Note D).... 60,000 600,000 - - -
November 2, 1998, shares issued for services, valued at cost
of services................................................. - - 200,000 25,000 -
November 16, 1998, conversion of preferred shares............. (60,000) (600,000) 300,000 600,000 -
November 23, 1998, shares issued for cash, net of $2,950
offering costs.............................................. - - 50,000 97,050 -
December 1, 1998, shares issued for officers' compensation
(Note E).................................................... - - 1,310,693 4,013,997 -
December 11, 1998, shares issued pursuant to employment
agreements.................................................. - - 175,000 514,063 -
December 22, 1998, shares issued in exchange for equipment
(Note D).................................................... 100,000 1,000,000 2,607,660 724,520 -
December, 1998, shares issued for cash........................ - - 50,000 50,000 -
(RESTUBBED TABLE)
Deficit
Accumulated
During Total
Development Shareholders'
Stage Equity
----- ------
Balance, November 28, 1995 (inception)........................ $ - $ -
Net loss for the period ended June 30, 1996................... - -
---------- ------------
BALANCE, June 30, 1996 - -
July 3, 1996, shares issued for cash (Note B)................. - 3,000
September 4, 1996, shares issued for cash..................... - 1,200
Net loss for the year ended June 30, 1997..................... (2,703) (2,703)
---------- ------------
BALANCE, June 30, 1997 (2,703) 1,497
June 15, 1998, cancellation of preferred stock................ - -
June 16, 1998, capital contributed by officer................. - 70
June 30, 1998, shares issued in asset acquisition (Note D).... - 125,274
Net loss for the year ended June 30, 1998..................... (4,761) (4,761)
---------- ------------
BALANCE, June 30, 1998 (7,464) 122,080
July 27, 1998 shares issued for software purchase (Note D).... - 600,000
November 2, 1998, shares issued for services, valued at cost
of services................................................. - 25,000
November 16, 1998, conversion of preferred shares............. - -
November 23, 1998, shares issued for cash, net of $2,950
offering costs.............................................. - 97,050
December 1, 1998, shares issued for officers' compensation
(Note E).................................................... - 4,013,997
December 11, 1998, shares issued pursuant to employment
agreements.................................................. - 514,063
December 22, 1998, shares issued in exchange for equipment
(Note D).................................................... - 724,520
December, 1998, shares issued for cash........................ - 50,000
</TABLE>
* Restated (See Note D)
See accompanying notes to the consolidated financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
QUEST NET CORP.
---------------
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
From November 28, 1998 (inception) through June 30, 1999 (Unaudited)
Preferred Stock Common Stock
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C>
January 5, 1999, shares issued for compensation at market value
of stock.............................................................. - - 17,667 178,878
January 5, 1999, shares issued for payment of offering costs of
$15,000............................................................... - - 24,000 -
Shares issued in three for one common stock dividend (Note D)........... - - 15,525,081 -
January 7, 1999, shares issued for cash................................. - - 25,000 75,000
January 21, 1998, shares issued for services at cost of services........ - - 101,333 7,600
January 1999, shares issued for purchase of domain names................ - - 1,500 7,000
January 25, 1999, shares issued for cash................................ - - 132,915 692,809
January 25, 1999, 47,000 warrants issued for cash....................... - - - -
February 15, 1999, shares issued in acquistion of Wings Online, Inc.
(Note G).............................................................. - - 29,326 200,000
February 12, 1999, shares issued pursuant to employment agreement....... - - 100,000 154,675
March 2, 1999, shares issued for services, valued at cost of
services.............................................................. - - 4,000 5,000
March 10, 1999, shares issued for services at market value of stock..... - - 677 10,000
May 3, 1999, shares issued in exchange for property..................... - - 39,894 300,000
May 27, 1999, shares issued for cash, net of $350,000 offering costs.... - - 910,747 4,650,000
July, 1999 cash redemption of preferred stock (Note X)..................(100,000) (1,000,000) - -
Net loss for the year ended June 30, 1999............................... - - - -
-------- ---------- ---------- -----------
BALANCE, JUNE 30, 1999.......... - $ - 22,045,500 $12,435,136
======== ========== ========== ===========
(RESTUBBED TABLE)
Deficit
Accumulated
During Total
Development Shareholders'
Warrants Stage Equity
-------- ----- ------
January 5, 1999, shares issued for compensation at market value <C>
of stock.............................................................. - - 178,878
January 5, 1999, shares issued for payment of offering costs of
$15,000............................................................... - - -
Shares issued in three for one common stock dividend (Note D)........... - - -
January 7, 1999, shares issued for cash................................. - - 75,000
January 21, 1998, shares issued for services at cost of services........ - - 7,600
January 1999, shares issued for purchase of domain names................ - - 7,000
January 25, 1999, shares issued for cash................................ - - 692,809
January 25, 1999, 47,000 warrants issued for cash....................... 7,191 - 7,191
February 15, 1999, shares issued in acquistion of Wings Online, Inc.
(Note G).............................................................. - - 200,000
February 12, 1999, shares issued pursuant to employment agreement....... - - 154,675
March 2, 1999, shares issued for services, valued at cost of
services.............................................................. - - 5,000
March 10, 1999, shares issued for services at market value of stock..... - - 10,000
May 3, 1999, shares issued in exchange for property..................... - - 300,000
May 27, 1999, shares issued for cash, net of $350,000 offering costs.... - - 4,650,000
July, 1999 cash redemption of preferred stock (Note X).................. - - -
Net loss for the year ended June 30, 1999............................... - (8,012,419) (8,012,419)
------- ----------- -----------
BALANCE, JUNE 30, 1999.......... $ 7,191 $(8,019,883) $ 4,422,444
======= =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements
F-6
<PAGE>
<TABLE>
<CAPTION>
QUEST NET CORP.
---------------
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
November 28,
1995
(inception)
For the Years Ended June 30, Through June 30,
1999 1998 1999
------------- ------------ ---------------
(Unaudited)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss....................................................$ (8,012,419) $ (4,761) $ (8,019,883)
Transactions not requiring cash:
Depreciation and amortization............................ 313,367 - 313,367
Loss on disposal of assets............................... 56,559 - 56,559
Increase to allowance for doubtful accounts.............. 867,842 - 867,842
Non-cash software cost of revenues....................... 600,000 - 600,000
Stock based compensation expense......................... 6,109,110 - 6,109,110
Changes in current assets and current liabilities:
Increase in receivables and prepaid expenses............ (910,357) - (910,357)
Increase in accounts payable and accrued liabilities
net of effects from purchase of Wings Online, Inc...... 23,000 3,237 26,237
------------ ------------- --------------
NET CASH USED IN
OPERATING ACTIVITIES (952,898) (1,524) (957,125)
------------ ------------- --------------
INVESTING ACTIVITIES
Equipment and leasehold purchases........................... (118,756) - (118,756)
Proceeds from sale of equipment............................. 2,100 - 2,100
Cash paid for deposits...................................... (69,250) - (69,250)
Purchase of Wings Online, Inc, net of $-0- cash received.... (135,000) - (135,000)
------------ ------------- --------------
NET CASH (USED IN)
INVESTING ACTIVITIES (320,906) - (320,906)
------------ ------------- --------------
FINANCING ACTIVITIES
Capital contribution........................................ - 70 70
Sale of preferred stock..................................... - - 3,000
Sale of common stock and warrants........................... 5,925,000 - 5,926,200
Cash paid for offering costs................................ (352,950) - (352,950)
Redemption of preferred stock............................... (1,000,000) - (1,000,000)
Proceeds from issuance of notes to related party............ 214,900 - 214,900
Principal payments of related party notes................... (214,900) - (214,900)
------------ ------------- --------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 4,572,050 70 4,576,320
------------ ------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS...................... 3,298,246 (1,454) 3,298,289
Cash and cash equivalents, beginning............................ 43 1,497 -
------------ ------------- --------------
Cash and cash equivalents, ending............................... $ 3,298,289 $ 43 $ 3,298,289
============ ============= ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.......................................... $ 5,943 $ - $ 5,943
============ ============= ==============
Cash paid for income taxes...................................... $ - $ - $ -
============ ============= ==============
NON-CASH INVESTING AND FINANCING ACTIVITIES:
2,000,000 common shares issued for property..................... $ - $ 125,274 $ 125,274
2,649,054 common shares issued for property..................... $ 1,031,520 $ - $ 1,031,520
160,000 preferred shares issued for property and software....... $ 1,600,000 $ - $ 1,600,000
24,000 common shares issued for payment of offering costs....... $ 15,000 $ - $ 15,000
29,326 common shares issued in acquisiton of Wings Online, Inc.. $ 200,000 $ - $ 200,000
</TABLE>
See accompanying notes to the consolidated financial statements
F-7
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A: Organization, business, liquidity and summary of significant accounting
- --------------------------------------------------------------------------------
policies
- --------
Organization and business
Quest Net Corp. (the "Company") was incorporated in the state of Colorado on
November 28, 1995 under the name of A. P. Sales, Inc. The Company was formed for
the purpose of entering the office furniture repair and reconditioning market.
In June of 1998, the Company acquired certain assets related to the internet
services industry and became a provider of Internet system and network
management solutions for enterprises with mission-critical Internet operations,
including server hosting, Internet connectivity, and Internet technology
services. At that time, the Company changed its name to Quest Net Corp. The
Company reincorporated in Florida in December 1998.
As shown in the accompanying financial statements, the Company incurred a net
loss of $8,019,883 during the period from November 28, 1995 (inception) through
June 30, 1999, and has a limited operating history. Those factors, as well as
the uncertain condition that the Company faces as a new business with an
unproven business model entering the new and rapidly evolving market of online
commerce and the Internet, create an uncertainty about the Company's ability to
continue as a going concern.
Management plans to commence significant operations during the next fiscal year,
reduce expenses resulting from stock based compensation and raise an additional
$5,000,000 in equity financing. The ability of the Company to continue as a
going concern is dependent on the success of these plans, and ultimately upon
achieving profitability. The financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.
Summary of significant accounting policies:
Basis of presentation
- ---------------------
The Company's primary operations since July 1998 have been devoted to developing
its Internet services business and raising capital. As a result, the
consolidated financial statements are presented in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by
Development Stage Enterprises." In order to generate significant revenues and
become an operating business, the Company will need to continue to market its
internet access services to customers in its current markets and in markets to
be acquired.
F-8
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of significant accounting policies continued:
Principles of Consolidation
- ---------------------------
The Company's consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries; Wings Online, Inc., IPQuest Corp.,
Quest Wireless Corp., Globalbot Corp., QuesTel Corp. and Quest Fiber Corp. All
material intercompany accounts and transactions have been eliminated in
consolidation.
Use of estimates
- ----------------
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Reclassifications
- -----------------
Certain prior-year amounts have been reclassified for comparative purposes to
conform to the current-year presentation.
Cash and cash equivalents
- -------------------------
The Company considers all short-term, highly liquid investments with an original
maturity date of three months or less to be cash equivalents. Cash and cash
equivalents are stated at cost, which approximates fair value. The Company has
concentrated its credit risk for cash by maintaining its cash in one money
market account. The maximum loss that would have resulted from that risk totaled
$4,351,891 at June 30, 1999. The Company has not experienced any losses in the
account and believes it is not exposed to any significant credit risk to cash.
Property and equipment
- ----------------------
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets, which is estimated to be three to five years.
Expenditures for repairs and maintenance are charged to expense when incurred.
Expenditures for major renewals and betterments, which extend the useful lives
of existing equipment, are capitalized and depreciated. Upon retirement or
disposition of property and equipment, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
recognized in the consolidated statements of operations.
Leasehold improvements are amortized over the life of the existing lease of
sixty months.
F-9
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of significant accounting policies continued:
Intangible assets
- -----------------
Intangible assets are stated net of accumulated amortization and include a
non-compete agreement acquired as a result of the Company's acquisition of Wings
Online, Inc. and goodwill resulting from the Company's purchase of equipment and
certain other assets from AVX Communications. Amortization is provided using the
straight-line method over three years. The Company evaluates on a regular basis
whether events and circumstances have occurred that indicate that the carrying
amount of intangible assets may warrant revision. Management believes that there
has been no impairment to the intangible assets as reflected in the Company's
consolidated financial statements as of June 30, 1999.
Long-lived assets
- -----------------
The Company periodically reviews the values assigned to long-lived assets, such
as property and equipment, to determine whether any impairments are other than
temporary. Management believes that the long-lived assets in the accompanying
balance sheets are appropriately valued.
Sources of supplies
- -------------------
The Company relies on third-party networks, local telephone companies and other
companies to provide data communications capacity. Although management feels
alternative telecommunications facilities could be found in a timely manner, any
disruption of these services could have an adverse effect on operating results.
Income taxes
- ------------
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and tax basis
of assets and liabilities for financial and income tax reporting. The deferred
tax assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes.
Revenue recognition
- -------------------
The Company recognizes revenue when services are provided.
F-10
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of significant accounting policies continued:
Stock-based compensation
- ------------------------
SFAS No. 123, "Accounting for Stock-Based Compensation" permits the use of
either a fair value based method or the method defined in Accounting Principles
Board Opinion 25, "Accounting for Stock Issued to Employees" ("APB 25") to
account for stock-based compensation arrangements. Companies that elect to use
the method provided in APB 25 are required to disclose pro forma net income and
earnings per share that would have resulted from the use of the fair value based
method. The Company has elected to continue to determine the value of
stock-based compensation arrangements under the provisions of APB 25 and,
accordingly, has included pro forma disclosures under SFAS No. 123 in Note E.
Fair value of financial instruments
- -----------------------------------
SFAS 107, "Disclosure About Fair Value of Financial Instruments," requires
certain disclosures regarding the fair value of financial instruments. The
Company has determined, based on available market information and appropriate
valuation methodologies, the fair value of its financial instruments
approximates carrying value. The carrying amounts of cash, accounts receivable,
prepaid expenses, accounts payable, accrued compensation, and other accrued
liabilities approximate fair value due to the short-term maturity of the
instruments.
Loss per share
- --------------
In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings Per Share" (SFAS 128). The Company adopted SFAS 128 for the
two year period ended June 30, 1999. Under SFAS 128, net loss per share-basic
excludes dilution and is determined by dividing loss available to common
shareholders by the weighted average number of common shares outstanding during
the period. Net loss per share-diluted reflects the potential dilution that
could occur if securities and other contracts to issue common stock were
exercised or converted into common stock. As of June 30, 1999, there were 87,999
stock options and 47,000 common stock purchase warrants outstanding which were
not included in the calculation net loss per share-diluted because they were
antidilutive.
Recently issued accounting pronouncements
- -----------------------------------------
The Company has adopted the following new accounting pronouncements for the year
ended June 30, 1999. There was no material effect on the financial statements
presented from the adoption of the new pronouncements.
SFAS No. 130, "Reporting Comprehensive Income," requires the reporting and
display of total comprehensive income and its components in a full set of
general-purpose financial statements.
F-11
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of significant accounting policies continued:
Recently issued accounting pronouncements continued
- ---------------------------------------------------
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is based on the "management" approach for reporting segments. The
management approach designates the internal organization that is used by
management for making operating decisions and assessing performance as the
source of the Company's reportable segments. SFAS No. 131 also requires
disclosure about the Company's products, the geographic areas in which it earns
revenue and holds long-lived assets, and its major customers.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Post-retirement
Benefits," which requires additional disclosures about pension and other
post-retirement benefit plans, but does not change the measurement or
recognition of those plans.
Statement of Position ("SOP") 98-1, "Accounting for the costs of Computer
Software Developed or Obtained for Internal Use." This SOP requires that
entities capitalize certain internal-use software costs once certain criteria
are met.
SOP 98-5, "Reporting on the costs of Start-Up Activities." SOP 98-5 provides,
among other things, guidance on the reporting of start-up costs and organization
costs. It requires costs of start-up activities and organization costs to be
expensed as incurred.
The Company will continue to review these new accounting pronouncements over
time, in particular SFAS 131 and SOP 98-1, to determine if any additional
disclosures are necessary based on evolving circumstances.
Note B: Related party transactions
- ----------------------------------
For the year ended June 30, 1999
- --------------------------------
During the year ended June 30, 1999 the President of the Company and another
entity owned by the President of the Company, paid on behalf of the Company
certain expenses totaling $103,976. The President also advanced $35,648 to the
Company for working capital purposes. The Company repaid $29,725 to the
President and issued a seven and half percent note payable to the President for
the remaining $109,899. As of June 30, 1999, the Company repaid the note and
accrued interest of $3,241 for a total of $113,140.
The President advanced the Company an additional $105,000 in exchange for a note
payable to the President. The Company repaid the $105,000 within sixty days of
issuance of the note, and did not accrue any interest.
F-12
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note B: Related party transactions continued
- --------------------------------------------
The Company paid $35,000 to an affiliate for consulting fees related to the
Company's proposed plan to expand into international markets.
From time to time during the year ended June 30, 1999, the Company paid certain
expenses related to ventures the President is associated with, but have no
relative business purpose to the Company. The amounts totaled $97,360 and have
been deducted from amounts accrued and payable to the President pursuant to his
employment agreement. See Note H Commitments and contingencies.
For the year ended June 30, 1998 and the period November 28, 1995 (inception)
- -----------------------------------------------------------------------------
through June 30, 1998 -
- ---------------------
On July 3, 1996, the Company issued 300,000 shares of its no par value preferred
stock to an officer and an affiliate company for $3,000. In June 1998, the
preferred shares were cancelled and the related $3,000 was reclassified as a
capital contribution.
Note C: Property and equipment
- -------------------------------
Furniture and equipment consisted of the following at June 30:
1999 1998
----------- -----------
Office equipment ............................... $ 44,588 $ 8,196
Computer equipment.............................. 1,468,317 66,966
Software........................................ 56,588 49,562
Artwork......................................... 9,545 --
Leasehold improvements.......................... 16,485 --
----------- -----------
1,595,523 124,724
Less accumulated depreciation................... (266,159) --
----------- -----------
$ 1,329,364 $ 124,724
=========== ===========
Depreciation expense for the years ended June 30, 1999, 1998 and inception
(November 28, 1995) through June 30, 1999 totaled $271,877, $-0-, and $271,877,
respectively.
As discussed in Note A to the financial statements, the Company has not yet
fully commenced planned operations. Certain computer equipment that was acquired
during the year ended June 30, 1999 has not yet been placed in service. The cost
of the equipment not being used at June 30, 1999 is $434,144 and accordingly the
Company has not recorded any depreciation expense related to the unused
equipment. Management expects the equipment to be placed in service during the
Company's next fiscal year.
F-13
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note D: Shareholders' equity
- ----------------------------
Preferred Stock
- ---------------
The Company is authorized to issue five million shares of no par value preferred
stock which may be issued in series with such designations, preferences, stated
values, rights, qualifications or limitations as determined by the Board of
Directors.
During the year ended June 30, 1999, the Company issued 60,000 shares of its
convertible preferred stock with a stated value of $10 per share in exchange for
certain software used in transacting credit card business over the internet. The
preferred stock was convertible into the Company's common stock based on a
discount of the average bid price for the Company's common stock on the date of
conversion. The preferred stock was converted into 300,000 shares in November
1998.
During the year ended June 30, 1999, the Company issued 100,000 shares of its
convertible redeemable preferred stock with a stated value of $10 per share,
along with 2,607,660 shares of its common stock in exchange for computer
equipment at a cost of $2,000,000. 480,000 of those shares were issued pursuant
to an exemption from registration as discussed below. Based on a third party
independent appraisal of the equipment, the Company recorded the transaction at
the fair value of the equipment of $1,724,520.
Common Stock
- ------------
On June 30, 1998, the Company issued 200,000 (restated from 2,000,000 for
reverse stock split) shares of its no par value common stock pursuant to an
Asset Purchase and Sale Agreement, whereby the Company would receive certain
assets from PACT Communication Group, Inc. - See Note G.
On October 16, 1998 the Company reversed its 4,400,000 outstanding common shares
to 440,000 to give effect to a one for ten reverse split approved by the
shareholders.
On December 31, 1998, the board of directors approved a three for one common
stock dividend to shareholders of record as of January 6, 1999. The number of
shares issued in the dividend of 15,525,081 was greater than twenty five percent
of the outstanding shares prior to the dividend, therefore the Company has
accounted for the transaction as if it were a forward three-for-one stock split.
F-14
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note D: Shareholders' equity continued
- --------------------------------------
Common stock continued
- ----------------------
During the year ended June 30, 1999 the Company sold 1,039,248 of its no par
value common stock in exchange for $925,000 in cash, $42,400 of equipment (see
discussion of equipment acquired for $2,000,000 above) and services valued at
the cost of the services of $32,600. The offerings were conducted on behalf of
the Company through its executive officers and directors. The shares offered
were not registered and were offered pursuant to an exemption from registration
claimed under Section 3(b) of the Securities Act of 1933, as amended, and Rule
504 of Regulation D promulgated thereunder. The Company incurred $17,950 in
legal costs related to the offerings. The offering costs were paid in $2,950
cash and in the issuance of 24,000 shares of the Company's restricted stock
valued at the cost of the services of $15,000. The costs have been deducted from
the offering proceeds and are recorded as such in the accompanying consolidated
financial statements.
Shares sold to one shareholder in conjunction with the above-mentioned offering
also included 47,000 warrants to purchase additional shares of the Company's no
par value common stock for $9.40 per share. The warrants may be exercised
anytime beginning January 25, 2000 and prior to January 25, 2001. The Company
valued the warrants at $7,191 using pricing methods similar to those used in
valuing options under SFAS 123.
In January 1999 the Company acquired from two different individuals the rights
to the domain names Boats Online and Cars Online for $10,000 and $4,000,
respectively. The purchase price was paid in 1,000 and 500 shares of the
Company's restricted stock, respectively valued at $5,000 and $2,000 along with
$5,000 and $2,000 in cash, respectively.
On February 12, 1999 the Company issued 29,326 shares of its restricted common
stock valued at the market price of the Company's free-trading common shares or
$200,000 and $135,000 in cash, in exchange for all of the outstanding shares of
Wings Online, Inc. - See Note G.
On May 3, 1999 the Company entered into an agreement with AVX Communications
whereby the Company would receive certain assets valued at $300,000 in exchange
for the issuance of 39,894 shares of the Company's restricted common stock. -
See Note G.
On May 27, 1999, pursuant to an exemption from registration claimed under
Section 3(b) of the Securities Act of 1933, as amended, and Rule 506 of
Regulation D promulgated thereunder, the Company sold 910,747 shares of its
common stock for $5,000,000 to one shareholder. The costs of the offering were
legal and finders' fees of $350,000, which have been deducted from the proceeds
of the offering in the accompanying consolidated financial statements.
F-15
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note E: Stock based compensation
- --------------------------------
On December 11, 1998, pursuant to employment contracts with key management and
officers, the Company issued 175,000 shares of the Company's common stock as
compensation to three employees. The Company has recorded stock compensation
expense of $514,063 based on the market price of the Company's free-trading
common stock as of the date of the grant which was December 1, 1998.
On January 5, 1999 the Company issued 10,000 shares of its restricted common
stock to a former officer of the Company as payment for services. The stock was
valued at the market price of the Company's free-trading common stock as of
January 5, 1999 and accordingly the Company has recorded $101,250 in stock
compensation expense.
On January 5, 1999 the Company issued 7,667 shares of its restricted common
stock, valued at the market price of the Company's free-trading common stock as
of January 5, 1999, to its board of directors and accordingly recorded a $77,628
charge to operations as directors' fees.
On February 12, 1999, the Company issued to an officer of the Company 100,000
shares of the Company's restricted common stock as payment pursuant to the
officer's employment agreement. The employment agreement dated July 1, 1998
states that the officer is to receive 50,000 shares per year, 25,000 of which is
to be issued each six months beginning January 1. The Company failed to issue
the officer the 25,000 shares prior to the three for one dividend effective
January 6, 1999. Therefore to make the officer whole, the Company issued 100,000
shares, valuing them at the total value of 25,000 shares at the market price of
the Company's free-trading stock which was $6.187 on January 1, 1999, resulting
in stock compensation expense of $154,675.
On March 2, 1999 as payment for $5,000 in consulting services, the Company
issued 4,000 shares of its restricted common stock, valued at the cost of the
services.
On March 10, 1999 as payment for $10,000 in consulting services, the Company
issued 677 shares of its restricted common stock, valued at the cost of the
services.
F-16
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note E: Stock based compensation continued
- -------------------------------------------
Common stock options
- --------------------
On September 9, 1998 the board of directors approved a performance bonus plan in
the form of common stock options with an exercise price of $.012 to the
President and CEO of the Company. The President would receive one share of
restricted common stock for every $100.00 of earning assets (increase in total
assets) generated prior to and after September 9, 1998. The number of shares to
be received as options are to be calculated at the end of each quarter and
expire five years from the date of grant which is considered to be the date both
the strike price and number of shares are determined. On December 1, 1998, based
on unaudited quarterly financial information, the board of directors granted to
the President options to purchase 1,310,693 shares of the Company's restricted
common stock for $.012 per share. The Company recorded stock compensation
expense in accordance with APB 25 of $3,998,269 which was the difference between
the exercise price of $.012 and the market value of the Company's common stock
on December 1, 1998 of $3.05. The President exercised the options in December of
1998. No other options have been granted pursuant to the performance bonus plan.
On March 26, 1999, the Company granted options to its three outside directors to
purchase 5,000 shares of the Company's common stock for $6.00 per share, which
was the market value of the Company's common stock on that date. The options
vest in two equal increments of 2,500 shares six months and twelve months from
the date of grant, as long as the option holders are members of the board at
time of vesting. The options expire two years from date of vesting. As of June
30, 1999 none of the options were vested.
On March 30, 1999 the Company granted options for 9,999 shares of its common
stock, exercisable for $6.00 per share. The options vest on March 30, 2000 and
expire on March 30, 2002. The options were granted at the market value of the
Company's common stock as of March 30, 1999. In accordance with APB 25, no
compensation expense was recorded.
On April 5, 1999 the Company granted options for 25,000 shares of its common
stock, exercisable for $4.00 per share, to a former officer. The options were
vested on the date of grant and expire April 5, 2000. The options were granted
at the market value of the Company's common stock as of April 5, 1999. In
accordance with APB 25, no compensation expense was recorded.
On May 17, 1999 the Company granted options for 10,000 shares of its common
stock, exercisable for $7.25 per share to certain consultants. The options were
granted at the market value of the Company's common stock as of May 17, 1999.
They are fully vested and expire on May 17, 2001. In accordance with APB 25, no
compensation expense was recorded.
F-17
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note E: Stock based compensation continued
- -------------------------------------------
Common stock options continued
- ------------------------------
On May 17, 1999 the Company granted options for 28,000 shares of its common
stock, exercisable for $7.25 per share to certain employees. The options were
granted at the market value of the Company's common stock as of May 17, 1999.
The options vest in six months from the date of grant. As of June 30, 1999 none
of the options were vested. In accordance with APB 25, no compensation expense
was recorded.
Summary
- -------
A summary of the status of the Company's stock option awards as of June 30,
1999, and the changes during the period ended June 30, 1999 is presented below:
Fixed Options Number
- ----------------------------------------------------
Outstanding at June 30, 1998........... --
Granted................................ 1,398,692
Exercised.............................. (1,310,693)
Canceled............................... --
----------
Outstanding at June 30, 1999........... 87,999
==========
The weighted average exercise price per share for the 87,999 outstanding options
at June 30, 1999 was $5.97.
SFAS 123
- --------
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 (SFAS 123), "Accounting form Stock-Based
Compensation". SFAS 123 encourages the use of a fair value based method of
accounting for compensation expense associated with stock option awards and
similar plans. SFAS 123 permits the continued use of the intrinsic value based
method prescribed by APB 25, but requires additional disclosures, including pro
forma calculations of net earnings and earnings per share, as if the fair value
method of accounting prescribed by SFAS 123 had been applied for the applicable
periods.
The fair value of each option granted has been estimated as of the grant date
using the Black-Scholes option-pricing model with the following weighted-average
assumptions: risk-free interest rate of 5.63 percent, expected volatility of 80
percent, expected life of two years, and no expected dividends. During the year
ended June 30, 1999, the weighted-average fair values of options granted were
$2.03 for options granted with an exercise price equal to the market price of
the stock.
F-18
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note E: Stock based compensation continued
- -------------------------------------------
SFAS 123 continued
- ------------------
Had compensation expense been determined based on the fair value at the grant
date, and charged to expense over vesting periods, consistent with the
provisions of SFAS 123, the Company's net loss and net loss per share would have
increased to the pro forma amounts indicated below:
Amount
------------------
As reported:
Net loss...................................... $(8,012,419)
Net loss per share - basic and diluted........ $ (0.71)
Pro Forma:
Net loss...................................... $(8,140,406)
Net loss per share - basic and diluted........ $ (0.72)
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully
transferable. Option valuation models also require the input of highly
subjective assumptions such as expected option life and expected stock price
volatility. Because the Company's stock-based awards have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, the
Company believes that the existing option valuation models do not necessarily
provide a reliable single measure of the fair value of its stock-based awards.
F-19
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note F: Income taxes
- ---------------------
A reconciliation of the U.S. statutory federal income tax rate to the effective
tax rate follows for the years ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
November 28,
1995
(Inception)
June 30, Through
--------------------------------- June 30,
1999 1998 1999
-------------- -------------- -------------------
<S> <C> <C> <C>
U.S. statutory federal rate.................. 34.00% 15.00% 34.00%
State income tax rate,
net of federal benefit.................... - 4.25% -
Permanent differences:
Deferred offering costs...................... 1.42% 1.42%
Excess officers compensation................. (15.42%) (15.42%)
Other........................................ (.02%) (.02%)
Temporary differences:
Depreciation expense......................... .20% .20%
Allowance for bad debt....................... (3.35%) (3.35%)
Net operating loss for which no tax
benefit is currently available............. (16.83) (19.25%) (16.83)
-------------- -------------- -------------------
- % -% - %
============== ============== ===================
</TABLE>
At June 30, 1999 and 1998, deferred taxes consisted of the following:
<TABLE>
<CAPTION>
June 30,
-----------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C>
Deferred tax assets,
Net operating loss....................................... $ 1,349,662 $ 1,064
Valuation allowance......................................... (1,349,662) (1,064)
------------------ ------------------
Net deferred taxes.................................... $ - $ -
================== ==================
</TABLE>
The valuation allowance offsets the net deferred tax asset for which there is no
assurance of recovery. The change in the valuation allowance for the years ended
June 30, 1999 and 1998 totaled $1,348,598 and $678, respectively. The net
operating loss carryforward expires through the year 2018.
F-20
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note F: Income taxes, continued
- --------------------------------
The valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the deferred tax asset will be
realized. At that time, the allowance will either be increased or reduced;
reduction could result in the complete elimination of the allowance if positive
evidence indicates that the value of the deferred tax assets is no longer
impaired and the allowance is no longer required.
Should the Company undergo an ownership change as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change will be subject to an annual limitation
which could reduce or defer the utilization of these losses.
Note G: Acquisitions
- ---------------------
Wings Online, Inc.
- -----------------
On February 15, 1999 the Company purchased all of the outstanding common stock
of Wings Online, Inc. ("Wings") in exchange for $135,000 cash and 29,326 of the
Company's common stock valued at $200,000. Net assets of Wings as of the date of
the acquisition totaled $3,372, which approximated fair value. As part of the
acquisition, the previous shareholders of Wings entered into an agreement to not
compete with the Company for thirty-six months. The excess of the purchase price
over the fair value of the assets, in the amount of $331,628 has been allocated
to the non-compete agreement and is being amortized over the life of the
agreement. Amortization expense of $41,453 has been recorded in the accompanying
consolidated financial statements for the year ended June 30, 1999.
The Company has recorded the transaction as a purchase in accordance with
Accounting Principles Board Opinion No. 16. The accompanying consolidated
financial statements include the results of operations of Wings from the date of
the acquisition, February 15, 1999 through June 30, 1999.
The following unaudited pro forma condensed consolidated statement of operations
gives effect to the acquisition of Wings as if it had occurred at the beginning
of the period presented. The unaudited pro forma financial information should be
read in conjunction with the separate audited financial statements and notes
thereto of each of the companies included in the pro forma.
The unaudited pro forma condensed consolidated statement of operations are not
necessarily indicative of results of operations had the acquisition occurred at
the beginning of the periods presented nor of results to be expected in the
future.
F-21
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note G: Acquisitions continued
- -------------------------------
Wings Online, Inc. continued
- ----------------------------
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended June 30, 1999
Pro forma
Quest Net Wings Adjustments Consolidated
--------- ----- ----------- ------------
<S> <C> <C> <C> <C>
Revenues........................................ $ 1,070,198 $ 105,169 (58,705) $ 1,116,662
Operating expenses.............................. (9,085,240) (97,668) (7,798) (9,190,706)
(Loss) income from operations................... (8,015,042) 7,501 (66,503) (8,074,044)
Interest expense................................ (5,943) - - (5,943)
Interest income................................. 8,566 - - 8,566
Net (loss) income............................... (8,012,419) 7,501 (66,503) (8,071,421)
Net (loss) income per share - basic and diluted. $ (0.71) $ 37.50 $ (0.71)
Basic and diluted shares outstanding............ 11,351,263 200 11,351,263
</TABLE>
Pro forma adjustments
- ---------------------
The consolidated financial statements of Quest Net include the results of
operations of Wings for the period February 15, 1999 through June 30, 1999. The
financial information of Wings presented in the pro forma statement are the
results of operations for Wings for the year ended June 30, 1999. Therefore the
adjustments reduce the pro forma consolidated information for the duplication of
the period February 15, 1999 through June 30, 1999 by the following: Revenues:
$58,705, Operating expenses: $61,292, Loss from operations and Net loss: $2,587.
The adjustments also include the increased amortization expense resulting from
the non-compete agreement as if the agreement was amortized for the full year of
$69,090.
The unaudited pro forma condensed consolidated financial information do not show
any adjustments for a change in the income tax benefit as the total pro forma
consolidated benefit for income taxes would be offset by any valuation allowance
due to any deferred tax asset derived from net operating losses. The valuation
allowance offsets the net deferred tax asset for which there is no assurance of
recovery.
Asset acquisitions
On May 3, 1999, the Company purchased certain assets, including computers,
software licenses, video editing and studio equipment, office equipment,
inventory, contracts for software development and interactive kiosk systems and
related software for $300,000 from AVX Communications. The purchase price was
paid in 39,894 shares of the Company's restricted common stock, valued at the
average bid and asked price for the three trading days prior to closing. The
fair value of the assets received is $89,144.
F-22
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note G: Acquisitions continued
- -------------------------------
Asset acquisitions continued
- ----------------------------
The excess of the purchase price over the fair value of the assets received is
$210,856 and has been recorded as goodwill in the accompanying consolidated
financial statements. As of June 30, 1999, the assets were still in transit and
had not been placed in service. The $89,144 attributed to the equipment and
software is recorded in the Company's consolidated balance sheet as "Property
not in service." As of June 30, 1999 the Company had not amortized any of the
goodwill, however management intends to assess the estimated useful life of the
goodwill once the assets are place in service and amortize the goodwill on a
straight-line basis over the estimated useful life.
On June 24, 1998, the Company entered into an agreement with PACT Communication
Group, Inc. ("Pactcom") to acquire certain assets of Pactcom in exchange for
2,000,000 shares of the Company's restricted common stock. The Company's
President was also a significant shareholder and officer of Pactcom, therefore
the transaction was recorded as a transfer of assets between entities under
common control and has been recorded at the historical cost basis of Pactcom as
determined under generally accepted accounting principles.
The assets acquired include equipment, software, furniture and an office lease
deposit, which have been recorded on the Company's books at $125,274. The
Company also acquired Pactcom's contracts with BellSouth Telecommunications,
Inc. ("Bellsouth") and WorldPass Communications Corporation ("WorldPass"),
office leases and certain employment agreements. There was no value assigned to
any of the above contracts in conjunction with the acquisition. Based on the
total value assigned to the assets received, the Company has valued the 200,000
(restated from 2,000,000) shares issued, as consideration for the assets, at
$125,274.
During the year ended June 30, 1999, the Company discovered that the BellSouth
contract could not be assigned by Pactcom to the Company and Pactcom has
subsequently terminated the contract. Amounts due under the contract for any
services or termination costs have not been accrued on the Company's records as
management believes that the costs should accrue to Pactcom.
The WorldPass contract was terminated during the year ended June 30, 1999.
F-23
<PAGE>
QUEST NET CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note H: Commitments and contingencies
- --------------------------------------
Litigation
- ----------
The Company is involved in various legal proceedings that have arisen in the
ordinary course of business. While it is not possible to predict the outcome of
such proceedings with certainty, in the opinion of the Company's management, all
such proceedings should not materially result in any liability, which would have
a material adverse effect on the financial position, liquidity or results of
operations of the Company.
As noted in the accompanying consolidated financial statements, the Company has
recorded a reserve for the doubtful collection of accounts receivable totaling
$867,842 of which substantially all of which is due from one customer. The
receivables resulted from the Company's sale of certain software and revenue
generated from the installation and modifications to the software. The Company
has filed lawsuit against the customer. The lawsuit is in the discovery stage
and management is unable to determine at June 30, 1999 the outcome of the
lawsuit.
Employment contracts
- --------------------
The Company has employment agreements and arrangements with its executive
officers. The agreements are dated March 20, 1998 and July 1, 1998. The
contracts provide for an annual issuance of 300,000 and 50,000 shares of the
Company's common stock, respectively, with fifty percent of the annual awards
payable every six months. During the year ended June 30, 1999 the Company
incurred compensation expense related to the contracts of $1,729,675, resulting
from the issuance of 175,000 common shares valued at the market price of the
Company's common stock on the anniversary date of the awards. 160,022 shares not
issued, but due at June 30, 1999 total $1,037,015, net of 14,978 shares valued
at $97,360 for the repayment of certain advances made to the President of the
Company. The accrual is recorded in the accompanying consolidated financial
statements as accrued stock compensation expense. - See Note B - Related party
transactions
The Company had employment agreements with certain key management during the
year June 30, 1999. The agreements were terminated during the year. Amounts paid
as stock compensation pursuant to the agreements were 25,000 shares valued at
$73,438, which is recorded in the accompanying consolidated financial statements
as stock compensation expense. Amounts due at June 30, 1999 for unissued common
stock awards of 12,500 shares have been accrued as stock compensation expense of
$81,250 and is recorded in the accompanying consolidated financial statements as
accrued stock compensation expense.
F-24
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note H: Commitments and contingencies continued
- ------------------------------------------------
Non-cancelable leases
- ---------------------
The Company leases office space under three separate non-cancelable operating
leases that expire in January 2004. Total office rent expense incurred under
these leases for the years ended June 30, 1999 and 1998 and for the period
November 28, 1995 (inception) through June 30, 1999 was $25,565, $-0- and
$25,565, respectively. Future minimum lease payments for the leases with initial
terms in excess of one year as of June 30, 1999 are as follows:
June 30, 2000.............. $ 117,494
June 30, 2001.............. $ 117,494
June 30, 2002.............. $ 117,494
June 30, 2003.............. $ 117,494
June 30, 2004.............. $ 65,698
Note I - Year 2000 Compliance
- -----------------------------
The Year 2000 issue ("Y2K") is the result of computer programs written using two
digits rather than four to define the applicable year. Any of the Company's
computer and telecommunications programs that have date sensitive software may
recognize a date using "00" as the year 1900 instead of 2000. This could result
in system failure or miscalculations causing disruptions in operations,
including the ability to process transactions, send invoices, or engage in
similar normal business activities. The Company is currently assessing its
current computer systems and has yet to determine the extent, if any, of
non-compliance. There is no certainty that the Company will not experience Y2K
issues.
The Company cannot determine the extent to which the Company is vulnerable to
third parties' failure to remediate their own Y2K problems. As a result, there
can be no guarantee that the systems of other companies on which the Company's
business relies will be timely converted, or that failure to convert by another
company, or a conversion that is incompatible with the Company's systems, would
have a material adverse affect on the Company. In view of the foregoing, there
can be no assurance that the Y2K issue will not have a material adverse effect
on the Company's business.
Note J - Subsequent event
- -------------------------
In July 1999, the Company redeemed its outstanding preferred stock for
$1,000,000. Due to the significance of the transaction, the accompanying
consolidated financial statements reflect the redemption as though it occurred
on June 30, 1999.
F-25
<PAGE>
WINGS ONLINE, INC.
------------------
FINANCIAL STATEMENTS
With
INDEPENDENT AUDITORS' REPORT
June 30, 1999
Prepared By:
Cordovano and Harvey, P.C.
--------------------------
Certified Public Accountants
Denver, Colorado
<PAGE>
<TABLE>
<CAPTION>
WINGS ONLINE, INC.
------------------
Index to Financial Statements
Page
----
<S> <C>
Independent auditors' report................................................................................. F-27
Balance sheet, June 30, 1999................................................................................. F-28
Statements of operations, for the years ended June 30, 1999 and 1998......................................... F-29
Statement of shareholder's equity, July 1, 1997 through
June 30, 1999........................................................................................... F-30
Statements of cash flows, for the years ended June 30, 1999 and 1998......................................... F-31
Summary of significant accounting policies................................................................... F-32
Notes to financial statements................................................................................ F-34
</TABLE>
F-26
<PAGE>
To the Board of Directors and Shareholders
Wings Online, Inc.
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of Wings Online, Inc. (an "S"
Corporation) as of June 30, 1999, and the related statements of operations,
shareholders' equity and cash flows for the years ended June 30, 1999 and 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 audit.
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 Wings Online, Inc., as of June
30, 1999, and the results of its operations and its cash flows for the years
ended June 30, 1999 and 1998 in conformity with generally accepted accounting
principles.
Cordovano and Harvey, P.C.
Denver, Colorado
July 10, 1999
F-27
<PAGE>
<TABLE>
<CAPTION>
WINGS ONLINE, INC.
------------------
Balance Sheet
June 30, 1999
<S> <C>
ASSETS
CURRENT ASSETS
Cash.................................................................................................... $ 15,557
Accounts receivable, less allowance for doubtful accounts
totaling $5,175...................................................................................... 5,175
----------
TOTAL CURRENT ASSETS 20,732
PROPERTY AND EQUIPMENT, less accumulated depreciation
of $7,891 (Note C)...................................................................................... 10,186
OTHER ASSETS................................................................................................. 716
----------
$ 31,634
==========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable........................................................................................ $ 10,684
Accrued liabilities..................................................................................... 6,106
Notes payable, related party (Note B)................................................................... 14,059
----------
TOTAL CURRENT LIABILITIES 30,849
==========
SHAREHOLDERS' EQUITY
Preferred stock, $.0001 par value; 5,000,000 shares authorized;
-0- shares issued and outstanding.................................................................... -
Common stock, $.0001 par value; 50,000,000 shares authorized;
200 shares issued and outstanding.................................................................... -
Additional paid-in capital.............................................................................. 200
Retained earnings....................................................................................... 585
----------
TOTAL SHAREHOLDER'S EQUITY 785
----------
$ 31,634
==========
</TABLE>
See accompanying summary of significant accounting policies
and notes to the financial statements.
F-28
<PAGE>
<TABLE>
<CAPTION>
WINGS ONLINE, INC.
------------------
Statements of Operations
For The Years Ended
June 30,
--------
1999 1998
---- ----
<S> <C> <C>
SALES............................................................................... $ 105,169 $ 46,161
COST OF SALES....................................................................... 19,316 7,458
---------- -----------
GROSS PROFIT 85,853 38,703
EXPENSES
Selling, general and administrative............................................ 52,924 17,998
Provision for uncollectible accounts........................................... 25,428 -
---------- -----------
NET INCOME $ 7,501 $ 20,705
========== ===========
Basic earnings per common share..................................................... $ 37.50 $ 103.52
========== ===========
Basic weighted average common shares outstanding.................................... 200 200
========== ===========
</TABLE>
See accompanying summary of significant accounting policies
and notes to the financial statements.
F-29
<PAGE>
<TABLE>
<CAPTION>
WINGS ONLINE, INC.
Statement of Shareholder's Equity
July 1, 1997 through June 30, 1999
Additional Total
Preferred Stock Common Stock Paid-In Retained Shareholders'
Shares Par Value Shares Par Value Capital Earnings Equity
------ --------- ------ --------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1997........................... - $ - 200 $ - $ 200 $ (935) $ (735)
Net income for the year ended
June 30, 1998................................ - - - - - 20,705 20,705
---- ----- ------- ------- -------- --------- ----------
BALANCE, JUNE 30, 1998 - - 200 - 200 19,770 19,970
Distributions paid to shareholders.............. - - - - - (26,686) (26,686)
Net income for the year ended
June 30, 1999................................ - - - - - 7,501 7,501
---- ----- ------- ------- -------- --------- ----------
BALANCE, JUNE 30, 1999 - $ - 200 $ - $ 200 $ 585 $ 785
==== ===== ======= ======= ======== ========= ==========
</TABLE>
See accompanying summary of significant accounting policies
and notes to the financial statements.
F-30
<PAGE>
<TABLE>
<CAPTION>
WINGS ONLINE, INC.
------------------
Statements of Cash Flows
For The Years Ended
June 30,
--------
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................................................ $ 7,501 $ 20,705
Transactions not requiring cash:
Depreciation and amortization...................................................... 5,367 3,528
Loss on write-off of organization costs............................................ 125 -
Allowance for uncollectible accounts............................................... 5,175 -
Changes in current assets and current liabilities:
Decrease in receivables and other current assets................................... 3,561 -
Increase in accounts payable and other
current liabilities............................................................. 16,412 377
-------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 38,141 24,610
-------- ---------
INVESTING ACTIVITIES
Purchases of furniture and equipment.................................................. (11,492) (2,507)
-------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES (11,492) (2,507)
-------- ---------
FINANCING ACTIVITIES
Distributions paid to officers........................................................ (26,686) -
Advances paid to officers............................................................. - (26,825)
Repayment advances from officers (Note B)............................................. - 4,702
Proceeds from notes payable (Note B).................................................. 14,059 -
-------- ---------
NET CASH (USED IN) FINANCING ACTVITIES (12,627) (22,123)
-------- ---------
NET CHANGE IN CASH 14,022 (20)
Cash, beginning of period.................................................................. 1,535 1,555
-------- ---------
CASH, END OF PERIOD $ 15,557 $ 1,535
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.............................................................................. $ 1,220 $ 11
======== =========
Income taxes.......................................................................... $ - $ -
======== =========
</TABLE>
See accompanying summary of significant accounting policies
and notes to the financial statements.
F-31
<PAGE>
WINGS ONLINE, INC.
------------------
Summary of Significant Accounting Policies
June 30, 1999
Use of estimates
- ----------------
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
Cash equivalents
- ----------------
For the purpose of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Property, equipment and depreciation
- ------------------------------------
Property and equipment is stated at cost and depreciated using the straight-line
method over the estimated useful lives of the assets. Maintenance and repair
costs are charged to expense as incurred. Gains or losses on disposition of
property and equipment are reflected in income.
Sales
- -----
Sales consist of monthly fees charged to customers for Internet advertisements.
Internet advertisement sales are recognized in the period ads are run.
Income Taxes
- ------------
The Company, with the consent of its shareholders, has elected under the
Internal Revenue Code to be an S corporation. In lieu of corporation income
taxes, the shareholders of an S corporation are taxed on their proportionate
share of the Company's taxable income. Therefore, no provision or liability for
federal income taxes has been included in the accompanying financial statements.
Fair value of financial instruments
- -----------------------------------
The Company has determined, based on available market information and
appropriate valuation methodologies, that the fair value of its financial
instruments approximates carrying value. The carrying amounts of cash,
receivables, payables and other current liabilities approximate fair value due
to the short-term maturity of the instruments.
Earnings per common share
- -------------------------
Effective December 31, 1997, SFAS 128 "Earnings per Share" requires a dual
presentation of earnings per share-basic and diluted. Basic earnings per common
share has been computed based on the weighted average number of common shares
outstanding. Diluted earnings per share reflects the increase in weighted
average common shares outstanding that would result from the assumed exercise of
outstanding stock options. However, the Company has a simple capital structure
for the periods presented and, therefore, there is no variance between the basic
and diluted earnings per share.
F-32
<PAGE>
WINGS ONLINE, INC.
------------------
Summary of Significant Accounting Policies
June 30, 1999
Recently issued accounting pronouncements
- -----------------------------------------
The Company has adopted the following new accounting pronouncements for the year
ended December 31, 1998. There was no effect on the financial statements
presented from the adoption of the new pronouncements. SFAS No. 130, "Reporting
Comprehensive Income," requires the reporting and display of total comprehensive
income and its components in a full set of general-purpose financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is based on the "management" approach for reporting segments. The
management approach designates the internal organization that is used by
management for making operating decisions and assessing performance as the
source of the Company's reportable segments. SFAS No. 131 also requires
disclosure about the Company's products, the geographic areas in which it earns
revenue and holds long-lived assets, and its major customers. SFAS No. 132,
"Employers' Disclosures about Pensions and Other Post-retirement Benefits,"
which requires additional disclosures about pension and other post-retirement
benefit plans, but does not change the measurement or recognition of those
plans.
F-33
<PAGE>
WINGS ONLINE, INC.
------------------
Notes to Financial Statements
June 30, 1999
Note A: Nature of Organization
- --------------------------------
Wings Online, Inc. (the "Company") was incorporated in Florida on
November 29, 1995. The Company sells advertising space on its web
site to dealers and individuals that are looking to sell their
aircraft.
On February 15, 1999, the shareholders of the Company entered into
a Stock Purchase Agreement with Quest Net Corp. ("Quest"), whereby
the shareholders received $135,000 and 29,326 shares of Quest's no
par value common stock in exchange for 100 percent of the
outstanding common shares of the Company. As a result, the Company
became a wholly owned subsidiary of Quest.
The Company has a tax year-end of December 31; however, the Company
adopted an accounting year-end of June 30 to correspond to the
year-end of its parent corporation, Quest.
Note B: Related party transactions
- ------------------------------------
At July 1, 1998, the officers owed the Company $14,627 for advances
received in prior years. During the year ended June 30, 1999, the
Company advanced the officers an additional $13,350, and the
officers repaid $1,292. As a result, the officers owed the Company
$26,686 at June 30, 1999, which was reclassified as a distribution
to shareholders and is included in the accompanying financial
statements in retained earnings. The officers resigned on February
15, 1999. As a result, an allowance was established against 100
percent of the receivable as of June 30, 1999.
On June 3, 1999 and June 30, 1999, the Company received $6,000 and
$8,059, respectively, for working capital in exchange for
promissory notes from Quest. The notes are unsecured, non-interest
bearing and are due on demand. The $14,059 is included in the
accompanying balance sheet as notes payable, related party.
Note C: Property and equipment
- --------------------------------
Property and equipment consisted of the following at June 30, 1999:
Furniture and fixtures........................ $ 4,868
Equipment..................................... 13,209
-------------------
18,077
Less: accumulated depreciation................ (7,891)
-------------------
$ 10,186
===================
Depreciation expense totaled $5,292 and $3,459 for the years ended
June 30, 1999 and 1998, respectively.
F-34
<PAGE>
WINGS ONLINE, INC.
------------------
Notes to Financial Statements
June 30, 1999
Note D: Year 2000 compliance
- ------------------------------
The Year 2000 issue (Y2K) is the result of computer programs
written using two digits rather than four to define the applicable
year. Any of the Company's computer and telecommunications programs
that have date sensitive software may recognize a date using "00"
as the year 1900 instead of 2000. This could result in system
failure or miscalculations causing disruptions in operations,
including the ability to process transactions, send invoices, or
engage in similar normal business activities.
The Company cannot determine the extent to which the Company is
vulnerable to third parties' failure to remediate their own Y2K
problems. As a result, there can be no guarantee that the systems
of other companies on which the Company's business relies will be
timely converted, or that failure to convert by another company, or
a conversion that is incompatible with the Company's systems, would
have a material adverse affect on the Company. In view of the
foregoing, there can be no assurance that the Y2K issue will not
have a material adverse effect on the Company's business.
F-35
<PAGE>
APPENDIX A
GLOSSARY OF SELECTED TERMS
Set forth below are certain technical terms defined as they are used in this
Prospectus.
ACCESS Access refers to the means by which a call is
connected from the end user's telephone to a long
distance carrier (i.e., regular local lines or
dedicated private lines). See Dedicated Access and
Switched Access.
ACCESS CHARGES Expenses incurred by an IXC and paid to LECs
and CAPs for accessing the local networks of the LECs
in order to originate and terminate long distance
calls and provide the customer connection for private
line services.
BACKBONE A centralized high-speed network that interconnects
smaller, independent networks.
BANDWIDTH The number of bits of information which can move
through a communications medium in a given amount of
time.
BASE STATION Transmitter, receiver, signaling and related
equipment located within an area served by our
proposed wireless local network.
BUNDLING Combining several services for one charge.
COMMON CARRIERS Companies that own or operate transmission facilities
and offer telecommunication services to the general
public on a non-discriminatory basis.
CAP A company that provides its customers with an
(COMPETITIVE alternative for local transport of private
ACCESS PROVIDER) line and special access telecommunications services.
DS-3 A data communications circuit capable of transmitting
data at 45 megabits per second sometimes called a
T-3).
DEDICATED Telecommunications lines dedicated or reserved for
use by particular customers.
DEDICATED ACCESS Access to a long-distance network over private lines-
analog or digital-reserved for the specific use of a
single entity.
DIGITAL A method of storing, processing and transmitting
information through the use of distinct electronic or
optical pulses that represent the binary digits 0 and
1. Digital transmission and switching technologies
employ a sequence of these pulses to represent
information as opposed to the continuously variable
analog signal. The precise digital numbers minimize
distortion (such as graininess or snow in the case of
video transmission, or static or other background
distortion in the case of audio transmission).
FACILITIES-BASED A facilities-based provider of telecommunications
services possesses it own call switching equipment
and transmission lines, regionally or nationally.
FIBER-OPTIC: A technology using light as a transmission mechanism.
IXC A long distance carrier providing services between
(INTEREXCHANGE local exchanges.
CARRIER)
INTERNET A global collection of interconnected computer
networks which use TCP/IP, a common communications
protocol.
A-1
<PAGE>
IP (INTERNET The most important of the protocols on which the
PROTOCOL) Internet is based. It allows a packet to traverse
multiple networks on the way to it final destination
nodes, routes outgoing messages, and recognizes in
coming messages
K Kilobit. A kilobit means a thousand bits per second
LANS The interconnection of computers for the purpose of
(LOCAL AREA sharing files, programs and various devices such as
NETWORKS) printers and high-speed modems. LANs may include
dedicated computers or file servers that provide a
centralized source of shared files and programs.
LATA A geographic area within which a LEC can provide
(LOCAL ACCESS telephone services, and between which a long
TRANSPORT AREA) distance carrier provides services.
LEC A LEC is a local exchange carrier-that is, a carrier
which provides local exchange services in a LATA or
LATAs, but not between LATAs.
LOCAL LOOP: That portion of the public telecommunications
network which extends from the service provider's
switch to the individual home or business end-user.
LOCAL LOOP Local telephone services.
SERVICES
MBPS Mega bits per second. Million bits per second. Bit is
a contraction of the term Binary digit. It is the
smallest unit of information (data a computer can
process, representing either high or low, yes or no,
or 1 or 0. It is the basic unit in data
communications. A bit can have a value of zero (a
mark) or one (a space.)
NETWORK A location where installed switching equipment routes
SWITCHING long distance calls and information with respect to
CENTER calls such as the length of the call and the
telephone numbers of the calling and called parties
--
OC-12 (OPTICAL A transmission rate for SONET, a high speed data
SIGNAL LEVEL transport service used on fiber optic cabling, at
12 CARRIER ) 622 megabits per second.
OC-48 (OPTICAL A transmission rate for SONET, a high speed data
SIGNAL LEVEL transport service used on fiber optic cabling, at
48 CARRIER ) 2,488 megabits per second.
POP Point of Presence. A local number where customers
can access the Company's network. distance
PRI Primary rate Interface. The equivalent of a T-1
circuit for the Integrated Services Digital Network
(ISDN). The ISDN can provide videoconferencing and
ultra faster data communications.
PROTOCOL An all-inclusive term used to describe the various
control functions, tuning and methodology standards
by which a communications system operates, as well as
any other equipment system characteristics necessary
to ensure compatibility.
SWITCH A switch is equipment that routes local and long
distance telephone calls over communications paths
between geographic points, opens or closes circuits
or selects the paths or circuits to be used for
transmission of voice or data. Switching is the
process of interconnecting circuits to form a
transmission path between users.
A-2
<PAGE>
SONET A standard way to interconnect high speed traffic
(SYNCHRONOUS from multiple vendors
OPTICAL NETWORK)
TCP/IP A suite of network protocols that allows computers
(TRANSMISSION with different architectures and operating system
CONTROL software to communicate with other computers on the
PROTOCOL/ Internet
INTERNET PROTOCOL)
T-1 A data communications circuit capable of transmitting
data at 1.5 megabits per second.
T-3 A data communications circuit capable of transmitting
data at 45 megabits per second (sometimes called
DS-3).
WAN Uses common carrier-provided lines that cover an
WIDE AREA extended geographical area. This network uses links
NETWORK provided by local telephone companies and
usually connects disperse sites
WIRELESS LOCAL Wireless Local Loop is a system that eliminates the
LOOP need for a wire (loop) connecting users to the public
switched telephone network, which is used in
conventional wired telephone systems, by transmitting
voice messages over radio waves for the "last mile"
connection between the location of the customer's
telephone and a base station connected to the network
equipment.
WORLD WIDE WEB A collection of computer systems supporting a
communications protocol that permits multi-media
presentation of information over the Internet.
A-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
No dealer, salesperson or other person has been
authorized to give any information or to make any
representations other than those contained in this
Prospectus, and, if given or made, such information 1,700,000 SHARES or
representations must not be relied upon as having been
authorized by the Company. This Prospectus does QUEST NET CORP.
not constitute an offer to sell or a solicitation of
an offer to buy any security other than the Common Stock
securities offered by this Prospectus, or an offer to
sell or a solicitation of an offer to buy any ________________
securities by any person in any jurisdiction in which
such offer or solicitation would be unlawful. PROSPECTUS
Neither the delivery of this Prospectus nor any sale ________________
made hereunder shall, under any circumstances, imply
that the information in this Prospectus is correct as
of any time subsequent to the date of this Prospectus.
----------------
TABLE OF CONTENTS
----------------
Page
----
Prospectus Summary.......................... 2
Risk Factors................................ 3
Capitalization.............................. 9
Selected Financial Information..............10
Management Discussion and Analysis of
Financial Condition and Results of
Operation............................... 11 QUEST NET CORP.
Business....................................13 2999 NE 191ST STREET, PH-8
Legal Proceedings...........................32 AVENTURA, FLORIDA 33180
Management..................................33 (305) 935-1080
Certain Transactions........................36
Principal Stockholders......................37
Market Price of Securities..................37
Description of Securities...................38
Dividend Policy.............................38
Selling Security Holders....................38
Plan of Distribution........................39
Interests Of Named Experts and Counsel......40
Experts.....................................40 ___, 1999
Legal Matters...............................40
Financial Information.......................F-1
Glossary of Selected Terms..................A-1
Until ____________, 1999 (25 days after the date hereof) all dealers effecting
transactions in the registered securities, whether or not participating in the
distribution, may be required to deliver a Prospectus.
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Articles of Incorporation and Florida law authorizes the Company to
indemnify directors and officers as follows:
1. So long as permitted by law, no director of the corporation shall be
personally liable to the corporation or its shareholders for damages
for breach of any duty owed by such person to the corporation or its
shareholders; provided, however, that, to the extent required by
applicable law, this Article shall not relieve any person from
liability for any breach of duty based upon an act or omission (i) in
breach of such person's duty of loyalty to the corporation or its
shareholders, (ii) not in good faith or involving a knowing violation
of law or (iii) resulting in receipt by such person of an improper
personal benefit. No amendment to or repeal of this Article and no
amendment, repeal or termination of effectiveness of any law
authorizing this Article shall apply to or effect adversely any right
or protection of any director for or with respect to any acts or
omissions of such director occurring prior to such amendment, repeal or
termination of effectiveness.
2. So long as permitted by law, no officer of the corporation shall be
personally liable to the corporation or its shareholders for damages
for breach of any duty owed by such person to the corporation or its
shareholders; provided, however, that, to the extent required by
applicable law, this Article shall not relieve any person from
liability for any breach of duty based upon an act or omission (i) in
breach of such person's duty of loyalty to the corporation or its
shareholders, (ii) not in good faith or involving a knowing violation
of law or (iii) resulting in receipt by such person of an improper
personal benefit. No amendment to or repeal of this Article and no
amendment, repeal or termination of effectiveness of any law
authorizing this Article shall apply to or effect adversely any right
or protection of any director for or with respect to any acts or
omissions of such officer occurring prior to such amendment, repeal or
termination of effectiveness.
3. To the extent that a Director, Officer, or other corporate agent of
this corporation has been successful on the merits or otherwise in
defense of any civil or criminal action, suit, or proceeding referred
to in sections (a) and (b), above, or in defense of any claim, issue,
or matter therein, he shall be indemnified against any expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
4. Expenses incurred by a Director, Officer, or other corporate agent
in connection with a civil or criminal action, suit, or proceeding may
be paid by the corporation in advance of the final disposition of such
action suit, or proceeding as authorized by the Board of Directors upon
receipt of an undertaking by or on behalf of the corporate agent to
repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF
1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE COMPANY
PURSUANT TO THE PROVISIONS SET FORTH ABOVE, THE COMPANY HAS BEEN INFORMED THAT
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH INDEMNIFICATION
IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses in connection with the issuance and distribution of the
securities being registered hereby will be borne by us and are estimated to be
as follows:
Registration Fee ......................... $ 1,803.00
Legal Fees ............................... $50,000
Accounting Fees........................... $22,000
Edgar Formatting Fees $ 5,000
Miscellaneous ............................ $ 2,000
Total ........................... $80,803.03
II-1
<PAGE>
ITEM 26. Recent Sales of Unregistered Securities(1)
In July 1996, under our former name A.P. Sales, Inc., we sold 300,000 shares of
our preferred stock to an affiliate and an accredited investor for a total
purchase price of $3,000. The sale was conducted pursuant to Regulation D Rule
504. Each of the investors were provided with and had access to financial and
other information concerning the Company and had the opportunity to ask
questions concerning the Company and its operations. Accordingly, the issuance
of these securities was exempt from the registration requirements of the Act
pursuant to Section 3(b) of the Act.
In September 1996, we concluded a private offering of a total of 2,400,000
shares of our common stock to thirty-eight investors for aggregate offering
proceeds of $1,200. The offering was conducted pursuant to Regulation D Rule
504. Each of the investors were provided with and had access to financial and
other information concerning the Company and had the opportunity to ask
questions concerning the Company and its operations. Accordingly, the issuance
of these securities was exempt from the registration requirements of the Act
pursuant to Section 3(b) of the Act.
In July 1998, we acquired certain assets of Pact Communication Group, Inc.
valued at $125,274 in exchange for an aggregate of 2,000,000 shares of our
common stock. Pact Communication Group, Inc was provided with or had access to
financial and other information concerning the Company and had the opportunity
to ask questions concerning the Company and its operations. Accordingly, the
issuance of these securities was exempt from the registration requirements of
the Act pursuant to Section 4(2) of the Act.
In July 1998, we acquired software from Simplex Ltda. valued at $600,000 in
exchange for 60,000 shares of our redeemable convertible preferred stock.
Simplex Ltda. was provided with or had access to financial and other information
concerning the Company and had the opportunity to ask questions concerning the
Company and its operations. Accordingly, the issuance of these securities was
exempt from the registration requirements of the Act pursuant to Section 4(2) of
the Act. In November 1999, these shares were converted into 300,000 shares of
our common stock at a conversion price of $2.00 per share.
In November 1998, we issued 150,000 shares of our common stock to a consultant
for consulting services valued at $25,000. These shares were issued pursuant to
Rule 504 of Regulation D under the Act. The consultant was provided with and had
access to financial and other information concerning the Company and had the
opportunity to ask questions concerning the Company and its operations.
Accordingly, the issuance of these securities was exempt from the registration
requirements of the Act pursuant to Section 3(b) of the Act.
In November 1998, we concluded a private offering of 50,000 shares of our common
stock to an accredited investor for aggregate proceeds of $100,000. These shares
were issued pursuant to Rule 504 of Regulation D under the Act. The consultant
was provided with and had access to financial and other information concerning
the Company and had the opportunity to ask questions concerning the Company and
its operations. Accordingly, the issuance of these securities was exempt from
the registration requirements of the Act pursuant to Section 3(b) of the Act.
In December 1998, we issued to employees of the Company, including officers, an
aggregate of 1,485,693 shares of our common stock pursuant to the terms of their
employment agreements. The employees were provided with or had access to
financial and other information concerning the Company and had the opportunity
to ask questions concerning the Company and its operations. Accordingly, the
issuance of these securities was exempt from the registration requirements of
the Act pursuant to Section 4(2) of the Act.
In December 1998, we acquired certain assets of Grupo Internet Latinoamericano
valued at $2,042,000 in exchange for an aggregate of 100,000 shares of our
redeemable preferred stock and 2,607,660 shares of our common stock. Grupo
Internet Latinoamericano was an accredited investor and was provided with or had
access to financial and other information concerning the Company and had the
opportunity to ask questions concerning the Company and its operations.
Accordingly, the issuance of these securities was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act. The Company
redeemed the redeemable convertible preferred shares in July 1999, at a
redemption price of $10.00 per share.
In December 1998 we issued 175,000 shares of common stock as compensation to
three employees pursuant to their employment agreements. The shares were valued
at $514,063. The employees were provided with or had access to financial and
II-2
<PAGE>
other information concerning the Company and had the opportunity to ask
questions concerning the Company and its operations. Accordingly, the issuance
of these securities was exempt from the registration requirements of the Act
pursuant to Section 4(2) of the Act.
In December 1998, we concluded a private offering of a total of 50,000 shares of
our common stock to an accredited investor for aggregate offering proceeds of
$50,000. The offering was conducted pursuant to Regulation D Rule 504. The
investors was provided with and had access to financial and other information
concerning the Company and had the opportunity to ask questions concerning the
Company and its operations. Accordingly, the issuance of these securities was
exempt from the registration requirements of the Act pursuant to Section 3(b) of
the Act.
In January 1999, we issued 24,000 shares of common stock for legal services
valued at $15,000, and 1,000 shares for consulting services valued at $4,500.
The consultants were provided with or had access to financial and other
information concerning the Company and had the opportunity to ask questions
concerning the Company and its operations. Accordingly, the issuance of these
securities was exempt from the registration requirements of the Act pursuant to
Section 4(2) of the Act.
In January 1999, we issued 10,000 shares of common stock pursuant to an
employment agreement. The employee was provided with or had access to financial
and other information concerning the Company and had the opportunity to ask
questions concerning the Company and its operations. Accordingly, the issuance
of these securities was exempt from the registration requirements of the Act
pursuant to Section 4(2) of the Act.
In January 1999, we issued an aggregate of 6,667 shares of common stock to
directors of the Company. The directors were provided with or had access to
financial and other information concerning the Company and had the opportunity
to ask questions concerning the Company and its operations. Accordingly, the
issuance of these securities was exempt from the registration requirements of
the Act pursuant to Section 4(2) of the Act.
In January 1999, we concluded a private offering of a total of 25,000 shares of
our common stock to an accredited investor for aggregate offering proceeds of
$75,000. The offering was conducted pursuant to Regulation D Rule 504. The
investor was provided with and had access to financial and other information
concerning the Company and had the opportunity to ask questions concerning the
Company and its operations. Accordingly, the issuance of these securities was
exempt from the registration requirements of the Act pursuant to Section 3(b) of
the Act.
In January 1999, we issued a total of 101,333 shares of our common stock for to
a consulting for services rendered valued at $7,600. The shares were issued
pursuant to Regulation D Rule 504. The consultant was provided with and had
access to financial and other information concerning the Company and had the
opportunity to ask questions concerning the Company and its operations.
Accordingly, the issuance of these securities was exempt from the registration
requirements of the Act pursuant to Section 3(b) of the Act.
In January 1999, we concluded a private offering of a total of 132,915 shares of
our common stock and warrants to purchase 45,000 shares of common stock at an
exercise price of $9.40 to an accredited investor for aggregate offering
proceeds of $700,000. In connection with the offer we issued warrants to
purchase 2,000 shares of common stock at an exercise price of $9.40 to certain
nonaffiliated principals in the transaction. The warrants are exercisable on
year from the date of issuance and expire two years thereafter. The offering was
conducted pursuant to Regulation D Rule 504. The investors were provided with
and had access to financial and other information concerning the Company and had
the opportunity to ask questions concerning the Company and its operations.
Accordingly, the issuance of these securities was exempt from the registration
requirements of the Act pursuant to Section 3(b) of the Act. In connection with
the offering the Company paid
In March 1999, we purchased Wings Online Inc, for 29,326 shares of our common
stock and $135,00 in cash. The Wings Online transaction was valued at $335,000.
The Wing Online shareholders were provided with or had access to financial and
other information concerning the Company and had the opportunity to ask
questions concerning the Company and its operations. Accordingly, the issuance
of these securities was exempt from the registration requirements of the Act
pursuant to Section 4(2) of the Act.
II-3
<PAGE>
In March 1999, we acquired two industry-specific, e-commerce sites, namely,
Boats Online, a boat marketplace and resource center, and Cars Online an
automobile market place valued at $10,000 and $4,000. These were acquired for an
aggregate of 1,500 shares of our common stock along with and aggregate of $7,000
in cash. The owners of the Boats Online and Cars Online sites were provided with
or had access to financial and other information concerning the Company and had
the opportunity to ask questions concerning the Company and its operations.
Accordingly, the issuance of these securities was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act.
In March 1999, we issued 677 shares of common stock for consulting services
valued at $10,000. The consultant were provided with or had access to financial
and other information concerning the Company and had the opportunity to ask
questions concerning the Company and its operations. Accordingly, the issuance
of these securities was exempt from the registration requirements of the Act
pursuant to Section 4(2) of the Act.
In March 1999, we issued 100,000 shares to Maxine Pereira, an officer of the
Company, pursuant to her employment agreement. The agreement called for the
issuance of 25,000 shares on January 1, 1999. The Company neglected to timely
issue the shares and therefore the shares were not issued at the time of the
stock dividend. The Board of Director authorized the issuance of the additional
75,000 shares that would have been issued to Ms. Pereira pursuant to the
dividend if the Company had performed its obligations under the employment
agreement.
In March 1999, the Company issued 4,000 shares of its common stock for
consulting services valued at $5,000. The consultant were provided with or had
access to financial and other information concerning the Company and had the
opportunity to ask questions concerning the Company and its operations.
Accordingly, the issuance of these securities was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act.
In May 1999, we acquired certain assets of AVX, Inc. valued at $300,000 in
exchange for an aggregate of 39,894 shares of our common stock. The Shareholder
of AVX was provided with or had access to financial and other information
concerning the Company and had the opportunity to ask questions concerning the
Company and its operations. Accordingly, the issuance of these securities was
exempt from the registration requirements of the Act pursuant to Section 4(2) of
the Act.
In May 1999, we completed a Regulation D Rule 506 private offering of 910,747
shares of common stock to an accredited investor and received gross proceeds of
$5,000,000. The investor was provided with or had access to financial and other
information concerning the Company and had the opportunity to ask questions
concerning the Company and its operations. Accordingly, the issuance of these
securities was exempt from the registration requirements of the Act pursuant to
Section 4(2) of the Act. In connection with this offering the Company paid
consulting fees of $350,000.
From March 1999 to date, we have issued options to purchase an aggregate of
1,398,692 shares of common stock to Mr. Pereira, an officer of the Company,
employees, and consultants. The exercise price of the options ranged from $.12
to $7.25 per share. Mr. Pereira exercised options to purchase 1,310,693 shares
of common stock. No other options have been exercised to date. The remaining
options are exercisable for a period of two to five years from the date of
grant.
In August 1999, we issued 25,000 shares of common to Maxine Pereira and 135,022
shares of common stock to Camilo Pereira. Mr. Pereira was due to be issued
150,000 shares, however the shares issued to Mr. Pereira were decreased to
offset money advanced to Mr. Pereira by the Company.
- ---------------------------
(1) Does not give effect to the 3 for 1 common stock dividend declared in
January 1999 or, except for the shares issued subsequent to October 16,
1998, the approximately 10-to-1 stock split on October 16, 1998.
ITEM 27 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
EXHIBIT DESCRIPTION
2. Asset Purchase Agreement (Pact)
3.1(a) Articles of Incorporation (Colorado)
3.1(b) Amended Articles of Incorporation(Colorado)
3.1(c) Articles of Incorporation (Florida)
3.2 Bylaws
3.2(a) Amended and Restated Bylaws
4. Warrant (Zubeir Kazi)
4.1 Warrant (Scott Goldstein)
4.2 Warrant (Sheldon Goldstein)
4.3 Warrant (DSF Capital)
II-4
<PAGE>
4.4 Warrant (Jeffery Stein)
5. Opinion of Rebecca J. Del Medico, P.A.
10. Lease (709)
10.1 Lease (1008)
10.2 Lease (901)
10.3 Employment Agreement (Camilo Pereira)
10.4 Employment Agreement (Maxine Pereira)
10.5 Qwest Agreement*
10.6 Bell South Agreement*
10.7 E.spire Agreement*
10.8 Subscription Agreement (James LLC.)
10.9 Registration Rights Agreement (James LLC.)
10.10 Wireless Agreement*
10.11 Software Purchase Agreement (Secure Transaction International
Corp.)
10.12 Asset Purchase Agreement (Grupo Internet Latinoamericano)
10.13 Software Purchase Agreement (Simplex)
10.14 Asset Purchase Agreement (AVX, Inc.)
10.15 Stock Purchase Agreement (Wings Online)
10.16 Network Sales and Service Agreement (Real Time Cash, Inc.)
10.17 Network Sales and Service Agreement (Real Time Encryption,
Inc.)
10.18 Network Sales and Service Agreement (Real Time Wireless,
Inc.)
10.19 Professional Consulting Agreement (Real Time Wireless, Inc.
10.20 Professional Consulting Agreement (Real Time Encryption, Inc.
10.21 Professional Consulting Agreement (Real Time Phone Services,
Inc.
20 Long Distance Public Notice
20.1 License (Cuba Travel)
21 Subsidiaries of the Company***
24. Consent of Cordovano and Harvey, P.C.
24.2 Consent of Rebecca J. Del Medico, P.A.**
* To be filed by Amendment
** Contained in Opinion of Rebecca J. Del Medico, P.A.
*** Filed on August 11, 1999, as an Exhibit to the Registration Statement
on Form SB-2
Item 28. Undertakings
(a) The Company hereby undertakes to file, during any period in which
offers or sales are being made, a post-effective amendment to this
Registration Statement (i) to include any Prospectus required by
Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the
Prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration
Statement; notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) may be reflected in
the form of Prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
Registration Statement; and (iii) to include any material information
with respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such information
in the Registration Statement.
(b) The Company hereby undertakes that, for the purpose of determining
any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) The Company hereby undertakes 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.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the Company, the Company has been advised that
in the opinion of the Securities and Exchange Commission such
II-5
<PAGE>
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
Company of expenses incurred or paid by a director, officer or
controlling person of the Company 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 Company will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(e) 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.
(f) 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets the
requirement for filing on Form SB-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Aventura, State of Florida, on the
25th day of August 1999.
QUEST NET CORP.
By: /S/ CAMILO PEREIRA
------------------
Camilo Pereira, Chairman of the Board,
Director, and President.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Dated: August 25, 1999 By: /S/ CAMILO PEREIRA
------------------
Camilo Pereira, Chairman of the Board,
Director, President and Chief Financial
Officer (PRINCIPAL ACCOUNTING OFFICER)
Dated: August 25, 1999 By: /S/ MAXINE PEREIRA
------------------
Maxine Pereira, Executive Vice-President
and Director
Dated: August 25, 1999 By: /S/ DAVID BLOCK
---------------
David Block, Director
Dated: _______, 1999 By: _______________________________
Victor V. Coppola, Director
Dated: _______, 1999 By: _______________________________
Lauri J. Fitz-Pegado, Director
II-6
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
<S> <C>
2. Asset Purchase Agreement (Pact)
3.1(a) Articles of Incorporation (Colorado)
3.1(b) Amended Articles of Incorporation(Colorado)
3.1(c) Articles of Incorporation (Florida)
3.2 Bylaws
3.2(a) Amended and Restated Bylaws
4. Warrant (Zubeir Kazi)
4.1 Warrant (Scott Goldstein)
4.2 Warrant (Sheldon Goldstein)
4.3 Warrant (DSF Capital)
4.4 Warrant (Jeffery Stein)
5. Opinion of Rebecca J. Del Medico, P.A.
10. Lease (709)
10.1 Lease (1008)
10.2 Lease (901)
10.3 Employment Agreement (Camilo Pereira)
10.4 Employment Agreement (Maxine Pereira)
10.5 Qwest Agreement*
10.6 Bell South Agreement*
10.7 E.spire Agreement*
10.8 Subscription Agreement (James LLC.)
10.9 Registration Rights Agreement (James LLC.)
10.10 Wireless Agreement*
10.11 Software Purchase Agreement (Secure Transaction International Corp.)
10.12 Asset Purchase Agreement (Grupo Internet Latinoamericano)
10.13 Software Purchase Agreement (Simplex)
10.14 Asset Purchase Agreement (AVX, Inc.)
10.15 Stock Purchase Agreement (Wings Online)
10.16 Network Sales and Service Agreement (Real Time Cash, Inc.)
10.17 Network Sales and Service Agreement (Real Time Encryption, Inc.)
10.18 Network Sales and Service Agreement (Real Time Wireless, Inc.)
10.19 Professional Consulting Agreement (Real Time Wireless, Inc.
10.20 Professional Consulting Agreement (Real Time Encryption, Inc.
10.21 Professional Consulting Agreement (Real Time Phone Services, Inc.
20 Long Distance Public Notice
20.1 License (Cuba Travel)
21 Subsidiaries of the Company***
24.1 Consent of Cordovano and Harvey, P.C.
24.2 Consent of Rebecca J. Del Medico, P.A.**
</TABLE>
* To be filed by Amendment
** Contained in Opinion of Rebecca J. Del Medico, P.A.
*** Filed on August 11, 1999, as an Exhibit to the Registration Statement
on Form SB-2
Exhibit 3.1C
[LOGO OMITTED]
I certify the attached is a true an correct copy of the Certificate of
Domestication and Articles of Incorporation for QUEST NET CORP., filed on
December 28, 1998 effective November 28, 1995, as shown by the records of this
office.
The document number of this corporation is P98000107182.
[SEAL OMITTED]
CR2EO22 (2-95)
Given under my hand and the
Great Seal of the State of Florida
at Tallahassee, the Capitol, this the
Twenty-eighth day of December, 1998
/s/ Sandra B. Mortham
---------------------
Sandra B. Mortham
Secretary of State
<PAGE>
ARTICLES OF INCORPORATION
OF
QUEST NET CORP.
Article I Name
The name of this corporation is Quest Net Corp.
Article II Principal Address
2999 NE 191 Street Suite 1008
Aventura, Florida 33180
Article III Commencement
This corporation shall commence on the date of the filing of these Articles.
Article IV Purpose
This corporation is organized for the purpose of transacting any or
all lawful business.
Article V Capital Stock
This corporation is authorized to issue 50,000,000 shares of, $.0001 par value,
common stock and 5,000,000 shares of, $.0001 Par value, Preferred Stock, the
rights and preferences of which shall be established by the corporation's Board
of Directors.
Article VI - Initial Registered Office and Agent
The street address of the initial registered office of this corporation is 2999
NE 191 Street, Suite 1008, Aventura, 33180 Florida and the name and address of
the initial registered agent is Robert Leff, Esq., 2999 NE 191 Street, Suite
1008, Aventura, 33180, Florida.
Article VII Board of Directors
The number of directors shall be established by the bylaws and may be either
increased or diminished from time to time as provided in the bylaws.
Article VIII - Incorporator
The name and address of the person signing these articles is:
Robert Leff
2999 NE 191 Street, Suite 1008
Aventura Florida 33180
<PAGE>
Article IX - Bylaws
The power to adopt, alter, amend or repeal bylaws shall be vested in the board
of directors.
Article X - Indemnification
Subject to the qualifications contained in Section 607.0850, Florida Statutes,
the corporation shall indemnify its officers and directors and former officers
and directors against expenses (including attorneys fees), judgements, fines and
amounts paid in settlement arising out of his or her services as an officer or
director of the corporation.
Article XI - Amendment
The corporation reserves the right to amend or repeal any provisions contained
in these Articles of Incorporation, or any amendment hereto, and any right
conferred upon the shareholders is subject to this reservation.
Article XII - Affiliated Transactions
This corporation elects not to be subject to the provisions of Section 607.0901,
Florida Statutes, regarding affiliated transactions.
Article XIII - Control-Share Acquisitions
This corporation elects not to be subject to the provisions of Section
607.0902, Florida Statutes, regarding control-share acquisitions.
Article XIV - Preemptive Rights
The Shareholders of the corporation shall have no preemptive rights.
IN WITNESS WHEREOF, the undersigned incorporator has executed these
article of incorporation this 23rd day of December 1998.
/s/ Robert Leff
-----------------------------
Robert Leff, Incorporator
<PAGE>
CERTIFICATE DESIGNATING PLACE OF BUSINESS OR DOMICILE FOR THE SERVICE OF PROCESS
WITHIN FLORIDA, NAMING AGENT UPON WHOM PROCESS MAY BE SERVED.
IN COMPLIANCE WITH SECTION 48.091 FLORIDA STATUTES, THE FOLLOWING IS
SUBMITTED:
FIRST-THAT QUEST NET CORP.
DESIRING TO ORGANIZE OR QUALIFY UNDER THE LAWS OF THE STATE OF FLORIDA, WITH ITS
PRINCIPAL PLACE OF BUSINESS AT THE CITY OF AVENTURA, STATE OF FLORIDA, HAS NAMED
ROBERT LEFF LOCATED AT 2999 NE 191 STREET SUITE 1008, AVENTURA, 33180, FLORIDA,
STATE OF FLORIDA, AS ITS AGENT TO ACCEPT SERVICE OF PROCESS WITHIN FLORIDA.
SIGNATURE: /s/ Robert Leff
------------------------
Robert Leff
TITLE: President/Incorporator
DATE: 12/23/98
HAVING BEEN NAMED TO ACCEPT SERVICE OF PROCESS FOR THE ABOVE STATED
CORPORATION, AT THE PLACE DESIGNATED IN THIS CERTIFICATE, I HEREBY AGREE TO ACT
IN THIS CAPACITY, AND I FURTHER AGREE TO COMPLY WITH THE PROVISIONS OF ALL
STATUTES RELATIVE TO THE PROPER AND COMPLETE PERFORMANCE OF MY DUTIES.
SIGNATURE: /s/ Robert Leff
------------------------
Robert Leff
DATE: 12/29/98
<PAGE>
------------------------
FOR OFFICE USE ONLY 009
ILLEGIBLE
ILLEGIBLE
ILLEGIBLE
19981231439 M
$ 10.00
SECRETARY OF STATE
12-30-1998 13:41:00
------------------------
Mail to: Secretary of State
Corporations Section
1560 Broadway, Suite 200
Denver, CO 80202
(303) 894-2251
Fax (303) 894-2242
MUST BE TYPED
FILING FEE: $10.00
MUST SUBMIT TWO COPIES
Please include a typed
self-addressed envelope
ARTICLES OF DISSOLUTION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Dissolution for the
purpose of dissolving the corporation.
FIRST: The name of the corporation is Quest Net Corp
----------------------------------------
----------------------------------------------------------------------
SECOND: The corporation's principal office is 2740 E. Oakland Park Blvd #206
------------------------------
Ft. Lauderdale, FL 33306
----------------------------------------------------------------------
(Include City, State, Zip)
or, if there is no principal office, the address to which service of
process may be mailed.
THIRD: The following trade names on file in the office of the Secretary of
State are hereby canceled:
----------------------------------------------------------------------
----------------------------------------------------------------------
FOURTH: Date dissolution was authorized 12-23, 1998
----- ----
FIFTH: Dissolution was authorized by: Directors [X] Shareholders []
Incorporators []
SIXTH: The number of shares voted for the dissolution by each voting group
was sufficient for approval.
--------------------------------
Signature ILLEGIBLE
--------------------------------
Title Chairman & C.E.O.
--------------------------------
Delayed Effective Date
------------------
The name of the corporation after the effective date of dissolution shall be
___________________________________________________, a dissolved Colorado
Corporation, 19___.
Revised 7/95
<PAGE>
Florida Department of State, Sandra B. Mortham, Secretary of State
CERTIFICATE OF DOMESTICATION
The undersigned, Robert B. Leff, Presient
--------------------------------------------------------------,
(Name) (Title)
of Quest Net Corp a foreign Corporation,
-----------------------------------------------
(Corporation Name)
in accordance with Florida Statutes, section 607.1801 does hereby certify.
1. The date on which corporation was first formed was November 28, 1995.
------------------
2. The jurisdiction where the above named corporations was first formed,
incorporated, or otherwise came into being was the State of Colorado.
----------------------
3. The name of the corporation immediately prior to the filing of this
Certificate of Domestication was Quest Net Corp.
------------------------------------------
4. The name of the Corporation, as set forth in its articles of incorporation,
to be filed pursuant to ss. 607.0202 and 607.0401 with this certificate is
Quest Net Corp.
-----------------------------------------------------------------------------
----------------------------------------------------------------------------.
5. The jurisdiction that constituted the seat, siege, social principal place of
business or central administration of the corporation, or any other
equivalent thereto under applicable law immediately prior to the filing of
the Certificate of Domestication was
the State of Florida
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
I am Robert Leff, of Quest Net Corp.
----------- -----------------------------------------------------------
and am authorized to sign this certificate of Domestication on behalf of the
corporation and have done so this the 18 day of December 1998.
-- -------- ---
/s/ Robert Leff
-----------------------------
(Authorized Signature)
Filing Fee:
Certificate of Domestication $50.00
Articles of Incorporation and Certified Copy 78.75
Total to domesticate and file ------
Exhibit 3.2
BYLAWS
OF
AP SALES, INC.
ARTICLE I
Offices
The principal office of the Corporation in Colorado shall initially be
located in Denver, Colorado. The Corporation may have such other offices, either
within or outside the State of Colorado, 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 Colorado
Business Corporation Act to be maintained in the State of Colorado 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 pursuant to notice
given by the Board of Directors for the purpose of electing directors and for
the transaction of such other business as may come before the meeting.
Section 2. Special Meetings.
Special meetings of the shareholders, for any purpose, unless otherwise
prescribed by statute, may be called by the President or by the Board of
Directors, and shall be called by the President at the request of the holders of
not less than ten (10%) percent of all the outstanding shares of the Corporation
entitled to vote at the meeting. Such request shall state the purposes of the
proposed meeting.
Section 3. Adjournment.
a. When the annual meeting is convened, or when any special meeting is
convened, the presiding officer may adjourn it for such period of time as may be
reasonably necessary to reconvene the meeting at another place and another time.
b. The presiding officer shall have the power to adjourn any meeting of
the shareholders for any proper purpose, including, but not limited to, lack of
a quorum, to secure a more adequate meeting place, to elect officials to count
and tabulate votes, to review any shareholder proposals or to pass upon any
challenge which may properly come before the meeting.
c. When a meeting is adjourned to another time or place, it shall not
be necessary to give any notice of the adjourned meeting if the time and place
to which the meeting is adjourned are announced at the meeting at which the
adjournment is taken, and any business may be transacted at the adjourned
meeting that might have been transacted on the original date of the meeting. If,
however, after the adjournment the Board fixes a new record date for the
adjourned meeting, a notice of the adjourned meeting shall be given in
compliance with Subsection (4)(a) of this Article II to each shareholder of
record on the new record date entitled to vote at such meeting.
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<PAGE>
Section 4. Notice of Meeting, Purpose of Meeting, Waiver.
a. Each shareholder of record entitled to vote at any meeting shall be
given in person, or by first class mail, postage prepaid, written notice of such
meeting which, in the case of a special meeting, shall set forth the purpose(s)
for which the meeting is called, not less than ten (10) or more then fifty (50)
days before the date of such meeting. If mailed, such notice is to be sent to
the shareholder's address as it appears on the stock transfer books of the
Corporation unless the shareholder shall have requested of the Secretary in
writing at least fifteen (15) days prior to the distribution of any required
notice that any notice intended for him to be sent to some other address, in
which case the notice may be sent to the address so designated. Notwithstanding
any such request by a shareholder, notice sent to a shareholder's address as it
appears on the stock transfer books of this Corporation as of the record date
shall be deemed properly given. Any notice of a meeting sent by the United
States mail shall be deemed delivered when deposited with proper postage thereon
with the United States Postal Service or in any mail receptacle under its
control.
b. A shareholder waives notice of any meeting by attendance, either in
person or by proxy, at such meeting or by waiving notice in writing either
before, during or after such meeting. Attendance at a meeting for the express
purpose of objecting that the meeting was not lawfully called or convened,
however, will not constitute a waiver of notice by a shareholder stating at the
beginning of the meeting, his objection that the meeting is not lawfully called
or convened.
c. Whenever the holders of at least eighty (80%) percent of the capital
stock of the Corporation having the right to vote shall be present at any annual
or special meeting of shareholders, however called or notified, and shall sign a
written consent thereto on the minutes of such meeting, the meeting shall be
valid for all purposes.
d. A Waiver of Notice signed by all shareholders entitled to vote at a
meeting of shareholders may also be used for any other proper purpose including,
but not limited to, designating any place within or without the State of
Colorado as the place for holding such a meeting.
e. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of shareholders need be specified in any written
Waiver of Notice.
Section 5. Closing of Transfer Books, Record Date, Shareholders' List.
a. In order to determine the holders of record of the capital stock of
the Corporation who are entitled to notice of meetings, to vote at a meeting or
adjournment thereof, or to receive payment of any dividend, or for any other
purpose, the Board of Directors may fix a date not more than fifty (50) days
prior to the date set for any of the above-mentioned activities for such
determination of shareholders.
b. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten (10) days immediately
preceding such meeting.
c. In lieu of closing the stock transfer books, the Board of Directors
may fix in advance a date as the date for such determination of shareholders,
such date in any case to be not more than fifty (50) days and, in case of a
meeting of shareholders, not less than ten (10) days prior to the date on which
the particular action, requiring such determination of shareholders, is to be
taken.
d. If the stock transfer books are not closed and no record date is
fixed for the determination of shareholders entitled to notice or to vote at a
meeting of shareholders, or to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the Board
of Directors declaring such dividend is adopted, as the case may be, shall be
the record date for such determination of shareholders.
2
<PAGE>
e. When a determination of shareholders entitled to vote at any meeting
of shareholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, unless the Board of Directors fixes a
new record date under this section for the adjourned meeting.
f. The officer or agent having charge of the stock transfer books of
the Corporation shall make, as of a date at least ten (10) days before each
meeting of shareholders, a complete list of the shareholders entitled to vote at
such meeting or any adjournment thereof, with the address of each shareholder
and the number and class and series, if any, of shares held by each shareholder.
Such list shall be kept on file at the registered office of the Corporation or
at the office of the transfer agent or registrar of the Corporation for a period
of ten (10) days prior to such meeting and shall be available for inspection by
any shareholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of any meeting of shareholders and
shall be subject to inspection by any shareholder at any time during the
meeting.
g. The original stock transfer books shall be prima facie evidence as
to the shareholders entitled to examine such list or stock transfer books or to
vote at any meeting of shareholders.
h. If the requirements of Subsection 5(f) of this Article II have not
been substantially complied with then, on the demand of any shareholder in
person or by proxy, the meeting shall be adjourned until such requirements are
complied with.
I. If no demand pursuant to section 5(h) is made, failure to comply
with the requirements of this Section shall not affect the validity of any
action taken at such meeting.
j. Subsection 5(g) of this Article II shall be operative only at such
time(s) as the Corporation shall have six (6) or more shareholders.
Section 6. Quorum.
a. At any meeting of the shareholders of the Corporation, the presence,
in person or by proxy, of shareholders owning a majority of the issued and
outstanding shares of the capital stock of the Corporation entitled to vote
thereat shall be necessary to constitute a quorum for the transaction of any
business. If a quorum is present the affirmative vote of a majority of the
shares represented at such meeting and entitled to vote on the subject matter
shall be the act of the shareholders. If there shall not be a quorum at any
meeting of the shareholders of the Corporation, then the holders of a majority
of the shares of the capital stock of the Corporation who shall be present at
such meeting, in person or by proxy, may adjourn such meeting from time to time
until holders of a majority of the shares of the capital stock shall attend. At
any such adjourned meeting at which a quorum shall be present, any business may
be transacted which might have been transacted at the meeting as originally
scheduled.
b. The shareholders at a duly organized meeting having a quorum may
continue to transact business until adjournment notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
Section 7. Presiding Officer, Order of Business.
a. Meetings of the shareholders shall be presided over by the Chairman
of the Board, or, if he is not present, by the President or, if he is not
present, by a Vice President or, if none of the Chairman of the Board, the
President, or a Vice President is present, the meeting shall be presided over by
a Chairman to be chosen by a plurality of the shareholders entitled to vote at
the meeting who are present, in person or by proxy. The presiding officer of any
meeting of the shareholders may delegate the duties and obligations of the
presiding officer of the meeting as he sees fit.
b. The Secretary of the Corporation, or, in his absence, an Assistant
Secretary shall act as Secretary of every meeting of shareholders, but if
neither the Secretary nor an Assistant Secretary is present, the presiding
officer of the meeting shall choose any person present to act as Secretary of
the meeting.
3
<PAGE>
c. The order of business shall be as follows:
1. Call of meeting to order.
2. Proof of notice of meeting.
3. Reading of minutes of last previous shareholders meeting or a
Waiver thereof.
4. Reports of officers.
5. Reports of committees.
6. Election of directors.
7. Regular and miscellaneous business.
8. Special matters.
9. Adjournment.
d. Notwithstanding the provisions of Article II, Section 7, Subsection
c, the order and topics of business to be transacted at any meeting shall be
determined by the presiding officer of the meeting in his sole discretion. In no
event shall any variation in the order of business or additions and deletions
from the order of business as specified in Article II, Section 7, Subsection c,
invalidate any actions properly taken at any meeting.
Section 8. Voting.
a. Unless otherwise provided for in the Certificate of Incorporation,
each shareholder shall be entitled, at each meeting and upon each proposal to be
voted upon, to one vote for each share of voting stock recorded in his name on
the books of the Corporation on the record date fixed as provided for in Article
II, Section 5.
b. The presiding officer at any meeting of the shareholders shall have
the power to determine the method and means of voting when any matter is to be
voted upon. The method and means of voting may include, but shall not be limited
to, vote by ballot, vote by hand or vote by voice. However, no method of voting
may be adopted which fails to take account of any shareholder's right to vote by
proxy as provided for in Section 10 of this Article II. In no event may any
method of voting be adopted which would prejudice the outcome of the vote.
Section 9. Action Without Meeting.
a. Any action required to be taken at any annual or special meeting of
shareholders of the Corporation, or any action which may be taken at any annual
or special meeting of such shareholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. If any class of shares is
entitled to vote thereon as a class, such written consent shall be required of
the holders of a majority of the shares of each class of shares entitled to vote
thereon.
b. Within ten (10) days after obtaining such authorization by written
consent, notice must be given to those shareholders who have not consented in
writing. The notice shall fairly summarize the material features of the
authorized action and, if the action be a merger, consolidation or sale or
exchange of assets for which dissenters' rights are provided under the Colorado
Business Corporation Act, the notice shall contain a clear statement of the
right of the shareholders dissenting therefrom to be paid the fair value of
their shares upon compliance with further provisions of the Colorado Business
Corporation Act regarding the rights of dissenting shareholders.
c. In the event that the action to which the shareholders' consent is
such as would have required the filing of a certificate under the Colorado
Business Corporation Act if such action had been voted on by shareholders at a
meeting thereof, the certificate filed under such other section shall state that
written consent has been given in accordance with the provisions of this Article
II, Section 9.
4
<PAGE>
Section 10. Proxies.
a. Every shareholder entitled to vote at a meeting of shareholders or
to express consent or dissent without a meeting, or his duly authorized
attorney-in-fact may authorize another person or persons to act for him by
proxy.
b. Every proxy must be signed by the shareholder or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the shareholder executing it, except as
otherwise provided in this Article II, Section 10.
c. The authority of the holder of a proxy to act shall not be revoked
by the incompetence or death of the shareholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the corporate officer responsible
for maintaining the list of shareholders.
d. Except when other provisions shall have been made by written
agreement between the parties, the record holder of shares held as pledges or
otherwise as security or which belong to another, shall issue to the pledgor or
to such owner of such shares, upon demand therefor and payment of necessary
expenses thereof, a proxy to vote or take other action thereon.
e. A proxy which states that it is irrevocable is irrevocable when it
is held by any of the following or a nominee of any of the following: (1) a
pledgee, (ii) a person who has purchased or agreed to purchase the shares; (iii)
a creditor or creditors of the Corporation who extend or continue to extend
credit to the Corporation in consideration of the proxy, if the proxy states
that it was given in consideration of such extension or continuation of credit,
the amount thereof, and the name of the person extending or continuing credit;
(iv) a person who has contracted to perform services as an officer of the
Corporation, if a proxy is required by the contract of employment, if the proxy
states that it was given in consideration of such contract of employment and
states the name of the employee and the period of employment contracted for, and
(v) a person designated by or under an agreement as provided in Article XI
hereof.
f. Notwithstanding a provision in a proxy stating that it is
irrevocable, the proxy becomes revocable after the pledge is redeemed, or the
debt of the Corporation is paid, or the period of employment provided for in the
contract of employment has terminated, or the agreement under Article XII
hereof, has terminated and, in a case provided for in Subsection 10(e)(iii) or
Subsection 10(e)(iv) of this Article II becomes irrevocable three years after
the date of the proxy or at the end of the period, if any, specified therein,
whichever period is less, unless the period of irrevocability is renewed from
time to time by the execution of a new irrevocable proxy as provided in this
Article II, Section 10. This Subsection 10(f) does not affect the duration of a
proxy under Subsection 10(b) of this Article II.
g. A proxy may be revoked, notwithstanding a provision making it
irrevocable, by a purchaser of shares without knowledge of the existence of the
provision unless the existence of the proxy and its irrevocability is noted
conspicuously on the face or back of the certificate representing such shares.
h. If a proxy for the same shares confers authority upon two (2) or
more persons and does not otherwise provide a majority of such persons present
at the meeting, or if only one is present, then that one may exercise all the
powers conferred by the proxy. If the proxy holders present at the meeting are
equally divided as to the right and manner of voting in any particular case, the
voting of such shares shall be prorated.
I. If a proxy expressly so provides, any proxy holder may appoint in
writing a substitute to act in his place.
Section 11. Voting of Shares by Shareholders.
a. Shares standing in the name of another corporation, domestic or
foreign, may be voted by the officer, agent, or proxy designated by the Bylaws
of the corporate shareholder, or, in the absence of any applicable Bylaw, by
such person as the Board of Directors of the corporate shareholder may
designate. Proof of such designation may be made by presentation of a certified
copy of the Bylaws or other instrument of the corporate shareholder. In the
absence of any such designation, or in case of conflicting designation by the
corporate shareholder, the Chairman of the Board, President, any vice president,
secretary and treasurer of the corporate shareholder, in that order shall be
presumed to possess authority to vote such shares.
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<PAGE>
b. Shares held by an administrator, executor, guardian or conservator
may be voted by him, either in person or by proxy, without a transfer of such
shares into his name. Shares standing in the name of a trustee may be voted by
him, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him without a transfer of such shares into his name.
c. Shares standing in the name of a receiver may be voted by such
receiver. Shares held by or under the control of a receiver but not standing in
the name of such receiver, may be voted by such receiver without the transfer
thereof into his name if authority to do so is contained in an appropriate order
of the court by which such receiver was appointed.
d. A shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledge.
e. Shares of the capital stock of the Corporation belonging to the
Corporation or held by it in a fiduciary capacity shall not be voted, directly
or indirectly, at any meeting, and shall not be counted in determining the total
number of outstanding shares.
ARTICLE III
Directors
Section 1. Board of Directors; Exercise of Corporate Powers.
a. 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 the Board of Directors except as may be otherwise provided in the
Articles of Incorporation. If any such provision is made in the Articles of
Incorporation, the powers and duties conferred or imposed upon the Board of
Directors shall be exercised or performed to such extent and by such person or
persons as shall be provided in the Articles of Incorporation.
b. Directors need not be residents of the state of incorporation unless
the Articles of Incorporation so require.
c. The Board of Directors shall have authority to fix the compensation
of Directors unless otherwise provided in the Articles of Incorporation.
d. A Director shall perform his duties as a Director, including his
duties as a member of any committee of the Board upon which he may serve, in
good faith, in a manner he reasonably believes to be in the best interests of
the Corporation, and with such care as an ordinarily prudent person in a like
position would use under similar circumstances.
e. In performing his duties, a Director shall be entitled to rely on
information, opinions, reports or statements, including financial data, in each
case prepared or presented by: (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) counsel, public accountants or other persons as
to matters which the Director reasonably believes to be within such persons'
professional or expert competence; or (iii) a committee of the Board upon which
he does not serve, duly designated in accordance with a provision of the
Articles of Incorporation or the Bylaws, as to matters within its designated
authority, which committee the Director reasonably believes to merit confidence.
f. A Director shall not be considered to be acting in good faith if he
has knowledge concerning the matter in question that would cause such reliance
described in Subsection 1(e) of this Article III to be unwarranted.
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g. A person who performs his duties in compliance with this Article
III, Section 1 shall have no liability by reason of being or having been a
Director of the Corporation.
h. A Director of the Corporation who is present at a meeting of the
Board of Directors at which action on any corporate matter is taken consents
thereto unless he votes against such action or abstains from voting in respect
thereto because of an asserted conflict of interest.
Section 2. Number, Election, Classification of Directors; Vacancies.
a. The Board of Directors of this Corporation shall consist of not
less than three (3) nor more than seven (7) members, unless the number of
shareholders is less than three, in which the Corporation shall have as many
directors as there are shareholders. The number of directors shall be fixed by
the initial Board of Directors. The number of directors constituting the initial
Board of Directors shall be fixed by the Articles of Incorporation. The number
of directors may be increased from time to time by the Board of directors, but
no decrease shall have the effect of shortening the term of any incumbent
director.
b. Each person named in the Articles of Incorporation as a member of
the initial Board of Directors, shall hold office until the first annual meeting
of shareholders, and until his successor shall have been elected and qualified
or until his earlier resignation, removal from office or death.
c. At the first annual meeting of shareholders and at each annual
meeting thereafter the shareholders shall elect directors to hold office until
the next succeeding annual meeting, except in case of the classification of
directors as permitted by the Colorado Business Corporation Act. Each director
shall hold office for the term for which he is elected and until his successor
shall have been elected and qualified or until his earlier resignation, removal
from office or death.
d. The shareholders, by amendment to these Bylaws, may provide that the
directors be divided into not more than four classes, as nearly equal in number
as possible, whose terms of office shall respectively expire at different times,
but no such term shall continue longer than four (4) years, and at least
one-fifth (1/5) in number of the directors shall be elected annually.
e. If directors are classified and the number of directors is
thereafter changed, any increase or decrease in directorships shall be so
apportioned among the classes as to make all classes as nearly equal in number
as possible.
f. Any vacancy occurring in the Board of Directors including any
vacancy created by reason of an increase in the number of directors, may be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors. A director elected to fill a
vacancy shall hold office only until the next election of directors by the
shareholders.
Section 3. Removal of Directors.
a. At a meeting of shareholders called expressly for that purpose,
directors may be removed in the manner provided in this Article III, Section 3.
Any director or the entire Board of Directors may be removed, with or without
cause, by a vote of the holders of a majority of the shares then entitled to
vote at an election of directors.
b. If the Corporation has cumulative voting, if less than the entire
Board is to be removed, no one of the directors may be removed if the votes cast
against his removal would be sufficient to elect him if then cumulatively voted
at an election of the entire Board of Directors, or, if there be classes of
directors, at an election of the class of directors of which he is a member.
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<PAGE>
Section 4. Director Quorum and Voting.
a. A majority of the number of directors fixed in the manner provided
in these Bylaws shall constitute a quorum for the transaction of business unless
a greater number if required elsewhere in these Bylaws.
b. A majority of the members of an Executive Committee or other
committee shall constitute a quorum for the transaction of business at any
meeting of such Executive Committee or other committee.
c. The act of the majority of the directors present at a Board meeting
at which a quorum is present shall be the act of the Board of Directors.
d. The act of a majority of the members of an Executive Committee
present at an Executive Committee meeting at which a quorum is present shall be
the act of the Executive Committee.
e. The act of a majority of the members of any other committee present
at a committee meeting at which a quorum is present shall be the act of the
committee.
Section 5. Director Conflicts of Interest.
a. No contract or other transaction between this Corporation and one or
more of its directors or any other Corporation, firm, association or entity in
which one or more of its directors are directors or officers or are financially
interested, shall be either void or voidable because of a relationship or
interest or because such director or directors are present at the meeting of
the Board of Directors or a committee thereof which authorizes, approves or
ratifies such contract or transaction or because his or their votes are counted
for such purpose, if:
(I) The fact of such relationship or interest is disclosed or known
to the Board of Directors or committee which authorizes, approves or ratifies
the contract or transaction by a vote or consent sufficient for the purpose
without counting the votes or consents of such interested directors; or
(ii) The fact of such relationship or interest is disclosed or known
to the shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent; or
(iii) The contract or transaction is fair and reasonable as to the
Corporation at the time it is authorized by the Board, a committee, or the
shareholders.
b. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
Section 6. Executive and Other Committees; Designation; Authority.
a. The Board of Directors, by resolution adopted by a majority of the
full Board of Directors, may designate from among its members an Executive
Committee and one or more other committees each of which, to the extent provided
in such resolution or in the Articles of Incorporation or these Bylaws, shall
have and may exercise all the authority of the Board of Directors, except that
no such committee shall have the authority to: (I) approve or recommend to
shareholders actions or proposals required by the Colorado Business Corporation
Act to be approved by shareholders; (ii) designate candidates for the office of
director for purposes of proxy solicitation or otherwise; (iii) fill vacancies
on the Board of Directors or any committee thereof; (iv) amend the Bylaws; or
(v) authorize or approve the issuance or sale of, or any contract to issue or
sell, shares or designate the terms of a series of class of shares, unless the
Board of Directors, having acted regarding general authorization for the
issuance or sale of shares, or any contract therefor, and, in the case of a
series, the designation thereof, has specified a general formula or method by
resolution or by adoption of a stock option or other plan, authorized a
committee to fix the terms upon which such shares may be issued or sold,
including, without limitation, the price, the rate or manner of payment of
dividends, provisions for redemption, sinking fund, conversion, and voting
preferential rights, and provisions for other features of a class of shares, or
a series of class of shares, with full power in such committee to adopt any
final resolution setting forth all the terms thereof and to authorize the
statement of the terms of a series for filing with the Secretary of State under
the Colorado Business Corporation Act.
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<PAGE>
b. The Board, by resolution adopted in accordance with Article III,
Subsection 6(a) may designate one or more directors as alternate members of any
such committee, who may act in the place and stead of any absent member or
members at any meeting of such committee.
c. Neither the designation of any such committee, the delegation
thereto of authority, nor action by such committee pursuant to such authority
shall alone constitute compliance by any member of the Board of Directors, not a
member of the committee in question, with his responsibility to act in good
faith, in a manner he reasonably believes to be in the best interests of the
Corporation, and with such care as an ordinarily prudent person in a like
position would use under similar circumstances.
Section 7. Place, Time, Notice, and Call of Directors' Meetings.
a. Meetings of the Board of Directors, regular or special, may be held
either within or without this state.
b. A regular meeting of the Board of Directors of the Corporation shall
be held for the election of officers of the Corporation and for the transaction
of such other business as may come before such meeting as promptly as
practicable after the annual meeting of the shareholders of this Corporation
without the necessity of other notice than this Bylaw. Other regular meetings
of the Board of Directors of the Corporation may be held at such times and at
such places as the Board of Directors of the Corporation may from time to time
resolve without other notice than such resolution. Special meetings of the Board
of Directors may be held at any time upon call of the Chairman of the Board or
the President or a majority of the Directors of the Corporation, at such time
and at such place as shall be specified in the call thereof. Notice of any
special meeting of the Board of Directors must be given at least two (2) days
prior thereto, if by written notice delivered personally; or at least five (5)
days prior thereto, if mailed; or at least two (2) days prior thereto, if by
telegram; or at least two (2) days prior thereto, if by telephone. If such
notice is given by mail, such notice shall be deemed to have been delivered
when deposited with the United States Postal Service addressed to the
business address of such director with postage thereon prepaid. If notice be
given by telegram, such notice shall be deemed delivered when the telegram is
delivered to the telegraph company. If notice is given by telephone, such notice
shall be deemed delivered when the call is completed.
c. Notice of a meeting of the Board of Directors need not be given to
any director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
d. 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.
e. A majority of the directors present, whether or not a quorum exists,
may adjourn any meeting of the Board of Directors to another time and place.
Notice of any such adjourned meeting shall be given to the directors who were
not present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
directors.
f. Members of the Board of Directors may participate in a meeting of
such Board by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time. Participation by such means shall constitute
presence in person at a meeting.
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Section 8. Action by Directors Without a Meeting.
Any action required by the Colorado Business Corporation Act to be
taken at a meeting of the directors of the Corporation, or a committee thereof,
may be taken without a meeting if a consent in writing, setting forth the action
so to be taken, signed by all of the directors, or all of the members of the
committee, as the case may be, is filed in the minutes of the proceedings of the
Board or of the committee. Such consent shall have the same effect as a
unanimous vote.
Section 9. Compensation.
The directors and members of the Executive and any other committee of
the Board of Directors shall be entitled to such reasonable compensation for
their services and on such basis as shall be fixed from time to time by
resolution of the Board of Directors. The Board of Directors and members of any
committee of the Board of Directors shall be entitled to reimbursement for any
reasonable expenses incurred in attending any Board or committee meeting. Any
director receiving compensation under this section shall not be prevented from
serving the Corporation in any other capacity and shall not be prohibited from
receiving reasonable compensation for such other services.
Section 10. Resignation.
Any Director of the Corporation may resign at any time without
acceptance by the Corporation. Such resignation shall be in writing and may
provide that such resignation shall take effect immediately or on any future
date stated in such notice.
Section 11. Removal.
Any Director of the Corporation may be removed for cause by a majority
vote of the other members of the Board of Directors as then constituted or with
or without cause by the vote of the holders of a majority of the outstanding
shares of capital stock shareholders of the Corporation called for such purpose.
Section 12. Vacancies.
In the event that a vacancy shall occur on the Board of Directors of
the Corporation whether because of death, resignation, removal, an increase in
the number of directors or any other reason, such vacancy may be filled by the
vote of a majority of the remaining directors of the Corporation even though
such remaining directors represent less than a quorum. An increase in the number
of directors shall create vacancies for the purpose of this section. A director
of the Corporation elected to fill a vacancy shall hold office for the unexpired
term of his predecessor, or in the case of an increase in the number of
directors, until the election and qualification of directors at the next annual
meeting of the shareholders.
ARTICLE IV
Officers
Section 1. Election; Number; Terms of Office.
a. The officers of the Corporation shall consist of a Chairman of the
Board, a President, a Secretary and a Treasurer, each of whom shall be elected
by the Board of Directors at such time and in such manner as may be prescribed
by these Bylaws. Such other officers and assistant officers and agents as may be
deemed necessary may be elected or appointed by the Board of Directors.
b. All officers and agents, as between themselves and the Corporation,
shall have such authority and perform such duties in the management of the
Corporation as are provided in these Bylaws, or as may be determined by
resolution of the Board of Directors not inconsistent with these Bylaws.
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c. Any two (2) or more offices may be held by the same person except
the offices of the President and Secretary.
d. A failure to elect a Chairman of the Board, President, a Secretary
and a Treasurer shall not affect the existence of the Corporation.
Section 2. Removal.
An officer of the Corporation shall hold office until the election and
qualification of his successor, however, any officer of the Corporation may be
removed from office by the Board of Directors whenever in its judgment the best
interests of the Corporation will be served thereby. Such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of any officer shall not of itself create any contract
right to employment or compensation.
Section 3. Vacancies.
Any vacancy in any office from any cause may be filled for the
unexpired portion of the term of such office by the Board of Directors.
Section 4. Powers and Duties.
a. The Chairman of the Board shall be the Chief Executive Officer of
the Corporation. The Chairman of the Board shall preside at all meetings of the
shareholders and of the Board of Directors. Except where by law the signature of
the President is required or unless the Board of Directors shall rule otherwise,
the Chairman of the Board shall possess the same power as the President to sign
all certificates, contracts and other instruments of the Corporation which may
be authorized by the Board of Directors. Unless a Chairman of the Board is
specifically elected, the President shall be deemed to be the Chairman of the
Board.
b. The President shall be the Chief Operating Officer of the
Corporation. He shall be responsible for the general day-to-day supervision of
the business and affairs of the Corporation. He shall sign or countersign all
certificates, contracts or other instruments of the Corporation as authorized by
the Board of Directors. He may, but need not, be a member of the Board of
Directors. In the absence of the Chairman of the Board, the President shall be
the Chief Executive Officer of the Corporation and shall preside at all meetings
of the shareholders and the Board of Directors. He shall make reports to the
Board of Directors and shareholders. He shall perform such other duties as are
incident to his office or are properly required of him by the Board of
Directors. The Board of Directors will at all times retain the power to
expressly delegate the duties of the President to any other officer of the
Corporation.
c. The Vice-President(s), if any, in the order designated by the Board
of Directors, shall exercise the functions of the President during the absence,
disability, death, or refusal to act of the President. During the time that any
Vice-President is properly exercising the functions of the President, such
Vice-President shall have all the powers of and be subject to all the
restrictions upon the President. Each Vice-President shall have such other
duties as are assigned to him from time to time by the Board of Directors or by
the President of the Corporation.
d. The Secretary of the Corporation shall keep the minutes of the
meetings of the shareholders of the Corporation and, if so requested, the
Secretary shall keep the minutes of the meetings of the Board of Directors of
the Corporation. The Secretary shall be the custodian of the minute books of the
Corporation and such other books and records of the Corporation as the Board of
Directors of the Corporation may direct. The Secretary shall make or cause to be
made all proper entries in all corporate books that the Board of Directors of
the Corporation may direct. The Secretary shall have the general responsibility
for maintaining the stock transfer books of the Corporation, or of supervising
the maintenance of the stock transfer books of the Corporation by the transfer
agent, if any, of the Corporation. The Secretary shall be the custodian of the
corporate seal of the Corporation and shall affix the corporate seal of the
Corporation on contracts and other instruments as the Board of Directors of the
Corporation may direct. The Secretary shall perform such other duties as are
assigned to him from time to time by the Board of Directors or the President of
the Corporation.
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c. The Treasurer of the Corporation shall have custody of all funds and
securities owned by the Corporation. The Treasurer shall cause to be entered
regularly in the proper books of account of the Corporation full and accurate
accounts of the receipts and disbursements of the Corporation. The Treasurer of
the Corporation shall render a statement of cash, financial and other accounts
of the Corporation whenever he is directed to render such a statement by the
Board of Directors or by the President of the Corporation. The Treasurer shall
at all reasonable times make available the Corporation's books and financial
accounts to any Director of the Corporation during normal business hours. The
Treasurer shall perform all other acts incident to the office of the Treasurer
of the Corporation, and he shall have such other duties as are assigned to him
from time to time by the Board of Directors or the President of the Corporation.
f. Other subordinate or assistant officers appointed by the Board of
Directors or by the President, if such authority is delegated to him by the
Board of Directors, shall exercise such powers and perform such duties as may be
delegated to them by the Board of Directors or by the President, as the case may
be.
g. In case of the absence or disability of any officer of the
Corporation and of any person authorized to act in his place during such period
of absence or disability, the Board of Directors may from time to time delegate
the powers and duties of such officer to any other officer or any director or
any other person whom it may select.
Section 5. Salaries.
The salaries of all Officers of the Corporation shall be fixed by the
Board of Directors. No officer shall be ineligible to receive such salary by
reason of the fact that he is also a Director of the Corporation and receiving
compensation therefor.
ARTICLE V
Loans to Employees and Officers:
Guaranty of Obligations of Employees and Officers
This Corporation may lend money to, guarantee any obligation of, or
otherwise assist any officer or other employee of the Corporation or of a
subsidiary, including any officer or employee who is a Director of the
Corporation or of a subsidiary, whenever, in the judgment of the Directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
Corporation. The loan, guaranty or other assistance may be with or without
interest, and may be an unsecured, or secured in such manner as the Board of
Directors shall approve including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this Article shall be deemed to deny, limit
or restrict the powers of guaranty or warranty of this Corporation at common law
or under any statute.
ARTICLE VI
STOCK CERTIFICATES; VOTING TRUSTS; TRANSFERS
Section 1. Certificates Representing Shares.
a. Every holder of shares in this Corporation shall be entitled to one
or more certificates, representing all shares to which he is entitled and such
certificates shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary of the Corporation and may be sealed with
the seal of the Corporation or a facsimile thereof. The signatures of the
President or Vice President and the Secretary or Assistant Secretary may be
facsimiles if the certificate is manually signed on behalf of a transfer agent
or a registrar, other than the Corporation itself or an employee of the
Corporation. In case any officer who signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such officer before
such certificate is issued, it may be used by the Corporation with the same
effect as if he were such officer at the date of its issuance.
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b. Each certificate representing shares shall state upon the face
thereof: (I) the name of the Corporation; (ii) that the Corporation is organized
under the laws of this state; (iii) the name of the person or persons to whom
issued; (iv) the number and class of shares, and the designation of the series,
if any, which such certificate represents; and (v) the par value of each share
represented by such certificate, or a statement that the shares are without par
value.
c. No certificate shall be issued for any shares until such shares are
fully paid.
Section 2. Transfer Book.
The Corporation shall keep at its registered office or principal place
of business or in the office of its transfer agent or registrar, a book (or
books where more than one kind, class, or series of stock is outstanding) to be
known as the Stock Book, containing the names, alphabetically arranged,
addresses and Social Security numbers of every shareholder, and the number of
shares of each kind, class or series of stock held of record. Where the Stock
Book is kept in the office of the transfer agent, the Corporation shall keep at
its office in the State of Colorado copies of the stock lists prepared from said
Stock Book and sent to it from time to time by said transfer agent. The Stock
Book or stock lists shall show the current status of the ownership of shares of
the Corporation provided, if the transfer agent of the Corporation be located
elsewhere, a reasonable time shall be allowed for transit or mail.
Section 3. Transfer of Shares.
a. The name(s) and address(s) of the person(s) to whom shares of stock
of this Corporation are issued, shall be entered on the Stock Transfer Books of
the Corporation, with the number of shares and date of issuance.
b. Transfer of shares of the Corporation shall be made on the Stock
Transfer Books of the Corporation by the Secretary or the transfer agent, only
when the holder of record thereof or the legal representative of such holder of
record or the attorney-in-fact of such holder of record, authorized by power of
attorney duly executed and filed with the Secretary or transfer agent of the
Corporation, shall surrender the Certificate representing such shares for
cancellation. Lost, destroyed or stolen Stock Certificates shall be replaced
pursuant to Section 5 of this Article VI.
c. The person or persons in whose names shares stand on the books of
the Corporation shall be deemed by the Corporation to be the owner of such
shares for all purposes, except as otherwise provided pursuant to Section 10 and
11 of Article II, or Section 4 of this Article VI.
Section 4. Voting Trusts.
a. Any number of shareholders of the Corporation may create a voting
trust for the purpose of conferring upon a trustee or trustees the right to vote
or otherwise represent their shares, for a period not to exceed ten (10) years,
by: (I) entering into a written voting trust; (ii) depositing a counterpart of
the agreement with the Corporation at its registered office; and (iii)
transferring their shares to such trustee or trustees for the purposes of this
Agreement. Prior to the recording of the Agreement, the shareholder concerned
shall tender the stock certificate(s) described therein to the corporate
secretary who shall note on each certificate:
"This Certificate is subject to the provisions of a voting trust
agreement dated _______________, recorded in Minute Book _______________, of the
Corporation.
_______________
Secretary"
b. Upon the transfer of such shares, voting trust certificates shall be
issued by the trustee or trustees to the shareholders who transfer their share
in trust. Such trustee or trustees shall keep a record of the holders of the
voting trust certificates evidencing a beneficial interest in the voting trust,
giving the names and addresses of all such holders and the number and class of
the shares in respect of which the voting trust certificates held by each are
issued, and shall deposit a copy of such record with the Corporation at its
registered office.
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b. Upon the transfer of such shares, voting trust certificates shall be
issued by the trustee or trustees to the shareholders who transfer their shares
in trust. Such trustee or trustees shall keep a record of the holders of the
voting trust certificates evidencing a beneficial interest in the voting trust,
giving the names and addresses of all such holders and the number and class of
the shares in respect of which the voting trust certificates held by each are
issued, and shall deposit a copy of such record with the Corporation at its
registered office.
c. The counterpart of the voting trust agreement and the copy of such
record so deposited with the Corporation shall be subject to the same right of
examination by a shareholder of the Corporation, in person or by agent or
attorney, as are the books and records of the Corporation, and such counterpart
and such copy of such record shall be subject to examination by any holder of
record of voting trust certificates either in person or by agent or attorney, at
any reasonable time for any proper purpose.
d. At any time before the expiration of a voting trust agreement as
originally fixed or as extended one or more times under this Article VI,
Subsection 4(d) one or more holders of voting trust certificates may, by
agreement in writing, extend the duration of such voting trust agreement,
nominating the same or substitute trustee or trustees, for an additional period
not exceeding ten (10) years. Such extension agreement shall not affect the
rights or obligations of persons not parties to the agreement, and such persons
shall be entitled to remove their shares from the trust and promptly to have
their stock certificates reissued upon the expiration date of the original term
of the voting trust agreement. The extension agreement shall in every respect
comply with and be subject to all the provisions of this Article VI, Section 4
applicable to the original voting trust agreement except that the ten (10) year
maximum period of duration shall commence on the date of adoption of the
extension agreement.
e. The trustees under the terms of the agreements entered into under
the provisions of this Article VI, Section 4 shall not acquire the legal title
to the shares but shall be vested only with the legal right and title to the
voting power which is incident to the ownership of the shares.
Section 5. Lost, Destroyed, or Stolen Certificates.
No certificate representing shares of the stock in the Corporation
shall be issued in place of any Certificate alleged to have been lost,
destroyed, or stolen except on production of evidence, satisfactory to the Board
of Directors, of such loss, destruction or theft, and, if the Board of Directors
so requires, upon the furnishing of an indemnity bond in such amount (but not to
exceed twice the fair market value of the shares represented by the Certificate)
and with such terms and with such surety as the Board of Directors may, in its
discretion, require.
ARTICLE VII
Books and Records
a. The Corporation shall keep correct and complete books and records
of account and shall keep minutes of the proceedings of its shareholders, Board
of Directors and committees of Directors.
b. Any books, records and minutes may be in written form or in any
other form capable of being converted into written form within a reasonable
time.
c. Any person who shall have been a holder of record of one quarter of
one percent of all shares or of voting trust certificates therefor at least six
months immediately preceding his demand or shall be the holder of record of, or
the holder of record of voting trust certificates for, at least five (5%)
percent of the outstanding shares of any class or series of the Corporation,
upon written demand stating the purpose thereof, shall have the right to
examine, in person or by agent or attorney, at any reasonable time or times, for
any proper purpose, its relevant books and records of account, minutes and
record of shareholders and to make extracts therefrom.
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d. No shareholder who within two (2) years has sold or offered for sale
any list of shareholders or of holders of voting trust certificates for shares
of this Corporation or any other Corporation; has aided or abetted any person in
procuring any list of shareholders or of holders of voting trust certificates
for any such purpose; or has improperly used any information secured through any
prior examination of the books and records of account, minutes, or record of
shareholders or of holders of voting trust certificates for shares of the
Corporation or any other Corporation; shall be entitled to examine the documents
and records of the Corporation as provided in Subsection C of this Article VII.
No shareholder who does not act in good faith or for a proper purpose in making
his demand shall be entitled to examine the documents and records of the
Corporation as provided in Subsection C of this Article VII.
e. Unless modified by resolution of the shareholders, this Corporation
shall prepare not later than four (4) months after the close of each fiscal
year:
(I) A balance sheet showing in reasonable detail the financial
conditions of the Corporation as of the date of its fiscal year.
(ii) A profit and loss statement showing the results of its
operation during its fiscal year.
f. Upon the written request of any shareholder or holder of voting
trust certificates for shares of the Corporation, the Corporation shall mail to
such shareholder or holder of voting trust certificates a copy of its most
recent balance sheet and profit and loss statement.
g. Such balance sheets and profit and loss statements shall be filed
and kept for at least five (5) years in the registered office of the Corporation
in this state and shall be subject to inspection during business hours by any
shareholder or holder of voting trust certificates.
ARTICLE VIII
Dividends
The Board of Directors of the Corporation may, from time to time,
declare and the Corporation may pay dividends on its shares in cash, property or
its own shares, except when the Corporation is insolvent or when the payment
thereof would render the Corporation insolvent subject to the following
provisions:
a. Dividends in cash or property may be declared and paid, except as
otherwise provided in this Article VIII only out of the unreserved and
unrestricted earned surplus of the Corporation or out of capital surplus,
however arising, but each dividend paid out of capital surplus shall be
identified as a distribution of capital surplus, and the amount per share paid
from such capital surplus shall be disclosed to the shareholders receiving the
same concurrently with the distribution.
b. Dividends may be declared and paid in the Corporation's treasury
shares.
c. Dividends may be declared and paid in the Corporation's authorized
but unissued shares out of any unreserved and unrestricted surplus of the
Corporation upon the following conditions:
(I) If a dividend is payable in the Corporation's own shares having
a par value, such shares shall be issued at not less than the par value thereof
and there shall be transferred to stated capital at the time such dividend is
paid an amount of surplus equal to the aggregate par value of the shares to be
issued as a dividend.
(ii) If a dividend is payable in the Corporation's own shares
without par value, such shares shall be issued at such stated value as shall be
fixed by the Board of Directors by resolution adopted at the time such dividend
is declared, and there shall be transferred to stated capital at the time such
dividend is paid an amount of surplus equal to the aggregate stated value so
fixed in respect of such shares; and the amount per share so transferred to
stated capital shall be disclosed to the shareholders receiving such dividend
concurrently with the payment thereof.
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d. No dividend payable in shares of any class shall be paid to the
holders of shares of any other class unless the Articles of Incorporation so
provide or such payment is authorized by the affirmative vote or written consent
of the holders of at least a majority of the outstanding shares of the class in
which the payment is to be made.
e. A split up or division of the issued shares of any class into a
greater number of shares of the same class without increasing the stated capital
of the Corporation shall not be construed to be a stock dividend within the
meaning of this Article VIII.
ARTICLE IX
Indemnification
Section 1. Action, etc. Other Than by or in the Right of the
Corporation.
The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding or investigation, whether civil, criminal or administrative,
and whether external or internal to the Corporation, (other than a judicial
action or suit brought by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or that, being or having been such a director, officer, employee or
agent, he is or was serving at the request of the Corporation as a director,
officer, employee, or trustee or agent of another corporation, partnership,
joint venture, trust or other enterprise (all such persons being referred to
hereafter as an "Agent"), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding, or any appeal
therein, if such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation, and
with respect to any criminal action or proceeding, had no reasonable cause to
believe such conduct was unlawful. The termination of any action, suit or
proceeding -- whether by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent -- shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, that such
person had reasonable cause to believe that his conduct was unlawful.
Section 2. Action, etc., by or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
judicial action or suit brought by or in the right of the Corporation to procure
a judgment in its favor by reason of the fact that he is or was an Agent (as
defined above) against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense, settlement or appeal
of such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for gross
negligence or willful misconduct in the performance of his or her duty to the
Corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Section 3. Determination of Right of Indemnification.
Any indemnification under Section 1 or 2 (unless ordered by a court)
shall be made by the Corporation unless a determination is reasonably and
promptly made (I) by the Board by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders, that such person acted in bad faith and
in a manner that such person did not believe to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal proceeding, that
such person believed or had reasonable cause to believe that his conduct was
unlawful.
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Section 4. Indemnification Against Expenses of Successful Party.
Notwithstanding the other provisions of this Article, to the extent
that an Agent has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice or the settlement of an
action without admission of liability, in defense of any proceeding or in
defense of any claim, issue or matter therein, or on appeal from any such
proceeding, action, claim or matter, such Agent shall be indemnified against all
expenses incurred in connection therewith.
Section 5. Advances of Expenses.
Except as limited by Section 6 of this Article, costs, charges and
expenses (including attorneys' fees) incurred in any action, suit, proceeding or
investigation or any appeal therefrom shall be paid by the Corporation in
advance of the final disposition of such matter, if the Agent shall undertake to
repay such amount in the event that it is ultimately determined, as provided
herein, that such person is not entitled to indemnification. Notwithstanding the
foregoing, no advance shall be made by the Corporation if a determination is
reasonably and promptly made by the Board of Directors or if a majority vote of
a quorum of disinterested directors cannot be obtained, then by independent
legal counsel in a written opinion, that, based upon the facts known to the
Board or counsel at the time such determination is made, such person acted in
bad faith and in a manner that such person did not believe to be in or not
opposed to the best interest of the Corporation, or, with respect to any
criminal proceeding, that such person believed or had reasonable cause to
believe his conduct was unlawful. In no event shall any advance be made in
instances where the Board or independent legal counsel reasonably determines
that such person deliberately breached his duty to the Corporation or its
shareholders.
Section 6. Right of Agent to Indemnification Upon Application;
Procedure Upon Application.
Any indemnification under Sections 1, 2 and 4 or advance under Section
5 of this Article, shall be made promptly, and in any event within ninety (90)
days, upon the written request of the Agent, unless with respect to applications
under Sections 1, 2 or 5, a determination is reasonably and promptly made by the
Board of Directors by a majority vote of a quorum of disinterested directors
that such Agent acted in a manner set forth in such Sections as to justify the
Corporation's not indemnifying or making an advance to the Agent. In the event
no quorum of disinterested directors is obtainable, the Board of Directors shall
promptly direct that independent legal counsel shall decide whether the Agent
acted in the manner set forth in such Sections as to justify the Corporation's
not indemnifying or making an advance to the Agent. The right to indemnification
or advances as granted by this Article shall be enforceable by the Agent in any
court of competent jurisdiction, if the Board or independent legal counsel
denies the claim, in whole or in part, or if no disposition of such claim is
made within ninety (90) days. The Agent's costs and expenses incurred in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such proceeding shall also be indemnified by the Corporation.
Section 7. Contribution.
In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Article is held
by a court of competent jurisdiction to be unavailable to an indemnitee in whole
or part, the Corporation shall, in such an event, after taking into account,
among other things, contributions by other directors and officers of the
Corporation pursuant to indemnification agreements or otherwise, and, in the
absence of personal enrichment, acts of intentional fraud or dishonesty or
criminal conduct on the part of the Agent, contribute to the payment of Agent's
losses to the extent that, after other contributions are taken into account,
such losses exceed: (I) in the case of a director of the Corporation or any of
its subsidiaries who is not an officer of the Corporation or any of such
subsidiaries, the amount of fees paid to him for serving as a director during
the 12 months preceding the commencement of the suit, proceeding or
investigation; or (ii) in the case of a director of the Corporation or any of
its subsidiaries who is also an officer of the Corporation or any of such
subsidiaries, the amount set forth in clause (I) plus 5% of the aggregate cash
compensation paid to said director for service in such office(s) during the 12
months preceding the commencement of the suit, proceeding or investigation; or
(iii) in the case of an officer of the Corporation or any of its subsidiaries,
5% of the aggregate cash compensation paid to such officer of service in such
office(s) during the 12 months preceding the commencement of such suit,
proceeding or investigation.
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Section 8. Other Rights and Remedies.
The indemnification provided by this Article shall not be deemed
exclusive of, and shall not affect, any other rights to which an Agent seeking
indemnification may be entitled under any law, Bylaw, or charter provision,
agreement, vote of stockholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be an
Agent and shall inure to the benefit of the heirs, executors and administrators
of such a person. All rights to indemnification under this Article shall be
deemed to be provided by a contract between the Corporation and the Agent who
serves in such capacity at any time while these Bylaws and other relevant
provisions of the general corporation law and other applicable law, if any are
in effect. Any repeal or modification thereof shall not affect any rights or
obligations then existing.
Section 9. Insurance.
Upon resolution passed by the Board, the Corporation may purchase
and maintain insurance on behalf of any person who is or was an Agent against
any liability asserted against such person and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under the
provisions of this Article. The Corporation may create a trust fund, grant a
security interest or use other means (including, without limitation, a letter of
credit) to ensure the payment of such sums as may become necessary to effect
indemnification as provided herein.
Section 10. Constituent Corporation.
For the purposes of this Article, references to the "Corporation"
include all constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation, so that any person who is or was
a director, officer, employee, agent or trustee of such a constituent
corporation or who, being or having been such a director, officer, employee or
trustee, is or was serving at the request of such constituent corporation as a
director, officer, employee, agent or trustee of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as such person would if he had served the resulting or
surviving corporation in the same capacity.
Section 11. Other Enterprises, Fines and Serving at Corporation's
Request.
For purposes of this Article, references to "other enterprise" in
Sections 1 and 10 shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service by Agent as director, officer, employee, trustee or
agent of the Corporation which imposes duties on, or involves services by, such
Agent with respect to any employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article.
Section 12. Savings Clause.
If this Article or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each Agent as to expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any action,
suit, appeal, proceeding or investigation, whether civil, criminal or
administrative, and whether internal or external, including a grand jury
proceeding and an action or suit brought by or in the right of the Corporation,
to the full extent permitted by any applicable portion of this Article that
shall not have been invalidated, or by any other applicable law.
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ARTICLE X
Amendment of Bylaws
a. The Board of Directors shall have the power to amend, alter, or
repeal these Bylaws, and to adopt new Bylaws, from time to time.
b. The shareholders of the Corporation, may, at any annual meeting
of the shareholders of the Corporation or at any special meeting of the
shareholders of the Corporation called for the purpose of amending these
Bylaws, amend, alter, or repeal these Bylaws, and adopt new Bylaws, from time to
time.
c. The Board of Directors shall not have the authority to adopt or
amend any Bylaw if such new Bylaw of such amendment would be inconsistent with
any Bylaw previously adopted by the shareholders of the Corporation. The
shareholders may prescribe in any Bylaw made by them that such Bylaw shall not
be altered, amended or repealed by the Board of Directors.
ARTICLE XI
Shareholder Agreements
Unless the shares of this Corporation are listed on a national
securities exchange or are regularly quoted by licensed securities dealers and
brokers, all the shareholders of this Corporation may enter into agreements
relating to any phase of business and affairs of the Corporation and which may
provide for, among other things, the election of directors of the Corporation in
a manner determined without reference to the number of shares of capital stock
of the Corporation owned by its shareholders, the determination of management
policy, and division of profits. Such agreement may restrict the discretion of
the Board of Directors and its management of the business of the Corporation
or may treat the Corporation as if it were a partnership or may arrange the
relationships of the shareholders in a manner that would be appropriate only
among partners. In the event such agreement shall be inconsistent in whole or in
part with the Articles of Incorporation and/or Bylaws of the Corporation, the
terms of such agreement shall govern. Such agreement shall be binding upon any
transferee of shares of this corporation provided such transferee has actual
notice thereof or a legend referring to such agreement is noted on the face or
back of the certificate or certificates representing the shares transferred to
such transferee.
AR11CLE XII
Fiscal Year
The Fiscal Year of this Corporation shall be determined by the Board
of Directors.
Date: 7/3/96 /s/ [ILLEGIBLE]
-------------- ------------------------------------
Secretary
19
Exhibit 3.2(a)
AMENDED AND RESTATED BYLAWS
OF
QUEST NET CORP.
Article I.-Meeting of Shareholders
Section 1. Annual Meetings. The annual meeting of the shareholders of
this Corporation shall be held in August at the time and place designated by the
Board of Directors of the Corporation. The annual meeting of shareholders for
any year shall be held no later than 13 months after the last preceding annual
meeting of shareholders. Business transacted at the annual meeting shall include
the election of directors of the Corporation.
Section 2. Special Meetings. Special meetings of the shareholders shall
be held when directed by the Board of Directors, or when holders of not less
than 10 percent of all the shares entitled to vote at the meeting deliver to the
Corporation's secretary one or more written demands to concur the meeting
describing the purpose or purposes for which it will be held. Only business
within the purpose or purposes described in the special meeting notice may be
conducted at a special meeting.
Section 3. Place. Meetings of shareholders may be held within or
without the State of Florida.
Section 4. Notice. Written notice stating the date, time and place of
the meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than 10 nor more than
60 days before the meeting, either personally by telegraph, teletype, or other
form of electronic communication, or by first class mail, 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, such
notice shall be deemed to be delivered when deposited in the United States mail
addressed to the shareholder at his address as it appears on the stock transfer
books of the Corporation, with postage thereon prepaid. The provisions of
Florida Statutes Section 607.0706 as to waiver of notice are applicable.
Notwithstanding the foregoing, no notice of a shareholders' meeting
need be given to a shareholder if: (i) an annual report and proxy statements for
two consecutive annual meetings of shareholders or (ii) all, and at least two
checks in payment of dividends or interest on securities during a 12-month
period have been sent by first-class United States mail, addressed to the
shareholder at his address as it appears on the share transfer books of the
Corporation, and returned undeliverable. The obligation of the Corporation to
give notice of a shareholders' meeting to any such shareholder shall be
reinstated once the corporation has received a new address for such shareholder
for entry on its share transfer books.
Section 5. Notice of Adjourned Meetings. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the new date, time and place are announced at the meeting
before an adjournment is taken, and any business may be transacted at the
adjourned meeting that might have been transacted on the original date of the
meeting. If, however, after the adjournment the Board of Directors fixes a new
record date for the adjourned meeting, a notice of adjourned meeting, shall be
given as provided in this section to each shareholder of record on the new
record date entitled to vote at such meeting.
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Section 6. Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other purpose, the Board of
Directors may fix in advance a date as the record date for the determination of
shareholders, such date in any case to be not more than 70 days before the
meeting or action requiring a determination of shareholders but in no event may
a record date fixed by the Board of Directors be a date preceding the date upon
which the resolution fixing the record date was adopted.
The record date for determining shareholders entitled to demand a
special meeting is 40 days before the Corporation first receives a demand to
convene a special meeting.
If no prior action is required by the Board of Directors, the record
date for determining shareholders entitled to take action without a meeting is
40 days before the date the first signed written consent is delivered to the
Corporation under Florida Statutes Section 607.0704. If not otherwise fixed, and
prior action is required by the Board of Directors, the record date for
determining shareholders entitled to take action without a meeting is at the
close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
If no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, then the record
date for determining shareholders entitled to notice of and to vote at an annual
or special shareholders' meeting is 40 days before the first notice is delivered
to shareholders.
A determination of shareholders entitled to notice of or to vote at a
shareholders' meeting shall be effective for any adjournment of the meeting
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.
Section 7. Shareholder Ouorum and Voting. Except as provided by law, a
majority of the outstanding shares of each class or series of voting stock then
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders but in no event shall a quorum consist of less than
1/3 of the shares of each class or series of voting stock then entitled to vote.
When a specified item of business is required to be voted on by a class or
series of stock, a majority of the outstanding shares of such class or series
shall constitute a quorum for the transaction of such item of business by that
class or series.
If a quorum is present, the affirmative vote of the majority of those
shares represented at the meeting in person or by proxy of each class or series
of voting stock and entitled to vote on the subject matter shall be the act of
the shareholders unless otherwise provided by law.
After a quorum has been established at a shareholders' meeting, the
subsequent withdrawal of shareholders, so as to reduce the number of
shareholders entitled to vote at the meeting below the number required for a
quorum, shall not affect the validity of any action taken at the meeting or any
adjournment thereof.
Section 8. Voting of Shares. Each outstanding voting share, regardless
of class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders.
Shares of stock of this Corporation owned by another corporation, the
majority of the voting stock of which is owned or controlled by this
Corporation, shall not be voted, directly or indirectly, at any meeting.
Provided however that nothing contained herein shall limit the power of a
corporation to vote any shares, including its own shares, held by it in a
fiduciary capacity.
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A shareholder may vote either in person or by proxy executed in writing
by the shareholder or his duly authorized attorney-in-fact.
At each election for directors every shareholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected at
that time and for whose election he has a right to vote.
Shares standing in the name of another corporation, domestic or
foreign, may be voted by the officer, agent, or proxy designated by the bylaws
of the corporate shareholder, or, in the absence of any applicable bylaw, by
such person as the Board of Directors of the corporate shareholder may
designate. Proof of such designation may be made by presentation of a certified
copy of the bylaws or other instrument of the corporate shareholder. In the
absence of any such designation, or in case of conflicting designation by the
corporate shareholder, the chairman of the board, president, any vice president,
secretary and treasurer of the corporate shareholder shall be presumed to
possess, in that order, authority to vote such shares.
Shares held by an administrator, executor, guardian, or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name or the name of his
nominee.
Shares held by or under the control of a receiver or a trustee in a
bankruptcy proceeding or any assignee for the benefit of creditors may be voted
by him without the transfer thereof into his name.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee or his nominee shall be entitled to vote the shares so
transferred.
Redeemable shares are not entitled to vote on any matter, and shall not
be deemed to be outstanding, after notice of redemption is mailed to the holders
thereof and a sum sufficient to redeem such shares has been deposited with a
bank, trust company, or other financial institution upon an irrevocable
obligation to pay the holders the redemption price upon surrender of the shares.
If a share or shares stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, tenants by the entirety, or otherwise, or if two or more persons have
the same fiduciary relationship respecting the same shares, unless the secretary
of the Corporation is given notice to the contrary and is furnished with a copy
of the instrument or order appointing them or creating the relationship wherein
it is so provided, then acts with respect to voting have the following effect:
(i) if only one votes, in person or by proxy, his act binds all; (ii) if more
than one vote, in person or by proxy, the act of the majority so voting binds
all; (iii) if more than one vote, in person or by proxy, but the vote is evenly
split on any particular matter, each faction is entitled to vote the share or
shares in question proportionally; (iv) if the instrument or order so filed
shows that any such tenancy is held in unequal interest, a majority or a vote
evenly split for purposes of this subsection shall be a majority or a vote
evenly split in interest; (v) trustees or other fiduciaries holding shares
registered in the name of a nominee may cause such shares to be voted by such
nominee as the trustee or other fiduciary may direct. Such nominee may vote
shares as directed by a trustee or other fiduciary without the necessity of
transferring the shares to the name of the trustee or other fiduciary.
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Section 9. Proxies. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting of a
shareholders' duly authorized attorney-in-fact may authorize another person or
persons to act for him by proxy by signing an appointment form either personally
or by his attorney in-fact. An executed telegram or cablegram appearing to have
been transmitted by such person, or a photographic, Photostat, facsimile or
equivalent reproduction of an appointment form is a sufficient appointment form.
An appointment of proxy is effective when received by the secretary or
other officer or agent authorized to tabulate votes. An appointment is valid for
up to 11 months unless a longer period is expressly provided in the appointment
form.
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. Every proxy shall be revocable at the pleasure of the
shareholder executing it, except as otherwise provided by law.
If a proxy for the same shares confers authority upon two or more
persons and does not otherwise provide, a majority of them present at the
meeting, or if only one is present then that one, may exercise all the powers
conferred by the proxy, but if the proxy holders present at the meeting are
equally divided as to the right and manner of voting in any particular case, the
voting of such shares shall be prorated.
If a proxy expressly provides, any proxy holder may appoint in writing
a substitute to act in his place.
Section 10. Action by Shareholders without a Meeting. Any action
required by law, these bylaws, or the articles of incorporation of this
Corporation to be taken at any annual or special meeting of shareholders of the
Corporation, or any action which may be taken at any annual or special meeting
of such shareholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing setting forth the action so taken, shall
be signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted. If
any class of shares is entitled to vote thereon as a class, such written consent
shall be required of the holders of a majority of the shares of each class of
shares entitled to vote as a class thereon and of the total shares entitled to
vote thereon. In order to be effective, the action must be evidenced by one or
more written consents describing the action taken, dated and signed by approving
shareholders having the requisite number of votes of each voting group entitled
to vote thereon, and delivered to the Corporation. No written consent shall be
effective to take the corporate action referred to therein unless, within 60
days of the date of the earliest dated consent delivered in the manner required
by this section, written consent signed by the number of holders required to
take action is delivered to the Corporation. Any written consent may be revoked
prior to the date that the Corporation receives the required number of consents
to authorize the proposed action. No revocation shall be effective unless in
writing and until received by the Corporation.
Within 10 days after obtaining such authorization by written consent,
notice shall be given to those shareholders that have not consented in writing.
The notice shall fairly summarize the material features of the authorized
action, and, if the action be a merger, consolidation or sale or exchange of
assets for which dissenters' rights are provided under the Florida Business
Corporation Act (the "Act"), the notice shall contain a clear statement of the
right of shareholders dissenting therefrom to be paid the fair value of their
shares upon compliance with further provisions of the Act regarding the rights
of dissenting shareholders.
Consent signed under this section shall have the effect of a meeting
vote and may be described as such in any document.
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The written consents of the shareholders consenting thereto or the
written reports of inspectors appointed to tabulate such consents shall be filed
with the minutes of proceedings of shareholders.
Article II.-Directors
Section 1. Function. 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, the Board of Directors.
Section 2. Qualification. Directors must be natural persons who are 18
years of age or older but need not be residents of this state or shareholders of
this Corporation.
Section 3. Compensation. The Board of Directors shall have authority to
fix the compensation of directors.
Section 4. Duties of Directors. A director shall perform his duties as
a director, including his duties as a member of any committee of the board upon
which he may serve, in good faith, in a manner he reasonably believes to be in
the best interests of the Corporation, and with such care as an ordinarily
prudent person in a like position would use under similar circumstances.
In discharging 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:
(a) one or more officers or employees of the Corporation whom
the director reasonably believes to be reliable and competent in the matters
presented,
(b) counsel, public accountants or other persons as to matters
which the director reasonably believes to be within such person's professional
or expert competence, or
(c) a committee of the board upon which he does not serve,
duly designated in accordance with a provision of the articles of incorporation
or the bylaws, as to matters within its designated authority, which committee
the director reasonably believes to merit confidence.
A director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause such reliance
described above to be unwarranted.
A person who performs his duties in compliance with this section shall
have no liability by reason of being or having been a director of the
Corporation.
Section 5. Presumption of Assent. A director of the Corporation who is
present at a meeting of its Board of Directors or a committee at which action on
any corporate matter is taken shall be presumed to have assented to the action
taken unless he objects at the beginning of the meeting (or promptly upon his
arrival) to such meeting or transacting specific business thereat or he votes
against such action or abstains from the action taken.
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Section 6. Number. This Corporation shall have no less than one and
no more than nine directors, the exact number of which shall be established by
resolution of the Board of Directors. The number of directors may be established
from time to time by resolution of the Board of Directors, but no decrease shall
have the effect of shortening the terms of any incumbent director.
Section 7. Election and Term. Each person named in the articles of
incorporation as a member of the initial Board of Directors and all other
directors appointed by the Board of Directors to fill vacancies thereof shall
hold office until the first annual meeting of shareholders, and until his
successor shall have been elected and qualified or until his earlier
resignation, removal from office or death.
At the first annual meeting of shareholders and at each annual meeting
thereafter the shareholders shall elect directors to hold office until the next
succeeding annual meeting. Each director shall hold office for the term for
which he is elected and until his successor shall have been elected and
qualified or until his earlier resignation, removal from office or death.
Section 8. Vacancies. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
directors, may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders. A vacancy that will occur at a specific later
date may be filled before the vacancy occurs but the new director may not take
office until the vacancy occurs.
Section 9. Removal of Directors. At a meeting of the shareholders
called expressly for that purpose, any director or the entire Board of Directors
may be removed, with or without cause by a vote of the holders of a majority of
the shares of each class or series of voting stock present in person or by proxy
then entitled to vote at an election of directors.
Section 10. Quorum and Voting. A majority of the number of directors
shall constitute a quorum for the transaction of business. 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 11. Director Conflicts of Interest. No contract or other
transaction between this Corporation and one or more of its directors or any
other corporation, firm, association or entity in which one or more of the
directors are directors or officers or are financially interested, shall be
either void or voidable because of such relationship or interest or because such
director or directors are present at the meeting of the Board of Directors or a
committee thereof which authorizes, approves or ratifies such contract or
transaction or because his or their votes are counted for such purpose, if:
(a) The fact of such relationship or interest is disclosed or
known to the Board of Directors or committee which authorizes, approves or
ratifies the contract or transaction by a vote or consent sufficient for the
purpose without counting the votes or consents of such interested directors; or
(b) The fact of such relationship or interest is disclosed or
known to the shareholders entitled to vote and they authorize, approve or ratify
such contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable as to
the Corporation at the time it is authorized by the board, a committee or the
shareholders.
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Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof, which authorizes, approves, or ratifies such contract or transaction.
Section 12. Place of Meeting. Regular and special meetings by the Board
of Directors may be held within or without the State of Florida.
Section 13. Time, Notice and Call of Meetings. Regular meetings of the
Board of Directors shall be held without notice immediately following the annual
shareholders' meeting. Written notice of the time and place of special meetings
of the Board of Directors shall be given to each director by either personal
delivery, first class mail, facsimile transmission, or telegram at least two
days before the meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail addressed to the director at his
address as it appears on the books of the Corporation, with postage thereon
prepaid.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all obligations to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
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.
A majority of the directors present, whether or not a quorum exists,
may adjourn any meeting of the Board of Directors to another time and place.
Notice of any such adjourned meeting shall be given to the directors who were
not present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment to the other
directors.
Meetings of the Board of Directors may be called by the president of
the Corporation or by any director.
Members of the Board of Directors may participate in a meeting of such
Board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
Section 14. Action Without a Meeting. Any action required to be taken
at a meeting of the directors of the Corporation, or any action which may be
taken at a meeting of the directors, may be taken without a meeting if a consent
in writing, setting forth the action to be taken, signed by all of the
directors, is filed in the minutes of the proceedings of the Board. Action taken
by written consent shall be effective when the last director signs the consent
unless an effective date is specified in the consent. Such consent shall have
the same effect as a unanimous meeting vote.
Section 15. Committees. The Board of Directors by resolution adopted by
a majority of the full Board of Directors may designate from among its members
such committees it deems prudent, such as, but not limited to, an executive
committee, audit committee, compensation committee, finance committee and a
litigation committee. Each committee shall be comprised of two or more members
who will serve at the pleasure of the Board of Directors.
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Section 16. Resignation. A director may resign at any time by
delivering notice to the Corporation. A resignation is effective when the notice
is delivered unless the notice specifies a later effective date.
Article III.-Officers
Section 1. Officers. The officers of this Corporation shall consist of
a chairman, president, one or more vice presidents, secretary, and treasurer,
and such other officers as may be designated by the Board of Directors, each of
whom shall be elected by the Board of Directors from time to time. Any two or
more offices may be held by the same person. The failure to elect any of the
above officers shall not affect the existence of this Corporation.
Section 2. Duties. The officers of this Corporation shall have the
following duties and such other duties as delegated by the Board of Directors or
chairman.
The chairman shall be the chief executive officer of the Corporation,
shall have general and active management of the business and affairs of the
Corporation subject to the directions of the Board of Directors, and shall
preside at all meetings of the stockholders and the Board of Directors.
The president shall be the chief operating officer of the Corporation,
and shall act whenever the chairman shall be unavailable.
The vice president(s) shall perform such duties as may be prescribed by
the Board of Directors or the president and shall act whenever the president
shall be unavailable.
The secretary shall have custody of and maintain all of the corporate
records except the financial records, shall record the minutes of all meetings
of the stockholders and whenever else required by the Board of Directors or the
president, and shall perform such other duties as may be prescribed by the Board
of Directors.
The treasurer shall be the chief financial and accounting officer. He
shall keep correct and complete records of account, showing accurately at all
times the financial condition of the corporation. He shall be the legal
custodian of all monies, notes, securities, and other valuables that may from
time to time come into the possession of the Corporation. He shall immediately
deposit all funds of the Corporation coming into his hands in some reliable bank
or other depository to be designated by the Board of Directors and shall keep
this bank account in the name of the Corporation. He shall furnish at meetings
of the Board of Directors, or whenever requested, a statement of the financial
condition of the Corporation and shall perform such other duties as the bylaws
provide or the Board of Directors may prescribe.
Section 3. Removal of Officers. Any officer or agent elected or
appointed by the Board of Directors may be removed by the Board whenever in its
judgment the best interests of the Corporation will be served thereby.
Any officer or agent elected by the stockholders may be removed only by
vote of the stockholders, unless the stockholders shall have authorized the
directors to remove such officer or agent.
Any vacancy, however, occurring, in any office may be filled by the
Board of Directors, unless the bylaws shall have expressly reserved such power
to the stockholders.
Removal of any officer shall be without prejudice to the contract
rights, if any, of the person so removed; however, election or appointment of an
officer or agent shall not of itself create contract rights.
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Article IV.-Stock Certificates
Section 1. Issuance. Every holder of shares in this Corporation shall
be entitled to have a certificate, representing all shares to which he is
entitled. No certificate shall be issued for any share until such share is fully
paid.
Section 2. Form. Certificates representing shares in this Corporation
shall be signed either manually or in facsimile by the president or vice
president and the secretary or an assistant secretary and may be sealed with the
seal of this Corporation or a facsimile thereof. In case any officer who signed
or whose facsimile signature has been placed upon such certificate shall have
ceased to be such officer before such certificate is issued, it may be issued by
the Corporation with the same effect as if he were such officer at the date of
its issuance.
Every certificate representing shares issued by this Corporation shall
set forth or fairly summarize upon the face or back of the certificate, or shall
state that the Corporation will furnish to any shareholder upon request and
without charge a full statement of, the designations, preferences, limitations
and relative rights of the shares of each class or series authorized to be
issued, and the variations in the relative rights and preferences between the
shares of each series so far as the same have been fixed and determined, and the
authority of the Board of Directors to fix and determine the relative rights and
preferences of subsequent series.
Every certificate representing shares which are restricted as to the
sale, disposition, or other transfer of such shares shall state that such shares
are restricted as to transfer and shall set forth or fairly summarize upon the
certificate.
Each certificate representing shares shall state upon its face: the
name of the Corporation; that the Corporation is organized under the laws of
this state; the name of the person or persons to whom issued; the number and
class of shares, and the designation of the series, if any, which such
certificate represents.
Section 3. Transfer of Stock. The Corporation shall register a stock
certificate presented to it for transfer if the certificate is properly endorsed
by the holder of record or by his duly authorized attorney, and the signature of
such person has been guaranteed by a commercial bank or trust company or by a
member of the New York or American Stock Exchange.
Section 4. Lost, Stolen or Destroyed Certificates. The Corporation
shall issue a new stock certificate in the place of any certificate previously
issued if the holder of record of the certificate (a) makes proof in affidavit
form that it has been lost, destroyed or wrongfully taken; (b) requests the
issuance of a new certificate before the Corporation has notice that the
certificate has been acquired by a purchaser for value in good faith and without
notice of any adverse claim; (c) gives bond in such form as the Corporation may
direct, to indemnify the Corporation, the transfer agent, and registrar against
any claim that may be made on account of the alleged loss, destruction, or theft
of a certificate; and (d) satisfies any other reasonable requirements imposed by
the Corporation.
Article V.-Corporate Records
Section 1. Corporate Records. This Corporation shall keep correct and
complete records and accurate books of account and shall keep as permanent
records minutes of all meetings and actions taken without a meeting of its
shareholders, Board of Directors and any committee of the Board of Directors.
9
<PAGE>
This Corporation shall keep at its registered office or principal place
of business, or at the office of its transfer agent or registrar, a record of
its shareholders, giving the names and addresses of all shareholders, and the
number, class and series, if any, of the shares held by each.
The Corporation shall keep a copy of the following records: (i) its
articles or restated articles of incorporation and all amendments to them
currently in effect; (ii) its bylaws or restated bylaws and all amendments to
them currently in effect; (iii) resolutions adopted by its Board of Directors
creating one or more classes or series of shares and fixing their relative
rights, preferences and limitations, if shares issued pursuant to those
resolutions are outstanding; (iv) the minutes of all shareholders' and Board of
Directors' meetings and records of all action taken by shareholders and Board of
Directors without a meeting for the past three years; (v) written communications
to all shareholders generally or all shareholders of a class or series within
the past three years including the financial statements furnished for the past
three years; (vi) a list of the names and business street addresses of its
current directors and officers; and (vii) its most recent annual report
delivered to the Department of State.
Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
Section 2. Shareholders' Inspection Rights. A shareholder of the
Corporation, his agent or attorney is entitled to inspect and copy, during
regular business hours at the Corporation's principal office, the Corporation's
articles or restated articles of incorporation and all amendments, the bylaws or
restated bylaws and all amendments, resolutions adopted by the Board of
Directors creating one or more classes or series of shares and fixing their
relative rights, preferences, and limitations if shares issued pursuant to those
resolutions are outstanding, the minutes of the shareholders meetings and
records of all actions taken by shareholders without a meeting for the past
three years, written communications to all shareholders generally or all
shareholders of a class or series within the past three years, including the
financial statements furnished for the past three years as required by law, a
list of the names and business street address of the Corporation's current
directors and officers and the Corporation's most recent annual report delivered
to the Department of State, if prior to his inspection he has given the
Corporation written notice of his demand at least five business days before the
date on which he wishes to inspect and copy. A shareholder of the Corporation is
entitled to inspect and copy, during regular business hours at a reasonable
location specified by the Corporation, excerpts from minutes of any meeting of
the Board of Directors, records of any action of a committee of the Board of
Directors while acting in place of the Board of Directors on behalf of the
Corporation, minutes of any meetings of the shareholders, and records of action
taken by the shareholders or Board of Directors without a meeting, accounting
records of the Corporation, the records of shareholders, and any other books and
records if his demand is made in good faith and for a proper purpose, he
describes with reasonable particularity his purpose and the records he desires
to inspect, the records are directly connected with his purpose and he gives the
Corporation written notice of his demand at least five business days before the
date on which he wishes to inspect and copy.
Section 3. Financial Information. Unless ratified by resolution of the
shareholders, the Corporation shall prepare and mail to its shareholders within
120 days after the close of each fiscal year or within such additional time
thereafter as is reasonably necessary to enable the Corporation to prepare its
financial statements, annual financial statements that include a balance sheet
as of the end of the fiscal year, an income statement for that year, a statement
of cash flow for that year and if such financial statements are reported upon by
a public accountant, his report.
10
<PAGE>
Article VI.-Distributions to Shareholders
The Board of Directors of this Corporation may, from time to time,
authorize and the Corporation may make distributions on its shares in cash,
property or its own shares, except when the Corporation (i) would not be able to
pay its debts as they become due in the usual course of business or (ii) the
Corporation's total assets would be less than the sum of its total liabilities
plus (unless the articles of incorporation provide otherwise) the amount that
would be needed, if the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution or when the declaration or payment thereof would be contrary to
any restrictions contained in the articles of incorporation.
The Board of Directors may base a determination that a distribution is
not prohibited under (i) or (ii) above either on financial statements prepared
on the basis of accounting practices and principles that are reasonable in the
circumstances or on a fair valuation or other method that is reasonable in the
circumstances. In the case of any distribution based upon such a valuation, each
such distribution shall be identified as a distribution based upon a current
valuation of assets, and the amount per share paid on the basis of such
valuation shall be disclosed to the shareholders concurrent with their receipt
of the distribution.
Article VII.-Corporate Seal
The Board of Directors shall provide a corporate seal which, shall be
circular in form and shall have inscribed thereon the following:
Article VIII.-Amendment
These bylaws may be repealed or amended, and new bylaws may be adopted
by the Board of Directors.
11
Exhibit 4.1
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
COMMON STOCK PURCHASE WARRANT
To Purchase 375 Shares of Common Stock of
QUESTNET CORP.
THIS CERTIFIES that, for value received, Scott Goldstein (the
"Investor"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after January 25, 2000 (the "Issuance
Date"), and on or prior to January 25, 2001 (the "Termination Date") but not
thereafter, to subscribe for and purchase from QUESTNET CORP, a Florida
corporation (the "Company"), three hundred seventy five (375) shares of Common
Stock (the "Warrant Shares"). The purchase price of one share of Common Stock
(the "Exercise Price") under this Warrant shall be equal to $9.40. The Exercise
Price and the number of shares for which the Warrant is exercisable shall be
subject to adjustment as provided herein. This Warrant is being issued in
connection with the Common Stock Purchase Agreement dated as of January 25,
1999, in the aggregate amount of Seven Hundred ($700,000) Dollars (the
"Agreement") and is subject to its terms. In the event of any conflict between
the terms of this Warrant and the Agreement, the Agreement shall control.
1. Title of Warrant. Prior to the expiration hereof and subject
to compliance with applicable laws, this Warrant and all rights hereunder are
transferable with the prior written consent of the Company (which consent shall
not be unreasonably withheld), in whole or in part, at the office or agency of
the Company by the holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed.
2. Authorization of Shares. The Company covenants that all
shares of Common Stock which may be issued upon the exercise of rights
represented by this Warrant will, upon exercise of the rights represented by
this Warrant, be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue).
<PAGE>
3. Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made at any time or times, in whole, before
the close of business on the Termination Date, or such earlier date on which
this Warrant may terminate as provided in paragraph 11 below, by the surrender
of this Warrant and the Subscription Form annexed hereto duly executed, at the
office of the Company (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address of
such holder appearing on the books of the Company) and upon payment of the
Exercise Price of the shares thereby purchased; whereupon the holder of this
Warrant shall be entitled to receive a certificate for the number of shares of
Common Stock so purchased. Certificates for shares purchased hereunder shall be
delivered to the holder hereof within five business days after the date on which
this Warrant shall have been exercised as aforesaid. Payment of the Exercise
Price of the shares may be by certified check or cashier's check or by wire
transfer to an account designated by the Company in an amount equal to the
Exercise Price multiplied by the number of shares being purchased.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Issuance of certificates for
shares of Common Stock upon the exercise of this Warrant shall be made without
charge to the holder hereof for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificates shall be issued in
the name of the holder of this Warrant or in such name or names as may be
directed by the holder of this Warrant; provided, however, that in the event
certificates for shares of Common Stock are to be issued in a name other than
the name of the holder of this Warrant, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the holder hereof; and provided further, that upon any transfer
involved in the issuance or delivery of any certificates for shares of Common
Stock, the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.
6. Closing of Books. The Company will at no time close its
shareholder books or records in any manner which interferes with the timely
exercise of this Warrant.
7. No Rights as Shareholder until Exercise. This Warrant does
not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company prior to the exercise thereof. If, however, at the
time of the surrender of this Warrant and purchase the holder hereof shall be
entitled to exercise this Warrant, the shares so purchased shall be and be
deemed to be issued to such holder as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been exercised.
8. Assignment and Transfer of Warrant. This Warrant may be
assigned with the prior written consent of the Company (which consent shall not
be unreasonably withheld) by the surrender of this Warrant and the Assignment
Form annexed hereto duly executed at the office of the Company (or such other
office or agency of the Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Company); provided, however, that this Warrant may not be resold or
otherwise transferred except (i) in a transaction registered under the
Securities Act, or (ii) in a transaction pursuant to an exemption, if available,
from such registration.
9. Loss, Theft, Destruction or Mutilation of Warrant. The
Company represents and warrants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
any Warrant or stock certificate, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it, and upon reimbursement to
the Company of all reasonable expenses incidental thereto, and upon surrender
and cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and dated
as of such cancellation, in lieu of this Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed
day for the taking of any action or the expiration of any right required or
granted herein shall be a Saturday, Sunday or a legal holiday, then such action
may be taken or such right may be exercised on the next succeeding day not a
legal holiday.
<PAGE>
11. Effect of Certain Events.
(a) If at any time the Company proposes (i) to sell or otherwise
convey all or substantially all of its assets or (ii) to effect a transaction
(by merger or otherwise) in which more than 50% of the voting power of the
Company is disposed of (collectively, a "Sale or Merger Transaction"), in which
the consideration to be received by the Company or its shareholders consists
solely of cash, the Company shall give the holder of this Warrant fifteen (15)
days' notice of the proposed effective date of the transaction specifying that
the Warrant shall terminate if the Warrant has not been exercised by the
effective date of the transaction.
(b) In case the Company shall at any time effect a Sale or
Merger Transaction in which the consideration to be received by the Company or
its shareholders consists in part of consideration other than cash, the holder
of this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such transaction had this Warrant been exercised immediately prior thereto.
12. Adjustments of Exercise Price and Number of Warrant Shares.
The number and kind of securities purchasable upon the exercise of this Warrant
and the Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in
shares of Common Stock or make a distribution in shares of Common Stock to
holders of its outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (iv) issue any shares of its capital
stock in a reclassification of the Common Stock, the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. An adjustment made pursuant to this paragraph
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
13. Voluntary Adjustment by the Company. The Company may at its
warrant, at any time during the term of this Warrant, reduce the then current
Exchange Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.
14. Notice of Adjustment. Whenever the number of Warrant shares
or number or kind of securities or other property purchasable upon the exercise
of this Warrant or the Exercise Price is adjusted, as herein provided, the
Company shall promptly mail by registered or certified mail, return receipt
requested, to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities or
property) purchasable upon the exercise of this Warrant and the Exercise Price
of such Warrant Shares after such adjustment, setting forth a brief statement of
the facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
15. Authorized Shares. The Company covenants that during the
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be necessary to
assure that such shares of Common Stock may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the OTC
Bulletin Board or any domestic securities exchange upon which the Common Stock
may be listed.
<PAGE>
16. Miscellaneous.
(a) Issue Date: Jurisdiction. The provisions of this Warrant
shall be construed and shall be given effect in all respects as if it had been
issued and delivered by the Company on the date hereof. This Warrant shall be
binding upon any successors or assigns of the Company. This Warrant shall
constitute a contract under the laws of Florida and for all purposes shall be
construed in accordance with and governed by the laws of said state without
regard to its conflict of law, principles or rules. The party who initiates
legal action shall choose the jurisdiction of the federal courts or the state
courts in connection with any dispute arising under this Agreement and hereby
waives, to the maximum permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. Each party waives its right to a trial by jury.
(b) Restrictions. The holder hereof acknowledges that the Common
Stock acquired upon the exercise of this Warrant, if not registered, may have
restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof of the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated: January 25, 1999
QUESTNET CORP
By /s/ Robert Leff, president
--------------------------
President
Exhibit 4.2
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
COMMON STOCK PURCHASE WARRANT
To Purchase 375 Shares of Common Stock of
QUESTNET CORP.
THE CERTIFIES that, for value received, Sheldon Goldstein (the
"Investor"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after January 25, 2000 (the "Issuance
Date"), and on or prior to January 25, 2001 (the "Termination Date") but not
thereafter, to subscribe for and purchase from QUESTNET CORP, a Florida
corporation (the "Company"), three hundred seventy five (375) shares of Common
Stock (the "Warrant Shares"). The purchase price of one share of Common Stock
(the "Exercise Price") under this Warrant shall be equal to $9.40. The Exercise
Price and the number of shares for which the Warrant is exercisable shall be
subject to adjustment as provided herein. This Warrant is being issued in
connection with the Common Stock Purchase Agreement dated as of January 25,
1999, in the aggregate amount of Seven Hundred ($700,000) Dollars (the
"Agreement) and is subject to its terms. In the event of any conflict between
the terms of this Warrant and the Agreement, the Agreement shall control.
1. Title of Warrant. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable with the prior written consent of the Company (which consent shall
not be unreasonably withheld), in whole or in part, at the office or agency of
the Company by the holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
<PAGE>
3. Exercise of Warrant. Exercise of the purchase rights represented by
this Warrant may be made at any time or times, in whole, before the close of
business on the Termination Date, or such earlier date on which this Warrant may
terminate as provided in paragraph 11 below, by the surrender of this Warrant
and the Subscription Form annexed hereto duly executed, at the office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the registered holder hereof at the address of such holder
appearing on the books of the Company) and upon payment of the Exercise Price of
the shares thereby purchased; whereupon the holder of this Warrant shall be
entitled to receive a certificate for the number of shares of Common Stock so
purchased. Certificates for shares purchased hereunder shall be delivered to the
holder hereof within five business days after the date on which this Warrant
shall have been exercised as aforesaid. Payment of the Exercise Price of the
shares may be by certified check or cashier's check or by wire transfer to an
account designated by the Company in an amount equal to the Exercise Price
multiplied by the number of shares being purchased.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. The Company will at no time close its shareholder
books or records in any manner which interferes with the timely exercise of this
Warrant.
7. No Rights as Shareholder until Exercise. This Warrant does not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company prior to the exercise thereof. If, however, at the time of the
surrender of this Warrant and purchase the holder hereof shall be entitled to
exercise this Warrant, the shares so purchased shall be and be deemed to be
issued to such holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been exercised.
8. Assignment and Transfer of Warrant. This Warrant may be assigned
with the prior written consent of the Company (which consent shall not be
unreasonably withheld) by the surrender of this Warrant and the Assignment Form
annexed hereto duly executed at the office of the Company (or such other office
or agency of the Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Company); provided, however, that this Warrant may not be resold or
otherwise transferred except (i) in a transaction registered under the
Securities Act, or (ii) in a transaction pursuant to an exemption, if available,
from such registration
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company
represents and warrants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
or stock certificate, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and upon reimbursement to the Company of
all reasonable expenses incidental thereto, and upon surrender and cancellation
of such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a legal
holiday.
<PAGE>
11. Effect of Certain Events.
(a) If at any time the Company proposes (i) to sell or otherwise convey
all or substantially all of its assets or (ii) to effect a transaction (by
merger or otherwise) in which more than 50% of the voting power of the Company
is disposed of (collectively, a "Sale or Merger Transaction"), in which the
consideration to be received by the Company or its shareholders consists solely
of cash, the Company shall give the holder of this Warrant fifteen (15) days'
notice of the proposed effective date of the transaction specifying that the
Warrant shall terminate if the Warrant has not been exercised by the effective
date of the transaction.
(b) In case the Company shall at any time effect a Sale or Merger
Transaction in which the consideration to be received by the Company or its
shareholders consists in part of consideration other than cash, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such transaction had this Warrant been exercised immediately; prior thereto.
12. Adjustments of Exercise Price and Number of Warrant Shares. The
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, the number of Warrant Shares purchasable
upon exercise of this Warrant immediately prior thereto shall be adjusted so
that the holder of this Warrant shall be entitled to receive the kind and number
of Warrant Shares or other securities of the Company which he would have owned
or have been entitled to receive had such Warrant been exercised in advance
thereof. An adjustment made pursuant to this paragraph shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
13. Voluntary Adjustment by the Company. The Company may at its
warrant, at any time during the term of this Warrant, reduce the then current
Exchange Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.
14. Notice of Adjustment. Whenever the number of Warrant shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the holder of this Warrant notice of such adjustment or adjustments setting
forth the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of such
Warrant Shares after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
15. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of Common Stock
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for shares of the Company's Common
Stock upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
shares of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the OTC Bulletin Board
or any domestic securities exchange upon which the Common Stock may be listed.
<PAGE>
16. Miscellaneous.
(a) Issue Date: Jurisdiction. The provisions of this Warrant shall be
construed and shall be given effect in all respects as if it had been issued and
delivered by the Company on the date hereof. This Warrant shall be binding upon
any successors or assigns of the Company. This Warrant shall constitute a
contract under the laws of Florida and for all purposes shall be construed in
accordance with and governed by the laws of said state without regard to its
conflict of law, principles or rules. The party who initiates legal action shall
choose the jurisdiction of the federal courts or the state courts in connection
with any dispute arising under this Agreement and hereby waives, to the maximum
permitted by law, any objection, including any objection based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions. Each
party waives its right to a trial by jury.
(b) Restrictions. The holder hereof acknowledges that the Common Stock
acquired upon the exercise of this Warrant, if not registered, may have
restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof of the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officers thereunto duly authorized.
Dated: January 25, 1999
QUESTNET CORP
By /s/ Robert Leff, president
--------------------------
President
Exhibit 4.3
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
COMMON STOCK PURCHASE WARRANT
To Purchase 1,000 Shares of Common Stock of
QUESTNET CORP.
THIS CERTIFIES that, for value received, DSF Capital, Inc. (the
"Investor"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after January 25, 2000 (the "Issuance
Date"), and on or prior to January 25, 2001 (the "Termination Date") but not
thereafter, to subscribe for and purchase from QUESTNET CORP, a Florida
corporation (the "Company"), one thousand (1,000) shares of Common Stock (the
"Warrant Shares"). The purchase price of one share of Common Stock (the
"Exercise Price") under this Warrant shall be equal to $9.40. The Exercise Price
and the number of shares for which the Warrant is exercisable shall be subject
to adjustment as provided herein. This Warrant is being issued in connection
with the Common Stock Purchase Agreement dated as of January 25, 1999, in the
aggregate amount of Seven Hundred ($700,000) Dollars (the "Agreement") and is
subject to its terms. In the event of any conflict between the terms of this
Warrant and the Agreement, the Agreement shall control.
1. Tide of Warrants. Prior to the expiration hereof and subject
to compliance with applicable laws, this Warrant and all rights hereunder are
transferable with the prior written consent of the Company (which consent shall
not be unreasonably withheld), in whole or in part, at the office or agency of
the Company by the holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed.
2. Authorization of Shares. The Company covenants that all
shares of Common Stock which may be issued upon the exercise of rights
represented by this Warrant will, upon exercise of the rights represented by
this Warrant, be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue).
<PAGE>
3. Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made at any time or times, in whole, before
the close of business on the Termination Date, or such earlier date on which
this Warrant may terminate as provided in paragraph 11 below, by the surrender
of this Warrant and the Subscription Form annexed hereto duly executed, at the
office of the Company (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address of
such holder appearing on the books of the Company) and upon payment of the
Exercise Price of the shares thereby purchased; whereupon the holder of this
Warrant shall be entitled to receive a certificate for the number of shares of
Common Stock so purchased. Certificates for shares purchased hereunder shall be
delivered to the holder hereof within five business days after the date on which
this Warrant shall have been exercised as aforesaid. Payment of the Exercise
Price of the shares may be by certified check or cashier's check or by wire
transfer to an account designated by the Company in an amount equal to the
Exercise Price multiplied by the number of shares being purchased.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Issuance of certificates for
shares of Common Stock upon the exercise of this Warrant shall be made without
charge to the holder hereof for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificates shall be issued in
the name of the holder of this Warrant or in such name or names as may be
directed by the holder of this Warrant; provided, however, that in the event
certificates for shares of Common Stock are to be issued in a name other than
the name of the holder of this Warrant, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the holder hereof; and provided further, that upon any transfer
involved in the issuance or delivery of any certificates for shares of Common
Stock, the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.
6. Closing of Books. The Company will at no time close its
shareholder books or records in any manner which interferes with the timely
exercise of this Warrant.
7. No Rights as Shareholder until Exercise. This Warrant does
not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company prior to the exercise thereof. If, however, at the
time of the surrender of this Warrant and purchase the holder hereof shall be
entitled to exercise this Warrant, the shares so purchased shall be and be
deemed to be issued to such holder as the record owner of such shares as of the
close of business on the date on which this Warrant have been exercised.
8. Assignment and Transfer of Warrant. This Warrant may be
assigned with the prior written consent of the Company (which consent shall not
be unreasonably withheld) by the surrender of this Warrant and the Assignment
Form annexed hereto duly executed at the office of the Company (or such other
office or agency of the Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Company); provided, however, that this Warrant may not be resold or
otherwise transferred except (i) in a transaction registered under the
Securities Act, or (ii) in a transaction pursuant to an exemption, if available,
from such registration.
9. Loss, Theft, Destruction or Multilation of Warrant. The
Company represents and warrants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
any Warrant or stock certificate, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it, and upon reimbursement to
the Company of all reasonable expenses incidental thereto, and upon surrender
and cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and dated
as of such cancellation, in lieu of this Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed
day for the taking of any action or the expiration of any right required or
granted herein shall be a Saturday, Sunday or a legal holiday, then such action
may be taken or such right may be exercised on the next succeeding day not a
legal holiday.
<PAGE>
11. Effect of Certain Events.
(a) If at any time the Company proposes (i) to sell or otherwise
convey all or substantially all of its assets or (ii) to effect a transaction
(by merger or otherwise) in which more than 50% of the voting power of the
Company is disposed of (collectively, a "Sale or Merger Transaction"), in which
the consideration to be received by the Company or its shareholders consists
solely of cash, the Company shall give the holder of this Warrant fifteen (15)
days' notice of the proposed effective date of the transaction specifying that
the Warrant shall terminate if the Warrant has not been exercised by the
effective date of the transaction.
(b) In case the Company shall at any time effect a Sale or
Merger Transaction in which the consideration to be received by the Company or
its shareholders consists in part of consideration other than cash, the holder
of this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such transaction had this Warrant been exercised immediately prior thereto.
12. Adjustments of Exercise Price and Number of Warrant Shares.
The number and kind of securities purchasable upon the exercise of this Warrant
and the Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in
shares of Common Stock or make a distribution in shares of Common Stock to
holders of its outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (iv) issue any shares of its capital
stock in a reclassification of the Common Stock, the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. An adjustment made pursuant to this paragraph
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
13. Voluntary Adjustment by the Company. The Company may at its
warrant, at any time during the term of this Warrant, reduce the then current
Exchange Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.
14. Notice of Adjustment. Whenever the number of Warrant shares
or number or kind of securities or other property purchasable upon the exercise
of this Warrant or the Exercise Price is adjusted, as herein provided, the
Company shall promptly mail by registered or certified mail, return receipt
requested, to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities or
property) purchasable upon the exercise of this Warrant and the Exercise Price
of such Warrant Shares after such adjustment, setting forth a brief statement of
the facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the conclusive evidence of such adjustment.
15. Authorized Shares. The Company covenants that during the
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be necessary to
assure that such shares of Common Stock may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the OTC
Bulletin Board or any domestic securities exchange upon which the Common Stock
may be listed.
<PAGE>
16. Miscellaneous.
(a) Issue Date: Jurisdiction. The provisions of this Warrant
shall be construed and shall be given effect in all respects as if it had been
issued and delivered by the Company on the date hereof. This Warrant shall be
binding upon any successors or assigns of the Company. This Warrant shall
constitute a contract under the laws of Florida and for all purposes shall be
construed in accordance with and governed by the laws of said state without
regard to its conflict of law, principles or rules. The party who initiates
legal action shall choose the jurisdiction of the federal courts or the state
courts in connection with any dispute arising under this Agreement and hereby
waives, to the maximum permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. Each party waives its right to a trial by jury.
(b) Restrictions. The holder hereof acknowledges that the Common
Stock acquired upon the exercise of this Warrant, if not registered, may have
restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof of the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated: January 25, 1999
QUESTNET CORP
By /s/ Robert Leff, president
--------------------------
President
Exhibit 4.4
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
COMMON STOCK PURCHASE WARRANT
To Purchase 250 Shares of Common Stock of
QUESTNET CORP.
THIS CERTIFIES that, for value received, Jeffrey Stein (the
"Investor"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after January 25, 2000 (the "Issuance
Date"), and on or prior to January 25, 2001 (the "Termination Date") but not
thereafter, to subscribe for and purchase from QUESTNET CORP, a Florida
corporation (the "Company"), two hundred fifty (250) shares of Common Stock (the
"Warrant Shares"). The purchase price of one share of Common Stock (the
"Exercise Price") under this Warrant shall be equal to $9.40. The Exercise Price
and the number of shares for which the Warrant is exercisable shall be subject
to adjustment as provided herein. This Warrant is being issued in connection
with the Common Stock Purchase Agreement dated as of January 25, 1999, in the
aggregate amount of Seven Hundred ($700,000) Dollars (the "Agreement") and is
subject to its terms. In the event of any conflict between the terms of this
Warrant and the Agreement, the Agreement shall control.
1. Title of Warrant. Prior to the expiration hereof and subject
to compliance with applicable laws, this Warrant and all rights hereunder are
transferable with the prior written consent of the Company (which consent shall
not be unreasonably withheld), in whole or in part, at the office or agency of
the Company by the holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed.
2. Authorization of Shares. The Company covenants that all
shares of Common Stock which may be issued upon the exercise of rights
represented by this Warrant will, upon exercise of the rights represented by
this Warrant, be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue).
<PAGE>
3. Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made at any time or times, in whole, before
the close of business on the Termination Date, or such earlier date on which
this Warrant may terminate as provided in paragraph 11 below, by the surrender
of this Warrant and the Subscription Form annexed hereto duly executed, at the
office of the Company (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address of
such holder appearing on the books of the Company) and upon payment of the
Exercise Price of the shares thereby purchased; whereupon the holder of this
Warrant shall be entitled to receive a certificate for the number of shares of
Common Stock so purchased. Certificates for shares purchased hereunder shall be
delivered to the holder hereof within five business days after the date on which
this Warrant shall have been exercised as aforesaid. Payment of the Exercise
Price of the shares may be by certified check or cashier's check or by wire
transfer to an account designated by the Company in an amount equal to the
Exercise Price multiplied by the number of share being purchased.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Issuance of certificates for
shares of Common Stock upon the exercise of this Warrant shall be made without
charge to the holder hereof for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificates shall be issued in
the name of the holder of this Warrant or in such name or names as may be
directed by the holder of this Warrant; provided, however, that in the event
certificates for shares of Common Stock are to be issued in a name other than
the name of the holder of this Warrant, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the holder hereof; and provided further, that upon any transfer
involved in the issuance or delivery of any certificates for shares of Common
Stock, the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.
6. Closing of Books. The Company will at no time close its
shareholder books or records in any manner which interferes with the timely
exercise of this Warrant.
7. No Rights as Shareholder until Exercise. This Warrant does
not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company prior to the exercise thereof. If, however, at the
time of the surrender of this Warrant and purchase the holder hereof shall be
entitled to exercise this Warrant, the shares so purchased shall be and be
deemed to be issued to such holder as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been exercised.
8. Assignment and Transfer of Warrant. This Warrant may be
assigned with the prior written consent of the Company (which consent shall not
be unreasonably withheld) by the surrender of this Warrant and the Assignment
Form annexed hereto duly executed at the office of the Company (or such other
office or agency of the Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Company); provided, however, that this Warrant may not be resold or
otherwise transferred except (i) in a transaction registered under the
Securities Act, or (ii) in a transaction pursuant to an exemption, if available,
from such registration.
9. Loss, Theft, Destruction or Mutilation of Warrant. The
Company represents and warrants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
any Warrant or stock certificate, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it, and upon reimbursement to
the Company of all reasonable expenses incidental thereto, and upon surrender
and cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and dated
as of such cancellation, in lieu of this Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed
day for the taking of any action or the expiration of any right required or
granted herein shall be a Saturday, Sunday or a legal holiday, then such action
may be taken or such right may be exercised on the next succeeding day not a
legal holiday.
<PAGE>
11. Effect of Certain Events.
(a) If at any time the Company proposes (i) to sell or otherwise
convey all or substantially all of its assets or (ii) to effect a transaction
(by merger or otherwise) in which more than 50% of the voting power of the
Company is disposed of (collectively, a "Sale or Merger Transaction"), in which
the consideration to be received by the Company or its shareholders consists
solely of cash, the Company shall give the holder of this Warrant fifteen (15)
days' notice of the proposed effective date of the transaction specifying that
the Warrant shall terminate if the Warrant has not been exercised by the
effective date of the transaction.
(b) In case the Company shall at any time effect a Sale or
Merger Transaction in which the consideration to be received by the Company or
its shareholders consists in part of consideration other than cash, the holder
of this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such transaction had this Warrant been exercised immediately prior thereto.
12. Adjustments of Exercise Price and Number of Warrant Shares.
The number and kind of securities purchasable upon the exercise of this Warrant
and the Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in
shares of Common Stock or make a distribution in shares of Common Stock to
holders of its outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (iv) issue any shares of its capital
stock in a reclassification of the Common Stock, the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. An adjustment made pursuant to this paragraph
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
13. Voluntary Adjustment by the Company. The Company may at its
warrant, at any time during the term of this Warrant, reduce the then current
Exchange Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.
14. Notice of Adjustment. Whenever the number of Warrant shares
or number or kind of securities or other property purchasable upon the exercise
of this Warrant or the Exercise Price is adjusted, as herein provided, the
Company shall promptly mail by registered or certified mail, return receipt
requested, to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities or
property) purchasable upon the exercise of this Warrant and the Exercise Price
of such Warrant Shares after such adjustment, setting forth a brief statement of
the facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
15. Authorized Shares. The Company covenants that during the
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be necessary to
assure that such shares of Common Stock may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the OTC
Bulletin Board or any domestic securities exchange upon which the Common Stock
may be listed.
<PAGE>
16. Miscellaneous.
(a) Issue Date; Jurisdiction. The provisions of this Warrant
shall be construed and shall be given effect in all respects as if it had been
issued and delivered by the Company on the date hereof. This Warrant shall be
binding upon any successors or assigns of the Company. This Warrant shall
constitute a contract under the laws of Florida and for all purposes shall be
construed in accordance with and governed by the laws of said state without
regard to its conflict of law, principles or rules. The party who initiates
legal action shall choose the jurisdiction of the federal courts or the state
courts in connection with any dispute arising under this Agreement and hereby
waives, to the maximum permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. Each party waives its right to trial by jury.
(b) Restrictions. The holder hereof acknowledges that the Common
Stock acquired upon the exercise of this Warrant, if not registered, may have
restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof of the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated: January 25, 1999
QUESTNET CORP
By /s/ Robert Leff, president
--------------------------
President
[Letterhead of Attorney]
August 25, 1999
Quest Net Corp.
2999 NE 191st Street, PH-8 ,
Aventura, Florida 33180
Re: Registration Statement on Form SB-2
Gentleman:
This opinion is submitted pursuant to applicable rules of the Securities and
Exchange Commission with respect to the registration by Quest Net Corp. (the
"Company") of an aggregate of 1,700,000 shares of common stock, no par value
(the "Common Stock") pursuant to a Registration Statement on Form SB-2.
In my capacity as general counsel to the Company, I have examined the original,
certified, conformed, or other copies of the Company's Certificate of
Incorporation, Bylaws and corporate minutes provided to me by the Company. In
all such examinations, I have assumed the genuineness of all signatures on
original documents, and the conformity to originals or certified documents of
all copies submitted to me as conformed, Photostat or other copies. .In passing
upon certain corporate records and documents of the Company, I have necessarily
assumed the correctness and completeness of the statements made or included
therein by the Company, and I express no opinion thereon. Based upon and in
reliance of the foregoing, I am of the opinion that the Common Stock has been
and upon issuance for the re-pricing structure will be upon issuance, validly
issued, fully paid and non-assessable. I hereby consent to the use of this
opinion in the Registration Statement on Form SB-2 to be filed with the
Commission.
/s/Rebecca J. Del Medico
- ------------------------
Rebecca J. Del Medico
Exhibit 10
LEASE AGREEMENT
between
CONCORDE CENTRE II ASSOCIATES
LANDLORD
and
QUEST NET CORP.
TENANT
INDEX TO LEASE FOR SUITE 709
Par. Caption Page
1. LEASED PREMISES..........................................................1
2. RENTAL ADJUSTMENT........................................................1
3. USE......................................................................2
4. UNUSUAL EQUIPMENT........................................................3
5. TENANT TO TAKE GOOD CARE OF PREMISES.....................................3
6. COMPLIANCE WITH DIRECTIVES OF AUTHORITIES................................3
7. ALTERATIONS AND IMPROVEMENTS.............................................3
8. INSPECTION, EXAMINATION AND ENTRY........................................4
9. NO LIABILITY.............................................................4
10. DAMAGE BY FIRE OR OTHER CASUALTY.........................................4
11. CONDEMNATION.............................................................5
12. NO ABATEMENT - SERVICES..................................................5
13. ABANDONMENT..............................................................6
14. DEFAULT AND REMEDIES.....................................................6
15. ASSIGNMENT OR SUB-LETTING OF TENANT'S INTEREST...........................8
16. COLLECTION OF RENT FROM OTHERS...........................................9
17. INFORMATION AS TO SUB-TENANTS............................................9
18. RIGHT OF LANDLORD TO USE ENTRANCES, ETC. AND TO CHANGE SAME..............9
19. ATTORNEYS' FEES..........................................................9
20. EXAMINATION OF PREMISES AND NO ORAL REPRESENTATION.......................9
21. SUBORDINATION...........................................................10
22. HOLDING OVER............................................................10
23. CERTIFICATE BY TENANT...................................................10
24. REMEDIES CUMULATIVE.....................................................10
25. NO WAIVER OF PERFORMANCE................................................11
26. AGREEMENT TO INDEMNIFY..................................................11
27. ADDITIONAL RENT.........................................................11
28. NOTICES.................................................................11
29. SURRENDER AT EXPIRATION OF THE TERM.....................................12
30. RULES AND REGULATIONS...................................................12
31. IMPROVEMENTS BY TENANT..................................................12
32. ACCEPTANCE BY TENANT....................................................12
33. SECURITY................................................................13
34. QUIET POSSESSION AND OTHER CONVENANTS...................................13
35. TENANT'S SHARE OF OPERATING EXPENSES....................................13
36. COMMON FACILITIES.......................................................15
37. BROKER..................................................................15
38. TRANSFER BY LANDLORD....................................................15
39. TIME....................................................................15
40. COPIES OF LEASE.........................................................15
41. SUCCESSORS..............................................................15
42. CONSTRUCTION, APPLICABLE LAW............................................16
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43. ENTIRE AGREEMENT........................................................16
44. TYPEWRITTEN AND HANDWRITTEN PROVISIONS..................................16
45. TENDER AND DELIVERY OF LEASE INSTRUMENT.................................16
46. OPTION..................................................................16
47. WAIVER OF JURY TRIAL....................................................16
48. CORPORATIONS AS LESSEE..................................................16
49. UNDERCOVER PARKING......................................................17
50. TENANT IMPROVEMENTS.....................................................17
51. CONTINGENCY.............................................................17
RULES AND REGULATIONS.........................................................18
EXHIBIT A.....................................................................21
EXHIBIT B.....................................................................22
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L E A S E A G R E E M E N T
THIS INDENTURE, (sometimes herein referred to as "Lease") made and
entered into the 5th day of March, 1999, between CONCORDE CENTRE II ASSOCIATES,
a Florida General Partnership ("Landlord"), and Quest Net Corp. ("Tenant").
WITNESSETH
1. LEASED PREMISES
Landlord hereby demises and lets unto Tenant, and Tenant hereby hires
and takes from Landlord subject to the terms and conditions hereof the Premises
outlined on the sketches attached hereto as Exhibits "A" and "B" on the seventh
floor, Suite (709) (the "Premises", "Demised Premises" or "Leased Premises"), in
the Concorde Centre II Building located at 2999 N.E. 191st Street, Aventura,
Miami-Dade County, Florida (the "Building") for the term of 58 months, to
commence on the 1st day of April, 1999, (the "Commencement Date"), or such date
as determined by paragraph 2.C. of this Lease and to end on January 31, 2004,
unless sooner terminated as hereinafter provided, at the annual rental of Thirty
Four Thousand Six Hundred Forty Six and 00/100 Dollars ($34,646.00), in lawful
money of the United States (the "Base Rent" or "Base Rental") which Tenant
covenants to pay to Landlord at its principal office, or that of its agent, or
at any other place designated in writing by Landlord in equal monthly
installments of Two Thousand Eight Hundred Eighty Seven and 17/100 Dollars
($2,887.17.00) in advance on the first day of each and every month during the
said term as the same may be adjusted under the provisions of Paragraph 2 of
this Lease, excepting that Tenant shall pay the first month's rent upon the
execution of this Lease. If the Commencement Date of the term is other than the
first day of the month, the rent shall be prorated for said month and the term
of the Lease shall end on the last day of the month which is 58 months from the
1st day of the month following the Commencement Date thereby adding such
prorated period to the term of the Lease. Tenant shall pay the rent herein
provided without deduction, diminution or setoff. Unpaid rent and all other
payments to be made by Tenant to Landlord shall bear interest at the highest
rate permitted under the Laws of the State of Florida from the date due until
paid, if said rental or other payments are not otherwise paid within Ten (10)
days of their due date. Tenant agrees to pay to Landlord any sales or use tax or
excise tax now or hereafter imposed or levied against any rent or any other
charge or payment hereafter required hereunder to be made by Tenant now or
hereafter imposed or levied by any governmental agency having jurisdiction
thereover simultaneously with the payment of the Base Rent as adjusted by
Paragraph 2 of this Lease or by any addendum. The land on which the Building is
located is hereinafter referred to as the "Land". All dimensions are approximate
only. Landlord reserves the right to change the size and layout of the Building
or the size, layout and location of the common areas and facilities as well as
to reduce or expand the size of the Building and/or erect additional buildings
upon the land adjacent thereto. There shall be an abatement of rent for thirty
(30) days from the commencement date during which time Tenant can set up the
Premises for its use.
2. RENTAL ADJUSTMENT
A. Base Rent will be adjusted on each Rental Adjustment Date in
accordance with the following: In view of the fluctuating purchasing power of
the dollar, the parties hereto desiring to adjust the Base Rent thereunder to
such purchasing power, agree that such adjustments shall be made on Rental
Adjustment Dates, as herein provided so as to reflect as nearly as possible such
fluctuations.
The Base Rent provided for in Paragraph 1 shall, at the commencement of
the second Lease year of the term and each year thereafter (the "Rental
Adjustment Date"), increase at the same rate as increases in the Consumer Price
Index, for all urban consumers, all items, base year 1967 = 100, published by
the United States Department of Labor, Bureau of Labor Statistics (Index). The
Index which is published for the month prior to the commencement of the term is
the beginning index ("Beginning Index"). Said increase adjustment to be
calculated as follows: If the Index published during the month just prior to the
Rental Adjustment Date ("Extension Index") has increased over the Beginning
Index, the Base Rent, as adjusted each year, for the following year (until the
next adjustment) shall be set by multiplying the Base Rent, as adjusted each
year, by a fraction, the numerator of which is the Extension Index and the
denominator of which is the Beginning Index.
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In no event will the Adjusted Base Rent during the second and subsequent
Lease years be less than the Base Rent originally provided or as to any
subsequent year less than the adjusted Base Rent for any prior year. The
increase in Base Rent as herein stated shall be exclusive of all other monetary
obligations of Tenant hereunder.
It is understood that the Index is now being published by the Bureau of
Labor Statistics. Should said Bureau change the manner of computing the Index,
the Bureau shall be requested to furnish a conversion factor designed to adjust
the new Index to the one previously in use and the adjustments to the new Index
shall be made on the basis of such conversion factor. Should the publication of
the Index be discontinued by said Bureau, then such other Index as may be
published by such Bureau most nearly approaching said discontinued Index shall
be used in making the adjustments herein provided. Should said Bureau
discontinue the publication of any Index herein contemplated, then such Index as
may be published by another United States Governmental Agency as most nearly
approximates the Index first above referred to shall govern and be substituted
as the Index to be used, subject to the application of an appropriate conversion
factor to be furnished by the governmental agency publishing the adopted Index.
If such governmental agency will not furnish such conversion factor, or if there
is not published by any such governmental agency another Index as aforesaid then
the landlord shall establish a new conversion factor or a new Index; provided
however, that in establishing any such conversion factor or Index the Landlord
shall do so reasonably subject to the intents and purposes herein set forth.
B. "Lease year" as used herein, shall mean in the first instance that
period of time commencing with the Commencement date and ending twelve months
thereafter, except if the Commencement Date is other than the 1st day of a
month, then for purposes of this paragraph the Commencement of the "Lease Year"
shall be the 1st day of the month following the Commencement Date and shall mean
each successive twelve (12) month period thereafter or any consecutive twelve
(12) month period which Landlord may select from time to time at Landlord's
election.
C. The term shall commence ("Commencement Date") on the 1st day of April
1999 or on the date Tenant takes possession of the Premises with any furniture
and personnel, whichever is earlier.
D. If the Landlord is unable to give possession of the Leased Premises
on the date of commencement of the aforesaid Lease term by reason of holding
over of any prior tenant or tenants, an abatement or diminution of the rent to
be paid hereunder shall be allowed Tenant under such circumstances, but nothing
herein shall operate to extend the term of the Lease beyond the agreed
expiration date, and said abatement in rent shall be the full extent of
Landlord's liability to Tenant for any loss or damage to Tenant on account of
said delay in obtaining possession of the Premises. There shall be no delay in
the commencement of the term of this Lease and/or payment of rent where Tenant
fails to occupy Premises when same are ready for occupancy, or where Tenant or
any agent or employee of Tenant causes a delay in preparing the Leased Premises
for occupancy for any reason whatsoever.
3. USE
Tenant shall use and occupy the Premises only for general office
business use as a telecommunications company and for no other purpose. In the
event the Tenant uses the Premises for purposes not expressly permitted herein,
the Landlord may terminate the Lease, or without notice to Tenant, restrain said
improper use by injunction.
Tenant shall not do or permit anything to be done in or about the
Demised Premises nor bring or keep anything therein which is not within the
permitted use of the Premises which will in any way increase the existing rate
of or affect any fire or other insurance upon the Building or any of its
contents, or cause a cancellation of any insurance policy covering said Building
or any part thereof or any of its contents. Tenant shall not do or permit
anything to be done in or about the Demised Premises which will in any way
obstruct or interfere with the rights of other tenants or occupants of the
Building or injure or annoy them or use or allow the Demised Premises to be used
for any
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improper, immoral, unlawful or objectionable purposes: nor shall Tenant cause,
maintain or permit any nuisance in or about the Demised Premises. Tenant shall
not commit or allow to be committed any waste in or upon the Demised Premises.
In the event Tenant's permitted use of the Demised Premises increases the
existing rate or affects any fire or other insurance, then and in that event
Tenant agrees to pay said increase.
By occupying the Demised Premises as a Tenant, or by installing
fixtures, facilities, or equipment, or by performing finishing work, Tenant
shall be deemed to have accepted the same and to have acknowledged that the
Premises are conclusively in the condition required by the Lease. This Lease
does not grant Tenant any right of air and light over and about the Premises or
the Building.
4. UNUSUAL EQUIPMENT
The Tenant will not install or maintain any electrically-operated
equipment or any heavy equipment of any kind including, safes, vaults, etc., or
other machinery, except light office machinery normally used, and equipment
ordinarily used in the telecommunications business without first obtaining the
consent in writing of the Landlord.
5. TENANT TO TAKE GOOD CARE OF PREMISES
Tenant shall keep the Premises in a clean, safe and sanitary condition.
All damage caused by Tenant's negligence, or that of his agents, servants,
employees or visitors, shall be repaired promptly by Tenant at his sole cost and
expense, so that the Premises are in at least as good condition as they were
prior to such damage. In the event that the Tenant fails to comply with the
foregoing provisions, the Landlord shall have the option to enter the Premises
and make all necessary repairs at Tenant's cost and expense, the same to be
considered as additional rent and added to and be payable with the next monthly
installment of rent.
6. COMPLIANCE WITH DIRECTIVES OF AUTHORITIES
Tenant shall promptly execute and comply with all statutes, ordinances,
rules, orders, regulations and requirements of the federal, state, county, and
municipal governments and any of their departments and agencies with
jurisdiction for the Demised Premises, and for the correction, prevention and
abatement of nuisances or other grievances in, upon or connected with said
Premises during the term of this Lease; and shall promptly comply with and
execute any rules, orders and regulations of the Southeastern Underwriters
Association for the prevention of fires, all at Tenant's own cost and expense.
If by reason of any failure of Tenant to comply with the provisions of this
Lease, the rate of fire insurance with extended coverage on the Building or
equipment or other property of Landlord which Landlord may have, but which
Landlord is not required to have, shall be higher than it otherwise would be,
Tenant shall reimburse Landlord, on demand, for that part of the premiums for
fire insurance and extended coverage paid by Landlord because of such failure on
part of Tenant.
7. ALTERATIONS AND IMPROVEMENTS
Tenant shall not cut, drill into, disfigure, deface, or injure any part
of the Premises, nor obstruct or permit any obstruction, alteration, addition,
improvement, decoration or installation in the Premises. All alterations,
additions, improvements, decorations or installations, including but not limited
to partitions, railings, air conditioning ducts or equipment (except movable
furniture and fixtures put in at the expense of Tenant and removable without
defacing or injuring the Building or the Premises), shall become the property of
Landlord at the termination of the term. Landlord, however, reserves the option
to require Tenant, upon demand in writing, to remove all fixtures and additions,
improvements, decorations or installations (including those not removable
without defacing or injuring the Premises) and to restore the Premises to the
same condition as when originally leased to Tenant, reasonable wear and tear
excepted; provided, however, Landlord shall not have the right to require Tenant
to remove any fixtures, additions, improvements, decorations, and/or
installations which are initially installed by and for Tenant in order to
prepare the Premises for occupancy by Tenant in a manner which has been approved
by Landlord. Tenant agrees to restore the Premises immediately and agrees in
case of his failure to do so, that Landlord may do so and collect the cost
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thereof from Tenant as hereinafter provided. Tenant will, at Tenant's own
expense, keep the Leased Premises in good repair and tenantable condition during
the Lease term and will replace at its own expense any and all broken glass
caused by Tenant in and about said Leased Premises. Tenant will make no
alterations, additions, signage or improvements in or to the Leased Premises or
the Building without the written consent of Landlord, which shall not be
unreasonably withheld insofar as nonstructural alterations are concerned.
8. INSPECTION, EXAMINATION AND ENTRY
Landlord and Landlord's agents shall have the right to enter the
Premises at all reasonable hours upon reasonable notice to examine the same, and
workmen may enter at any time in the event of emergency and otherwise at
reasonable times when authorized by Landlord or Landlord's agents to make such
repairs, alterations or improvements in the Building as Landlord may in its sole
discretion deem necessary or desirable. If during the last month of the term,
Tenant shall have removed all or substantially all of Tenant's property,
Landlord may immediately enter the Premises and prepare them for any future
Tenant. Furthermore, the Landlord may allow such future Tenant to occupy the
Premises. These acts shall have no effect upon Tenant's obligations under this
Lease and Tenant shall be entitled to no abatement or diminution of rent as a
result thereof, except that in the event such future Tenant makes any payment
for the period up until the expiration of this Lease, Tenant shall be entitled
to an abatement of rent for such period. If Tenant shall not be personally
present to open and permit entry into the Premises, when entry thereto shall be
necessary hereunder, Landlord may forcibly enter same without rendering Landlord
liable to any claim for damages and without affecting the obligation and
covenants of this Lease. Employees of Landlord and Landlord's agents shall be
permitted to enter the Premises by passkey at all reasonable times. During the
last six months of the term of this Lease Agreement, if Tenant has not executed
a renewal of this Lease Agreement, Landlord shall be permitted to enter the
Premises during reasonable hours and with reasonable notice for the purpose
of showing the Premises to prospective tenants.
9. NO LIABILITY
Tenant will not hold Landlord liable for any latent defect in the
Premises or in the Building. Landlord shall not be liable for any failure of
water supply, electric current, heating or air conditioning, elevator service,
or any other service; nor for injury or damage to person or property caused by
fire or theft or by the elements or by other tenants or persons in the Building,
or resulting from the operation of elevators, heating or air conditioning or
lighting apparatus, or from falling plaster, or from steam, gas, electricity,
water, rain, or dampness, which may leak or flow from any part of the Building,
or from the pipes, appliances, or plumbing work of the same, or from any other
place or for damages resulting from the acts or omissions of Tenant, Tenant's
agents, employees, invitees or other occupants of the Building. Nor shall
Landlord be liable for any loss or damage that Tenant may sustain by reason of
the closing or darkening of any of the windows in the Premises through the
erection of or any addition to a new building or otherwise, and the same shall
not constitute a constructive eviction. All goods or property or personal
effects stored or placed by the Tenant in or about the Building shall be at the
sole risk of the Tenant. The foregoing, with regard to liability on the part of
Landlord, shall not be applicable in the event Landlord is found to be negligent
in a court of competent jurisdiction. The foregoing provisions do not relieve
Landlord from its obligation to perform ordinary maintenance and repairs to the
common areas.
10. DAMAGE BY FIRE OR OTHER CASUALTY
If, through no fault or negligence of Tenant, his visitors, agents or
servants, the Premises shall be partially damaged by fire or other casualty, the
damage shall be repaired by Landlord, and the rent, until such repairs are made,
shall be apportioned according to the portion of the Premises which are still
usable. If the damage shall be so extensive as to render the Premises wholly
untenantable, the rent shall cease until such time as the Premises shall become
tenantable. However, if the damage is so extensive that the Premises cannot be
made tenantable within three (3) months from the date of the fire or other
casualty, either party shall have the right to terminate this Lease upon ten
(10) days' written notice to the other. In case the Building (though the
Premises may not be affected) is so injured or destroyed by fire or other
casualty that Landlord shall decide not to rebuild or reconstruct the Building,
the term of this Lease shall cease upon ten (10) days' written notice sent by
Landlord
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and the rent shall be paid up to the time of such destruction and the Lease
shall thereafter be of no further effect. In the event that any question shall
arise between Landlord and Tenant as to whether or not repairs shall have been
made with reasonable dispatch, due allowance shall be made for any delays which
may arise in connection with the adjustment of the fire insurance loss and for
any delays arising out of what are commonly known as "labor troubles" or
"material troubles" or from any other cause beyond Landlord's control. In any
event Landlord shall not be liable to Tenant by reason of fire or other damage
to the Building or the Premises.
11. CONDEMNATION
If the entire Leased Premises shall be taken by any public authority
under the power of eminent domain, then the term of this Lease (or of any option
period exercised hereunder) shall cease as of the date possession shall be taken
by such public authority and the rent shall be paid up to that day with a
proportionate refund by Landlord of any prepaid rent. If any part of the Demised
Premises material to the operations of Tenant shall be taken under eminent
domain, either party to this Lease shall have the right to terminate the Lease
and declare the same null and void by notice in writing delivered to the other
party within ten (10) days after such taking. If neither party elects to
terminate this Lease, Tenant shall continue in possession of the remainder of
the Leased Premises and all of the terms of this Lease shall continue in full
force and effect, except that the rent shall be reduced in proportion to the
extent of the Premises taken. All damages awarded for any taking under the power
of eminent domain, whether for the whole or a part of the Leased Premises, shall
belong to and be the property of the Landlord, whether such damages shall be
awarded as compensation for diminution in value to the leasehold or to the fee
of the Premises; provided, however, that Landlord shall not be entitled to any
award made to Tenant for loss of business, or depreciation to, damage to, or
costs or removal of, or for the value of stock, trade fixtures, furniture, and
other personal property belonging to the Tenant.
12. NO ABATEMENT - SERVICES
No diminution or abatement of rent, or other compensation, shall be
allowed for inconvenience or injury arising from the making of repairs,
alterations or improvements to the Building nor for any space taken to comply
with any law, ordinance or order of government authority, except that if Tenant
is prevented from conducting its business or prevented from ingress or egress to
the Premises for any period of time, rent shall be abated for such period unless
the reason for lack of ability to conduct Tenant's business or lack of ingress
or egress is caused by an event beyond the control of Landlord, and only if
Landlord does not diligently pursue the repair or replacement of the source of
the problem within a reasonable time. Tenant should carry business interruption
insurance for such an event. Landlord will furnish the following services to
Tenant from Monday through Friday except for Christmas Day, George Washington's
Birthday, Memorial Day, Labor Day, Thanksgiving Day, Fourth of July, Martin
Luther King's Birthday, and New Year's Day, or any subsequent nationally
recognized holiday:
(a) Cleaning services, deemed by Landlord to be normal and usual in a
first-class office building, except that shampooing and replacement of carpet as
required by Tenant shall be at Tenant's own expense.
(b) Heat and air conditioning in the common areas from 8:00 A.M. to 6:00
P.M.
In addition, Landlord will make available automatically operated
elevator service, electrical current for normal office use (separately metered
by and for Tenant and which will be paid for by Tenant and not Landlord), and
water for normal drinking and lavatory in the common areas use at all times and
on all days throughout the year. In the event Premises shares an electric meter
with one or more other premises, Landlord shall pay the cost of electric and
allocate the cost proportionately between or among the tenants based on the
ratio of square footage of each premises to the total square footage of the
combined premises.
Except as expressly provided herein Landlord is not otherwise
responsible for any maintenance to Tenant's Premises and Tenant is solely
responsible for all utilities and the maintenance of Tenant's Premises including
but not limited to electric, plumbing, HVAC and pest control.
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Tenant shall maintain a service contract for the HVAC system during the
term of Lease and provide Landlord with copy thereof.
No electric current shall be used except that furnished or approved by
the Landlord, nor shall any electric cable or wire be brought into the Leased
Premises, except upon the written consent and approval of the Landlord. Tenant
shall use only office machines and equipment that operate on the Building's
standard electric circuits, but which in no event shall overload the Building's
standard electric circuits from which the Tenant obtains electric current. Any
consumption of electric current whether or not it requires special circuits or
equipment (the installation of which shall be at Tenant's expense after approval
in writing by the Landlord) shall be paid for by the Tenant.
Such services and such other services as Landlord in its sole and
absolute discretion may elect to provide, shall be provided so long as Lessee is
not in default under any of the terms, provisions, covenants and conditions of
this Lease, subject to interruption caused by repairs, renewals, improvements,
changes of service, alterations, strikes, lockouts, labor controversies,
inability to obtain fuel or power, accidents, breakdowns, catastrophes, national
or local emergencies, acts of God and conditions and causes beyond the control
of Landlord, and upon such happening, no claim for damages or abatement of rent
for failure to furnish any such services shall be made by the Tenant or allowed
by the Landlord.
It is understood and agreed between the parties hereto that any charges
against Tenant by Landlord for services or for work done on the Leased Premises
by order of Tenant, or otherwise accruing under this Lease, shall be considered
as additional rent due and shall be included in any lien for rent.
13. ABANDONMENT
In case Tenant shall fail to take possession upon the commencement of
the term, or in case the Premises or any part thereof shall be vacated prior to
the expiration of the term of this Lease, Landlord shall have the right to enter
the Premises without instituting any proceeding, either by force or otherwise,
without being liable for damages therefor, and take possession for its own use
or relet the Premises or any part thereof, for the unexpired portion of the term
or longer and to collect the rent therefor, and to apply the rents so collected
to the payment of rent and all other sums payable to Landlord or do nothing,
accelerate the rent due under the Lease and seek a monetary judgment. Tenant
shall remain responsible to Landlord for any and all deficiency, loss and damage
suffered by Landlord, as provided for herein.
For the purpose of this Section the Premises shall be deemed to have
been abandoned when the rent is delinquent and Tenant shall have vacated the
Premises and been away therefrom for five (5) consecutive days, exclusive of
holidays, irrespective of whether the keys have been delivered to Landlord or
not, and no notice has been given by Tenant to Landlord of its intention not to
occupy the Premises for a specified period of time, and/or furniture and or
equipment has been removed from the Premises in a sufficient quantity so that
any reasonable person would be aware that Tenant was no longer conducting
business in the Premises.
14. DEFAULT AND REMEDIES
All rights and remedies of the Landlord herein enumerated shall be
cumulative, and none shall exclude another or any other right or remedy provided
at law or in equity.
(a) If Tenant or any guarantor of this Lease shall become bankrupt or
insolvent or unable to pay its debts as such become due, or file any debtor
proceedings or if Tenant or any guarantor shall take or have taken against
either party in any court pursuant to any statute either of the United States or
of any State, a petition in bankruptcy or insolvency or for reorganization or
for the appointment of a receiver or trustee of all or a portion of Tenant's
personal property, or if Tenant or any such guarantor makes an assignment for
the benefit or creditors, or petitions for or enters into an arrangement, then
this Lease shall terminate and Landlord, in addition to any other rights or
remedies it may have, shall have the immediate right of reentry and may remove
all persons and property from
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the Leased Premises and such property may be removed and stored in a public
warehouse or elsewhere at the cost of and for the account of Tenant, all without
service of notice or resort to legal process and without being deemed guilty of
trespass, or becoming liable for any loss or damage which may be occasioned
thereby.
(b) If the Tenant defaults in the payment of rent or in the prompt and
full performance of any provisions of this Lease, or if the leasehold interest
or the Tenant's business or fixtures of Tenant are levied upon under execution
or attached by process of law, or if the Tenant makes an assignment for the
benefit of creditors, of if a receiver is appointed for any property of the
Tenant, or if the Tenant abandons the Premises, or if Tenant fails to cure a
monetary default within three (3) days after written notice thereof or fails to
cure a non-monetary default within seven (7) days from written notice thereof,
or if said non-monetary default is of such a nature that same cannot be cured
within seven (7) days, Tenant fails to diligently commence to cure within that
time and thereafter continues to proceed to cure same, then Landlord may
forthwith terminate this Lease and the Tenant's right to possession of the
Demised Premises, or terminate only Tenant's right to possession hereunder.
(c) Upon any termination of this Lease, whether by lapse of time or
otherwise, the Tenant shall surrender possession and vacate the Premises
immediately, and deliver possession thereof to the Landlord, and hereby grants
to the Landlord full and free license to enter into and upon the Premises in
such event with due process of law and to expel or remove the Tenant and any
others who may be occupying or within the Premises and to remove any and all
property therefrom, using such force as may be necessary without being deemed in
any manner guilty of trespass, eviction or forcible entry or detainer, and
without relinquishing the Landlord's rights to rent of any other right given to
Landlord hereunder or by operation of law. The Tenant expressly waives the
service of any demand for the payment of rent or for possession and the service
of any notice of the Landlord's election to terminate this Lease or to reenter
the Premises, except as provided for in subparagraph (b) of this paragraph, and
agrees that the simple breach of any covenants or provisions of this Lease by
the Tenant shall, of itself, without the service of any notice or demand
whatsoever, constitute an unlawful detainer by Tenant of the Premises within the
meaning of the Statutes of the State of Florida.
(d) If the Tenant abandons the Premises or otherwise entitles the
Landlord so to elect, and the Landlord does elect to terminate the Tenant's
right to possession only, without terminating the Lease, the Landlord may, at
the Landlord's option, enter into the Premises, remove the Tenant's signs and
other evidence of tenancy, and to take and hold possession thereof without such
entry and possession terminating the Lease or releasing the Tenant, in whole or
in part, from the Tenant's obligation to pay the rent hereunder for the full
term, and in any such case the Tenant shall pay forthwith to the Landlord a sum
equal to the entire amount of the rent reserved for the remainder of the stated
term plus any other sums due hereunder. Upon and after entry into possession
without termination of the Lease, the Landlord may, but need not, relet the
Premises or any part thereof for the account of the Tenant to any person, firm
or corporation other than the Tenant for such rent, for such time and upon such
terms as the Landlord, in the Landlord's sole discretion, shall determine and
the Landlord shall not be required to accept any tenant offered by the Tenant or
to observe any instructions given by the Tenant about such reletting. In any
such case, the Landlord may make repairs, alterations and additions in or to
the Premises and redecorate the same to the extent deemed by the Landlord
necessary or desirable, and the Tenant shall, upon demand, pay the cost thereof,
together with all of Landlord's expenses of the reletting, including by way of
example, but not by way of limitation, advertising expenses, commissions,
broker's fees, etc. If the consideration collected by the Landlord upon any such
reletting for the Tenant's account is not sufficient to pay monthly the full
amount of the rent reserved in this Lease, together with the costs of repairs,
alterations, additions, redecorating and the Landlord's expenses, the Tenant
shall pay to the Landlord the amount of each monthly deficiency upon demand; and
if the consideration so collected from any such reletting is more than
sufficient to pay the full amount of the rent reserved herein, together with the
costs and expenses of the Landlord, then the Landlord, at the end of the stated
term of the Lease, shall account for the surplus to the Tenant. Landlord shall
use reasonable effort to mitigate Tenant's liability for the payment of rent by
attempting to lease the Premises to another tenant. However such effort shall
not take precedence over the leasing of any other vacant space in the building.
(e) Tenant hereby irrevocably appoints Landlord as agent and
attorney-in-fact of Tenant, to enter upon the Premises in the event of default
by Tenant in the payment of any rent herein reserved,
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or in the performance of any term, covenant or condition herein contained to be
kept or performed by Tenant, and to remove any and all furniture and personal
property whatsoever situated upon the Premises. Any and all property which may
be removed from the Premises by the Landlord pursuant to the authority of this
Lease or of law, to which the Tenant is or may be entitled, may be handled,
removed or stored by landlord at the risk, cost and expense of Tenant, and
Landlord shall in no event be responsible for the value, preservation or
safekeeping thereof. Tenant shall pay to Landlord, upon demand, all expenses
incurred in such removal and all storage charges against such property so long
as the same shall be in the Landlord's possession or under Landlord's control.
Landlord may place such property in storage for the account of, and at the
expense of Tenant and if Tenant fails to pay the cost of storing such property
after it has been stored for a period of fifteen (15) days or more, Landlord may
sell any or all of such property in such manner and at such times and places as
Landlord, in its sole discretion, may deem proper, without notice to or demand
upon Tenant for the payment of any part of such charges or the removal of any
such property and shall apply the proceeds of such sale first to the cost of
expenses of such sale, including reasonable attorneys' fees; second to the
payment of the costs and charges of storing any property; third, to the payment
of any other sums of money which may then or thereafter be due to Landlord from
Tenant under any of the terms hereof; and fourth, the balance, if any, to
Tenant. The removal and storage of Tenant's property as above provided shall not
constitute a waiver of Landlord's lien thereon.
(f) Tenant shall pay upon demand all of Landlord's costs, charges and
expenses, including the fees of counsel, agents and others retained by Landlord,
incurred in enforcing Tenant's obligations hereunder or incurred by Landlord in
any litigation, negotiation or transaction in which Tenant causes Landlord,
without Landlord's fault, to become involved or concerned. Attorneys' fees shall
be awardable for all phases of litigation, trial, as well as appellate. In the
event of litigation, the prevailing party shall be entitled to reimbursement of
reasonable legal expenses and costs.
(g) To perfect and assist in the implementation of certain of Landlord's
rights in and to the Tenant's personal property, Tenant hereby pledges and
assigns to Landlord and grants unto Landlord a lien upon all furniture,
fixtures, goods and chattels of Tenant which shall or may be brought or put on
the Premises as further security for the faithful performance of the terms,
provisions, conditions and covenants of this Lease. Tenant specifically agrees
that said lien may be enforced by distress, foreclosure or otherwise at the
election of the Landlord.
(h) Notwithstanding any contrary provision of this Lease, Tenant shall
look solely to the interest of Landlord or its successor (as landlord hereunder)
in the real property of which the Leased Premises are a part for the
satisfaction of any judgment or judicial process requiring the payment of money
as a result of any negligence or breach of this Lease by Landlord or such
successor, and no other assets of Landlord or its successor shall be subject to
levy, execution or other enforcement procedure for the satisfaction of Tenant's
remedies in any of such events. Tenant's sole right and remedy in any action or
proceeding concerning Landlord's reasonableness (where the same is required
under this Lease) shall be an action for declaratory judgment and/or specific
performance.
(i) If Tenant shall fail to observe or perform any term or condition on
Tenant's part to be observed or performed under this Lease or in the event of an
emergency then Landlord may immediately, without notice perform the same for the
account of Tenant, and if Landlord shall make any expenditure or incur any
obligation for the payment of money in connection therewith (including
reasonable attorneys' fees in instituting, prosecuting and/or defending any
action or proceeding through appeal), the sums paid or obligations incurred,
with interest as specified in paragraph 1 hereof, and costs shall be deemed to
be additional rent hereunder and shall be paid by Tenant to Landlord within ten
(10) days after rendition of a bill or statement therefor.
15. ASSIGNMENT OR SUB-LETTING OF TENANT'S INTEREST
The Tenant's interest in this Lease or any security deposited thereunder
shall not be sold, transferred, mortgaged or assigned, nor shall the Premises,
or any part thereof, including desk space, be let or sublet without the prior
written consent of Landlord. Such consent shall not be unreasonably withheld.
Even through Landlord may consent to a sale, transfer, mortgage, assignment of
subletting thereof, the aforesaid restrictions shall remain in full force and
effect, and no further sale, transfer, mortgage, assignment or subletting shall
be made without Landlord's consent in writing.
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In the event Tenant desires to assign this Lease or sublet substantially the
entire Demised Premises to any party, Tenant shall give Landlord written notice
thereof and Landlord shall have a period of fifteen (15) business days after the
receipt of such written notice within which to elect to terminate this Lease. In
the event Landlord elects to terminate this Lease, then Landlord will return to
Tenant any prepaid rentals or security deposits held hereunder. In the event
Landlord does not elect to terminate this Lease, then Landlord agrees that it
will not unreasonably withhold its consent to the requested transfer or
subletting. No such assignment or subletting shall relieve Tenant of its
obligations hereunder. The placing of a plaque sign adjacent to the entry of the
Premises or a directory strip on the directory board by the Lessor with a name
other than the name of the Lessee, as indicated herein, shall not constitute a
consent of assignment on the part of the Lessor.
16. COLLECTION OF RENT FROM OTHERS
If the Tenant's interest in this Lease be assigned, or if the Premises
or any part thereof be sublet, Landlord may, after default by Tenant, collect
rent from the assignee or sub-tenant and apply the net amount collected to the
rent due from Tenant. No such collection shall be deemed a waiver of the
covenant herein against sale, transfer, mortgage, assignment and subletting or a
release of Tenant from the performance of the covenants herein contained. In the
event of such default, Tenant hereby assigns the rent due from the sub-tenant or
assignee to Landlord, and hereby authorizes such sub-tenant or assignee to pay
the rent directly to Landlord.
17. INFORMATION AS TO SUB-TENANTS
If the Premises shall be sublet in whole or in part by Tenant, Tenant
will, on demand of Landlord, furnish and supply in writing, within three (3)
business days after such demand, any and all information with regard to said
sub-tenants which Landlord may request. Nothing herein contained shall be
construed to be a consent to any sub-letting or a waiver of the covenant against
sub-letting contained therein.
18. RIGHT OF LANDLORD TO USE ENTRANCES, ETC. AND TO CHANGE SAME
For the purpose of making repairs or alterations in any portion of the
Building of which the Premises form a part, Landlord may use one or more of the
street entrances, halls, passageways and elevators of the said Building,
provided, however, that there be no unnecessary obstruction of the right of
entry to the Premises while the same are occupied. Landlord may at any time
change the name or number of the Building, remodel or alter the same, or the
location of any entrance thereto, or any other portion thereof not occupied by
Tenant, and the same shall not constitute a constructive or actual, total or
partial eviction.
19. ATTORNEYS' FEES
If Tenant shall at any time be in default hereunder, and if Landlord
shall, in connection with such default, retain its attorneys to institute any
action and/or render other professional services, then Tenant will reimburse
Landlord for the expense of attorneys' fees and disbursements thereby incurred
by the Landlord. The amount of such expenses shall be collected as additional
rent. In the event of litigation between the parties, the prevailing party shall
be entitled to reimbursement of reasonable legal fees and costs.
20. EXAMINATION OF PREMISES AND NO ORAL REPRESENTATION
The taking of possession of the Premises by Tenant shall be conclusive
evidence that the Premises were in good and satisfactory condition at the time
such possession was taken. No representations, except those contained herein,
have been made on the part of the Landlord with respect to this undertaking,
whether relating to the repair, condition or otherwise of the Premises or the
Building. Tenant will make no claim on account of any representation whatsoever,
whether made by renting agent, broker, offices or other representative of
Landlord or which may be contained
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in any circular, prospectus or advertisement relating to the Premises, or
otherwise, unless the same is specifically set forth in this Lease.
21. SUBORDINATION
Tenant agrees that its rights hereunder are subordinate to the lien of
any mortgage, ground lease, or any other method of financing or refinancing now
or hereafter placed against the land and/or the Demised Premises and/or any/or
all of the Building now built or hereafter to be built on the land by Landlord
and to any and all advances made or to be made thereunder and to the interest
thereon and to all renewals, replacements, modifications, consolidations and
extensions thereof. This paragraph shall be self-operative and no further
instrument of subordination shall be required. Tenant further agrees that it
will enter into and execute all documents which any such mortgagee or any ground
lessor may reasonably request Tenant to enter into and execute, including a
subordination agreement within seven (7) days of written request therefor from
Landlord or Landlord's agent. Tenant agrees that it will send copies of all
notices to Landlord, to Landlord's mortgagees or ground lessors, provided that
Tenant has been furnished with the name and address of such mortgagees or ground
lessors, and further provided that Landlord or Landlord's mortgagee or ground
lessor has requested Tenant to send copies of such notices. Tenant agrees
that Tenant will attorn to any mortgage or ground lessor or purchaser at a
foreclosure sale, if requested so to do. Tenant hereby appoints Landlord and
Landlord's successor(s) an interest as Tenant's Attorney-in-Fact to execute any
and all documents necessary to effectuate all of the provisions of this
paragraph. If a mortgagee of Landlord shall request reasonable modifications to
this Lease, Tenant agrees that, within five (5) days after request by the
mortgagee, Tenant shall execute, acknowledge, and deliver to the mortgagee an
agreement, in form and substance satisfactory to the mortgagee, evidencing such
modifications, provided that such modifications do not increase Tenant's
obligations under this Lease or materially adversely affect (a) the leasehold
interest created by this Lease, or (b) Tenant's use and occupancy of the Leased
Premises.
22. HOLDING OVER
If the Tenant retains possession of the Premises or any part thereof
after the termination of the term of any extension thereof, by lapse of time or
otherwise, the Tenant shall pay the Landlord rent at double the rate payable for
the month immediately preceding said holdover, for the time the Tenant thus
remains in possession. The provisions of this paragraph do not waive the
Landlord's rights of reentry or any other right hereunder. Unless Landlord
serves written notice to Tenant to vacate the Premises, without a written
agreement to extend the term of the Lease, any retention of the Premises by
Tenant after the termination of this Lease or any extension thereof shall be
considered a tenancy-at-will on a month to month basis, in which case either
party can terminate the tenancy by giving the other party fifteen (15) days
notice in writing, prior to the last day of given month, of its intention to
terminate. For example, a notice given on June 15 would terminate the tenancy on
June 30. However a notice give on June 16 would terminate the tenancy on July
31. All notices must be in accordance with the notice provisions of paragraph
28.
23. CERTIFICATE BY TENANT
Tenant shall deliver to Landlord or to its mortgagees, auditors, or
prospective purchaser, or to the owner of the fee, within Ten (1O) days, when
requested by Landlord, a certificate to the effect that this Lease is in full
force and effect and that Landlord is not in default herein or stating
specifically any exceptions thereto. Failure to give such a certificate within
ten (10) days after written request shall be conclusive evidence that Lease is
in full force and effect and Landlord is not in default and Tenant shall be
estopped from asserting any defaults known to him at that time.
24. REMEDIES CUMULATIVE
The various rights, remedies, powers and elections of Landlord
reserved, expressed or contained in this Lease, are cumulative and no one of
them shall be deemed to be exclusive to the others or of such other rights
remedies, powers, options, or elections as are now, or may hereafter be,
conferred upon Landlord by law.
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25. NO WAIVER OF PERFORMANCE
No waiver of Landlord of any provision hereof shall be deemed to have
been made unless such waiver be in writing signed by Landlord. The failure of
Landlord to insist upon the strict performance of any of the covenants or
conditions of this Lease, or to exercise any option herein conferred, shall not
be construed as waiving or relinquishing for the future of any such covenants,
conditions or options, but the same shall continue and remain in full force and
effect. No act of Landlord or its agent during the term hereof shall be deemed
an acceptance or a surrender of the Premises unless made in writing and
personally subscribed by Landlord. The delivery of the keys to the Premises by
Tenant to Landlord or its agents shall not be deemed a surrender and acceptance
thereof. No payment by Tenant of a lesser amount than the monthly rent herein
stipulated shall be deemed to be other than on account of the stipulated rent.
26. AGREEMENT TO INDEMNIFY
Tenant shall indemnify and save Landlord harmless, and does agree to
indemnify and save Landlord harmless, of and from and pay all fines, claims,
demands, and causes of action of every nature whatsoever arising or growing out
of any manner connected with the occupation or use of the Premises and Building,
and every part thereof, by Tenant and the employees, agents, servants, guests
and invitees of Tenant, including without limiting the generality of the
foregoing, any claims, demands and causes of action for personal injury and/or
property damage, and said indemnification shall extend to any fines, claims,
demands and causes of action of every nature whatsoever which may be made upon,
sustained or incurred by Landlord by reason of any breach, violation or
non-performance of any term, covenant, or condition hereof on the part of the
Tenant, or by reason of any act or omission on the part of Tenant and the
employees, agents, servants, guests and invitees of Tenant except in the case of
sole negligence on the part of the Landlord without negligence on the part of
Tenant. In any such event, contributory negligence on the part of the Landlord
shall not in any way affect Tenant's obligation under this indemnification
except as it relates to the percentage of liability. Tenant agrees that this
indemnification shall further extend to all costs incurred by Landlord,
including reasonable attorneys' fees.
Tenant agrees that, at all times during the term (as well as prior and
subsequent thereto if Tenant or its agents shall then use or occupy any portion
of the Leased Premises), it shall keep in force, in a responsible insurance
company licensed to do business in the State of Florida, comprehensive general
liability and property damage liability insurance in a single limit of not less
than $1,000,000.00 covering death or injury to any person(s) as well as property
damage. Such policy shall (a) include landlord, its managing agent (if any), and
such other parties as Landlord may designate as parties insured; (b) be
considered primary insurance; (c) include by endorsement an agreement insuring
Tenant's indemnity and hold harmless obligations under Paragraph 26; and (d)
provide that it may not be cancelled or changed without at least thirty (30)
days prior written notice from the carrier to each party insured thereunder.
Upon Landlord's request from time to time, Tenant shall furnish Landlord with
either the original policy, or at Tenant's option, a certificate of the
insurance so carried by Tenant.
In case Landlord shall be made a party to any litigation commenced
against Tenant, then Tenant shall protect and hold Landlord harmless and shall
pay all costs, expenses and reasonable attorneys' fees incurred or paid by
Landlord in connection with such litigation.
27. ADDITIONAL RENT
If Landlord shall make any expenditures, for which Tenant is liable
under this Lease, or if Tenant shall fail to make any payment due Landlord under
this Lease, the amount thereof shall at Landlord's option be deemed "additional
rent" and shall be due with the next succeeding installment of rent. For the
non-payment of and "additional rent" Landlord shall have the same remedies and
rights that Landlord has for the non-payment of the Base Rent.
28. NOTICES
All notices shall be in writing. Any notice by Landlord to Tenant shall
be deemed to be duly
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given if either delivered personally to Tenant or sent by registered or
certified mail, or by such other means permitted by law addressed to Tenant at
the Building in which the Premises are situated or until commencement of the
term of this Lease being 2999 NE 191 Street, Suite 1008, Aventura, FL 33180. Any
notice by Tenant to Landlord shall be deemed duly given if sent by registered or
certified mail, addressed to Landlord c/o Woods Management, 2740 W. 5th Avenue,
Hialeah, Florida 33010 (or at such other address as may hereafter be designated
by Landlord), and also to the agent of Landlord, if any, charged with the
renting and management of the Building.
29. SURRENDER AT EXPIRATION OF THE TERM
Tenant agrees at the expiration of the term to quit and surrender the
Premises and everything belonging to or connected therewith in as good state and
condition as reasonable wear and use thereof will permit, and to remove all
signs, advertisements and rubbish from the said Premises; and Tenant hereby
expressly authorizes Landlord, as the agent of Tenant, to remove such rubbish
and make such changes and repairs as may be necessary to restore the Premises to
such condition at the expense of Tenant. Landlord shall have the right to show
the Premises to prospective tenants during the sixty (60) day period prior to
the expiration of the term of the Lease, with reasonable notice and during
reasonable hours if Tenant has not executed a renewal agreement or exercised its
option, if any, to renew the Lease.
30. RULES AND REGULATIONS
Tenant agrees to observe and comply with and Tenant agrees that his
agents, servants, employees and all persons visiting in the Premises will serve
and comply with the rules and regulations annexed hereto and such other and
further rules and regulations as Landlord may from time to time deem needful and
prescribe for the reputation, safety, care and cleanliness of the Building and
the preservation of good order therein and the comfort, quiet, and convenience
of other occupants of the Building, which rules and regulations shall be deemed
terms and conditions of this Lease. Landlord shall not be liable to Tenant for
the violation of any of the said rules and regulations by any other Tenant or
person. Landlord agrees that the rules and regulations will be reasonable and
will not interfere with Tenant's quiet enjoyment of the Demised Premises.
31. IMPROVEMENTS BY TENANT
In making any alterations, decorations, additions, installations or
improvements to or in the Premises, Tenant shall employ only such labor as shall
have been approved by Landlord, which approval shall not be unreasonably
withheld; and all such work done by or for Tenant shall be performed and
installed in such a manner that the same shall comply with all provisions of
law, ordinances and all rules and regulations of any and all agencies and
authorities having jurisdiction over the Premises, and at such time and in such
manner as not to interfere with the progress of any work being performed by or
on account of Landlord. Notwithstanding the foregoing it is understood that
Tenant is not obliged by Landlord to make any improvement or improvements. In no
event shall Tenant have the right to create or permit there to be established,
any lien or encumbrances of any nature against the Premises or the Building for
said improvement or improvements by Tenant, and Tenant shall fully and promptly
pay the cost of any improvement or improvements made or contracted by Tenant.
Any mechanic's lien filed against the Premises or the Building for work claimed
to have been done, or materials claimed to have been furnished to Tenant, shall
be duly discharged by Tenant within Ten (10) days after the filing of the lien.
Any person, firm or entity performing labor or furnishing materials or fixtures
for Tenant shall look solely to the Tenant for repayment and shall have no right
to subject the Landlord's interest in the Building, or in the real property on
which the Building and common areas are situate to any Claim arising for work
done or performed for and on behalf of Tenant.
32. ACCEPTANCE BY TENANT
Tenant has inspected the Demised Premises and accepts the same in its
present condition as shell space and Tenant is responsible for construction and
payments for all improvements thereto as approved by Landlord. It is understood
that any dimensions or sizes on either working or renting plans are merely
approximations and whether the plans are attached or are made part of this Lease
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or not, Landlord shall not be liable, and this Lease shall not be void or
voidable because of exigencies arising during construction, alterations or
preparation for Tenant's occupancy which result in changes not indicated on such
plans.
33. SECURITY
Tenant has deposited with Landlord the sum of Eight Thousand Seven
Hundred Fifty Four and 00/100 Dollars ($8,754.00) as security for the faithful
performance and observance by Tenant of the terms, provisions and conditions of
this Lease. Tenant shall not use or offset the security deposit against any
rental charges or other obligations to be paid by Tenant hereunder. It is agreed
that, in the event Tenant defaults in respect of any of the terms, provisions
and conditions of this Lease, including, but not limited to, the payment of rent
and additional rent, Landlord may use, apply or retain the whole or any part of
the security deposited to the extent required for the payment of any rent and
additional rent or any other sum as to which Tenant is in default or for any sum
which Landlord may expend or may be required to expend by reason of Tenant's
default in respect of any of the terms, covenants and conditions of this Lease,
including, but not limited to, any damages or deficiency in the reletting of the
Premises, whether such damage accrued before or after summary proceedings or
other reentry by Landlord. In the event the Tenant shall fully and faithfully
comply with all of the terms, provisions, covenants and conditions of this
Lease, the security shall be returned to Tenant after the date fixed at the end
of the Lease, and after delivery of entire possession of the Premises to
Landlord. In the event of a sale of the Land and Building, of which the Premises
form a part, Landlord shall thereupon be released by Tenant from all liability
for the return of such security and Tenant agrees to look solely to the new
Landlord for the return of said security. It is agreed that the provisions
hereof shall apply to every transfer or assignment made of the security to a new
Landlord. Tenant further covenants that it will not assign or encumber the
monies deposited herein as security and that neither Landlord nor its assigns
shall be bound by any such assignment or encumbrance. Landlord shall not be
required to keep the security in a segregated account and the security may be
entitled to any interest on the security. The mortgagee holding a mortgage
encumbering the Building shall not be responsible to Tenant for the security
deposit in the event such mortgagee becomes the owner of the Building through
foreclosure or by reason of a deed in lieu thereof. Tenant agrees not to look to
any mortgagee or purchaser at any foreclosure sale or grantee in a deed given in
lieu of foreclosure for the return of any security deposit given to Landlord
unless Landlord has given such deposit to any such entity.
34. QUIET POSSESSION AND OTHER COVENANTS
Landlord covenants that if and so long as Tenant pays the rent and
additional rent reserved by this Lease and performs and observes all of the
covenants, conditions and rules and regulations hereof, Tenant shall quietly
enjoy the Premises, subject, however, to the terms of this Lease. Tenant
expressly agrees for himself, his executors, administrators, personal
representatives, successors and assigns that the covenant of quiet enjoyment
(express or implied) and all other covenants in this Lease on the part of
Landlord to be performed shall be binding upon Landlord only as long as Landlord
remains the owner of the Building of which the Premises form a part.
35. TENANT'S SHARE OF OPERATING EXPENSES
Commencing with the Commencement Date, Tenant shall pay its
proportionate share of Operating Expenses (CAM-Common Area Maintenance) in
accordance with the following:
A. For the purposes of this Paragraph 35:
i. "Operating Expenses" shall mean any or all expenses incurred by
Landlord in connection with the operation of the Building and the Land (being
the real property on which the Building and appurtenant facilities are situate),
including all expenses incurred as a result of the Landlord's compliance with
any of its obligations hereunder. Operating Expenses shall include, by way of
example but not be limited to: (a) the cost of all charges for water and sewer
service and all other utilities, including electricity, together with any taxes
thereon; (b) the cost of all charges for rent, casualty, war risk (if obtainable
from the United States Government) and liability and flood insurance;
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[INSERT MISSING MANUSCRIPT PAGE 14]
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C. Commencing with the first Operational Year and each year thereafter,
the Tenant shall pay to Landlord as additional rent Tenant's Estimated Share of
Operating Expenses. Tenant's Estimated Share of Operating Expenses shall be
divided by twelve (12) and paid monthly in advance by Tenant to Landlord as
additional rent. If the statement furnished by Landlord to Tenant, pursuant to
Section B of this Paragraph 35 at the end of the then Operational Year shall
indicate that Tenant's Estimated Share of Operating Expenses exceeded Tenant's
Share of Operating Expenses, Landlord shall credit the amount of such excess
against the subsequent payment of rent due hereunder; if such statement
furnished by Landlord to Tenant hereunder shall indicate that the Tenant's Share
of Operating Expenses exceeded Tenant's Estimated Share of Operating Expense for
the then Operational Year, Tenant shall forthwith pay the amount of such excess
to Landlord immediately. In the event the actual Operating Expenses during any
month in any Operational Year exceeds Landlord's projection for such month, and
it becomes apparent to Landlord that Tenant's monthly payments for Operating
Expenses will not pay Tenant's Share of Operating Expenses for such Operational
Year, Landlord may give written notice to Tenant of any such expected deficiency
and in such notice may increase the monthly payments being made by Tenant to
Landlord hereby to the extent of such expected deficiency.
D. The estimated CAM at the commencement of the lease is One Thousand
Two Hundred Twenty Two and 80/100 Dollars ($1,222.80) per month plus sales tax.
36. COMMON FACILITIES
So long as this Lease is in good standing Tenant and Tenant's employees,
agents, servants, customers and invitees shall have a nonexclusive right to use
the Common Facilities (as defined in Paragraph 35 hereof) in common with the
other occupants of the Building, employees, agents, servants, customers, other
invitees and designees of Landlord, subject to the Rules and Regulations
promulgated by landlord from time to time.
37. BROKER
Tenant covenants, warrants and represents that no broker was
instrumental in consummating this Lease, other than Woods Management Corporation
of Florida whose commission will be paid by Landlord, and that no conversations
or negotiations were had with any other Broker concerning the renting of the
Demised Premises. Tenant agrees to hold Landlord harmless from and against, and
agrees to defend at its own expense and pay any and all claims for a brokerage
commission by Tenant with any other brokers.
38. TRANSFER BY LANDLORD
In the event that the interest or estate of Landlord in the Land or
Building shall terminate by operation of law or by bona fide sale or by
execution or foreclosure sale, or for any other reason, then and in any such
event Landlord shall be released and relieved from all liability and
responsibility as to obligations to be performed by Landlord hereunder or
otherwise. In such event Landlord's successor, by acceptance of rent from Tenant
hereunder, shall become liable and responsible to Tenant in respect to all such
obligations of Landlord under this Lease.
39. TIME
The parties hereto agree that time is of the essence of this Lease and
applies to all terms and conditions contained herein.
40. COPIES OF LEASE
This Lease may be executed by the parties hereto in one or more
counterparts each of which shall be an original and all of which constitute one
and the same agreement. Copies of this Lease or any amendment hereto certified
by the parties to be true and correct shall be satisfactory evidence thereof for
all purposes.
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41. SUCCESSORS
The terms and conditions of this Lease shall inure to the benefit of and
be binding upon any successor hereunder, as well as upon the personal
representatives, heirs, assigns (where permitted) and all other successors in
interest of the parties.
42. CONSTRUCTION, APPLICABLE LAW
The words "Landlord" and "Tenant" as used herein shall include the
plural as well as the singular. Words used in masculine gender include the
feminine and neuter. If there be more than one Landlord or Tenant, the
obligations imposed hereunder upon the Landlord or Tenant shall be joint or
several. The section headings or titles in this Lease are not a part hereof and
shall have no effect upon the construction or interpretation of any part hereof.
This Lease shall be construed and enforced under the laws of the State of
Florida. Should any provisions of this Lease be illegal or unenforceable under
such laws, it or they shall be considered severable and this Lease and its
conditions shall remain in force and be binding upon the parties hereto just as
though the illegal or unenforceable provisions had never been included herein.
43. ENTIRE AGREEMENT
This Lease contains the entire agreement between the parties hereto and
all previous negotiations leading thereto, and it may be modified only by an
agreement in writing signed and sealed by Landlord and Tenant. No surrender of
the Leased Premises, or of the remainder of the terms of this Lease, shall be
valid unless accepted by Landlord in writing. Tenant acknowledges and agrees
that Tenant has not relied upon any statement, representation, prior written or
prior or contemporaneous oral promises, agreements or warranties except such as
are expressed herein.
44. TYPEWRITTEN AND HANDWRITTEN PROVISIONS
To the extent that any portions of the handwritten provisions, or
amendments to this Lease conflict with the typewritten provisions, then in all
events, the handwritten provisions shall prevail.
45. TENDER AND DELIVERY OF LEASE INSTRUMENT
Submission of this instrument for examination does not constitute an
offer, right of first refusal, reservation of or option for the Leased Premises
or any other space or premises in, on or about the Building. This instrument
becomes effective as a Lease upon execution and delivery by both Landlord and
Tenant.
46. OPTION
Provided this Lease is in good standing and Tenant is not in default
hereunder, Landlord hereby gives and grants to Tenant the right, privilege and
option of extending this Lease for one successive term(s) of five (5) years; the
extended term commencing from the date of the expiration of the initial term. In
order to exercise the option herein granted, Tenant must give written notice by
certified mail, return receipt requested or by hand delivery (the date of
receipt or the date of a signed receipt evidencing hand delivery shall be deemed
the date of notice) of Tenant's intention to exercise the option to extend not
less than six (6) months prior to the expiration of then current term. Failure
to give such notice shall make the options to extend null and void. All of the
terms, covenants and conditions of this Lease will apply during the initial and
extended term, including that base rent during the initial and extended term
will be adjusted on the rental adjustment dates as herein provided in Paragraph
2 of this Lease, and rent as adjusted will prevail until the next rental
adjustment date.
47. WAIVER OF JURY TRIAL
The parties hereto waive trial by jury in connection with proceedings or
counterclaims brought by either of the parties hereto against each other.
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48. CORPORATIONS AS LESSEE
If Lessee is a corporation or a partnership, the person signing this
Lease on behalf of such corporation or partnership hereby warrants that he has
full authority from such corporation or partnership to sign this Lease and
obligate the corporation or partnership hereunder.
49. UNDERCOVER PARKING
Upon execution, Tenant has reserved 0 undercover parking spaces and will
pay $0.00 per month as additional rent for the privilege of the use thereof,
during the term of this Lease.
50. TENANT IMPROVEMENTS
Landlord shall replace the carpeting throughout the Premises and paint
all partitions in the Premises.
51. CONTINGENCY
This Lease is contingent upon the execution of a termination of lease
for the tenant currently in possession of the Premises.
TENANT'S SIGNATURE INDICATES THAT TENANT HAS READ THE ENTIRE AGREEMENT
AND HAS RECEIVED A FILLED IN COPY OF THIS AGREEMENT.
IN WITNESS WHEREOF, the respective parties have hereunto set their hands
and seals and/or affixed their corporate seals and caused these presents to be
executed by their duly authorized officers the date first above written.
Signed, scaled and delivered "LANDLORD" - CONCORDE CENTRE II
in the presence of: ASSOCIATES
____________________________
____________________________
By:____________________________
(as to Landlord) Harold Schenk, V.P.
CONCORDE EQUITIES CORP.,
General Partner
"TENANT" QUEST NET CORP.
____________________________
____________________________ By:____________________________
(as to Tenant) Camilo Pereira, President
(Print and sign name)
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RULES AND REGULATIONS
1. Tenant, its officers, agents, servants and employees shall not block or
obstruct any of the entries, passages, doors, elevators, elevator doors,
hallways or stairways of Building or place, empty or throw any rubbish, litter,
trash or material of any nature into such areas, or permit such areas to be
used at any time except for ingress and egress of Tenant, its officers, agents,
servants, employees, patrons, licensees, customers, visitors or invitees.
2. No sign, door plaque, advertisement or notice shall be displayed, painted of
affixed by Tenant, its officers, agents, servants, employees, patrons,
licensees, customers, visitors or invitees in or on any part of the outside or
inside of Building, or Leased Premises without prior written consent of Landlord
and then only of such color, size, character, style and material and in such
places as shall be approved and designated by Landlord. Signs on doors and
entrances to Leased Premises shall be placed thereon by a contractor designated
by Landlord and paid for be Tenant.
3. Landlord will not be responsible for lost or stolen property, equipment,
money or any article taken from Leased Premises, Building or common facilities
regardless of how or when loss occurs.
4. Tenant, its officers, agents, servants and employees shall not install or
operate any refrigerating, heating or air conditioning apparatus or carry on any
mechanical operation or bring into Leased Premises, Building of common
facilities any inflammable fluids or explosives without written permission of
Landlord.
5. Tenant, its officers, agents, servants or employees shall not use Leased
Premises, Building or common facilities for housing, lodging or sleeping
purposes or for the cooking or preparation of food without the prior written
consent of Landlord.
6. No additional locks shall be placed on any door in Building without the prior
written consent of Landlord. Landlord will furnish two keys to each lock on
doors in the Leased Premises and Landlord, upon request of Tenant, shall provide
additional duplicate keys at Tenant's expense. Landlord may at all times keep a
pass key to the Leased Premises. All keys shall be returned to Landlord promptly
upon termination of this Lease.
7. Landlord reserves the right to close Building at 7:00 PM, subject, however,
to Tenant's right to admittance under regulations prescribed by Landlord, and to
require that persons entering the Building identify themselves and establish
their right to enter or leave the Building.
8. All plate and other glass now in Leased Premises or Building which is broken
through cause attributable to Tenant, its officers, agents, servants, employees,
patrons, licensees, customers, visitors or invitees shall be replaced by and at
expense of Tenant under the direction of Landlord.
9. Tenant shall give Landlord prompt notice of all accidents to or defects in
air conditioning equipment, plumbing, electric facilities or any part or
appurtenance of Leased Premises.
10. The plumbing facilities shall not be used for any other purpose than that
for which they are constructed, and no foreign substance of any kind shall be
thrown therein, and the expense of any breakage, stoppage, or damage resulting
from a violation of these provisions shall be borne by Tenant, who shall, or
whose officers, employees, agents, servants, patrons, customers, licensees,
visitors or invitees shall have caused it.
11. All contractors and/or technicians performing work for Tenant within the
Leased Premises or Building shall be referred to Landlord for approval before
performing such work. This shall apply to all work including, but not limited
to, installation of telephones, telegraph equipment, electrical devices and
attachments, and all installation affecting floors, walls, windows, doors,
ceilings, equipment or any other physical feature of the Building or Leased
Premises. None of this work shall be done by Tenant without Landlord's prior
written approval.
12. Glass panel doors that reflect or admit light into the passageways or into
any place in the Building shall not be covered or obstruction by the Tenant and
Tenant shall not permit, erect and/or
18
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place drapes, furniture, fixtures, shelving, display cases or tables, lights or
signs and advertising devices in front of or in proximity of interior and
exterior windows, glass panels or glass doors providing a view into the interior
of the Leased Premises unless same shall have first been approved in writing by
Landlord.
13. No space in the Building shall, without the prior written consent of
Landlord, be used for manufacturing, public sales, or for the storage of
merchandise, or for the sale of merchandise, goods or property of any kind, or
auction.
14. Canvassing, soliciting and peddling in the Building is prohibited and each
Tenant shall cooperate to prevent the same. In this respect, Tenant shall
promptly report such activities to the Building Manager's Office.
15. There shall not be used in any space, or in the public halls of the
Building, either by any Tenant or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and side guards.
16. Neither Tenant nor any officer, agent, employee, servant, patron, customer,
visitor, licensee or invitee of any Tenant shall go upon the roof of the
Building without the written consent of the Landlord.
17. The Landlord's janitors or cleaning personnel shall not be hindered by
Tenant after 5:30 P.M., and such work may be done at any time when the offices
are vacant. The windows, doors and fixtures may be cleaned at any time. Tenant
shall provide adequate waste and rubbish receptacles, cabinets, bookcases, map
cases, etc., necessary to prevent unreasonable hardship to Landlord in
discharging its obligations regarding cleaning service. In this regard, Tenant
shall also empty all glasses, cups and other containers holding any type of
liquid whatsoever.
18. In the event Tenant must dispose of crates, boxes, etc., which will not fit
into office wastepaper baskets, it will be the responsibility of Tenant to
dispose of same. In no event shall Tenant set such items in the public hallways
or other areas of the Building, excepting Tenant's own Premises, for disposal.
19. Tenant will be responsible for any damage to the Leased Premises, including
carpeting and flooring, as a result of: rust or corrosion of file cabinets;
roller chairs; metal objects; or, spills of any type of liquid.
20. If the Premises demised to any Tenant become infested with vermin, such
Tenant, at its sole cost and expense, shall cause its Premises to he
exterminated from time to time, to the satisfaction of Landlord, and shall
employ such exterminators therefore as shall be approved by Landlord.
21. Tenant shall not install any antenna or aerial wires, or radio or television
equipment, or any other type of equipment, inside or outside of the Building,
without Landlord's prior approval in writing, and upon such terms and conditions
as may be specified by Landlord in each and every instance.
22. Landlord shall have the power to prescribe the weight and position of iron
safes and machinery, and they shall in all cases stand on two-inch thick plank
to distribute the weight, and the expense of repairing any damage done to the
Building by installing or removing a safe or machinery, or by the same while on
the Premises, shall be borne by Tenant. Safes and machinery shall not be moved
into or out of the Building except by persons approved of and at times fixed by
the Superintendent. No freight, furniture, packages or bulky matter of any
description will be received in the Building, or carried up or down in the
elevators, except during hours designated by Landlord. Tenant agrees that all
machines or machinery placed in the Premises by Tenant will be erected and
placed so as to prevent and vibration or annoyance to any other of the Tenants
in the Building of which the Premises are a part, and it is agreed that upon
written request of the Landlord, Tenant will, within ten (10) days after the
mailing of such notice, provide approved settings for the absorbing, preventing,
or decreasing of noise from any or all machines or machinery placed in the
Premises.
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23. Tenant shall not obtain any towel supply or ice service except from person
designated by Landlord, nor obtain drinking water for delivery on the Premises
from any source not approved by Landlord.
24. In case Landlord shall, in the exercise of any right herein granted, store
any personal property, belonging to Tenant, Landlord shall have the further
right to dispose of such property by sale or otherwise upon two weeks' notice in
writing for that purpose. If Landlord shall sell any such property, Landlord
shall be entitled to retain from the proceeds thereof the expenses of the sale
and cost of storage.
26. Any window treatments installed must conform to Concorde Centre
specifications: one inch (1") Levelor mini blind in the color black.
27. Landlord reserves the right to modify the foregoing rules and regulations or
any of them, and to make such other and further rules and regulations as in its
absolute judgement may from time to time be needful for the reputation, safety,
care and cleanliness of the Building, and for the preservation of good order
therein, and any such other and further rules and regulations shall be binding
upon the parties hereto with the same force and effect as if they had been
inserted at the time of the execution hereof.
20
Exhibit 10.1
LEASE AGREEMENT
between
CONCORDE CENTRE II ASSOCIATES
LANDLORD
and
QUEST NET CORP.
TENANT
INDEX TO LEASE FOR SUITE 1008 (PENTHOUSE 8)
Par. Caption Page
1. LEASED PREMISES..........................................................1
2. RENTAL ADJUSTMENT........................................................1
3. USE......................................................................2
4. UNUSUAL EQUIPMENT........................................................3
5. TENANT TO TAKE GOOD CARE OF PREMISES.....................................3
6. COMPLIANCE WITH DIRECTIVES OF AUTHORITIES................................3
7. ALTERATIONS AND IMPROVEMENTS.............................................3
8. INSPECTION, EXAMINATION AND ENTRY........................................4
9. NO LIABILITY.............................................................4
10. DAMAGE BY FIRE OR OTHER CASUALTY.........................................4
11. CONDEMNATION.............................................................5
12. NO ABATEMENT - SERVICES..................................................5
13. ABANDONMENT..............................................................6
14. DEFAULT AND REMEDIES.....................................................6
15. ASSIGNMENT OR SUB-LETTING OF TENANT'S INTEREST...........................8
16. COLLECTION OF RENT FROM OTHERS...........................................9
17. INFORMATION AS TO SUB-TENANTS............................................9
18. RIGHT OF LANDLORD TO USE ENTRANCES, ETC. AND TO CHANGE SAME..............9
19. ATTORNEYS' FEES..........................................................9
20. EXAMINATION OF PREMISES AND NO ORAL REPRESENTATION.......................9
21. SUBORDINATION............................................................9
22. HOLDING OVER............................................................10
23. CERTIFICATE BY TENANT...................................................10
24. REMEDIES CUMULATIVE.....................................................10
25. NO WAIVER OF PERFORMANCE................................................10
26. AGREEMENT TO INDEMNIFY..................................................11
27. ADDITIONAL RENT.........................................................11
28. NOTICES.................................................................11
29. SURRENDER AT EXPIRATION OF THE TERM.....................................12
30. RULES AND REGULATIONS...................................................12
31. IMPROVEMENTS BY TENANT..................................................12
32. ACCEPTANCE BY TENANT....................................................12
33. SECURITY................................................................12
34. QUIET POSSESSION AND OTHER CONVENANTS...................................13
35. TENANT'S SHARE OF OPERATING EXPENSES....................................13
36. COMMON FACILITIES.......................................................15
37. BROKER..................................................................15
38. TRANSFER BY LANDLORD....................................................15
39. TIME....................................................................15
40. COPIES OF LEASE.........................................................15
41. SUCCESSORS..............................................................15
42. CONSTRUCTION, APPLICABLE LAW............................................15
43. ENTIRE AGREEMENT........................................................16
<PAGE>
44. TYPEWRITTEN AND HANDWRITTEN PROVISIONS..................................16
45. TENDER AND DELIVERY OF LEASE INSTRUMENT.................................16
46. OPTION..................................................................16
47. WAIVER OF JURY TRIAL....................................................16
48. CORPORATIONS AS LESSEE..................................................16
49. UNDERCOVER PARKING......................................................16
50. TENANT IMPROVEMENTS.....................................................17
PERSONAL INFORMATION....................................................18
RULES AND REGULATIONS...................................................19
EXHIBIT A...............................................................20
EXHIBIT B...............................................................21
BUILDING STANDARDS..................................................... 22
<PAGE>
L E A S E A G R E E M E N T
THIS INDENTURE, (sometimes herein referred to as "Lease" ) made and
entered into the 18th day of December, 1998, between CONCORDE CENTRE II
ASSOCIATES, a Florida General Partnership ("Landlord"), and Quest Net Corp.
("Tenant").
WITNESSETH
1. LEASED PREMISES
Landlord hereby demises and lets unto Tenant, and Tenant hereby hires
and takes from Landlord subject to the terms and conditions hereof the Premises
outlined on the sketches attached hereto as Exhibits "A" and "B" on the tenth
floor, Suite 1008 (Penthouse 8) (the "Premises", "Demised Premises" or "Leased
Premises"), in the Concorde Centre II Building located at 2999 N.E. 191st
Street, Aventura, Miami-Dade County, Florida (the "Building") for the term of
five (5) years, to commence on the 15th day of January, 1999, (the "Commencement
Date"), or such date as determined by paragraph 2.C. of this Lease and to end
five years thereafter, unless sooner terminated as hereinafter provided, at the
annual rental of Thirty Five Thousand Seven Hundred Sixty Eight and 00/100
Dollars ($35,768.00), in lawful money of the United States (the "Base Rent" or
"Base Rental") which Tenant covenants to pay to Landlord at its principal
office, or that of its agent, or at any other place designated in writing by
Landlord in equal monthly installments of Two Thousand Nine Hundred Eighty and
67/100 Dollars ($2,980.67.00) in advance on the first day of each and every
month during the said term as the same may be adjusted under the provisions of
Paragraph 2 of this Lease, excepting that Tenant shall pay the first month's
rent upon the execution of this Lease. If the Commencement Date of the term is
other than the first day of the month, the rent shall be prorated for said month
and the term of the Lease shall end on the last day of the month which is five
(5) years from the 1st day of the month following the Commencement Date thereby
adding such prorated period to the term of the Lease. Tenant shall pay the rent
herein provided without deduction, diminution or setoff. Unpaid rent and all
other payments to be made by Tenant to Landlord shall bear interest at the
highest rate permitted under the Laws of the State of Florida from the date due
until paid, if said rental or other payments are not otherwise paid within Ten
(10) days of their due date. Tenant agrees to pay to Landlord any sales or use
tax or excise tax now or hereafter imposed or levied against any rent or any
other charge or payment hereafter required hereunder to be made by Tenant now or
hereafter imposed or levied by any governmental agency having jurisdiction
thereover simultaneously with the payment of the Base Rent as adjusted by
Paragraph 2 of this Lease or by any addendum. The land on which the Building is
located is hereinafter referred to as the "Land". All dimensions are approximate
only. Landlord reserves the right to change the size and layout of the Building
or the size, layout and location of the common areas and facilities as well as
to reduce or expand the size of the Building and/or erect additional buildings
upon the land adjacent thereto. There shall be an abatement of rent for thirty
(30) days from the commencement date during which time Tenant can set up the
Premises for its use.
2. RENTAL ADJUSTMENT
A. Base Rent will be adjusted on each Rental Adjustment Date in
accordance with the following: In view of the fluctuating purchasing power of
the dollar, the parties hereto desiring to adjust the Base Rent thereunder to
such purchasing power, agree that such adjustments shall be made on Rental
Adjustment Dates, as herein provided so as to reflect as nearly as possible such
fluctuations.
The Base Rent provided for in Paragraph 1 shall, at the commencement of
the second Lease year of the term and each year thereafter (the "Rental
Adjustment Date"), increase at the same rate as increases in the Consumer Price
Index, for all urban consumers, all items, base year 1967 = 100, published by
the United States Department of Labor, Bureau of Labor Statistics (Index). The
Index which is published for the month prior to the commencement of the term is
the beginning index ("Beginning Index"). Said increase adjustment to be
calculated as follows: If the Index published during the month just prior to the
Rental Adjustment Date ("Extension Index") has increased over the Beginning
Index, the Base Rent for the following year (until the next adjustment) shall be
set by multiplying the Base Rent set forth in Paragraph 1 by a fraction, the
numerator of which is the Extension Index and the denominator of which is the
Beginning Index.
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In no event will the Adjusted Base Rent during the second and subsequent
Lease years be less than the Base Rent originally provided or as to any
subsequent year less than the adjusted Base Rent for any prior year. The
increase in Base Rent as herein stated shall be exclusive of all other monetary
obligations of Tenant hereunder.
It is understood that the Index is now being published by the Bureau of
Labor Statistics. Should said Bureau change the manner of computing the Index,
the Bureau shall be requested to furnish a conversion factor designed to adjust
the new Index to the one previously in use and the adjustments to the new Index
shall be made on the basis of such conversion factor. Should the publication of
the Index be discontinued by said Bureau, then such other Index as may be
published by such Bureau most nearly approaching said discontinued Index shall
be used in making the adjustments herein provided. Should said Bureau
discontinue the publication of any Index herein contemplated, then such Index as
may be published by another United States Governmental Agency as most nearly
approximates the Index first above referred to shall govern and be substituted
as the Index to be used, subject to the application of an appropriate conversion
factor to be furnished by the governmental agency publishing the adopted Index.
If such governmental agency will not furnish such conversion factor, or if there
is not published by any such governmental agency another Index as aforesaid then
the landlord shall establish a new conversion factor or a new Index, provided
however, that in establishing any such conversion factor or Index the Landlord
shall do so reasonably subject to the intents and purposes herein set forth.
B. "Lease year" as used herein, shall mean in the first instance that
period of time commencing with the Commencement date and ending twelve months
thereafter, except if the Commencement Date is other than the 1st day of a
month, then for purposes of this paragraph the Commencement of the "Lease Year"
shall be the 1st day of the month following the Commencement Date and shall mean
each successive twelve (12) month period thereafter or any consecutive twelve
(12) month period which Landlord may select from time to time at Landlord's
election.
C. The term shall commence ("Commencement Date") on the 15th day of
January 1999 or on the date Tenant takes possession of the Premises with any
furniture and personnel, whichever is earlier.
D. If the Landlord is unable to give possession of the Leased Premises
on the date of commencement of the aforesaid Lease term by reason of holding
over of any prior tenant or tenants, an abatement or diminution of the rent to
be paid hereunder shall be allowed Tenant under such circumstances, but nothing
herein shall operate to extend the term of the Lease beyond the agreed
expiration date, and said abatement in rent shall be the full extent of
Landlord's liability to Tenant for any loss or damage to Tenant on account of
said delay in obtaining possession of the Premises. There shall be no delay in
the commencement of the term of this Lease and/or payment of rent where Tenant
fails to occupy Premises when same are ready for occupancy, or where Tenant or
any agent or employee of Tenant causes a delay in preparing the Leased Premises
for occupancy for any reason whatsoever.
3. USE
Tenant shall use and occupy the Premises only for general office
business use as a telecommunications company and for no other purpose. In the
event the Tenant uses the Premises for purposes not expressly permitted herein,
the Landlord may terminate the Lease, or without notice to Tenant, restrain said
improper use by injunction.
Tenant shall not do or permit anything to be done in or about the
Demised Premises nor bring or keep anything therein which is not within the
permitted use of the Premises which will in any way increase the existing rate
of or affect any fire or other insurance upon the Building or any of its
contents, or cause a cancellation of any insurance policy covering said Building
or any part thereof or any of its contents. Tenant shall not do or permit
anything to be done in or about the Demised Premises which will in any way
obstruct or interfere with the rights of other tenants or occupants of the
Building or injure or annoy them or use or allow the Demised Premises to be used
for any improper, immoral, unlawful or objectionable purposes: nor shall Tenant
cause, maintain or permit any nuisance in or about the Demised Premises. Tenant
shall not commit or allow to be committed any waste in or upon the Demised
Premises. In the event Tenant's permitted use of the Demised
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Premises increases the existing rate or affects any fire or other insurance,
then and in that event Tenant agrees to pay said increase.
By occupying the Demised Premises as a Tenant, or by installing
fixtures, facilities, or equipment, or by performing finishing work, Tenant
shall be deemed to have accepted the same and to have acknowledged that the
Premises are conclusively in the condition required by the Lease. This Lease
does not grant Tenant any right of air and light over and about the Premises or
the Building.
4. UNUSUAL EQUIPMENT
The Tenant will not install or maintain any electrically-operated
equipment or any heavy equipment of any kind including, safes, vaults, etc., or
other machinery, except light office machinery normally used, and equipment
ordinarily used in the telecommunications business without first obtaining the
consent in writing of the Landlord.
5. TENANT TO TAKE GOOD CARE OF PREMISES
Tenant shall keep the Premises in a clean, safe and sanitary condition.
All damage caused by Tenant's negligence, or that of his agents, servants,
employees or visitors, shall be repaired promptly by Tenant at his sole cost and
expense, so that the Premises are in at least as good condition as they were
prior to such damage. In the event that the Tenant fails to comply with the
foregoing provisions, the Landlord shall have the option to enter the Premises
and make all necessary repairs at Tenant's cost and expense, the same to be
considered as additional rent and added to and be payable with the next monthly
installment of rent.
6. COMPLIANCE WITH DIRECTIVES OF AUTHORITIES
Tenant shall promptly execute and comply with all statutes, ordinances,
rules, orders, regulations and requirements of the federal, state, county, and
municipal governments and any of their departments and agencies with
jurisdiction for the Demised Premises, and for the correction, prevention and
abatement of nuisances or other grievances in, upon or connected with said
Premises during the term of this Lease, and shall promptly comply with and
execute any rules, orders and regulations of the Southeastern Underwriters
Association for the prevention of fires, all at Tenant's own cost and expense.
If by reason of any failure of Tenant to comply with the provisions of this
Lease, the rate of fire insurance with extended coverage on the Building or
equipment or other property of Landlord which Landlord may have, but which
Landlord is not required to have, shall be higher than it otherwise would be,
Tenant shall reimburse Landlord, on demand, for that part of the premiums for
fire insurance and extended coverage paid by Landlord because of such failure on
part of Tenant.
7. ALTERATIONS AND IMPROVEMENTS
Tenant shall not cut, drill into, disfigure, deface, or injure any
part of the Premises, nor obstruct or permit any obstruction, alteration,
addition, improvement, decoration or installation in the Premises. All
alterations, additions, improvements, decorations or installations, including
but not limited to partitions, railings, air conditioning ducts or equipment
(except movable furniture and fixtures put in at the expense of Tenant and
removable without defacing or injuring the Building or the Premises), shall
become the property of Landlord at the termination of the term. Landlord,
however, reserves the option to require Tenant, upon demand in writing, to
remove all fixtures and additions, improvements, decorations or installations
(including those not removable without defacing or injuring the Premises) and to
restore the Premises to the same condition as when originally leased to Tenant,
reasonable wear and tear excepted; provided, however, Landlord shall not have
the right to require Tenant to remove any fixtures, additions, improvements,
decorations, and/or installations which are initially installed by and for
Tenant in order to prepare the Premises for occupancy by Tenant in a manner
which has been approved by Landlord. Tenant agrees to restore the Premises
immediately and agrees in case of his failure to do so, that Landlord may do so
and collect the cost thereof from Tenant as hereinafter provided. Tenant will,
at Tenant's own expense, keep the Leased Premises in good repair and tenantable
condition during the Lease term and will replace at its own expense any and all
broken glass caused by Tenant in and about said
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Leased Premises. Tenant will make no alterations, additions, signage or
improvements in or to the Leased Premises or the Building without the written
consent of Landlord, which shall not be unreasonably withheld insofar as
non-structural alterations are concerned.
8. INSPECTION, EXAMINATION AND ENTRY
Landlord and Landlord's agents shall have the right to enter the
Premises at all reasonable hours upon reasonable notice to examine the same, and
workmen may enter at any time in the event of emergency and otherwise at
reasonable times when authorized by Landlord or Landlord's agents to make such
repairs, alterations or improvements in the Building as Landlord may in its sole
discretion deem necessary or desirable. If during the last month of the term,
Tenant shall have removed all or substantially all of Tenant's property,
Landlord may immediately enter the Premises and prepare them for any future
Tenant. Furthermore, the Landlord may allow such future Tenant to occupy the
Premises. These acts shall have no effect upon Tenant's obligations under this
Lease and Tenant shall be entitled to no abatement or diminution of rent as a
result thereof, except that in the event such future Tenant makes any payment
for the period up until the expiration of this Lease, Tenant shall be entitled
to an abatement of rent for such period. If Tenant shall not be personally
present to open and permit entry into the Premises, when entry thereto shall be
necessary hereunder, Landlord may forcibly enter same without rendering Landlord
liable to any claim for damages and without affecting the obligation and
covenants of this Lease. Employees of Landlord and Landlord's agents shall be
permitted to enter the Premises by passkey at all reasonable times. During the
last six months of the term of this Lease Agreement, if Tenant has not executed
a renewal of this Lease Agreement, Landlord shall be permitted to enter the
Premises during reasonable hours and with reasonable notice for the purpose of
showing the Premises to prospective tenants.
9. NO LIABILITY
Tenant will not hold Landlord liable for any latent defect in the
Premises or in the Building. Landlord shall not be liable for any failure of
water supply, electric current, heating or air conditioning, elevator service,
or any other service; nor for injury or damage to person or property caused by
fire or theft or by the elements or by other tenants or persons in the Building,
or resulting from the operation of elevators, heating or air conditioning or
lighting apparatus, or from falling plaster, or from steam, gas, electricity,
water, rain, or dampness, which may leak or flow from any part of the Building,
or from the pipes, appliances, or plumbing work of the same, or from any other
place or for damages resulting from the acts or omissions of Tenant, Tenant's
agents, employees, invitees or other occupants of the Building. Nor shall
Landlord be liable for any loss or damage that Tenant may sustain by reason of
the closing or darkening of any of the windows in the Premises through the
erection of or any addition to a new building or otherwise, and the same shall
not constitute a constructive eviction. All goods or property or personal
effects stored or placed by the Tenant in or about the Building shall be at the
sole risk of the Tenant. The foregoing, with regard to liability on the part of
Landlord, shall not be applicable in the event Landlord is found to be negligent
in a court of competent jurisdiction. The foregoing provisions do not relieve
Landlord from its obligation to perform ordinary maintenance and repairs to the
common areas.
10. DAMAGE BY FIRE OR OTHER CASUALTY
If, through no fault or negligence of Tenant, his visitors, agents or
servants, the Premises shall be partially damaged by fire or other casualty, the
damage shall be repaired by Landlord, and the rent, until such repairs are made,
shall be apportioned according to the portion of the Premises which are still
usable. If the damage shall be so extensive as to render the Premises wholly
untenantable, the rent shall cease until such time as the Premises shall become
tenantable. However, if the damage is so extensive that the Premises cannot be
made tenantable within three (3) months from the date of the fire or other
casualty, either party shall have the right to terminate this Lease upon ten
(10) days' written notice to the other. In case the Building (though the
Premises may not be affected) is so injured or destroyed by fire or other
casualty that Landlord shall decide not to rebuild or reconstruct the Building,
the term of this Lease shall cease upon ten (10) days' written notice sent by
Landlord and the rent shall be paid up to the time of such destruction and the
Lease shall thereafter be of no further effect. In the event that any question
shall arise between Landlord and Tenant as to whether or not repairs shall have
been made with reasonable dispatch, due allowance shall be made for any delays
which may arise in connection with the adjustment of the
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fire insurance loss and for any delays arising out of what are commonly known as
"labor troubles" or "material troubles" or from any other cause beyond
Landlord's control. In any event Landlord shall not be liable to Tenant by
reason of fire or other damage to the Building or the Premises.
11. CONDEMNATION
If the entire Leased Premises shall be taken by any public authority
under the power of eminent domain, then the term of this Lease (or of any option
period exercised hereunder) shall cease as of the date possession shall be taken
by such public authority and the rent shall be paid up to that day with a
proportionate refund by Landlord of any prepaid rent. If any part of the Demised
Premises material to the operations of Tenant shall be taken under eminent
domain, either party to this Lease shall have the right to terminate the Lease
and declare the same null and void by notice in writing delivered to the other
party within ten (10) days after such taking. If neither party elects to
terminate this Lease, Tenant shall continue in possession of the remainder of
the Leased Premises and all of the terms of this Lease shall continue in full
force and effect, except that the rent shall be reduced in proportion to the
extent of the Premises taken. All damages awarded for any taking under the power
of eminent domain, whether for the whole or a part of the Leased Premises, shall
belong to and be the property of the Landlord, whether such damages shall be
awarded as compensation for diminution in value to the leasehold or to the fee
of the Premises; provided, however, that Landlord shall not be entitled to any
award made to Tenant for loss of business, or depreciation to, damage to, or
costs or removal of, or for the value of stock, trade fixtures, furniture, and
other personal property belonging to the Tenant.
12. NO ABATEMENT - SERVICES
No diminution or abatement of rent, or other compensation, shall be
allowed for inconvenience or injury arising from the making of repairs,
alterations or improvements to the Building nor for any space taken to comply
with any law, ordinance or order of government authority, except that if Tenant
is prevented from conducting its business or prevented from ingress or egress to
the Premises for any period of time, rent shall be abated for such period unless
reason for lack of ability to conduct Tenant's business or lack of ingress or
egress is caused by an event beyond the control of Landlord, and only if
Landlord does not diligently pursue the repair or replacement of the source of
the problem within a reasonable time. Tenant should carry business interruption
insurance for such an event. Landlord will furnish the following services to
Tenant from Monday through Friday except for Christmas Day, George Washington's
Birthday, Memorial Day, Labor Day, Thanksgiving Day, Fourth of July, Martin
Luther King's Birthday, and New Year's Day, or any subsequent nationally
recognized holiday:
(a) Cleaning services, deemed by Landlord to be normal and usual in a
first-class office building, except that shampooing and replacement of carpet as
required by Tenant shall be at Tenant's own expense.
(b) Heat and air conditioning in the common areas from 8:00 A.M. to
6:00 P.M.
In addition, Landlord will make available automatically operated
elevator service, electrical current for normal office use (separately metered
by and for Tenant and which will be paid for by Tenant and not Landlord), and
water for normal drinking and lavatory in the common areas use at all times and
on all days throughout the year. In the event Premises shares an electric meter
with one or more other premises, Landlord shall pay the cost of electric and
allocate the cost proportionately between or among the tenants based on the
ratio of square footage of each premises to the total square footage of the
combined premises.
Except as expressly provided herein Landlord is not otherwise
responsible for any maintenance to Tenant's Premises and Tenant is solely
responsible for all utilities and the maintenance of Tenant's Premises including
but not limited to electric, plumbing, HVAC and pest control.
Tenant shall maintain a service contract for the HVAC system during the
term of Lease and provide Landlord with copy thereof.
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No electric current shall be used except that furnished or approved by
the Landlord, nor shall any electric cable or wire be brought into the Leased
Premises, except upon the written consent and approval of the Landlord. Tenant
shall use only office machines and equipment that operate on the Building's
standard electric circuits, but which in no event shall overload the Building's
standard electric circuits from which the Tenant obtains electric current. Any
consumption of electric current whether or not it requires special circuits or
equipment (the installation of which shall be at Tenant's expense after approval
in writing by the Landlord) shall be paid for by the Tenant.
Such services and such other services as Landlord in its sole and
absolute discretion may elect to provide, shall be provided so long as Lessee is
not in default under any of the terms, provisions, covenants and conditions of
this Lease, subject to interruption caused by repairs, renewals, improvements,
changes of service, alterations, strikes, lockouts, labor controversies,
inability to obtain fuel or power, accidents, breakdowns, catastrophes, national
or local emergencies, acts of God and conditions and causes beyond the control
of Landlord, and upon such happening, no claim for damages or abatement of rent
for failure to furnish any such services shall be made by the Tenant or allowed
by the Landlord.
It is understood and agreed between the parties hereto that any charges
against Tenant by Landlord for services or for work done on the Leased Premises
by order of Tenant, or otherwise accruing under this Lease, shall be considered
as additional rent due and shall be included in any lien for rent.
13. ABANDONMENT
In case Tenant shall fail to take possession upon the commencement of
the term, or in case the Premises or any part thereof shall be vacated prior to
the expiration of the term of this Lease, Landlord shall have the right to enter
the Premises without instituting any proceeding, either by force or otherwise,
without being liable for damages therefor, and take possession for its own use
or relet the Premises or any part thereof, for the unexpired portion of the term
or longer and to collect the rent therefor, and to apply the rents so collected
to the payment of rent and all other sums payable to Landlord or do nothing,
accelerate the rent due under the Lease and seek a monetary judgment. Tenant
shall remain responsible to Landlord for any and all deficiency, loss and damage
suffered by Landlord, as provided for herein.
For the purpose of this Section the Premises shall be deemed to have
been abandoned when the rent is delinquent and Tenant shall have vacated the
Premises and been away therefrom for five (5) consecutive days, exclusive of
holidays, irrespective of whether the keys have been delivered to Landlord or
not, and no notice has been given by Tenant to Landlord of its intention not to
occupy the Premises for a specified period of time, and/or furniture and or
equipment has been removed from the Premises in a sufficient quantity so that
any reasonable person would be aware that Tenant was no longer conducting
business in the Premises.
14. DEFAULT AND REMEDIES
All rights and remedies of the Landlord herein enumerated shall be
cumulative, and none shall exclude another or any other right or remedy provided
at law or in equity.
(a) If Tenant or any guarantor of this Lease shall become bankrupt or
insolvent or unable to pay its debts as such become due, or file any debtor
proceedings or if Tenant or any guarantor shall take or have taken against
either party in any court pursuant to any statute either of the United States or
of any State, a petition in bankruptcy or insolvency or for reorganization or
for the appointment of a receiver or trustee of all or a portion of Tenant's
personal property, or if Tenant or any such guarantor makes an assignment for
the benefit or creditors, or petitions for or enters into an arrangement, then
this Lease shall terminate and Landlord, in addition to any other rights or
remedies it may have, shall have the immediate right of reentry and may remove
all persons and property from the Leased Premises and such property may be
removed and stored in a public warehouse or elsewhere at the cost of and for the
account of Tenant, all without service of notice or resort to legal process and
without being deemed guilty of trespass, or becoming liable for any loss or
damage which may be occasioned thereby.
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(b) If the Tenant defaults in the payment of rent or in the prompt and
full performance of any provisions of this Lease, or if the leasehold interest
or the Tenant's business or fixtures of Tenant are levied upon under execution
or attached by process of law, or if the Tenant makes an assignment for the
benefit of creditors, of if a receiver is appointed for any property of the
Tenant, or if the Tenant abandons the Premises, or if Tenant fails to cure a
monetary default within three (3) days after written notice thereof or fails to
cure a non-monetary default within seven (7) days from written notice thereof,
or if said non-monetary default is of such a nature that same cannot be cured
within seven (7) days, Tenant fails to diligently commence to cure within that
time and thereafter continues to proceed to cure same, then Landlord may
forthwith terminate this Lease and the Tenant's right to possession of the
Demised Premises, or terminate only Tenant's right to possession hereunder.
(c) Upon any termination of this Lease, whether by lapse of time or
otherwise, the Tenant shall surrender possession and vacate the Premises
immediately, and deliver possession thereof to the Landlord, and hereby grants
to the Landlord full and free license to enter into and upon the Premises in
such event with due process of law and to expel or remove the Tenant and any
others who may be occupying or within the Premises and to remove any and all
property therefrom, using such force as may be necessary without being deemed in
an manner guilty of trespass, eviction or forcible entry or detainer, and
without relinquishing the Landlord's rights to rent of any other right given to
Landlord hereunder or by operation of law. The Tenant expressly waives the
service of any demand for the payment of rent or for possession and the service
of any notice of the Landlord's election to terminate this Lease or to reenter
the Premises, except as provided for in subparagraph (b) of this paragraph, and
agrees that the simple breach of any covenants or provisions of this Lease by
the Tenant shall, of itself, without the service of any notice or demand
whatsoever, constitute an unlawful detainer by Tenant of the Premises within the
meaning of the Statutes of the State of Florida.
(d) If the Tenant abandons the Premises or otherwise entitles the
Landlord so to elect, and the Landlord does elect to terminate the Tenant's
right to possession only, without terminating the Lease, the Landlord may, at
the Landlord's option, enter into the Premises, remove the Tenant's signs and
other evidence of tenancy, and to take and hold possession thereof without such
entry and possession terminating the Lease or releasing the Tenant, in whole or
in part, from the Tenant's obligation to pay the rent hereunder for the full
term, and in any such case the Tenant shall pay forthwith to the Landlord a sum
equal to the entire amount of the rent reserved for the remainder of the stated
term plus any other sums due hereunder. Upon and after entry into possession
without termination of the Lease, the Landlord may, but need not, relet the
Premises or any part thereof for the account of the Tenant to any person, firm
or corporation other than the Tenant for such rent, for such time and upon such
terms as the Landlord, in the Landlord's sole discretion, shall determine and
the Landlord shall not be required to accept any tenant offered by the Tenant or
to observe any instructions given by the Tenant about such reletting. In any
such case, the Landlord may make repairs, alterations and additions in or to the
Premises and redecorate the same to the extent deemed by the Landlord necessary
or desirable, and the Tenant shall, upon demand, pay the cost thereof, together
with all of Landlord's expenses of the reletting, including by way of example,
but not by way of limitation, advertising expenses, commissions, broker's fees,
etc. If the consideration collected by the Landlord upon any such reletting for
the Tenant's account is not sufficient to pay monthly the full amount of the
rent reserved in this Lease, together with the costs of repairs, alterations,
additions, redecorating and the Landlord's expenses, the Tenant shall pay to the
Landlord the amount of each monthly deficiency upon demand; and if the
consideration so collected from any such reletting is more than sufficient to
pay the full amount of the rent reserved herein, together with the costs and
expenses of the Landlord, then the Landlord, at the end of the stated term of
the Lease, shall account for the surplus to the Tenant. Landlord shall use
reasonable effort to mitigate Tenant's liability for the payment of rent by
attempting to lease the Premises to another tenant. However such effort shall
not take precedence over the leasing of any other vacant space in the building.
(e) Tenant hereby irrevocably appoints Landlord as agent and
attorney-in-fact of Tenant, to enter upon the Premises in the event of default
by Tenant in the payment of any rent herein reserved, or in the performance of
any term, covenant or condition herein contained to be kept or performed by
Tenant, and to remove any and all furniture and personal property whatsoever
situated upon the Premises. Any and all property which may be removed from the
Premises by the Landlord pursuant to the authority of this Lease or of law, to
which the Tenant is or may be entitled, may be handled, removed or stored by
landlord at the risk, cost and expense of Tenant, and Landlord shall in no event
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be responsible for the value, preservation or safekeeping thereof. Tenant shall
pay to Landlord, upon demand, all expenses incurred in such removal and all
storage charges against such property so long as the same shall be in the
Landlord's possession or under Landlord's control. Landlord may place such
property in storage for the account of, and at the expense of Tenant and if
Tenant fails to pay the cost of storing such property after it has been stored
for a period of fifteen (15) days or more, Landlord may sell any or all of such
property in such manner and at such times and places as Landlord, in its sole
discretion, may deem proper, without notice to or demand upon Tenant for the
payment of any part of such charges or the removal of any such property and
shall apply the proceeds of such sale first to the cost of expenses of such
sale, including reasonable attorneys' fees; second to the payment of the costs
and charges of storing any property; third, to the payment of any other sums of
money which may then or thereafter be due to Landlord from Tenant under any of
the terms hereof, and fourth, the balance, if any, to Tenant. The removal and
storage of Tenant's property as above provided shall not constitute a waiver of
Landlord's lien thereon.
(f) Tenant shall pay upon demand all of Landlord's costs, charges and
expenses, including the fees of counsel, agents and others retained by Landlord,
incurred in enforcing Tenant's obligations hereunder or incurred by Landlord in
any litigation, negotiation or transaction in which Tenant causes Landlord,
without Landlord's fault, to become involved or concerned. Attorneys' fees shall
be awardable for all phases of litigation, trial, as well as appellate. In the
event of litigation, the prevailing party shall be entitled to reimbursement of
reasonable legal expenses and costs.
(g) To perfect and assist in the implementation of certain of
Landlord's rights in and to the Tenant's personal property, Tenant hereby
pledges and assigns to Landlord and grants unto Landlord a lien upon all
furniture, fixtures, goods and chattels of Tenant which shall or may be brought
or put on the Premises as further security for the faithful performance of the
terms, provisions, conditions and covenants of this Lease. Tenant specifically
agrees that said lien may be enforced by distress, foreclosure or otherwise at
the election of the Landlord.
(h) Notwithstanding any contrary provision of this Lease, Tenant shall
look solely to the interest of Landlord or its successor (as landlord hereunder)
in the real property of which the Leased Premises are a part for the
satisfaction of any judgment or judicial process requiring the payment of money
as a result of any negligence or breach of this Lease by Landlord or such
successor, and no other assets of Landlord or its successor shall be subject to
levy, execution or other enforcement procedure for the satisfaction of Tenant's
remedies in any of such events. Tenant's sole right and remedy in any action or
proceeding concerning Landlord's reasonableness (where the same is required
under this Lease) shall be an action for declaratory judgment and/or specific
performance.
(i) If Tenant shall fail to observe or perform any term or condition on
Tenant's part to be observed or performed under this Lease or in the event of an
emergency then Landlord may immediately, without notice perform the same for the
account of Tenant, and if Landlord shall make any expenditure or incur any
obligation for the payment of money in connection therewith (including
reasonable attorneys' fees in instituting, prosecuting and/or defending any
action or proceeding through appeal), the sums paid or obligations incurred,
with interest as specified in paragraph 1 hereof, and costs shall be deemed to
be additional rent hereunder and shall be paid by Tenant to Landlord within ten
(1O) days after rendition of a bill or statement therefor.
15. ASSIGNMENT OR SUB-LETTING OF TENANT'S INTEREST
The Tenant's interest in this Lease or any security deposited
thereunder shall not be sold, transferred, mortgaged or assigned, nor shall the
Premises, or any part thereof, including desk space, be let or sublet without
the prior written consent of Landlord. Such consent shall not be unreasonably
withheld. Even through Landlord may consent to a sale, transfer, mortgage,
assignment of subletting thereof, the aforesaid restrictions shall remain in
full force and effect, and no further sale, transfer, mortgage, assignment or
subletting shall be made without Landlord's consent in writing. In the event
Tenant desires to assign this Lease or sublet substantially the entire Demised
Premises to any party, Tenant shall give Landlord written notice thereof and
Landlord shall have a period of fifteen (15) business days after the receipt of
such written notice
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within which to elect to terminate this Lease. In the event Landlord elects to
terminate this Lease, then Landlord will return to Tenant any prepaid rentals or
security deposits held hereunder. In the event Landlord does not elect to
terminate this Lease, then Landlord agrees that it will not unreasonably
withhold its consent to the requested transfer or subletting. No such assignment
or subletting shall relieve Tenant of its obligations hereunder. The placing of
a plaque sign adjacent to the entry of the Premises or a directory strip on the
directory board by the Lessor with a name other than the name of the Lessee, as
indicated herein, shall not constitute a consent of assignment on the part of
the Lessor.
16. COLLECTION OF RENT FROM OTHERS
If the Tenant's interest in this Lease be assigned, or if the Premises
or any part thereof be sublet, Landlord may, after default by Tenant, collect
rent from the assignee or sub-tenant and apply the net amount collected to the
rent due from Tenant. No such collection shall be deemed a waiver of the
covenant herein against sale, transfer, mortgage, assignment and subletting or a
release of Tenant from the performance of the covenants herein contained. In the
event of such default, Tenant hereby assigns the rent due from the sub-tenant or
assignee to Landlord, and hereby authorizes such sub-tenant or assignee to pay
the rent directly to Landlord.
17. INFORMATION AS TO SUB-TENANTS
If the Premises shall be sublet in whole or in part by Tenant, Tenant
will, on demand of Landlord, furnish and supply in writing, within three (3)
business days after such demand, any and all information with regard to said
sub-tenants which Landlord may request. Nothing herein contained shall be
construed to be a consent to any sub-letting or a waiver of the covenant against
sub-letting contained therein.
18. RIGHT OF LANDLORD TO USE ENTRANCES, ETC. AND TO CHANGE SAME
For the purpose of making repairs or alterations in any portion of the
Building of which the Premises form a part, Landlord may use one or more of the
street entrances, halls, passageways and elevators of the said Building,
provided, however, that there be no unnecessary obstruction of the right of
entry to the Premises while the same are occupied. Landlord may at any time
change the name or number of the Building, remodel or after the same, or the
location of any entrance thereto, or any other portion thereof not occupied by
Tenant, and the same shall not constitute a constructive or actual, total or
partial eviction.
19. ATTORNEYS' FEES
If Tenant shall at any time be in default hereunder, and if Landlord
shall, in connection with such default, retain its attorneys to institute any
action and/or render other professional services, then Tenant will reimburse
Landlord for the expense of attorneys' fees and disbursements thereby incurred
by the Landlord. The amount of such expenses shall be collected as additional
rent. In the event of litigation between the parties, the prevailing party shall
be entitled to reimbursement of reasonable legal fees and costs.
20. EXAMINATION OF PREMISES AND NO ORAL REPRESENTATION
The taking of possession of the Premises by Tenant shall be conclusive
evidence that the Premises were in good and satisfactory condition at the time
such possession was taken. No representations, except those contained herein,
have been made on the part of Landlord with respect to this undertaking, whether
relating to the repair, condition or otherwise of the Premises or the Building.
Tenant will make no claim on account of any representation whatsoever, whether
made by any renting agent, broker, offices or other representative of Landlord
or which may be contained in any circular, prospectus or advertisement relating
to the Premises, or otherwise, unless the same is specifically set forth in this
Lease.
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21. SUBORDINATION
Tenant agrees that its rights hereunder are subordinate to the lien of
any mortgage, ground lease, or any other method of financing or refinancing now
or hereafter placed against the land and/or the Demised Premises and/or any/or
all of the Building now built or hereafter to be built on the land by Landlord
and to any and all advances made or to be made thereunder and to the interest
thereon and to all renewals, replacements, modifications, consolidations and
extensions thereof. This paragraph shall be self-operative and no further
instrument of subordination shall be required. Tenant further agrees that it
will enter into and execute all documents which any such mortgagee or any ground
lessor may reasonably request Tenant to enter into and execute, including a
subordination agreement within seven (7) days of written request therefor from
Landlord or Landlord's agent. Tenant agrees that it will send copies of all
notices to Landlord, to Landlord's mortgagees or ground lessors, provided that
Tenant has been furnished with the name and address of such mortgagees or ground
lessors, and further provided that Landlord or Landlord's mortgagee or ground
lessor has requested Tenant to send copies of such notices. Tenant agrees that
Tenant will attorn to any mortgage or ground lessor or purchaser at a
foreclosure sale, if requested so to do. Tenant hereby appoints Landlord and
Landlord's successor(s) an interest as Tenant's Attorney-in-Fact to execute any
and all documents necessary to effectuate all of the provisions of this
paragraph. If a mortgagee of Landlord shall request reasonable modifications to
this Lease, Tenant agrees that, within five (5) days after request by the
mortgagee, Tenant shall execute, acknowledge, and deliver to the mortgagee an
agreement, in form and substance satisfactory to the mortgagee, evidencing such
modifications, provided that such modifications do not increase Tenant's
obligations under this Lease or materially adversely affect (a) the leasehold
interest created by this Lease, or (b) Tenant's use and occupancy of the Leased
Premises.
22. HOLDING OVER
If the Tenant retains possession of the Premises or any part thereof
after the termination of the term of any extension thereof, by lapse of time or
otherwise, the Tenant shall pay the Landlord rent at double the rate payable for
the month immediately preceding said holdover, for the time the Tenant thus
remains in possession. The provisions of this paragraph do not waive the
Landlord's rights of reentry or any other right hereunder. Unless Landlord
serves written notice to Tenant to vacate the Premises, without a written
agreement to extend the term of the Lease, any retention of the Premises by
Tenant after the termination of this Lease or any extension thereof shall be
considered a tenancy-at-will on a month to month basis, in which case either
party can terminate the tenancy by giving the other party fifteen (15) days
notice in writing, prior to the last day of given month, of its intention to
terminate. For example, a notice given on June 15 would terminate the tenancy on
June 30. However a notice give on June 16 would terminate the tenancy on July
31. All notices must be in accordance with the notice provisions of paragraph
28.
23. CERTIFICATE BY TENANT
Tenant shall deliver to Landlord or to its mortgagees, auditors, or
prospective purchaser, or to the owner of the fee, within Ten (10) days, when
requested by Landlord, a certificate to the effect that this Lease is in full
force and effect and that Landlord is not in default herein or stating
specifically any exceptions thereto. Failure to give such a certificate within
ten (10) days after written request shall be conclusive evidence that Lease is
in full force and effect and Landlord is not in default and Tenant shall be
estopped from asserting any defaults known to him at that time.
24. REMEDIES CUMULATIVE
The various rights, remedies, powers and elections of Landlord
reserved, expressed or contained in this Lease, are cumulative and no one of
them shall be deemed to be exclusive to the others or of such other rights
remedies, powers, options, or elections as are now, or may hereafter be,
conferred upon Landlord by law.
25. NO WAIVER OF PERFORMANCE
No waiver of Landlord of any provision hereof shall be deemed to have
been made unless such waiver be in writing signed by Landlord. The failure of
Landlord to insist upon the strict performance of any of the convenants or
conditions of this Lease, or to exercise any option herein conferred, shall not
be construed as waiving or relinquishing for the future of any such convenants,
conditions or options, but the same shall continue and remain in full force and
effect. No act of
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Landlord or its agent during the term hereof shall be deemed an acceptance or a
surrender of the Premises unless made in writing and personally subscribed by
Landlord. The delivery of the keys to the Premises by Tenant to Landlord or its
agents shall not be deemed a surrender and acceptance thereof. No payment by
Tenant of a lesser amount than the monthly rent herein stipulated shall be
deemed to be other than on account of the stipulated rent.
26. AGREEMENT TO INDEMNIFY
Tenant shall indemnify and save Landlord harmless, and does agree to
indemnify and save Landlord harmless, of and from and pay all fines, claims,
demands, and causes of action of every nature whatsoever arising or growing out
of any manner connected with the occupation or use of the Premises and Building,
and every part thereof, by Tenant and the employees, agents, servants, guests
and invitees of Tenant, including without limiting the generality of the
foregoing, any claims, demands and causes of action for personal injury and/or
property damage, and said indemnification shall extend to any fines, claims,
demands and causes of action of every nature whatsoever which may be made upon,
sustained or incurred by Landlord by reason of any breach, violation or
nonperformance of any term, covenant, or condition hereof on the part of the
Tenant, or by reason of any act or omission on the part of Tenant and the
employees, agents, servants, guests and invitees of Tenant except in the case of
sole negligence on the part of Landlord without negligence on the part of
Tenant. In any such event, contributory negligence on the part of the Landlord
shall not in any way affect Tenant's obligation under this indemnification
except as it relates to the percentage of liability. Tenant agrees that this
indemnification shall further extend to all costs incurred by Landlord,
including reasonable attorneys' fees.
Tenant agrees that, at all times during the term (as well as prior and
subsequent thereto if Tenant or its agents shall then use or occupy any portion
of the Leased Premises), it shall keep in force, in a responsible insurance
company licensed to do business in the State of Florida, comprehensive general
liability and property damage liability insurance in a single limit of not less
than $1,000,000.00 covering death or injury to any person(s) as well as property
damage. Such policy shall (a) include landlord, its managing agent (if any), and
such other parties as Landlord may designate as parties insured; (b) be
considered primary insurance; (c) include by endorsement an agreement insuring
Tenant's indemnity and hold harmless obligations under Paragraph 26; and (d)
provide that it may not be cancelled or changed without at least thirty (30)
days prior written notice from the carrier to each party insured thereunder.
Upon Landlord's request from time to time, Tenant shall furnish Landlord with
either the original policy, or at Tenant's option, a certificate of the
insurance so carried by Tenant.
In case Landlord shall be made a party to any litigation commenced
against Tenant, then Tenant shall protect and hold Landlord harmless and shall
pay all costs, expenses and reasonable attorneys' fees incurred or paid by
Landlord in connection with such litigation.
27. ADDITIONAL RENT
If Landlord shall make any expenditures, for which Tenant is liable
under this Lease, or if Tenant shall fail to make any payment due Landlord under
this Lease, the amount thereof shall at Landlord's option be deemed "additional
rent" and shall be due with the next succeeding installment of rent. For the
non-payment of and "additional rent" Landlord shall have the same remedies and
rights that Landlord has for the non-payment of the Base Rent.
28. NOTICES
All notices shall be in writing. Any notice by Landlord to Tenant shall
be deemed to be duly given if either delivered personally to Tenant or sent by
registered or certified mail, or by such other means permitted by law addressed
to Tenant at the Building in which the Premises are situated or until
commencement of the term of this Lease being 2740 E. Oakland Park Boulevard,
Suite 206/B, Ft. Lauderdale, FL 33306. Any notice by Tenant to Landlord shall be
deemed duly given if sent by registered or certified mail, addressed to Landlord
c/o Woods Management, 2740 W. 5th Avenue, Hialeah, Florida 33010 (or at such
other address as may hereafter be designated by Landlord), and also to the agent
of Landlord, if any, charged with the renting and management of the Building.
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29. SURRENDER AT EXPIRATION OF THE TERM
Tenant agrees at the expiration of the term to quit and surrender the
Premises and everything belonging to or connected therewith in as good state and
condition as reasonable wear and use thereof will permit, and to remove all
signs, advertisements and rubbish from the said Premises; and Tenant hereby
expressly authorizes Landlord, as the agent of Tenant, to remove such rubbish
and make such changes and repairs as may be necessary to restore the Premises to
such condition at the expense of Tenant. Landlord shall have the right to show
the Premises to prospective tenants during the sixty (60) day period prior to
the expiration of the term of the Lease, with reasonable notice and during
reasonable hours if Tenant has not executed a renewal agreement or exercised its
option, if any, to renew the Lease.
30. RULES AND REGULATIONS
Tenant agrees to observe and comply with and Tenant agrees that his
agents, servants, employees and all persons visiting in the Premises will serve
and comply with the rules and regulations annexed hereto and such other and
further rules and regulations as Landlord may from time to time deem needful and
prescribe for the reputation, safety, care and cleanliness of the Building and
the preservation of good order therein and the comfort, quiet, and convenience
of other occupants of the Building, which rules and regulations shall be deemed
terms and conditions of this Lease. Landlord shall not be liable to Tenant for
the violation of any of the said rules and regulations by any other Tenant or
person. Landlord agrees that the rules and regulations will be reasonable and
will not interfere with Tenant's quiet enjoyment of the Demised Premises.
31. IMPROVEMENTS BY TENANT
In making any alterations, decorations, additions, installations or
improvements to or in the Premises, Tenant shall employ only such labor as shall
have been approved by Landlord, which approval shall not be unreasonably
withheld, and all such work done by or for Tenant shall be performed and
installed in such a manner that the same shall comply with all provisions of
law, ordinances and all rules and regulations of any and all agencies and
authorities having jurisdiction over the Premises, and at such time and in such
manner as not to interfere with the progress of any work being performed by or
on account of Landlord. Notwithstanding the foregoing it is understood that
Tenant is not obliged by Landlord to make any improvement or improvements. In no
event shall Tenant have the right to create or permit there to be established,
any lien or encumbrances of any nature against the Premises or the Building for
said improvement or improvements by Tenant, and Tenant shall fully and promptly
pay the cost of any improvement or improvements made or contracted by Tenant.
Any mechanic's lien filed against the Premises or the Building for work claimed
to have been done, or materials claimed to have been furnished to Tenant, shall
be duly discharged by Tenant within Ten (10) days after the filing of the lien.
Any person, firm or entity performing labor or furnishing materials or fixtures
for Tenant shall look solely to the Tenant for repayment and shall have no right
to subject the Landlord's interest in the Building, or in the real property on
which the Building and common areas are situate to any Claim arising for work
done or performed for and on behalf of Tenant.
32. ACCEPTANCE BY TENANT
Tenant has inspected the Demised Premises and accepts the same in its
present condition as shell space and Tenant is responsible for construction and
payments for all improvements thereto as approved by Landlord. It is understood
that any dimensions or sizes on either working or renting plans are merely
approximations and whether the plans are attached or are made part of this Lease
or not, Landlord shall not be liable, and this Lease shall not be void or
voidable because of exigencies arising during construction, alterations or
preparation for Tenant's occupancy which result in changes not indicated on such
plans.
33. SECURITY
Tenant has deposited with Landlord the sum of Eight Thousand Nine
Hundred Ninety Seven and 00/100 Dollars ($8,997.00) as security for the faithful
performance and observance by Tenant of the terms, provisions and conditions
of this Lease. Tenant shall not use or offset the security
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deposit against any rental charges or other obligations to be paid by Tenant
hereunder. It is agreed that, in the event Tenant defaults in respect of any of
the terms, provisions and conditions of this Lease, including, but not limited
to, the payment of rent and additional rent, Landlord may use, apply or retain
the whole or any part of the security deposited to the extent required for the
payment of any rent and additional rent or any other sum as to which Tenant is
in default or for any sum which Landlord may expend or may be required to expend
by reason of Tenant's default in respect of any of the terms, covenants and
conditions of this Lease, including, but not limited to, any damages or
deficiency in the reletting of the Premises, whether such damage accrued before
or after summary proceedings or other reentry by Landlord. In the event the
Tenant shall fully and faithfully comply with all of the terms, provisions,
covenants and conditions of this Lease, the security shall be returned to Tenant
after the date fixed at the end of the Lease, and after delivery of entire
possession of the Premises to Landlord. In the event of a sale of the Land and
Building, of which the Premises form a part, Landlord shall thereupon be
released by Tenant from all liability for the return of such security and Tenant
agrees to look solely to the new Landlord for the return of said security. It is
agreed that the provisions hereof shall apply to every transfer or assignment
made of the security to a new Landlord. Tenant further covenants that it will
not assign or encumber the monies deposited herein as security and that neither
Landlord nor its assigns shall be bound by any such assignment or encumbrance.
Landlord shall not be required to keep the security in a segregated account and
the security may be entitled to any interest on the security. The mortgagee
holding a mortgage encumbering the Building shall not be responsible to Tenant
for the security deposit in the event such mortgagee becomes the owner of the
Building through foreclosure or by reason of a deed in lieu thereof. Tenant
agrees not to look to any mortgagee or purchaser at any foreclosure sale or
grantee in a deed given in lieu of foreclosure for the return of any security
deposit given to Landlord unless Landlord has given such deposit to any such
entity.
34. QUIET POSSESSION AND OTHER COVENANTS
Landlord covenants that if and so long as Tenant pays the rent and
additional rent reserved by this Lease and performs and observes all of the
covenants, conditions and rules and regulations hereof, Tenant shall quietly
enjoy the Premises, subject, however, to the terms of this Lease. Tenant
expressly agrees for himself, his executors, administrators, personal
representatives, successors and assigns that the covenant of quiet enjoyment
(express or implied) and all other covenants in this Lease on the part of
Landlord to be performed shall be binding upon Landlord only as long as Landlord
remains the owner of the Building of which the Premises form a part.
35. TENANT'S SHARE OF OPERATING EXPENSES
Commencing with the Commencement Date, Tenant shall pay its
proportionate share of Operating Expenses (CAM-Common Area Maintenance) in
accordance with the following:
A. For the purposes of this Paragraph 35:
i. "Operating Expenses" shall mean any or all expenses incurred by
Landlord in connection with the operation of the Building and the Land (being
the real property on which the Building and appurtenant facilities are situate),
including all expenses incurred as a result of the Landlord's compliance with
any of its obligations hereunder. Operating Expenses shall include, by way of
example but not be limited to: (a) the cost of all charges for water and sewer
service and all other utilities, including electricity, together with any taxes
thereon; (b) the cost of charges for rent, casualty, war risk (if obtainable
from the United States Government) and liability and flood insurance; (c) window
cleaning, janitorial service, and service contracts with independent
contractors; (d) taxes and special and extraordinary governmental assessments
against the Building and the land; (e) Tenant will also pay as an operating
expense "Tenant's Proportional Shares of the Cost of all common area expenses of
the Building and Land. "Common Area Expense of the Building and Land" means the
total cost and expense incurred in operating and maintaining the common
facilities, hereinafter defined, actually used or available for use by the
Tenant and the employees, agents, servants, customers and other invitees of the
Tenant, excluding only items of expense commonly known and designated as
"carrying charges", but specifically including, without limitation, real estate
taxes, personal property taxes and special assessments, management fees,
gardening and landscaping, the costs of public liability and property damage
insurance, repairs,
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repaving, adding or replacing light poles, line painting, lighting, sanitary
control, trash, rubbish, garbage and other refuse removal, depreciation of
machinery and equipment used in such maintenance the cost of personnel to
implement such services, to direct parking, and to police the common facilities.
"Common Facilities" means all areas, space, equipment and special
services now or hereafter provided by the Landlord in the exercise of its sole
discretion for the common or joint use of and benefit of the occupants of the
Building, their employees, agents, servants, customers and other invitees,
including without limitation, parking areas, access roads, driveways, elevators,
landscape areas, truck serviceways, pedestrian walks, courts, stairs, lobbies,
hallways, ramps and sidewalks, washrooms and parcel pick-up stations.
Operating Expenses shall not include (1) expenses for repairs or other
work occasioned by fire or other casualty; (2) leasing commissions; (3) interest
or amortization payments on any mortgage or mortgages and rental under any
ground or underlying leases; (4) wages, salaries or other compensation paid to
any employee of Landlord not engaged in the operation of the Building, or to any
executive employee of Landlord not engaged in the management of the Building;
(5) any expenses for work performed under a work letter or similar agreement
(whether oral or written) either relating to the Premises or to other tenants'
Premises; (6) repairs, replacements and other expenditures which are properly
characterized as capital expenditures; (7) repairs and rebuilding necessitated
by condemnation; (8) advertising and promotion expenses; (9) all legal and
registration fee, costs and disbursements; and (10) expenses of redecorating and
renovating space for new tenants.
ii. Operational year shall mean in the first instance that period of
time commencing with the Commencement Date and ending at midnight, December 31,
1999 and thereafter shall mean each successive twelve (12) month period
commencing January 1 and ending at midnight on the last day of the next
succeeding December. The last Operational Year shall mean that period of time
commencing January 1, 2004 and ending at midnight on the last day of the Lease
term. Landlord reserves the right to change Operational Year to any other
consecutive twelve (12) month period.
iii. "Tenant's Proportionate Share of the Operating Expenses" shall
mean a fraction of which the numerator is the gross leasable area of the
Premises and the denominator of which is the gross leasable area for offices
within the Building which the parties hereby agree for all purposes to be 1.99%.
iv. "Tenant's Estimated Share of Operating Expense" shall mean the
actual amount of Operating Expenses for the Prior Operational Year multiplied by
the Tenant's Proportionate Share of Operating Expense (except for the First
Year, it shall mean the amount projected by Landlord for such Operational Years
multiplied by Tenant's Proportionate Share of Operating Expense). For the first
and last Operational Year Landlord shall pro-rate Tenant's Estimated Share of
Operating Expenses based on the number of months in the first or last
Operational Year.
v. "Tenant's Share of Operating Expenses" for any operational year
shall mean the Operating Expenses actually incurred in such Operational Year
multiplied by Tenant's Proportionate Share of Operating Expenses.
B. After the expiration of any Operational Year, Landlord shall furnish
to Tenant a written detailed statement of the Operating Expenses incurred for
such Operational Year. Such statement shall set forth Tenant's Share of
Operating Expenses for such Operational Year.
C. Commencing with the first Operational Year and each year thereafter,
the Tenant shall pay to Landlord as additional rent Tenant's Estimated Share of
Operating Expenses. Tenant's Estimated Share of Operating Expenses shall be
divided by twelve (12) and paid monthly in advance by Tenant to Landlord as
additional rent. If the statement furnished by Landlord to Tenant, pursuant to
Section B of this Paragraph 35 at the end of the then Operational Year shall
indicate that Tenant's Estimated Share of Operating Expenses exceeded Tenant's
Share of Operating Expenses, Landlord shall credit the amount of such excess
against the subsequent payment of rent due hereunder; if such statement
furnished by Landlord to Tenant hereunder shall indicate that the Tenant's Share
of Operating Expenses exceeded Tenant's Estimated Share of Operating Expense for
the then
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Operational Year, Tenant shall forthwith pay the amount of such excess to
Landlord immediately. In the event the actual Operating Expenses during any
month in any Operational Year exceeds Landlord's projection for such month, and
it becomes apparent to Landlord that Tenant's monthly payments for Operating
Expenses will not pay Tenant's Share of Operating Expenses for such Operational
Year, Landlord may give written notice to Tenant of any such expected deficiency
and in such notice may increase the monthly payments being made by Tenant to
Landlord hereby to the extent of such expected deficiency.
D. The estimated CAM at the commencement of the lease is One Thousand
Two Hundred Forty Three and 11/100 Dollars ($1,243.11) per month plus sales tax.
36. COMMON FACILITIES
So long as this Lease is in good standing Tenant and Tenant's
employees, agents, servants, customers and invitees shall have a nonexclusive
right to use the Common Facilities (as defined in Paragraph 35 hereof) in common
with the other occupants of the Building, employees, agents, servants,
customers, other invitees and designees of Landlord, subject to the Rules and
Regulations promulgated by landlord from time to time.
37. BROKER
Tenant covenants, warrants and represents that no broker was
instrumental in consummating this Lease, other than Woods Management Corporation
of Florida whose commission will be paid by Landlord, and that no conversions or
negotiations were had with any other Broker concerning the renting of the
Demised Premises. Tenant agrees to hold Landlord harmless from and against, and
agrees to defend at its own expense and pay any and all claims for a brokerage
commission by Tenant with any other brokers.
38. TRANSFER BY LANDLORD
In the event that the interest or estate of Landlord in the Land or
Building shall terminate by operation of law or by bona fide sale or by
execution or foreclosure sale, or for any other reason, then and in any such
event Landlord shall be released and relieved from all liability and
responsibility as to obligations to be performed by Landlord hereunder or
otherwise. In such event Landlord's successor, by acceptance of rent from Tenant
hereunder, shall become liable and responsible to Tenant in respect to all such
obligations of Landlord under this Lease.
39. TIME
The parties hereto agree that time is of the essence of this Lease and
applies to all terms and conditions contained herein.
40. COPIES OF LEASE
This Lease may be executed by the parties hereto in one or more
counterparts each of which shall be an original and all of which constitute one
and the same agreement. Copies of this Lease or any amendment hereto certified
by the parties to be true and correct shall be satisfactory evidence thereof for
all purposes.
41. SUCCESSORS
The terms and conditions of this Lease shall inure to the benefit of
and be binding upon any successor hereunder, as well as upon the personal
representatives, heirs, assigns (where permitted) and all other successors in
interest of the parties.
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42. CONSTRUCTION, APPLICABLE LAW
The words "Landlord" and "Tenant" as used herein shall include the
plural as well as the singular. Words used in masculine gender include the
feminine and neuter. If there be more than one Landlord or Tenant, the
obligations imposed hereunder upon the Landlord or Tenant shall be joint or
several. The section headings or titles in this Lease are not a part hereof and
shall have no effect upon the construction or interpretation of any part hereof.
This Lease shall be construed and enforced under the laws of the State of
Florida. Should any provisions of this Lease be illegal or unenforceable under
such laws, it or they shall be considered severable and this Lease and its
conditions shall remain in force and be binding upon the parties hereto just as
though the illegal or unenforceable provisions had never been included herein.
43. ENTIRE AGREEMENT
This Lease contains the entire agreement between the parties hereto and
all previous negotiations leading thereto, and it may be modified only by an
agreement in writing signed and sealed by Landlord and Tenant. No surrender of
the Leased Premises, or of the remainder of the terms of this Lease, shall be
valid unless accepted by Landlord in writing. Tenant acknowledges and agrees
that Tenant has not relied upon any statement, representation, prior written or
prior or contemporaneous oral promises, agreements or warranties except such as
are expressed herein.
44. TYPEWRITTEN AND HANDWRITTEN PROVISIONS
To the extent that any portions of the handwritten provisions, or
amendments to this Lease conflict with the typewritten provisions, then in all
events, the handwritten provisions shall prevail.
45. TENDER AND DELIVERY OF LEASE INSTRUMENT
Submission of this instrument for examination does not constitute an
offer, right of first refusal, reservation of or option for the Leased Premises
or any other space or premises in, on or about the Building. This instrument
becomes effective as a Lease upon execution and delivery by both Landlord and
Tenant.
46. OPTION
Provided this Lease is in good standing and Tenant is not in default
hereunder, Landlord hereby gives and grants to Tenant the right, privilege and
option of extending this Lease for one successive term(s) of five (5) years; the
extended term commencing from the date of the expiration of the initial term. In
order to exercise the option herein granted, Tenant must give written notice by
certified mail, return receipt requested or by hand delivery (the date of
receipt or the date of a signed receipt evidencing hand delivery shall be deemed
the date of notice) of Tenant's intention to exercise the option to extend not
less than six (6) months prior to the expiration of then current term. Failure
to give such notice shall make the options to extend null and void. All of the
terms, covenants and conditions of this Lease will apply during the initial and
extended term, including that base rent during the initial and extended term
will be adjusted on the rental adjustment dates as herein provided in Paragraph
2 of this Lease, and rent as adjusted will prevail until next rental adjustment
date.
47. WAIVER OF JURY TRIAL
The parties hereto waive trial by jury in connection with proceedings
or counterclaims brought by either of the parties hereto against each other.
48. CORPORATIONS AS LESSEE
If Lessee is a corporation or a partnership, the person signing this
Lease on behalf of such
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50. TENANT IMPROVEMENTS
Landlord will make tenant improvements in the Premises, subject to the
restrictions indicated in the Building Standards, a copy of which is attached,
for a sum not to exceed $7318.00. Although not included in the Building
Standards, Landlord will pay a sum not to exceed $701.00 toward the installation
of venetian blinds which sum shall be subtracted from the $7318.00 above.
TENANT'S SIGNATURE INDICATES THAT TENANT HAS READ THE ENTIRE AGREEMENT
AND HAS RECEIVED A FILLED IN COPY OF THIS AGREEMENT.
IN WITNESS WHEREOF, the respective parties have hereunto set their
hands and seals and/or affixed their corporate seals and caused these presents
to be executed by their duly authorized officers the date first above written.
Signed, sealed and delivered "LANDLORD" - CONCORDE CENTER II
in the presence of: ASSOCIATES
[illegible]
- --------------------------------
[illegible]
- -------------------------------- By: /s/ Harold Schenk
(as to Landlord) -------------------------------
Harold Schenk, V.P.
CONCORDE EQUITIES CORP.,
General Partner
"TENANT" QUEST NET CORP
[illegible]
- --------------------------------
[illegible] By: /s/ Robert Leff
- -------------------------------- -------------------------------
(as to Tenant) Robert Leff, President
(Print and sign name)
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PERSONAL INFORMATION OF PRINCIPAL
(This does not imply any liability on the part of the principal)
Name:__________________________________
Address:_______________________________
_______________________________________
_______________________________________
Home Phone:____________________________
S.S.#:_________________________________
Drivers License #:_____________________
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RULES AND REGULATIONS
1. Tenant, its officers, agents, servants and employees shall not block or
obstruct any of the entries, passages, doors, elevators, elevator doors,
hallways or stairways of Building or place, empty or throw any rubbish, litter,
trash or material of any nature into such areas, or permit such areas to
be used at any time except for ingress and egress of Tenant, its officers,
agents, servants, employees, patrons, licensees, customers, visitors or
invitees.
2. No sign, door plaque, advertisement or notice shall be displayed,
painted of affixed by Tenant, its officers, agents, servants, employees,
patrons, licensees, customers, visitors or invitees in or on any part of the
outside or inside of Building, or Leased Premises without prior written consent
of Landlord and then only of such color, size, character, style and material and
in such places as shall be approved and designated by Landlord. Signs on doors
and entrances to Leased Premises shall be placed thereon by a contractor
designated by Landlord and paid for be Tenant.
3. Landlord will not be responsible for lost or stolen property, equipment,
money or any article taken from Leased Premises, Building or common facilities
regardless of how or when loss occurs.
4. Tenant, its officers, agents, servants and employees shall not install
or operate any refrigerating, heating or air conditioning apparatus or carry on
any mechanical operation or bring into Leased Premises, Building of common
facilities any inflammable fluids or explosives without written permission of
Landlord.
5. Tenant, its officers, agents, servants or employees shall not use Leased
Premises, Building or common facilities for housing, lodging or sleeping
purposes or for the cooking or preparation of food without the prior written
consent of Landlord.
6. No additional locks shall be placed on any door in Building without the
prior written consent of Landlord. Landlord will furnish two keys to each lock
on doors in the Leased Premises and Landlord, upon request of Tenant, shall
provide additional duplicate keys at Tenant's expense. Landlord may at all times
keep a pass key to the Leased Premises. All keys shall be returned to Landlord
promptly upon termination of this Lease.
7. Landlord reserves the right to close Building at 7:00 PM, subject,
however, to Tenant's right to admittance under regulations prescribed by
Landlord, and to require that persons entering the Building identify themselves
and establish their right to enter or leave the Building.
8. All plate and other glass now in Leased Premises or Building which is
broken through cause attributable to Tenant, its officers, agents, servants,
employees, patrons, licensees, customers, visitors or invitees shall be replaced
by and at expense of Tenant under the direction of Landlord.
9. Tenant shall give Landlord prompt notice of all accidents to or defects
in air conditioning equipment, plumbing, electric facilities or any part or
appurtenance of Leased Premises.
10. The plumbing facilities shall not be used for any other purpose than
that for which they are constructed, and no foreign substance of any kind shall
be thrown therein, and the expense of any breakage, stoppage, or damage
resulting from a violation of these provisions shall be borne by Tenant, who
shall, or whose officers, employees, agents, servants, patrons, customers,
licensees, visitors or invitees shall have caused it.
11. All contractors and/or technicians performing work for Tenant within
the Leased Premises or Building shall be referred to Landlord for approval
before performing such work. This shall apply to all work including, but not
limited to, installation of telephones, telegraph equipment, electrical devices
and attachments, and all installation affecting floors, walls, windows, doors,
ceilings, equipment or any other physical feature of the Building or Leased
Premises. None of this work shall be done by Tenant without Landlord's prior
written approval.
12. Glass panel doors that reflect or admit light into the passageways or
into any place in the Building shall not be covered or obstruction by the Tenant
and Tenant shall not permit, erect and/or place drapes, furniture, fixtures,
shelving, display cases or tables, lights or signs and advertising
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devices in front of or in proximity of interior and exterior windows, glass
panels or glass doors providing a view into the interior of the Leased Premises
unless same shall have first been approved in writing by Landlord.
13. No space in the Building shall, without the prior written consent of
Landlord, be used for manufacturing, public sales, or for the storage of
merchandise, or for the sale of merchandise, goods or property of any kind, or
auction.
14. Canvassing, soliciting and peddling in the Building is prohibited and
each Tenant shall cooperate to prevent the same. In this respect, Tenant shall
promptly report such activities to the Building Manager's Office.
15. There shall not be used in any space, or in the public halls of the
Building, either by any Tenant or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and side guards.
16. Neither Tenant nor any officer, agent, employee, servant, patron,
customer, visitor, licensee or invitee of any Tenant shall go upon the roof of
the Building without the written consent of the Landlord.
17. The Landlord's janitors or cleaning personnel shall not be hindered by
Tenant after 5:30 P.M., and such work may be done at any time when the offices
are vacant. The windows, doors and fixtures may be cleaned at any time. Tenant
shall provide adequate waste and rubbish receptacles, cabinets, bookcases, map
cases, etc., necessary to prevent unreasonable hardship to Landlord in
discharging its obligations regarding cleaning service. In this regard, Tenant
shall also empty all glasses, cups and other containers holding any type of
liquid whatsoever.
18. In the event Tenant must dispose of crates, boxes, etc., which will not
fit into office wastepaper baskets, it will be the responsibility of Tenant to
dispose of same. In no event shall Tenant set such items in the public hallways
or other areas of the Building, excepting Tenant's own Premises, for disposal.
19. Tenant will be responsible for any damage to the Leased Premises,
including carpeting and flooring, as a result of: rust or corrosion of file
cabinets; roller chairs; metal objects; or, spills of any type of liquid.
20. If the Premises demised to any Tenant become infested with vermin, such
Tenant, at its sole cost and expense, shall cause its Premises to be
exterminated from time to time, to the satisfaction of Landlord, and shall
employ such exterminators therefore as shall be approved by Landlord.
21. Tenant shall not install any antenna or aerial wires, or radio or
television equipment, or any other type of equipment, inside or outside of the
Building, without Landlord's prior approval in writing, and upon such terms and
conditions as may be specified by Landlord in each and every instance.
22. Landlord shall have the power to prescribe the weight and position of
iron safes and machinery, and they shall in all cases stand on two-inch thick
plank to distribute the weight, and the expense of repairing any damage done to
the Building by installing or removing a safe or machinery, or by the same while
on the Premises, shall be borne by Tenant. Safes and machinery shall not be
moved into or out of the Building except by persons approved of and at times
fixed by the Superintendent. No freight, furniture, packages or bulky matter of
any description will be received in the Building, or carried up or down in the
elevators, except during hours designated by Landlord. Tenant agrees that all
machines or machinery placed in the Premises by Tenant will be erected and
placed so as to prevent and vibration or annoyance to any other of the Tenants
in the Building of which the Premises are a part, and it is agreed that upon
written request of the Landlord, Tenant will, within ten (10) days after the
mailing of such notice, provide approved settings for the absorbing, preventing,
or decreasing of noise from any or all machines or machinery placed in the
Premises.
23. Tenant shall not obtain any towel supply or ice service except from
person designated by Landlord, nor obtain drinking water for delivery on the
Premises from any source not approved by Landlord.
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24. In case Landlord shall, in the exercise of any right herein granted,
store any personal property, belonging to Tenant, Landlord shall have the
further right to dispose Of such property by sale or otherwise upon two weeks'
notice in writing for that purpose. If Landlord shall sell any such property,
Landlord shall be entitled to retain from the proceeds thereof the expenses of
the sale and cost of storage.
26. Any window treatments installed must conform to Concorde Centre
specifications: one inch (1") Levelor mini blind in the color black.
27. Landlord reserves the right to modify the foregoing rules and
regulations or any of them, and to make such other and further rules and
regulations as in its absolute judgement may from time to time be needful for
the reputation, safety, care and cleanliness of the Building, and for the
preservation of good order therein, and any such other and further rules and
regulations shall be binding upon the parties hereto with the same force and
effect as if they had been inserted at the time of the execution hereof.
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Exhibit "A"
Penthouse Floor Plan
Indicating Suite 1008 (Penthouse 8)
in the shaded area
[Floor plan omitted]
<PAGE>
Exhibit "B"
Suite 1008 (Penthouse 8)
2104 Gross Sq. Ft.
1830 Net Sq. Ft.
[Floor plan omitted]
<PAGE>
CONCORDE
CENTER II
STANDARD BUILD-OUT
SHALL BE BASED ON THE FOLLOWING:
ITEM
1. DRYWALL PARTITION WALL
9' high with 1/2" thick walls each side 3 5/8" thick studs. Finished with two
coats of paint and vinyl base. Quantity - 1 Linear foot per each 15 square feet
of floor space.
2. DEMISING PARTITION WALL
12' Floor to Ceiling height with 5/8" type X Drywall each side, fire taped,
finished with two coats of paint and vinyl base. Quantity - as needed.
3. FLOORING ALLOWANCE - $10/sq. yd.
4. INTERIOR DOORS
One 3' x 7' Hollow core pre hung door, Birch, non label per each 250 square feet
of floor space.
5. CEILING
2' x 4' Grid suspended ceiling with 2' x 4' standard lay in tiles.
6. ENTRY DOOR
One 3' x 8' Fire rated, birch, solid core door with steel frame per each 1500
square feet of floor space.
ITEM
7. FIRE PROTECTION SPRINKLER SYSTEM
Quantity - One sprinkler head per 100 square feet of ceiling area.
8. H.V.A.C.
(Air Conditioning) - 3 Ton cooling capacity per each 1000 square feet of floor
space.
9. ELECTRICAL PANELS AND TRANSFORMER
To be located in Tenant's suite. Electric Meter to be located in the common area
electrical closet. ELECTRICAL DUPLEX OUTLETS - 1 each per 40 square feet of
floor space; LIGHTING - 1 (2' x 4') fixture (non-parabolic, fluorescent) per 100
square feet of office floor space.
10. TELEPHONE OUTLET
Quantity - One per 250 square feet of floor area. Stub up and terminate in
ceiling plenum.
11. ARCHITECTURAL DESIGN $.50/sq. ft. ALLOWANCE
Exhibit 10.2
LEASE AGREEMENT
between
CONCORDE CENTRE II ASSOCIATES
LANDLORD
and
QUEST NET CORP.
TENANT
INDEX TO LEASE FOR SUITE 901
Par. Caption Page
1. LEASED PREMISES..........................................................1
2. RENTAL ADJUSTMENT........................................................1
3. USE......................................................................2
4. UNUSUAL EQUIPMENT........................................................3
5. TENANT TO TAKE GOOD CARE OF PREMISES.....................................3
6. COMPLIANCE WITH DIRECTIVES OF AUTHORITIES................................3
7. ALTERATIONS AND IMPROVEMENTS.............................................3
8. INSPECTION, EXAMINATION AND ENTRY........................................4
9. NO LIABILITY.............................................................4
10. DAMAGE BY FIRE OR OTHER CASUALTY.........................................4
11. CONDEMNATION.............................................................5
12. NO ABATEMENT - SERVICES..................................................5
13. ABANDONMENT..............................................................6
14. DEFAULT AND REMEDIES.....................................................6
15. ASSIGNMENT OR SUB-LETTING OF TENANT'S INTEREST...........................8
16. COLLECTION OF RENT FROM OTHERS...........................................9
17. INFORMATION AS TO SUB-TENANTS............................................9
18. RIGHT OF LANDLORD TO USE ENTRANCES, ETC. AND TO CHANGE SAME..............9
19. ATTORNEYS' FEES..........................................................9
20. EXAMINATION OF PREMISES AND NO ORAL REPRESENTATION.......................9
21. SUBORDINATION...........................................................10
22. HOLDING OVER............................................................10
23. CERTIFICATE BY TENANT...................................................10
24. REMEDIES CUMULATIVE.....................................................10
25. NO WAIVER OF PERFORMANCE................................................11
26. AGREEMENT TO INDEMNIFY..................................................11
27. ADDITIONAL RENT.........................................................11
28. NOTICES.................................................................11
29. SURRENDER AT EXPIRATION OF THE TERM.....................................12
30. RULES AND REGULATIONS...................................................12
31. IMPROVEMENTS BY TENANT..................................................12
32. ACCEPTANCE BY TENANT....................................................12
33. SECURITY................................................................13
34. QUIET POSSESSION AND OTHER CONVENANTS...................................13
35. TENANT'S SHARE OF OPERATING EXPENSES....................................13
36. COMMON FACILITIES.......................................................15
37. BROKER..................................................................15
38. TRANSFER BY LANDLORD....................................................15
39. TIME....................................................................15
40. COPIES OF LEASE.........................................................15
41. SUCCESSORS..............................................................15
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42. CONSTRUCTION, APPLICABLE LAW............................................15
43. ENTIRE AGREEMENT........................................................16
44. TYPEWRITTEN AND HANDWRITTEN PROVISIONS..................................16
45. TENDER AND DELIVERY OF LEASE INSTRUMENT.................................16
46. OPTION..................................................................16
47. WAIVER OF JURY TRIAL....................................................16
48. CORPORATIONS AS LESSEE..................................................16
49. UNDERCOVER PARKING......................................................16
SIGNATURE PAGE..........................................................17
PERSONAL INFORMATION....................................................18
RULES AND REGULATIONS...................................................19
EXHIBIT A - FLOOR PLAN INDICATING DEMISING WALLS IN RELATION TO
ENTIRE FLOOR
EXHIBIT B - FLOOR PLAN INDICATING DEMISING WALLS - CLOSE UP
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for any prior year. The increase in Base Rent as herein stated shall be
exclusive of all other monetary obligations of Tenant hereunder.
It is understood that the Index is now being published by the Bureau of
Labor Statistics. Should said Bureau change the manner Of computing the Index,
the Bureau shall be requested to furnish a conversion factor designed to adjust
the new Index to the one previously in use and the adjustments to the new Index
shall be made on the basis of such conversion factor. Should the publication of
the Index be discontinued by said Bureau, then such other Index as may be
published by such Bureau most nearly approaching said discontinued Index shall
be used in making the adjustments herein provided. Should said Bureau
discontinue the publication of any Index herein contemplated, then such Index as
may be published by another United States Governmental Agency as most nearly
approximates the Index first above referred to shall govern and be substituted
as the Index to be used, subject to the application of an appropriate conversion
factor to be furnished by the governmental agency publishing the adopted Index.
If such governmental agency will not furnish such conversion factor, or if there
is not published by any such governmental agency another Index as aforesaid then
the landlord shall establish a new conversion factor or a new Index; provided
however, that in establishing any such conversion factor or Index the Landlord
shall do so reasonably subject to the intents and purposes herein set forth.
B. "Lease year" as used herein, shall mean in the first instance that
period of time commencing with the Commencement date and ending twelve months
thereafter, except if the Commencement Date is other than the 1st day of a
month, then for purposes of this paragraph the Commencement of the "Lease Year"
shall be the 1st day of the month following the Commencement Date and shall mean
each successive twelve (12) month period thereafter or any consecutive twelve
(12) month period which Landlord may select from time to time at Landlord's
election.
C. The term and the Tenant's obligation to pay rent shall commence
("Commencement Date") on the 1st day of January 1999, or on the date the Tenant
takes possession of the Premises with any furniture and personnel, whichever is
earlier.
D. If the Landlord is unable to give possession of the Leased Premises
on the date of commencement of the aforesaid Lease term by reason of holding
over of any prior tenant or tenants, an abatement or diminution of the rent to
be paid hereunder shall be allowed Tenant under such circumstances, but nothing
herein shall operate to extend the term of the Lease beyond the agreed
expiration date, and said abatement in rent shall be the full extent of
Landlord's liability to Tenant for any loss or damage to Tenant on account of
said delay in obtaining possession of the Premises. There shall be no delay in
the commencement of the term of this Lease and/or payment of rent where Tenant
fails to occupy Premises when same are ready for occupancy, or where Tenant or
any agent or employee of Tenant causes a delay in preparing the Leased Premises
for occupancy for any reason whatsoever.
3. USE
Tenant shall use and occupy the Premises only for general office
business use as a telecommunications company and for no other purpose. In the
event the Tenant uses the Premises for purposes not expressly permitted herein,
the Landlord may terminate the Lease, or without notice to Tenant, restrain said
improper use by injunction.
Tenant shall not do or permit anything to be done in or about the
Demised Premises nor bring or keep anything therein which is not within the
permitted use of the Premises which will in any way increase the existing rate
of or affect any fire or other insurance upon the Building or any of its
contents, or cause a cancellation of any insurance policy covering said Building
or any part thereof or any of its contents. Tenant shall not do or permit
anything to be done in or about the Demised Premises which will in any way
obstruct or interfere with the rights of other tenants or occupants of the
Building or injure or annoy them or use or allow the Demised Premises to be used
for any improper, immoral, unlawful or objectionable purposes: nor shall Tenant
cause, maintain or permit any nuisance in or about the Demised Premises. Tenant
shall not commit or allow to be committed any waste in or upon the Demised
Premises. In the event Tenant's permitted use of the Demised Premises increases
the existing rate or affects any fire or other insurance, then and in that event
Tenant agrees to pay said increase.
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By occupying the Demised Premises as a Tenant, or by installing
fixtures, facilities, or equipment, or by performing finishing work, Tenant
shall be deemed to have accepted the same and to have acknowledged that the
Premises are conclusively in the condition required by the Lease. This Lease
does not grant Tenant any right of air and light over and about the Premises or
the Building.
4. UNUSUAL EQUIPMENT
The Tenant will not install or maintain any electrically-operated
equipment or any heavy equipment of any kind including, safes, vaults, etc., or
other machinery, except light office machinery normally used, and equipment
ordinarily used in the telecommunications business without first obtaining the
consent in writing of the Landlord.
5. TENANT TO TAKE GOOD CARE OF PREMISES
Tenant shall keep the Premises in a clean, safe and sanitary condition.
All damage caused by Tenant's negligence, or that of his agents, servants,
employees or visitors, shall be repaired promptly by Tenant at his sole cost and
expense, so that the Premises are in at least as good condition as they were
prior to such damage. In the event that the Tenant fails to comply with the
foregoing provisions, the Landlord shall have the option to enter the Premises
and make all necessary repairs at Tenant's cost and expense, the same to be
considered as additional rent and added to and be payable with the next monthly
installment of rent.
6. COMPLIANCE WITH DIRECTIVES OF AUTHORITIES
Tenant shall promptly execute and comply with all statutes, ordinances,
rules, orders, regulations and requirements of the federal, state, county, and
municipal governments and any of their departments and agencies with
jurisdiction for the Demised Premises, and for the correction, prevention and
abatement of nuisances or other grievances in, upon or connected with said
Premises during the term of this Lease; and shall promptly comply with and
execute any rules, orders and regulations of the Southeastern Underwriters
Association for the prevention of fires, all at Tenant's own cost and expense.
If by reason of any failure of Tenant to comply with the provisions of this
Lease, the rate of fire insurance with extended coverage on the Building or
equipment or other property of Landlord which Landlord may have, but which
Landlord is not required to have, shall be higher than it otherwise would be,
Tenant shall reimburse Landlord, on demand, for that part of the premiums for
fire insurance and extended coverage paid by Landlord because of such failure on
part of Tenant.
7. ALTERATIONS AND IMPROVEMENTS
Tenant shall not cut, drill into, disfigure, deface, or injure any part
of the Premises, nor obstruct or permit any obstruction, alteration, addition,
improvement, decoration or installation in the Premises. All alterations,
additions, improvements, decorations or installations, including but not limited
to partitions, railings, air conditioning ducts or equipment (except movable
furniture and fixtures put in at the expense of Tenant and removable without
defacing or injuring the Building or the Premises), shall become the property of
Landlord at the termination of the term. Landlord, however, reserves the option
to require Tenant, upon demand in writing, to remove all fixtures and additions,
improvements, decorations or installations (including those not removable
without defacing or injuring the Premises) and to restore the Premises to the
same condition as when originally leased to Tenant, reasonable wear and tear
excepted; provided, however, Landlord shall not have the right to require Tenant
to remove any fixtures, additions, improvements, decorations, and/or
installations which are initially installed by and for Tenant in order to
prepare the Premises for occupancy by Tenant in a manner which has been approved
by Landlord. Tenant agrees to restore the Premises immediately and agrees in
case of his failure to do so, that Landlord may do so and collect the cost
thereof from Tenant as hereinafter provided. Tenant will, at Tenant's own
expense, keep the Lease Premises in good repair and tenantable condition during
the Lease term and will replace at its own expense any and all broken glass
caused by Tenant in and about said Leased Premises. Tenant will make no
alterations, additions, signage or improvements in or to the Leased Premises or
the Building without the written consent of Landlord, which shall not be
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unreasonably withheld insofar as non-structural alterations are concerned.
8. INSPECTION, EXAMINATION AND ENTRY
Landlord and Landlord's agents shall have the right to enter the
Premises at all reasonable hours upon reasonable notice to examine the same, and
workmen may enter at any time in the event of emergency and otherwise at
reasonable times when authorized by Landlord or Landlord's agents to make such
repairs, alterations or improvements in the Building as Landlord may in its sole
discretion deem necessary or desirable. If during the last month of the term,
Tenant shall have removed all or substantially all of Tenant's property,
Landlord may immediately enter the Premises and prepare them for any future
Tenant. Furthermore, the Landlord may allow such future Tenant to occupy the
Premises. These acts shall have no effect upon Tenant's obligations under this
Lease and Tenant shall be entitled to no abatement or diminution of rent as a
result thereof, except that in the event such future Tenant makes any payment
for the period up until the expiration of this Lease, Tenant shall be entitled
to an abatement of rent for such period. If Tenant shall not be personally
present to open and permit entry into the Premises, when entry thereto shall be
necessary hereunder, Landlord may forcibly enter same without rendering Landlord
liable to any claim for damages and without affecting the obligation and
covenants of this Lease. Employees of Landlord and Landlord's agents shall be
permitted to enter the Premises by passkey at all reasonable times. During the
last six months of the term of this Lease Agreement, if Tenant has not executed
a renewal of this Lease Agreement, Landlord shall be permitted to enter the
Premises during reasonable hours and with reasonable notice for the purpose of
showing the Premises to prospective tenants.
9. NO LIABILITY
Tenant will not hold Landlord liable for any latent defect in the
Premises or in the Building. Landlord shall not be liable for any failure of
water supply, electric current, heating or air conditioning, elevator service,
or any other service; nor for injury or damage to person or property caused by
fire or theft or by the elements or by other tenants or persons in the Building,
or resulting from the operation of elevators, heating or air conditioning or
lighting apparatus, or from falling plaster, or from steam, gas, electricity,
water, rain, or dampness, which may leak or flow from any part of the Building,
or from the pipes, appliances, or plumbing work of the same, or from any other
place or for damages resulting from the acts or omissions of Tenant, Tenant's
agents, employees, invitees or other occupants of the Building. Nor shall
Landlord be liable for any loss or damage that Tenant may sustain by reason of
the closing or darkening of any of the windows in the Premises through the
erection of or any addition to a new building or otherwise, and the same shall
not constitute a constructive eviction. All goods or property or personal
effects stored or placed by the Tenant in or about the Building shall be at the
sole risk of the Tenant. The foregoing, with regard to liability on the part of
Landlord, shall not be applicable in the event Landlord is found to be negligent
in a court of competent jurisdiction. The foregoing provisions do not relieve
Landlord from its obligation to perform ordinary maintenance and repairs to the
common areas.
10. DAMAGE BY FIRE OR OTHER CASUALTY
If, through no fault or negligence of Tenant, his visitors, agents or
servants, the Premises shall be partially damaged by fire or other casualty, the
damage shall be repaired by Landlord, and the rent, until such repairs are made,
shall be apportioned according to the portion of the Premises which are still
usable. If the damage shall be so extensive as to render the Premises wholly
untenantable, the rent shall cease until such time as the Premises shall become
tenantable. However, if the damage is so extensive that the Premises cannot be
made tenantable within three (3) months from the date of the fire or other
casualty, either party shall have the right to terminate this Lease upon ten
(10) days' written notice to the other. In case the Building (though the
Premises may not be affected) is so injured or destroyed by fire or other
casualty that Landlord shall decide not to rebuild or reconstruct the Building,
the term of this Lease shall cease upon ten (10) days' written notice sent by
Landlord and the rent shall be paid up to the time of such destruction and the
Lease shall thereafter be of no further effect. In the event that any question
shall arise between Landlord and Tenant as to whether or not repairs shall have
been made with reasonable dispatch, due allowance shall be made for any delays
which may arise in connection with the adjustment of the fire insurance loss and
for any delays arising out of what are commonly known as "labor troubles" or
"material troubles" or from any other cause beyond Landlord's control. In any
event Landlord
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shall not be liable to Tenant by reason of fire or other damage to the Building
or the Premises.
11. CONDEMNATION
If the entire Leased Premises shall be taken by any public authority
under the power of eminent domain, then the term of this Lease (or of any option
period exercised hereunder) shall cease as of the date possession shall be taken
by such public authority and the rent shall be paid up to that day with a
proportionate refund by Landlord of any prepaid rent. If any part of the Demised
Premises material to the operations of Tenant shall be taken under eminent
domain, either party to this Lease shall have the right to terminate the Lease
and declare the same null and void by notice in writing delivered to the other
party within ten (10) days after such taking. If neither party elects to
terminate this Lease, Tenant shall continue in possession of the remainder of
the Leased Premises and all of the terms of this Lease shall continue in full
force and effect, except that the rent shall be reduced in proportion to the
extent of the Premises taken. All damages awarded for any taking under the power
of eminent domain, whether for the whole or a part of the Leased Premises, shall
belong to and be the property of the Landlord, whether such damages shall be
awarded as compensation for diminution in value to the leasehold or to the fee
of the Premises; provided, however, that Landlord shall not be entitled to any
award made to Tenant for loss of business, or depreciation to, damage to, or
costs or removal of, or for the value of stock, trade fixtures, furniture, and
other personal property belonging to the Tenant.
12. NO ABATEMENT - SERVICES
No diminution or abatement of rent, or other compensation, shall be
allowed for inconvenience or injury arising from the making of repairs,
alterations or improvements to the Building nor for any space taken to comply
with any law, ordinance or order of government authority except that if Tenant
is prevented from conducting its business or prevented from ingress or egress to
the Premises for any period of time, rent shall be abated for such period unless
reason for lack of ability to conduct Tenant's business or lack of ingress or
egress is caused by an event beyond the control of Landlord, and only if
Landlord does not diligently pursue the repair or replacement of the source of
the problem within a reasonable time. Tenant should carry business interruption
insurance for such an event. Landlord will furnish the following services to
Tenant from Monday through Friday except for Christmas Day, George Washington's
Birthday, Memorial Day, Labor Day, Thanksgiving Day, Fourth of July, Martin
Luther King's Birthday, and New Year's Day, or any subsequent nationally
recognized holiday:
(a) Cleaning services, deemed by Landlord to be normal and usual in a
first-class office building, except that shampooing and replacement of carpet as
required by Tenant shall be at Tenant's own expense.
(b) Heat and air conditioning in the common areas from 8:00 A.M. to
6:00 P.M.
In addition, Landlord will make available automatically operated
elevator service, electrical current for normal office use (separately metered
by and for Tenant and which will be paid for by Tenant and not Landlord), and
water for normal drinking and lavatory in the common areas use at all times and
on all days throughout the year. In the event Premises shares an electric meter
with one or more other premises, Landlord shall pay the cost of electric and
allocate the cost proportionately between or among the tenants based on the
ratio of square footage of each premises to the total square footage of the
combined premises.
Except as expressly provided herein Landlord is not otherwise
responsible for any maintenance to Tenant's Premises and Tenant is solely
responsible for all utilities and the maintenance of Tenant's Premises including
but not limited to electric, plumbing, HVAC and pest control.
Tenant shall maintain a service contract for the HVAC system during the
term of Lease and provide Landlord with copy thereof.
No electric current shall be used except that furnished or approved by
the Landlord, nor shall any electric cable or wire be brought into the Leased
Premises, except upon the written consent and
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approval of the Landlord. Tenant shall use only office machines and equipment
that operate on the Building's standard electric circuits, but which in no event
shall overload the Building's standard electric circuits from which the Tenant
obtains electric current. Any consumption of electric current whether or not it
requires special circuits or equipment (the installation of which shall be at
Tenant's expense after approval in writing by the Landlord) shall be paid for by
the Tenant.
Such services and such other services as Landlord in its sole and
absolute discretion may elect to provide, shall be provided so long as Lessee is
not in default under any of the terms, provisions, covenants and conditions of
this Lease, subject to interruption caused by repairs, renewals, improvements,
changes of service, alterations, strikes, lockouts, labor controversies,
inability to obtain fuel or power, accidents, breakdowns, catastrophes, national
or local emergencies, acts of God and conditions and causes beyond the control
of Landlord, and upon such happening, no claim for damages or abatement of rent
for failure to furnish any such services shall be made by the Tenant or allowed
by the Landlord.
It is understood and agreed between the parties hereto that any charges
against Tenant by Landlord for services or for work done on the Leased Premises
by order of Tenant, or otherwise accruing under this Lease, shall be considered
as additional rent due and shall be included in any lien for rent.
13. ABANDONMENT
In case Tenant shall fail to take possession upon the commencement of
the term, or in case the Premises or any part thereof shall be vacated prior to
the expiration of the term of this Lease, Landlord shall have the right to enter
the Premises without instituting any proceeding, either by force or otherwise,
without being liable for damages therefor, and take possession for its own use
or relet the Premises or any part thereof, for the unexpired portion of the term
or longer and to collect the rent therefor, and to apply the rents so collected
to the payment of rent and all other sums payable to Landlord or do nothing,
accelerate the rent due under the Lease and seek a monetary judgment. Tenant
shall remain responsible to Landlord for any and all deficiency, loss and damage
suffered by Landlord, as provided for herein.
For the purpose of this Section the Premises shall be deemed to have
been abandoned when the rent is delinquent and Tenant shall have vacated the
Premises and been away therefrom for five (5) consecutive days, exclusive of
holidays, irrespective of whether the keys have been delivered to Landlord or
not, and no notice has been given by Tenant to Landlord of its intention not to
occupy the Premises for a specified period of time, and/or furniture and or
equipment has been removed from the Premises in a sufficient quantity so that
any reasonable person would be aware that Tenant was no longer conducting
business in the Premises.
14. DEFAULT AND REMEDIES
All rights and remedies of the Landlord herein enumerated shall be
cumulative, and none shall exclude another or any other right or remedy
provided at law or in equity.
(a) If Tenant or any guarantor of this Lease shall become bankrupt or
insolvent or unable to pay its debts as such become due, or file any debtor
proceedings or if Tenant or any guarantor shall take or have taken against
either party in any court pursuant to any statute either of the United States or
of any State, a petition in bankruptcy or insolvency or for reorganization or
for the appointment of a receiver or trustee of all or a portion of Tenant's
personal property, or if Tenant or any such guarantor makes an assignment for
the benefit or creditors, or petitions for or enters into an arrangement, then
this Lease shall terminate and Landlord, in addition to any other rights or
remedies it may have, shall have the immediate right of reentry and may remove
all persons and property from the Leased Premises and such property may be
removed and stored in a public warehouse or elsewhere at the cost of and for the
account of Tenant, all without service of notice or resort to legal process and
without being deemed guilty of trespass, or becoming liable for any loss or
damage which may be occasioned thereby.
(b) If the Tenant defaults in the payment of rent or in the prompt and
full performance of any
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provisions of this Lease, or if the leasehold interest or the Tenant's business
or fixtures of Tenant are levied upon under execution or attached by process of
law, or if the Tenant makes an assignment for the benefit of creditors, of if a
receiver is appointed for any property of the Tenant, or if the Tenant abandons
the Premises, or if Tenant fails to cure a monetary default within three (3)
days after written notice thereof or fails to cure a non-monetary default within
seven (7) days from written notice thereof, or if said non-monetary default is
of such a nature that same cannot be cured within seven (7) days, Tenant fails
to diligently commence to cure within that time and thereafter continues to
proceed to cure same, then Landlord may forthwith terminate this Lease and the
Tenant's right to possession of the Demised Premises, or terminate only Tenant's
right to possession hereunder.
(c) Upon any termination of this Lease, whether by lapse of time or
otherwise, the Tenant shall surrender possession and vacate the Premises
immediately, and deliver possession thereof to the Landlord, and hereby grants
to the Landlord full and free license to enter into and upon the Premises in
such event with due process of law and to expel or remove the Tenant and any
others who may be occupying or within the Premises and to remove any and all
property therefrom, using such force as may be necessary without being deemed in
any manner guilty of trespass, eviction or forcible entry or detainer, and
without relinquishing the Landlord's rights to rent of any other right given to
Landlord hereunder or by operation of law. The Tenant expressly waives the
service of any demand for the payment of rent or for possession and the service
of any notice of the Landlord's election to terminate this Lease or to reenter
the Premises, except as provided for in subparagraph (b) of this paragraph, and
agrees that the simple breach of any covenants or provisions of this Lease by
the Tenant shall, of itself, without the service of any notice or demand
whatsoever, constitute an unlawful detainer by Tenant of the Premises within the
meaning of the Statutes of the State of Florida.
(d) If the Tenant abandons the Premises or otherwise entitles the
Landlord so to elect, and the Landlord does elect to terminate the Tenant's
right to possession only, without terminating the Lease, the Landlord may, at
the Landlord's option, enter into the Premises, remove the Tenant's signs and
other evidence of tenancy, and to take and hold possession thereof without such
entry and possession terminating the Lease or releasing the Tenant, in whole or
in part, from the Tenant's obligation to pay the rent hereunder for the full
term, and in any such case the Tenant shall pay forthwith to the Landlord a sum
equal to the entire amount of the rent reserved for the remainder of the stated
term plus any other sums due hereunder. Upon and after entry into possession
without termination of the Lease, the Landlord may, but need not, relet the
Premises or any part thereof for the account of the Tenant to any person, firm
or corporation other than the Tenant for such rent, for such time and upon such
terms as the Landlord, in the Landlord's sole discretion, shall determine and
the Landlord shall not be required to accept any tenant offered by the Tenant or
to observe any instructions given by the Tenant about such reletting. In any
such case, the Landlord may make repairs, alterations and additions in or to the
Premises and redecorate the same to the extent deemed by the Landlord necessary
or desirable, and the Tenant shall, upon demand, pay the cost thereof, together
with all of Landlord's expenses of the reletting, including by way of example,
but not by way of limitation, advertising expenses, commissions, broker's fees,
etc. If the consideration collected by the Landlord upon any such reletting for
the Tenant's account is not sufficient to pay monthly the full amount of the
rent reserved in this Lease, together with the costs of repairs, alterations,
additions, redecorating and the Landlord's expenses, the Tenant shall pay to the
Landlord the amount of each monthly deficiency upon demand; and if the
consideration so collected from any such reletting is more than sufficient to
pay the full amount of the rent reserved herein, together with the costs and
expenses of the Landlord, then the Landlord, at the end of the stated term of
the Lease, shall account for the surplus to the Tenant. Landlord shall use
reasonable effort to mitigate Tenant's liability for the payment of rent by
attempting to lease the Premises to another tenant. However such effort shall
not take precedence over the leasing of any other vacant space in the building.
(e) Tenant hereby irrevocably appoints Landlord as agent and
attorney-in-fact of Tenant, to enter upon the Premises in the event of default
by Tenant in the payment of any rent herein reserved, or in the performance of
any term, convenant or condition herein contained to be kept or performed by
Tenant, and to remove any and all furniture and personal property whatsoever
situated upon the Premises. Any and all property which may be removed from the
Premises by the Landlord pursuant to the authority of this Lease or of law, to
which the Tenant is or may be entitled, may be handled, removed or stored by
landlord at the risk, cost and expense of Tenant, and Landlord shall in no event
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be responsible for the value, preservation or safekeeping thereof. Tenant shall
pay to Landlord, upon demand, all expenses incurred in such removal and all
storage charges against such property so long as the same shall be in the
Landlord's possession or under Landlord's control. Landlord may place such
property in storage for the account of, and at the expense of Tenant and if
Tenant fails to pay the cost of storing such property after it has been stored
for a period of fifteen (15) days or more, Landlord may sell any or all of such
property in such manner and at such times and places as Landlord, in its sole
discretion, may deem proper, without notice to or demand upon Tenant for the
payment of any part of such charges or the removal of any such property and
shall apply the proceeds of such sale first to the cost of expenses of such
sale, including reasonable attorneys' fees; second to the payment of the costs
and charges of storing any property; third, to the payment of any other sums of
money which may then or thereafter be due to Landlord from Tenant under any of
the terms hereof, and fourth, the balance, if any, to Tenant. The removal and
storage of Tenant's property as above provided shall not constitute a waiver of
Landlord's lien thereon.
(f) Tenant shall pay upon demand all of Landlord's costs, charges and
expenses, including the fees of counsel, agents and others retained by Landlord,
incurred in enforcing Tenant's obligations hereunder or incurred by Landlord in
any litigation, negotiation or transaction in which Tenant causes Landlord,
without Landlord's fault, to become involved or concerned. Attorneys' fees shall
be awardable for all phases of litigation, trial, as well as appellate. In the
event of litigation, the prevailing party shall be entitled to reimbursement of
reasonable legal expenses and c
(g) To perfect and assist in the implementation of certain of
Landlord's rights in and to the Tenant's personal property, Tenant hereby
pledges and assigns to Landlord and grants unto Landlord a lien upon all
furniture, fixtures, goods and chattels of Tenant which shall or may be brought
or put on the Premises as further security for the faithful performance of the
terms, provisions, conditions and covenants of this Lease. Tenant specifically
agrees that said lien may be enforced by distress, foreclosure or otherwise at
the election of the Landlord.
(h) Notwithstanding any contrary provision of this Lease, Tenant shall
look solely to the interest of Landlord or its successor (as landlord hereunder)
in the real property of which the Leased Premises are a part for the
satisfaction of any judgment or judicial process requiring the payment of money
as a result of any negligence or breach of this Lease by Landlord or such
successor, and no other assets of Landlord or its successor shall be subject to
levy, execution or other enforcement procedure for the satisfaction of Tenant's
remedies in any of such events. Tenant's sole right and remedy in any action or
proceeding concerning Landlord's reasonableness (where the same is required
under this Lease) shall be an action for declaratory judgment and/or specific
performance.
(i) If Tenant shall fail to observe or perform any term or condition on
Tenant's part to be observed or performed under this Lease or in the event of an
emergency then Landlord may immediately, without notice perform the same for the
account of Tenant, and if Landlord shall make any expenditure or incur any
obligation for the payment of money in connection therewith (including
reasonable attorneys' fees in instituting, prosecuting and/or defending any
action or proceeding through appeal), the sums paid or obligations incurred,
with interest as specified in paragraph 1 hereof, and costs shall be deemed to
be additional rent hereunder and shall be paid by Tenant to Landlord within ten
(1O) days after rendition of a bill or statement therefor.
15. ASSIGNMENT OR SUB-LETTING OF TENANT'S INTEREST
The Tenant's interest in this Lease or any security deposited
thereunder shall not be sold, transferred, mortgaged or assigned, nor shall the
Premises, or any part thereof, including desk space, be let or sublet without
the prior written consent of Landlord. Such consent shall not be unreasonably
withheld. Even through Landlord may consent to a sale, transfer, mortgage,
assignment of subletting thereof, the aforesaid restrictions shall remain in
full force and effect, and no further sale, transfer, mortgage, assignment or
subletting shall be made without Landlord's consent in writing. In the event
Tenant desires to assign this Lease or sublet substantially the entire Demised
Premises to any party, Tenant shall give Landlord written notice thereof and
Landlord shall have a period of fifteen (15) business days after the receipt of
such written notice within which to elect to
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terminate this Lease. In the event Landlord elects to terminate this Lease, then
Landlord will return to Tenant any prepaid rentals or security deposits held
hereunder. In the event Landlord does not elect to terminate this Lease, then
Landlord agrees that it will not unreasonably withhold its consent to the
requested transfer or subletting. No such assignment or subletting shall relieve
Tenant of its obligations hereunder. The placing of a plaque sign adjacent to
the entry of the Premises or a directory strip on the directory board by the
Lessor with a name other than the name of the Lessee, as indicated herein, shall
not constitute a consent of assignment on the part of the Lessor.
16. COLLECTION OF RENT FROM OTHERS
If the Tenant's interest in this Lease be assigned, or if the Premises
or any part thereof be sublet, Landlord may, after default by Tenant, collect
rent from the assignee or sub-tenant and apply the net amount collected to the
rent due from Tenant. No such collection shall be deemed a waiver of the
covenant herein against sale, transfer, mortgage, assignment and subletting or a
release of Tenant from the performance of the covenants herein contained. In the
event of such default, Tenant hereby assigns the rent due from the sub-tenant or
assignee to Landlord, and hereby authorizes such sub-tenant or assignee to pay
the rent directly to Landlord.
17. INFORMATION AS TO SUB-TENANTS
If the Premises shall be sublet in whole or in part by Tenant, Tenant
will, on demand of Landlord, furnish and supply in writing, within three (3)
business days after such demand, any and all information with regard to said
sub-tenants which Landlord may request. Nothing herein contained shall be
construed to be a consent to any sub-letting or a waiver of the covenant against
sub-letting contained therein.
18. RIGHT OF LANDLORD TO USE ENTRANCES, ETC. AND TO CHANGE SAME
For the purpose of making repairs or alterations in any portion of the
Building of which the Premises form a part, Landlord may use one or more of the
street entrances, halls, passageways and elevators of the said Building,
provided, however, that there be no unnecessary obstruction of the right of
entry to the Premises while the same are occupied. Landlord may at any time
change the name or number of the Building, remodel or alter the same, or the
location of any entrance thereto, or any other portion thereof not occupied by
Tenant, and the same shall not constitute a constructive or actual, total or
partial eviction.
19. ATTORNEYS' FEES
If Tenant shall at any time be in default hereunder, and if Landlord
shall, in connection with such default, retain its attorneys to institute any
action and/or render other professional services, then Tenant will reimburse
Landlord for the expense of attorneys' fees and disbursements thereby incurred
by the Landlord. The amount of such expenses shall be collected as additional
rent. In the event of litigation between the parties, the prevailing party shall
be entitled to reimbursement of reasonable legal fees and costs.
20. EXAMINATION OF PREMISES AND NO ORAL REPRESENTATION
The taking of possession of the Premises by Tenant shall be conclusive
evidence that the Premises were in good and satisfactory condition at the time
such possession was taken. No representations, except those contained herein,
have been made on the part of Landlord with respect to this undertaking, whether
relating to the repair, condition or otherwise of the Premises or the Building.
Tenant will make no claim on account of any representation whatsoever, whether
made by any renting agent, broker, offices or other representative of Landlord
or which may be contained in any circular, prospectus or advertisement relating
to the Premises, or otherwise, unless the same is specifically set forth in this
Lease.
21. SUBORDINATION
Tenant agrees that its rights hereunder are subordinate to the lien of
any mortgage, ground lease, or any other method of financing or refinancing now
or hereafter placed against the land
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and/or the Demised Premises and/or any/or all of the Building now built or
hereafter to be built on the land by Landlord and to any and all advances made
or to be made thereunder and to the interest thereon and to all renewals,
replacements, modifications, consolidations and extensions thereof. This
paragraph shall be self-operative and no further instrument of subordination
shall be required. Tenant further agrees that it will enter into and execute all
documents which any such mortgagee or any ground lessor may reasonably request
Tenant to enter into and execute, including a subordination agreement within
seven (7) days of written request therefor from Landlord or Landlord's agent.
Tenant agrees that it will send copies of all notices to Landlord, to Landlord's
mortgagees or ground lessors, provided that Tenant has been furnished with the
name and address of such mortgagees or ground lessors, and further provided that
Landlord or Landlord's mortgagee or ground lessor has requested Tenant to send
copies of such notices. Tenant agrees that Tenant will attorn to any mortgage or
ground lessor or purchaser at a foreclosure sale, if requested so to do. Tenant
hereby appoints Landlord and Landlord's successor(s) an interest as Tenant's
Attorney-in-Fact to execute any and all documents necessary to effectuate all of
the provisions of this paragraph. If a mortgagee of Landlord shall request
reasonable modifications to this Lease, Tenant agrees that, within five (5) days
after request by the mortgagee, Tenant shall execute, acknowledge, and deliver
to the mortgagee an agreement, in form and substance satisfactory to the
mortgagee, evidencing such modifications, provided that such modifications do
not increase Tenant's obligations under this Lease or materially adversely
affect (a) the leasehold interest created by this Lease, or (b) Tenant's use and
occupancy of the Leased Premises.
22. HOLDING OVER
If the Tenant retains possession of the Premises or any part thereof
after the termination of the term of any extension thereof, by lapse of time or
otherwise, the Tenant shall pay the Landlord rent at double the rate payable for
the month immediately preceding said holdover, for the time the Tenant thus
remains in possession. The provisions of this paragraph do not waive the
Landlord's rights of reentry or any other right hereunder. Unless Landlord
serves written notice to Tenant to vacate the Premises, without a written
agreement to extend the term of the Lease, any retention of the Premises by
Tenant after the termination of this Lease or any extension thereof shall be
considered a tenancy-at-will on a month to month basis, in which case either
party can terminate the tenancy by giving the other party fifteen (15) days
notice in writing, prior to the last day of given month, of its intention to
terminate. For example, a notice given on June 15 would terminate the tenancy on
June 30. However a notice give on June 16 would terminate the tenancy on July
31. All notices must be in accordance with the notice provisions of paragraph
28.
23. CERTIFICATE BY TENANT
Tenant shall deliver to Landlord or to its mortgagees, auditors, or
prospective purchaser, or to the owner of the fee, within Ten (10) days, when
requested by Landlord a certificate to the effect that this Lease is in full
force and effect and that Landlord is not in default herein or stating
specifically any exceptions thereto. Failure to give such a certificate within
ten (10) days after written request shall be conclusive evidence that Lease is
in full force and effect and Landlord is not in default and Tenant shall be
estopped from asserting any defaults known to him at that time.
24. REMEDIES CUMULATIVE
The various rights, remedies, powers and elections of Landlord
reserved, expressed or contained in this Lease, are cumulative and no one of
them shall be deemed to be exclusive to the others or of such other rights
remedies, powers, options or elections as are now, or may hereafter be,
conferred upon Landlord by law.
25. NO WAIVER OF PERFORMANCE
No waiver of Landlord of any provision hereof shall be deemed to have
been made unless such waiver be in writing signed by Landlord. The failure of
Landlord to insist upon the strict performance of any of the convenants or
conditions of this Lease, or to exercise any option herein conferred, shall not
be construed as waiving or relinquishing for the future of any such convenants,
conditions or options but the same shall continue and remain in full force and
effect. No act of Landlord or its agent during the term hereof shall be deemed
an acceptance or a surrender of the
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Premises unless made in writing and personally subscribed by Landlord. The
delivery of the keys to the Premises by Tenant to Landlord or its agents shall
not be deemed a surrender and acceptance thereof. No payment by Tenant of a
lesser amount than the monthly rent herein stipulated shall be deemed to be
other than on account of the stipulated rent.
26. AGREEMENT TO INDEMNIFY
Tenant shall indemnify and save Landlord harmless, and does agree to
indemnify and save Landlord harmless, of and from and pay all fines, claims,
demands, and causes of action of every nature whatsoever arising or growing out
of any manner connected with the occupation or use of the Premises and Building,
and every part thereof, by Tenant and the employees, agents, servants, guests
and invitees of Tenant, including without limiting the generality of the
foregoing, any claims, demands and causes of action for personal injury and/or
property damage, and said indemnification shall extend to any fines, claims,
demands and causes of action of every nature whatsoever which may be made upon,
sustained or incurred by Landlord by reason of any breach, violation or
nonperformance of any term, covenant, or condition hereof on the part of Tenant,
or by reason of any act or omission on the part of Tenant and the employees,
agents, servants, guests and invitees of Tenant except in the case of sole
negligence on the part of Landlord without negligence on the part of Tenant. In
any such event, contributory negligence on the part of the Landlord shall not in
any way affect Tenant's obligation under this indemnification except as it
relates to the percentage of liability. Tenant agrees that this indemnification
shall further extend to all costs incurred by Landlord, including reasonable
attorneys' fees.
Tenant agrees that, at all times during the term (as well as prior and
subsequent thereto if Tenant or its agents shall then use or occupy any portion
of the Leased Premises), it shall keep in force, in a responsible insurance
company licensed to do business in the State of Florida, comprehensive general
liability and property damage liability insurance in a single limit of not less
than $1,000,000.00 covering death or injury to any person(s) as well as property
damage. Such policy shall (a) include landlord, its managing agent (if any), and
such other parties as Landlord may designate as parties insured; (b) be
considered primary insurance; (c) include by endorsement an agreement insuring
Tenant's indemnity and hold harmless obligations under Paragraph 26; and (d)
provide that it may not be cancelled or changed without at least thirty (30)
days prior written notice from the carrier to each party insured thereunder.
Upon Landlord's request from time to time, Tenant shall furnish Landlord with
either the original policy, or at Tenant's option, a certificate of the
insurance so carried by Tenant.
In case Landlord shall be made a party to any litigation commenced
against Tenant, then Tenant shall protect and hold Landlord harmless and shall
pay all costs, expenses and reasonable attorneys' fees incurred or paid by
Landlord in connection with such litigation.
27. ADDITIONAL RENT
If Landlord shall make any expenditures, for which Tenant is liable
under this Lease, or if Tenant shall fail to make any payment due Landlord under
this Lease, the amount thereof shall at Landlord's option be deemed "additional
rent" and shall be due with the next succeeding installment of rent. For the
non-payment of and "additional rent" Landlord shall have the same remedies and
rights that Landlord has for the non-payment of the Base Rent.
28. NOTICES
All notices shall be in writing. Any notice by Landlord to Tenant shall
be deemed to be duly given if either delivered personally to Tenant or sent by
registered or certified mail, or by such other means permitted by law addressed
to Tenant at the Building in which the Premises are situated or until
commencement of the term of this Lease being 2740 E. Oakland Park Boulevard,
Suite 206/B, Ft. Lauderdale, FL 33306. Any notice by Tenant to Landlord shall be
deemed duly given if sent by registered or certified mail, addressed to Landlord
c/o Woods Management, 2740 W. 5th Avenue, Hialeah, Florida 33010 (or at such
other address as may hereafter be designated by Landlord), and also to the agent
of Landlord, if any, charged with the renting and management of the Building.
29. SURRENDER AT EXPIRATION OF THE TERM
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Tenant agrees at the expiration of the term to quit and surrender the
Premises and everything belonging to or connected therewith in as good state and
condition as reasonable wear and use thereof will permit, and to remove all
signs, advertisements and rubbish from the said Premises; and Tenant hereby
expressly authorizes Landlord, as the agent of Tenant, to remove such rubbish
and make such changes and repairs as may be necessary to restore the Premises to
such condition at the expense of Tenant. Landlord shall have the right to show
the Premises to prospective tenants during the sixty (60) day period prior to
the expiration of the term of the Lease, with reasonable notice and during
reasonable hours if Tenant has not executed a renewal agreement or exercised its
option, if any, to renew the Lease.
30. RULES AND REGULATIONS
Tenant agrees to observe and comply with and Tenant agrees that his
agents, servants, employees and all persons visiting in the Premises will serve
and comply with the rules and regulations annexed hereto and such other and
further rules and regulations as Landlord may from time to time deem needful and
prescribe for the reputation, safety, care and cleanliness of the Building and
the preservation of good order therein and the comfort, quiet, and convenience
of other occupants of the Building, which rules and regulations shall be deemed
terms and conditions of this Lease. Landlord shall not be liable to Tenant for
the violation of any of the said rules and regulations by any other Tenant or
person. Landlord agrees that the rules and regulations will be reasonable and
will not interfere with Tenant's quiet enjoyment of the Demised Premises.
31. IMPROVEMENTS BY TENANT
In making any alterations, decorations, additions, installations or
improvements to or in the Premises, Tenant shall employ only such labor as shall
have been approved by Landlord, which approval shall not be unreasonably
withheld, and all such work done by or for Tenant shall be performed and
installed in such a manner that the same shall comply with all provisions of
law, ordinances and all rules and regulations of any and all agencies and
authorities having jurisdiction over the Premises, and at such time and in such
manner as not to interfere with the progress of any work being performed by or
on account of Landlord. Notwithstanding the foregoing it is understood that
Tenant is not obliged by Landlord to make any improvement or improvements. In no
event shall Tenant have the right to create or permit there to be established,
any lien or encumbrances of any nature against the Premises or the Building for
said improvement or improvements by Tenant, and Tenant shall fully and
promptly pay the cost of any improvement or improvements made or contracted by
Tenant. Any mechanic's lien filed against the Premises or the Building for work
claimed to have been done, or materials claimed to have been furnished to
Tenant, shall be duly discharged by Tenant within Ten (10) days after the filing
of the lien. Any person, firm or entity performing labor or furnishing materials
or fixtures for Tenant shall look solely to the Tenant for repayment and shall
have no right to subject the Landlord's interest in the Building, or in the real
property on which the Building and common areas are situate to any Claim arising
for work done or performed for and on behalf of Tenant.
32. ACCEPTANCE BY TENANT
Tenant has inspected the Demised Premises and accepts the same in its
present condition as shell space and Tenant is responsible for construction and
payments for all improvements thereto as approved by Landlord. It is understood
that any dimensions or sizes on either working or renting plans are merely
approximations and whether the plans are attached or are made part of this Lease
or not, Landlord shall not be liable, and this Lease shall not be void or
voidable because of exigencies arising during construction, alterations or
preparation for Tenant's occupancy which result in changes not indicated on such
plans.
33. SECURITY
Tenant has deposited with Landlord the sum of Three Thousand One
Hundred Four and 00/100 Dollars ($3,104.00) as security for the faithful
performance and observance by Tenant of the terms, provisions and conditions of
this Lease. Tenant shall not use or offset the security deposit against any
rental charges or other obligations to be paid by Tenant hereunder. It is agreed
that, in the event Tenant defaults in respect of any of the terms, provisions
and conditions of this Lease,
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including, but not limited to, the payment of rent and additional rent, Landlord
may use, apply or retain the whole or any part of the security deposited to the
extent required for the payment of any rent and additional rent or any other sum
as to which Tenant is in default or for any sum which Landlord may expend or may
be required to expend by reason of Tenant's default in respect of any of the
terms, covenants and conditions of this Lease, including, but not limited to,
any damages or deficiency in the reletting of the Premises, whether such damage
accrued before or after summary proceedings or other reentry by Landlord. In the
event the Tenant shall fully and faithfully comply with all of the terms,
provisions, covenants and conditions of this Lease, the security shall be
returned to Tenant after the date fixed at the end of the Lease, and after
delivery of entire possession of the Premises to Landlord. In the event of a
sale of the Land and Building, of which the Premises form a part, Landlord shall
thereupon be released by Tenant from all liability for the return of such
security and Tenant agrees to look solely to the new Landlord for the return of
said security. It is agreed that the provisions hereof shall apply to every
transfer or assignment made of the security to a new Landlord. Tenant further
covenants that it will not assign or encumber the monies deposited herein as
security and that neither Landlord nor its assigns shall be bound by any such
assignment or encumbrance. Landlord shall not be required to keep the security
in a segregated account and the security may be entitled to any interest on the
security. The mortgagee holding a mortgage encumbering the Building shall not be
responsible to Tenant for the security deposit in the event such mortgagee
becomes the owner of the Building through foreclosure or by reason of a deed in
lieu thereof. Tenant agrees not to look to any mortgagee or purchaser at any
foreclosure sale or grantee in a deed given in lieu of foreclosure for the
return of any security deposit given to Landlord unless Landlord has given such
deposit to any such entity.
34. QUIET POSSESSION AND OTHER COVENANTS
Landlord covenants that if and so long as Tenant pays the rent and
additional rent reserved by this Lease and performs and observes all of the
covenants, conditions and rules and regulations hereof, Tenant shall quietly
enjoy the Premises, subject, however, to the terms of this Lease. Tenant
expressly agrees for himself, his executors, administrators, personal
representatives, successors and assigns that the covenant of quiet enjoyment
(express or implied) and all other covenants in this Lease on the part of
Landlord to be performed shall be binding upon Landlord only as long as Landlord
remains the owner of the Building of which the Premises form a part.
35. TENANT'S SHARE OF OPERATING EXPENSES
Commencing with the Commencement Date, Tenant shall pay its
Proportionate share of Operating Expenses (CAM-Common Area Maintenance) in
accordance with the following:
A. For the purposes of this Paragraph 35:
i. "Operating Expenses" shall mean any or all expenses incurred by
Landlord in connection with the operation of the Building and the Land (being
the real property on which the Building and appurtenant facilities are situate),
including all expenses incurred as a result of the Landlord's compliance with
any of its obligations hereunder. Operating Expenses shall include, by way of
example but not be limited to: (a) the cost of all charges for water and sewer
service and all other utilities, including electricity, together with any taxes
thereon; (b) the cost of all charges for rent, casualty, war risk (if obtainable
from the United States Government) and liability and flood insurance; (c) window
cleaning, janitorial service, and service contracts with independent
contractors; (d) taxes and special and extraordinary governmental assessments
against the Building and the land; (e) Tenant will also pay as an operating
expense "Tenant's Proportional Share of the Cost of all common area expenses of
the Building and Land. "Common Area Expense of the Building and Land" means the
total cost and expense incurred in operating and maintaining the common
facilities, hereinafter defined, actually used or available for use by the
Tenant and the employees, agents, servants, customers and other invitees of the
Tenant, excluding only items of expense commonly known and designated as
"carrying charges", but specifically including, without limitation, real estate
taxes, personal property taxes and special assessments, management fees,
gardening and landscaping, the costs of public liability and property damage
insurance, repairs, repaving, adding or replacing light poles, line painting,
lighting, sanitary control, trash, rubbish, garbage and other refuse removal,
depreciation of machinery and equipment used in such
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maintenance the cost of personnel to implement such services, to direct parking,
and to police the common facilities.
"Common Facilities" means all areas, space, equipment and special
services now or hereafter provided by the Landlord in the exercise of its sole
discretion for the common or joint use of and benefit of the occupants of the
Building, their employees, agents, servants, customers and other invitees,
including without limitation, parking areas, access roads, driveways, elevators,
landscape areas, truck serviceways, pedestrian walks, courts, stairs, lobbies,
hallways, ramps and sidewalks, washrooms and parcel pick-up stations.
Operating Expenses shall not include (1) expenses for repairs or other
work occasioned by fire or other casualty; (2) leasing commissions; (3) interest
or amortization payments on any mortgage or mortgages and rental under any
ground or underlying leases; (4) wages, salaries or other compensation paid to
any employee of Landlord not engaged in the operation of the Building, or to any
executive employee of Landlord not engaged in the management of the Building;
(5) any expenses for work performed under a work letter or similar agreement
(whether oral or written) either relating to the Premises or to other tenants'
Premises; (6) repairs, replacements and other expenditures which are properly
characterized as capital expenditures; (7) repairs and rebuilding necessitated
by condemnation; (8) advertising and promotion expenses; (9) all legal and
registration fee, costs and disbursements; and (10) expenses of redecorating
and renovating space for new tenants.
ii. Operational year shall mean in the first instance that period of
time commencing with the Commencement Date and ending at midnight, December 31,
1999 and thereafter shall mean each successive twelve (12) month period
commencing January 1 and ending at midnight on the last day of the next
succeeding December. The last Operational Year shall mean that period of time
commencing January 1, 2004 and ending at midnight on the last day of the Lease
term. Landlord reserves the right to change Operational Year to any other
consecutive twelve (12) month period.
iii. "Tenant's Proportionate Share of the Operating Expenses" shall
mean a fraction of which the numerator is the gross leasable area of the
Premises and the denominator of which is the gross leasable area for offices
within the Building which the parties hereby agree for all purposes to be .69%.
iv. "Tenant's Estimated Share of Operating Expense" shall mean the
actual amount of Operating Expenses for the prior Operational Year multiplied by
the Tenant's Proportionate Share of Operating Expense (except for the First
Year, it shall mean the amount projected by Landlord for such Operational Years
multiplied by Tenant's Proportionate Share of Operating Expense). For the first
and last Operational Year Landlord shall pro-rate Tenant's Estimated Share of
Operating Expenses based on the number of months in the first or last
Operational Year.
v. "Tenant's Share of Operating Expenses" for any operational year
shall mean the Operating Expenses actually incurred in such Operational Year
multiplied by Tenant's Proportionate Share of Operating Expenses.
B. After the expiration of any Operational Year, Landlord shall furnish
to Tenant a written detailed statement of the Operating Expenses incurred for
such Operational Year. Such statement shall set forth Tenant's Share of
Operating Expenses for such Operational Year.
C. Commencing with the first Operational Year and each year thereafter,
the Tenant shall pay to Landlord as additional rent Tenant's Estimated Share of
Operating Expenses. Tenant's Estimated Shares of Operating Expenses shall be
divided by twelve (12) and paid monthly in advance by Tenant to Landlord as
additional rent. If the statement furnished by Landlord to Tenant, pursuant to
Section B of this Paragraph 35 at the end of the then Operational Year shall
indicate that Tenant's Estimated Share of Operating Expenses exceeded Tenant's
Share of Operating Expenses, Landlord shall credit the amount of such excess
against the subsequent payment of rent due hereunder; if such statement
furnished by Landlord to Tenant hereunder shall indicate that the Tenant's Share
of Operating Expenses exceeded Tenant's Estimated Share of Operating Expense for
the then Operational Year, Tenant shall forthwith pay the amount of such excess
to Landlord immediately. In the event the actual Operating Expenses during any
month in any Operational Year exceeds
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Landlord's projection for such month, and it becomes apparent to Landlord that
Tenant's monthly payments for Operating Expenses will not pay Tenant's Share of
Operating Expenses for such Operational Year, Landlord may give written notice
to Tenant of any such expected deficiency and in such notice may increase the
monthly payments being made by Tenant to Landlord hereby to the extent of such
expected deficiency.
D. The estimated CAM at the commencement of the lease is Four Hundred
Twenty Eight and 95/100 Dollars ($428.95) per month plus sales tax.
36. COMMON FACILITIES
So long as this Lease is in good standing Tenant and Tenant's
employees, agents, servants, customers and invitees shall have a nonexclusive
right to use the Common Facilities (as defined in Paragraph 35 hereof) in common
with the other occupants of the Building, employees, agents, servants,
customers, other invitees and designees of Landlord, subject to the Rules and
Regulations promulgated by landlord from time to time.
37. BROKER
Tenant covenants, warrants and represents that no broker was
instrumental in consummating this Lease, other than Woods Management Corporation
of Florida whose commission will be paid by Landlord, and that no conversions or
negotiations were had with any other Broker concerning the renting of the
Demised Premises. Tenant agrees to hold Landlord harmless from and against, and
agrees to defend at its own expense any pay any and all claims for a brokerage
commission by Tenant with any other brokers.
38. TRANSFER BY LANDLORD
In the event that the interest or estate of Landlord in the Land or
Building shall terminate by operation of law or by bona fide sale or by
execution or foreclosure sale, or for any other reason, then and in any such
event Landlord shall be released and relieved from all liability and
responsibility as to obligations to be performed by Landlord hereunder or
otherwise. In such event Landlord's successor, by acceptance of rent from Tenant
hereunder, shall become liable and responsible to Tenant in respect to all such
obligations of Landlord under this Lease.
39. TIME
The parties hereto agree that time is of the essence of this Lease and
applies to all terms and conditions contained herein.
40. COPIES OF LEASE
This Lease may be executed by the parties hereto in one or more
counterparts each of which shall be an original and all of which constitute one
and the same agreement. Copies of this Lease or any amendment hereto certified
by the parties to be true and correct shall be satisfactory evidence thereof for
all purposes.
41. SUCCESSORS
The terms and conditions of this Lease shall inure to the benefit of
and be binding upon any successor hereunder, as well as upon the personal
representatives, heirs, assigns (where permitted) and all other successors in
interest of the parties.
42. CONSTRUCTION, APPLICABLE LAW
The words "Landlord" and "Tenant" as used herein shall include the
plural as well as the singular. Words used in masculine gender include the
feminine and neuter. If there be more than one Landlord or Tenant, the
obligations imposed hereunder upon the Landlord or Tenant shall be joint or
several. The section headings or titles in this Lease are not a part hereof and
shall have no effect upon the construction or interpretation of any part hereof.
This Lease shall be construed and
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enforced under the laws of the State of Florida. Should any provisions of this
Lease be illegal or unenforceable under such laws, it or they shall be
considered severable and this Lease and its conditions shall remain in force and
be binding upon the parties hereto just as though the illegal or unenforceable
provisions had never been included herein.
43. ENTIRE AGREEMENT
This Lease contains the entire agreement between the parties hereto and
all previous negotiations leading thereto, and it may be modified only by an
agreement in writing signed and sealed by Landlord and Tenant. No surrender of
the Leased Premises, or of the remainder of the terms of this Lease, shall be
valid unless accepted by Landlord in writing. Tenant acknowledges and agrees
that Tenant has not relied upon any statement, representation, prior written or
prior or contemporaneous oral promises, agreements or warranties except such as
are expressed herein.
44. TYPEWRITTEN AND HANDWRITTEN PROVISIONS
To the extent that any portions of the handwritten provisions, or
amendments to this Lease conflict with the typewritten provisions, then in all
events, the handwritten provisions shall prevail.
45. TENDER AND DELIVERY OF LEASE INSTRUMENT
Submission of this instrument for examination does not constitute an
offer, right of first refusal, reservation of or option for the Leased Premises
or any other space or premises in, on or about the Building. This instrument
becomes effective as a Lease upon execution and delivery by both Landlord and
Tenant.
46. OPTION
Provided this Lease is in good standing and Tenant is not in default
hereunder, Landlord hereby gives and grants to Tenant the right, privilege and
option of extending this Lease for one successive term(s) of five (5) years; the
extended term commencing from the date of the expiration of the initial term. In
order to exercise the option herein granted, Tenant must give written notice by
certified mail, return receipt requested or by hand delivery (the date of
receipt or the date of a signed receipt evidencing hand delivery shall be deemed
the date of notice) of Tenant's intention to exercise the option to extend not
less than six (6) months prior to the expiration of then current term. Failure
to give such notice shall make the options to extend null and void. All of the
terms, covenants and conditions of this Lease will apply during the initial and
extended term, including that base rent during the initial and extended term
will be adjusted on the rental adjustment dates as herein provided in Paragraph
2 of this Lease, and rent as adjusted will prevail until next rental adjustment
date.
47. WAIVER OF JURY TRIAL
The parties hereto waive trial by jury in connection with proceedings
or counterclaims brought by either of the parties hereto against each other.
48. CORPORATIONS AS LESSEE
If Lessee is a corporation or a partnership, the person signing this
Lease on behalf of such corporation or partnership hereby warrrants that he has
full authority from such corporation or partnership to sign this Lease and
obligate the corporation or partnership hereunder.
49. UNDERCOVER PARKING
Upon execution, Tenant has reserved 0 undercover parking spaces and
will pay $0.00 per month as additional rent for the privilege of the use
thereof, during the term of this Lease.
50. Landlord hereby authorizes Tenant to install antennas on the roof for
wireless transmission, provided that plans for such installation are submitted
to Landlord for approval and provided that such installation may only be
attached to the walls of the elevator machine room or inside of the
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parapet walls. Upon termination of the Lease, Tenant shall remove all antennas
and patch and paint any holes in the walls to match the surrounding surface. No
penetration of the roof membrane shall be permitted.. Any wires must be through
existing roof vents.
51. Landlord hereby authorizes Tenant to make tenant improvements
including the blocking of the windows from within the Premises, subject to
Landlord's approval of plans and specifications and provided that all work is
done by licensed contractors after obtaining a permit from the City of Aventura
Building Department.
52. Landlord hereby authorizes Tenant to install a generator at a location
to be determined.
53. Landlord hereby authorizes Tenant to install fiber optic connections
into the Premises for Internet usage subject to approval of plans and
specifications by Landlord.
54. Landlord hereby grants Tenant access to the Premises from the date of
the execution of this Lease by both parties until the commencement date of the
Lease for the purpose of making the tenant improvements indicated in paragraph
51 and for the purpose of installing its equipment. In the event Tenant's
equipment emits objectionable noise which disturbs other tenants in the
building, Tenant shall take all measures necessary to prevent such noise. In
the event Tenant is unable to reduce the noise level, and Landlord is receiving
complaints from other Tenants in the Building, Tenant shall relocate such
equipment to another location to be determined by Landlord and Tenant, or if
this is unfeasible, Landlord may elect to terminate the Lease.
TENANT'S SIGNATURE INDICATES THAT TENANT HAS READ THE ENTIRE AGREEMENT
AND HAS RECEIVED A FILLED IN COPY OF THIS AGREEMENT.
IN WITNESS WHEREOF, the respective parties have hereunto set their
hands and seals and/or affixed their corporate seals and caused these presents
to be executed by their duly authorized officers the date first above written.
Signed, sealed and delivered "LANDLORD" - CONCORDE CENTRE II
in the presence of: ASSOCIATES
- --------------------------------
- -------------------------------- By:
(as to Landlord) -------------------------------
Harold Schenk, V.P.
CONCORDE EQUITIES CORP.,
General Partner
"TENANT" QUEST NET CORP.
/s/ George Elia
- --------------------------------
/s/ George Elia By: /s/ Robert Leff, President
- -------------------------------- -------------------------------
(as to Tenant) Robert Leff, President
(Print and sign name)
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PERSONAL INFORMATION OF PRINCIPAL
(This does not imply any liability on the part of the principal)
Name:__________________________________
Address:_______________________________
_______________________________________
_______________________________________
Home Phone:____________________________
S.S.#:________________________________
Drivers License #:_____________________
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RULES AND REGULATIONS
1. Tenant, its officers, agents, servants and employees shall not block or
obstruct any of the entries, passages, doors, elevators, elevator doors,
hallways or stairways of Building or place, empty or throw any rubbish, litter,
trash or material of any nature into such areas, or permit such areas to
be used at any time except for ingress and egress of Tenant, its officers,
agents, servants, employees, patrons, licensees, customers, visitors or
invitees.
2. No sign, door plaque, advertisement or notice shall be displayed,
painted of affixed by Tenant, its officers, agents, servants, employees,
patrons, licensees, customers, visitors or invitees in or on any part of the
outside or inside of Building, or Leased Premises without prior written consent
of Landlord and then only of such color, size, character, style and material and
in such places as shall be approved and designated by Landlord. Signs on doors
and entrances to Leased Premises shall be placed thereon by a contractor
designated by Landlord and paid for be Tenant.
3. Landlord will not be responsible for lost or stolen property, equipment,
money or any article taken from Leased Premises, Building or common facilities
regardless of how or when loss occurs.
4. Tenant, its officers, agents, servants and employees shall not install
or operate any refrigerating, heating or air conditioning apparatus or carry on
any mechanical operation or bring into Leased Premises, Building of common
facilities any inflammable fluids or explosives without written permission of
Landlord.
5. Tenant, its officers, agents, servants or employees shall not use Leased
Premises, Building or common facilities for housing, lodging or sleeping
purposes or for the cooking or preparation of food without the prior written
consent of Landlord.
6. No additional locks shall be placed on any door in Building without the
prior written consent of Landlord. Landlord will furnish two keys to each lock
on doors in the Leased Premises and Landlord, upon request of Tenant, shall
provide additional duplicate keys at Tenant's expense. Landlord may at all times
keep a pass key to the Leased Premises. All keys shall be returned to Landlord
promptly upon termination of this Lease.
7. Landlord reserves the right to close Building at 7:00 PM, subject,
however, to Tenant's right to admittance under regulations prescribed by
Landlord, and to require that persons entering the Building identify themselves
and establish their right to enter or leave the Building.
8. All plate and other glass now in Leased Premises or Building which is
broken through cause attributable to Tenant, its officers, agents, servants,
employees, patrons, licensees, customers, visitors or invitees shall be replaced
by and at expense of Tenant under the direction of Landlord.
9. Tenant shall give Landlord prompt notice of all accidents to or defects
in air conditioning equipment, plumbing, electric facilities or any part or
appurtenance of Leased Premises.
10. The plumbing facilities shall not be used for any other purpose than
that for which they are constructed, and no foreign substance of any kind shall
be thrown therein, and the expense of any breakage, stoppage, or damage
resulting from a violation of these provisions shall be borne by Tenant, who
shall, or whose officers, employees, agents, servants, patrons, customers,
licensees, visitors or invitees shall have caused it.
11. All contractors and/or technicians performing work for Tenant within the
Leased Premises or Building shall be referred to Landlord for approval before
performing such work. This shall apply to all work including, but not limited
to, installation of telephones, telegraph equipment, electrical devices and
attachments, and all installation affecting floors, walls, windows, doors,
ceilings, equipment or any other physical feature of the Building or Leased
Premises. None of this work shall be done by Tenant without Landlord's prior
written approval.
12. Glass panel doors that reflect or admit light into the passageways or
into any place in the Building shall not be covered or obstruction by the Tenant
and Tenant shall not permit, erect and/or place drapes, furniture, fixtures,
shelving, display cases or tables, lights or signs and advertising
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devices in front of or in proximity of interior and exterior windows, glass
panels or glass doors providing a view into the interior of the Leased Premises
unless same shall have first been approved in writing by Landlord.
13. No space in the Building shall, without the prior written consent of
Landlord, be used for manufacturing, public sales, or for the storage of
merchandise, or for the sale of merchandise, goods or property of any kind, or
auction.
14. Canvassing, soliciting and peddling in the Building is prohibited and
each Tenant shall cooperate to prevent the same. In this respect, Tenant shall
promptly report such activities to the Building Manager's Office.
15. There shall not be used in any space, or in the public halls of the
Building, either by any Tenant or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and side guards.
16. Neither Tenant nor any officer, agent, employee, servant, patron,
customer, visitor, licensee or invitee of any Tenant shall go upon the roof of
the Building without the written consent of the Landlord.
17. The Landlord's janitors or cleaning personnel shall not be hindered by
Tenant after 5:30 P.M., and such work may be done at any time when the offices
are vacant. The windows, doors and fixtures may be cleaned at any time. Tenant
shall provide adequate waste and rubbish receptacles, cabinets, bookcases, map
cases, etc., necessary to prevent unreasonable hardship to Landlord in
discharging its obligations regarding cleaning service. In this regard, Tenant
shall also empty all glasses, cups and other containers holding any type of
liquid whatsoever.
18. In the event Tenant must dispose of crates, boxes, etc., which will not
fit into office wastepaper baskets, it will be the responsibility of Tenant to
dispose of same. In no event shall Tenant set such items in the public hallways
or other areas of the Building, excepting Tenant's own Premises, for disposal.
19. Tenant will be responsible for any damage to the Leased Premises,
including carpeting and flooring, as a result of: rust or corrosion of file
cabinets; roller chairs; metal objects; or, spills of any type of liquid.
20. If the Premises demised to any Tenant become infested with vermin, such
Tenant, at its sole cost and expense, shall cause its Premises to be
exterminated from time to time, to the satisfaction of Landlord, and shall
employ such exterminators therefore as shall be approved by Landlord.
21. Tenant shall not install any antenna or aerial wires, or radio or
television equipment, or any other type of equipment, inside or outside of the
Building, without Landlord's prior approval in writing, and upon such terms and
conditions as may be specified by Landlord in each and every instance.
22. Landlord shall have the power to prescribe the weight and position of
iron safes and machinery, and they shall in all cases stand on two-inch thick
plank to distribute the weight, and the expense of repairing any damage done to
the Building by installing or removing a safe or machinery, or by the same while
on the Premises, shall be borne by Tenant. Safes and machinery shall not be
moved into or out of the Building except by persons approved of and at times
fixed by the Superintendent. No freight, furniture, packages or bulky matter of
any description will be received in the Building, or carried up or down in the
elevators, except during hours designated by Landlord. Tenant agrees that all
machines or machinery placed in the Premises by Tenant will be erected and
placed so as to prevent and vibration or annoyance to any other of the Tenants
in the Building of which the Premises are a part, and it is agreed that upon
written request of the Landlord, Tenant will, within ten (10) days after the
mailing of such notice, provide approved settings for the absorbing, preventing,
or decreasing of noise from any or all machines or machinery placed in the
Premises.
23. Tenant shall not obtain any towel supply or ice service except from
person designated by Landlord, nor obtain drinking water for delivery on the
Premises from any source not approved by Landlord.
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24. In case Landlord shall, in the exercise of any right herein granted,
store any personal property, belonging to Tenant, Landlord shall have the
further right to dispose of such property by sale or otherwise upon two weeks'
notice in writing for that purpose. If Landlord shall sell any such property,
Landlord shall be entitled to retain from the proceeds thereof the expenses of
the sale and cost of storage.
26. Any window treatments installed must conform to Concorde Centre
specifications: one inch (1") Levelor mini blind in the color black.
27. Landlord reserves the right to modify the foregoing rules and
regulations or any of them, and to make such other and further rules and
regulations as in its absolute judgement may from time to time be needful for
the reputation, safety, care and cleanliness of the Building, and for the
preservation of good order therein, and any such other and further rules and
regulations shall be binding upon the parties hereto with the same force and
effect as if they had been inserted at the time of the execution hereof.
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Exhibit "A"
[Floor Plan Omitted]
<PAGE>
Exhibit "B"
[Site Plan Omitted]
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT dated March 20, 1998, between PACT Communication
Group Inc., (the "Company"), and Camilo Pereira (the "Executive").
WHEREAS, the Company desires to employ Executive and to ensure the
continued availability to the Company of the Executive's services, and the
Executive is willing to accept such employment and render such services, all
upon and subject to the terms and conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth in this Agreement, and intending to be legally bound, the Company and
the Executive agree as follows:
1. Term of Employment.
(a) Term. The Company hereby employs the Executive, and the Executive
hereby accepts employment with the Company, for a period commencing on the
date of this Agreement and ending five years from the date hereof (the
"Term").
(b) Continuing Effect. Notwithstanding any termination of this
Agreement at the end of the Term or otherwise, the provisions of Sections 6
and 7 shall remain in full force and effect and the provisions of Sections
6(b) and 7 shall be binding upon the legal representatives, successors and
assigns of the Executive, except as otherwise provided in Section 5(d).
2. Duties.
(a) General Duties. The executive shall serve as chief executive
officer of the Company, with duties and responsibilities that are customary
for such executives. The Executive will also perform services for such
subsidiaries as may be necessary. The Executive will use his best efforts
to performs his duties and discharge his responsibilities pursuant to this
Agreement competently, carefully and faithfully.
(b) Devotion of Time. The Executive will devote all of his time,
attention and energies during normal business hours (exclusive of periods
of sickness and disability and of such normal holiday and vacation periods
as have been established by the Company) to the affairs of the Company. The
Executive will not enter the employ of or serve as a consultant to, or in
any way perform any services with or without compensation to, any other
persons, business or organization without the prior consent of the board of
directors of the Company; provided, that the Executive shall be permitted
to devote a limited amount of his time, without compensation, to charitable
or similar organizations.
3. Compensation and Expenses.
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(a) Salary. For the services of the Executive to be rendered under
this Agreement, the Company will pay the Executive an annual base salary of
$125,000 during the Term, subject to annual cost of living increases and
increase based on Executive's performance. The annual salary under this
Section 3(a) will be reduced, however, to the extent that the Executive
elects to defer any portion thereof under the terms of any deferred
compensation or savings plan maintained by the Company. The Company will
pay the Executive his annual salary in equal installments no less
frequently than monthly.
(b) Bonus. The Company shall determine its adjusted net profits after
excluding all compensation paid to executive officers of the Company and
corporate overhead attributable to the Company as a whole. For each fiscal
year, the Company shall take 5% of its adjusted net profits, including the
net profits of each subsidiary and pay said sum to the Executive no later
than 30 days after the company's fiscal year.
(c) Expenses. In addition to any compensation received pursuant to
Section 3(a), (b) and (c), the Company will reimburse or advance funds to
the Executive for all reasonable travel, entertainment and miscellaneous
expenses incurred in connection with the performance of his duties under
this Agreement, provided that the Executive properly accounts for such
expenses to the Company in accordance with the Company's practices. Such
reimbursement or advances will be made in accordance with policies and
procedures of the Company in effect from time to time relating to
reimbursement of or advances to executive officers, the Company will
provide up to $ 1000.00 per month as automobile expenses.
4. Benefits.
(a) Vacation. For each 12-month period during the Term, the Executive
will be entitled to three weeks of vacation without loss of compensation or
other benefits to which he is entitled under this Agreement, to be taken at
such times as the Executive may select and the affairs of the Company may
permit.
(b) Employee Benefit Programs. Without limiting the compensation to
which the Executive is entitled pursuant to the provisions of Section 3 or
this Section 4, during the Term, the Executive will be entitled to
participate in any pension, insurance or other employee benefit plan that
is maintained at that time by the Company for its executive officers,
including programs of life and medical insurance and reimbursement of
membership fees in civic, social and professional organizations.
(c) Options. The Executive shall receive incentive options to purchase
up to an aggregate of 300,000 shares of the Company's common stock on each
anniversary date of his employment, the terms and conditions of which shall
be determined by the Company's Board of Directors, provided however that
Options granted to Executive shall be on terms equal to or more favorable
than those granted or to be granted to other officers and directors of the
Company.
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The Company will not grant to officers and directors options whose terms
are more favorable than those granted to Executive's without the prior
written consent of the Executive.
5. Termination.
(a) Termination Without Cause. The Company may terminate the
Executive's employment pursuant to the terms of this Agreement without
cause. Such termination will become effective upon the date specified in
such notice, provided that such date is at least 60 days from the date of
such notice. Upon any such termination without cause:
(i) for a period of 36 months following such termination or for a
period equal to the remaining term of this Agreement, whichever is
greater, the Company will continue to pay the Executive his annual
salary than in effect at the time of his termination (pursuant to
Section 3(a), his Bonus pursuant to Section 3 (c) ;and Executive shall
be entitled to his receive Stock Options pursuant to Section 3 (c);
and
(ii) the Company will continue to maintain for such period, for
the benefit of the Executive, the employee benefit programs referred
to in Section 4(b) that were in effect on the date of such
termination.
In the event Executive's employment is terminated without cause, the
Company shall release the Executive from the provisions of Section 6.
(b) Termination for Cause. The Company may terminate the Executive's
employment pursuant to the terms of this Agreement at any time for cause by
given written notice of termination. Such termination will become effective
upon the giving of such notice, except that termination based upon clause
(v) below shall not become effective unless the Executive shall fail to
correct such breach within 60 days of receipt of written notice thereof
provided pursuant to the preceding sentence. Upon any such termination for
cause, the Executive shall have no right to compensation, commission,
options, bonus or reimbursement under Section 3, or to participate in any
employee benefit programs under Section 4 for any period subsequent to the
effective date of termination. For purposes of this Section 5(b), "cause"
shall mean: (i) the Executive is convicted of a felony which is related to
the Executive's employment or the business of the Company; (ii) the
Executive, in carrying out his duties hereunder, has been found in a civil
action to have committed willful gross negligence or willful gross
misconduct resulting, in either case, in material harm to the Company;
(iii) the Executive misappropriates Company funds or otherwise defrauds the
Company; (iv) the Executive materially breaches any provision of Section 6
or Section 7; and (v) the Executive materially fails to perform his duties
under Section 2 resulting in material harm to the Company.
(c) Death or Disability. Excepting for the conditions and obligations
contained in this Section 5(c), this Agreement and the obligations of the
Company hereunder will terminate upon the death or disability of the
Executive.
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For purposes of this Section 5(c), "disability" shall mean that for a
period of six months in any 12-month period the Executive is incapable of
substantially fulfilling the duties set forth in Section 2 because of
physical, mental or emotional incapacity resulting from injury, sickness or
disease.
Upon termination by death or disability, the Company will pay the Executive
or his legal representative, as the case may be: (i) his annual salary at such
time pursuant to Section 3(a) through the date of such termination of
employment; paid upon the same terms and conditions as if this Agreement were in
fully force and effect (ii) the Executive's Bonus as set forth in Section 3(b)
of this Agreement; and his Stock Options as set forth in Section 3(c). paid upon
the same terms and conditions as if this Agreement were in fully force and
effect. Should the termination by death or disability occur prior to the
anniversary date on which Executive would be entitled to receive his Stock
Options, than Executive shall be entitled to received a portion of such stock
options equal to the total number of options to which the Executive would have
been entitled to receive on his anniversary date divided by 365, times the
number of days elapsed from his prior anniversary date to his termination.
(d) Special Termination. In the event that (i) the Executive, with or
without change in title or formal corporate action, shall no longer
exercise all of the duties and responsibilities and shall no longer possess
substantially all the authority set forth in Section 2; or (ii) the Company
materially breaches this Agreement or the performance of its duties and
obligations hereunder; or (iii) any entity or person not now an executive
officer of the Company becomes either individually or as part of a group
the beneficial owner of 20% or more of the Company's common stock, the
Executive, by written notice to the Company, may elect to deem the
Executive's employment hereunder to have been terminated by the Company
without cause under Section 5(a) hereof, in which event the Executive shall
be entitled to the compensation payable pursuant to clauses (i)and (ii) of
Section 5(a). In such event, the Company shall release the Executive from
the provisions of Section 6.
(e) Voluntary Termination. The Executive, on 30 days prior written
notice to the Company, may terminate his employment voluntarily (i) at any time
following termination of the initial Term or (ii) at any time following the
death or disabling illness of a member of the Executive's immediate family or
similar personal, non-business related occurrence as a result of which the
Executive concludes he must devote a substantial amount of his time and energies
to his family or other personal matter and not to his business activities so as
to preclude his fulfilling his obligations under this Agreement. Upon any such
termination, the Company will pay the Executive (i) his annual salary at such
time pursuant to Section 3(a) through the date of such termination of
employment; (ii) any bonus which would have been payable through the date of
termination pursuant to Section 3(b); and (iii) than Executive shall be entitled
to received a portion of such stock options equal to the total number of options
to which the Executive would have been entitled to receive on his anniversary
date divided by 365, times the number of days elapsed from his prior anniversary
date to termination.
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(f) Continuing Effect. Notwithstanding any termination of the
Executive's employment as provided in this Section 5 or otherwise, the
provisions of Sections 6 and 7 shall remain in full force and effect,
except as otherwise provided in Sections 5(a) and (d).
6. Non-competition Agreement.
(a) Competition with the Company. Until termination of his employment
and for a period of 12 months commencing on the date of termination, the
Executive, directly or indirectly, in association with or as a stockholder,
director, officer, consultant, employee, partner, joint venturer, member or
otherwise of or through any person, firm, corporation, partnership,
association or other entity, will not compete with the Company or any of
its affiliates in the offer, sale or marketing of products or services that
are competitive with the products or services offered by the Company,
within any metropolitan area in the United States or elsewhere in which the
Company is then engaged in the offer and sale of competitive products or
services; provided, however, the foregoing shall not prevent Executive from
accepting employment with an enterprise engaged in two or more lines of
business, one of which is the same or similar to the Company's business
(the "Prohibited Business") if Executive's employment is totally unrelated
to the Prohibited Business; provided, further, the foregoing shall not
prohibit Executive from owning up to 5% of the securities of any
publicly-traded enterprise provided Executive is not an employee, director,
officer, consultant to such enterprise or otherwise reimbursed for services
rendered to such enterprise.
(b) Solicitation of Customers. During the periods in which the
provisions of Section 6(a) shall be in effect, the Executive, directly or
indirectly, will not seek Prohibited Business from any Customer (as defined
below) on behalf of any enterprise or business other than the Company,
refer Prohibited Business from any Customer to any enterprise or business
other than the Company or receive commissions based on sales or otherwise
relating to the Prohibited Business from any Customer, or any enterprise or
business other than the Company. For purposes of this Section 6(b), the
term "Customer" means any person, firm, corporation, partnership,
association or other entity to which the Company or any of its affiliates
sold or provided goods or services during the 24-month period prior to the
time at which any determination is required to be made as to whether any
such person, firm, corporation, partnership, association or other entity is
a Customer.
(c) No Payment. The Executive acknowledges and agrees that no separate
or additional payment will be required to be made to him in consideration
of his undertakings in this Section 6.
7. Nondisclosure of Confidential Information. The Executive acknowledges
that during his employment he will learn and will have access to confidential
information regarding the Company and its affiliates, including without
limitation (i) confidential or secret plans, programs, documents, agreements or
other material relating to the business, services or activities of the Company
and its affiliates and (ii)
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trade secrets, market reports, customer investigations, customer lists and other
similar information that is proprietary information of the Company or its
affiliates (collectively referred to as "confidential information"). The
Executive acknowledges that such confidential information as is acquired and
used by the Company or its affiliates is a special, valuable and unique asset.
All records, files, materials and confidential information obtained by the
Executive in the course of his employment with the Company are confidential and
proprietary and shall remain the exclusive property of the Company or its
affiliates, as the case may be. The Executive will not, except in connection
with and as required by his performance of his duties under this Agreement, for
any reason use for his own benefit or the benefit of any person or entity with
which he may be associated or disclose any such confidential information to any
person, firm, corporation, association or other entity for any reason or purpose
whatsoever without the prior written consent of the board of directors of the
Company, unless such confidential information previously shall have become
public knowledge through no action by or omission of the Executive.
8. Equitable Relief.
(a) The Company and the Executive recognize that the services to be
rendered under this Agreement by the Executive are special, unique and of
extraordinary character, and that in the event of the breach by the
Executive of the terms and conditions of this Agreement or if the
Executive, without the prior consent of the board of directors of the
Company, shall leave his employment for any reason and take any action in
violation of Section 6 or Section 7, the Company will be entitled to
institute and prosecute proceedings in any court of competent jurisdiction
referred to in Section 8(b) below, to enjoin the Executive from breaching
the provisions of Section 6 or Section 7. In such action, the Company will
not be required to plead or prove irreparable harm or lack of an adequate
remedy at law. Nothing contained in this Section 8 shall be construed to
prevent the Company from seeking such other remedy in arbitration in case
of any breach of this Agreement by the Executive, as the Company may elect.
(b) Any proceeding or action must be commenced in the federal courts,
or in the absence of federal jurisdiction in state court, in either case in
Florida where the Company maintains its principal offices. The Executive
and the Company irrevocably and unconditionally submit to the jurisdiction
of such courts and agree to take any and all future action necessary to
submit to the jurisdiction of such courts. The Executive and the Company
irrevocably waive any objection that they now have or hereafter irrevocably
waive any objection that they now have or hereafter may have to the laying
of venue of any suit, action or proceeding brought in any such court and
further irrevocably waive any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient
forum. Final judgment against the Executive or the Company in any such suit
shall be conclusive and may be enforced in other jurisdictions by suit on
the judgment, a certified or true copy or which shall be conclusive
evidence of the fact and the amount of any liability of the Executive or
the Company therein described, or by appropriate proceedings under any
applicable treaty or otherwise.
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9. Assignability. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the Company. The Executive's obligations hereunder may not be
assigned or alienated and any attempt to do so by the Executive will be void.
10. Severability.
(a) The Executive expressly agrees that the character, duration and
geographical scope of the provisions set forth in this Agreement are
reasonable in light of the circumstances as they exist on the date hereof.
Should a decision, however, be made at a later date by a court of competent
jurisdiction that the character, duration or geographical scope of such
provisions is unreasonable, then it is the intention and the agreement of
the Executive and the Company that this Agreement shall be construed by the
court in such a manner as to impose only those restrictions on the
Executive's conduct that are reasonable in the light of the circumstances
and as are necessary to assure to the Company the benefits of this
Agreement. If, in any judicial proceeding, a court shall refuse to enforce
all of the separate covenants deemed included herein because taken together
they are more extensive than necessary to assure to the Company the
intended benefits of this Agreement, it is expressly understood and agreed
by the parties hereto that the provisions of this Agreement that, if
eliminated, would permit the remaining separate provisions to be enforced
in such proceeding shall be deemed eliminated, for the purposes of such
proceeding, from this Agreement.
(b) If any provision of this Agreement otherwise is deemed to be
invalid or unenforceable or is prohibited by the laws of the state or
jurisdiction where it is to be performed, this Agreement shall be
considered divisible as to such provision and such provision shall be
inoperative in such state or jurisdiction and shall not be part of the
consideration moving from either of the parties to the other. The remaining
provisions of this Agreement shall be valid and binding and of like effect
as though such provision were not included.
11. Notices and Addresses. All notices, offers, acceptance and any other
acts under this Agreement (except payment) shall be in writing, and shall be
sufficiently given if delivered to the addressees in person, by Federal Express
or similar receipted delivery, by facsimile delivery or, if mailed, postage
prepaid, by certified mail, return receipt requested, as follows:
To the Company: PACT Communication Group, Inc.
2740 East Oakland Park Blvd
Suite 206/8
Ft. Lauderdale, Florida 33306
To the Executive: Camilo Pereira
1955 NE 208 Terrace
Miami, Florida 33179
7
<PAGE>
or to such other address as either of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
12. Counterpart. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature.
13. Arbitration. Except for any controversy or claim seeking equitable
relief as provided in Section 8 of this Agreement, any controversy or claim
arising out of or relating to this Agreement, or to the interpretation, breach
or enforcement thereof or any other dispute between the parties, shall be
submitted to one arbitrator and settled by arbitration in West Palm Beach,
Florida, in accordance with the rules, then obtaining, of the American
Arbitration Association. Any reward made by such arbitrator shall be final,
binding and conclusive on all parties hereto for all purposes, and judgment may
be entered thereon in any court having jurisdiction thereof.
14. Attorney's Fees. In the event that there is any controversy or claim
arising out of or relating to this Agreement, or to the interpretation, breach
or enforcement thereof, and any action or proceeding is commenced to enforce the
provisions of this Agreement, the prevailing party shall be entitled to a
reasonable attorney's fee, costs and expenses.
15. Governing Law. This Agreement and any dispute, disagreement, or issue
of construction or interpretation arising hereunder whether relating to its
execution, its validity, the obligations provided therein or performance shall
be governed or interpreted according to the internal laws of the State of
Florida without regard to choice of law considerations.
16. Entire Agreements. This Agreement constitutes the entire Agreement
between the parties and supersedes all prior oral and written agreements between
the parties hereto with respect to the subject matter hereof. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, except by a statement in writing signed by the party or
parties against which enforcement or the change, waiver discharge or termination
is sought.
17. Additional Documents. The parties hereto shall execute such additional
instruments as may be reasonably required by their counsel in order to carry out
the purpose and intent of this Agreement and to fulfill the obligations of the
parties hereunder.
18. Section and Paragraph Headings. The section and paragraph headings in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
8
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IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date and year first above written.
PACT Communication Group, Inc.
(illegible) By: /s/ George Elia
- --------------------------- -------------------------------
George Elia, Vice-President
(illegible) By: /s/ Camilo Pereira
- --------------------------- -------------------------------
Camilo Pereira, Employee
9
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT dated July 1st, 1998, between Quest Net Corp.,
(the "Company"), and Maxine Ann Pereira (the "Executive").
WHEREAS, the Company desires to employ Executive and to ensure the
continued availability to the Company of the Executive's services, and the
Executive is willing to accept such employment and render such services, all
upon and subject to the terms and conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth in this Agreement, and intending to be legally bound, the Company and
the Executive agree as follows:
1. Term of Employment.
(a) Term. The Company hereby employs the Executive, and the Executive
hereby accepts employment with the Company, for a period commencing on the
date of this Agreement and ending five years from the date hereof (the
"Term").
(b) Continuing Effect. Notwithstanding any termination of this
Agreement at the end of the Term or otherwise, the provisions of Sections 6
and 7 shall remain in full force and effect and the provisions of Sections
6(b) and 7 shall be binding upon the legal representatives, successors and
assigns of the Executive, except as otherwise provided in Section 5(d).
2. Duties.
(a) General Duties. The executive shall serve as Vice President of
Network Administration, with duties and responsibilities that are customary
for such executives. The Executive will also perform services for such
subsidiaries as may be necessary. The Executive will use his best efforts
to performs his duties and discharge his responsibilities pursuant to this
Agreement competently, carefully and faithfully.
(b) Devotion of Time. The Executive will devote all of his time,
attention and energies during normal business hours (exclusive of periods
of sickness and disability and of such normal holiday and vacation periods
as have been established by the Company) to the affairs of the Company. The
Executive will not enter the employ of or serve as a consultant to, or in
any way perform any services with or without compensation to, any other
persons, business or organization without the prior consent of the board of
directors of the Company; provided, that the Executive shall be permitted
to devote a limited amount of his time, without compensation, to charitable
or similar organizations.
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3. Compensation and Expenses.
(a) Salary. For the services of the Executive to be rendered under
this Agreement, the Company will pay the Executive an annual base salary of
$48,000 during the Term, subject to annual cost of living increases and
increase based on Executive's performance. The annual salary under this
Section 3(a) will be reduced, however, to the extent that the Executive
elects to defer any portion thereof under the terms of any deferred
compensation or savings plan maintained by the Company. The Company will
pay the Executive his annual salary in equal installments no less
frequently than monthly.
(b) Expenses. In addition to any compensation received pursuant to
Section 3(a), (b) and (c), the Company will reimburse or advance funds to
the Executive for all reasonable travel, entertainment and miscellaneous
expenses incurred in connection with the performance of his duties under
this Agreement, provided that the Executive properly accounts for such
expenses to the Company in accordance with the Company's practices. Such
reimbursement or advances will be made in accordance with policies and
procedures of the Company in effect from time to time relating to
reimbursement of or advances to executive officers.
4. Benefits.
(a) Vacation. For each 12-month period during the Term, the Executive
will be entitled to three weeks of vacation without loss of compensation or
other benefits to which he is entitled under this Agreement, to be taken at
such times as the Executive may select and the affairs of the Company may
permit.
(b) Employee Benefit Programs. Without limiting the compensation to
which the Executive is entitled pursuant to the provisions of Section 3 or
this Section 4, during the Term, the Executive will be entitled to
participate in any pension, insurance or other employee benefit plan that
is maintained at that time by the Company for its executive officers,
including programs of life and medical insurance and reimbursement of
membership fees in civic, social and professional organizations.
(c) Options. The Executive shall receive incentive of 50,000 shares of
the Company's common stock on each anniversary date of her employment, to
be paid pro rata every six month,the terms and conditions of which shall
be determined by the Company's Board of Directors, provided however that
grante to Executive shall be on terms equal to or more favorable than those
granted or to be granted to other officers and directors of the Company.
The Company will not grant to officers and directors options whose terms
are more favorable than those granted to Executive's without the prior
written consent of the Executive.
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<PAGE>
5. Termination.
(a) Termination Without Cause. The Company may terminate the
Executive's employment pursuant to the terms of this Agreement without
cause. Such termination will become effective upon the date specified in
such notice, provided that such date is at least 07 days from the date of
such notice. Upon any such termination without cause:
In the event Executive's employment is terminated without cause,
the Company shall release the Executive from the provisions of Section
6.
(b) Termination for Cause. The Company may terminate the Executive's
employment pursuant to the terms of this Agreement at any time for cause by
given written notice of termination. Such termination will become effective
upon the giving of such notice, except that termination based upon clause
(v) below shall not become effective unless the Executive shall fail to
correct such breach within 07 days of receipt of written notice thereof
provided pursuant to the preceding sentence. Upon any such termination for
cause, the Executive shall have no right to compensation, commission,
options, bonus or reimbursement under Section 3, or to participate in any
employee benefit programs under Section 4 for any period subsequent to the
effective date of termination. For purposes of this Section 5(b), "cause"
shall mean: (i) the Executive is convicted of a felony which is related to
the Executive's employment or the business of the Company; (ii) the
Executive, in carrying out his duties hereunder, has been found in a civil
action to have committed willful gross negligence or willful gross
misconduct resulting, in either case, in material harm to the Company;
(iii) the Executive misappropriates Company funds or otherwise defrauds the
Company; (iv) the Executive materially breaches any provision of Section 6
or Section 7; and (v) the Executive materially fails to perform his duties
under Section 2 resulting in material harm to the Company.
(c) Death or Disability. Excepting for the conditions and obligations
contained in this Section 5(c), this Agreement and the obligations of the
Company hereunder will terminate upon the death or disability of the
Executive. For purposes of this Section 5(c), "disability" shall mean that
for a period of three months in any 12-month period the Executive is
incapable of substantially fulfilling the duties set forth in Section 2
because of physical, mental or emotional incapacity resulting from injury,
sickness or disease.
Upon termination by death or disability, the Company will pay the Executive
or his legal representative, as the case may be: (i) his annual salary at such
time pursuant to Section 3(a) through the date of such termination of
employment; paid
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<PAGE>
upon the same terms and conditions as if this Agreement were in fully force and
effect (ii) the Executive's Bonus as set forth in Section 3(b) of this
Agreement; and his Stock Options as set forth in Section 3(c). paid upon the
same terms and conditions as if this Agreement were in fully force and effect.
Should the termination by death or disability occur prior to the anniversary
date on which Executive would be entitled to receive his Stock Options, than
Executive shall be entitled to received a portion of such stock options equal to
the total number of options to which the Executive would have been entitled to
receive on his anniversary date divided by 365, times the number of days elapsed
from his prior anniversary date to his termination.
(d) Special Termination. In the event that (i) the Executive, with or
without change in title or formal corporate action, shall no longer
exercise all of the duties and responsibilities and shall no longer possess
substantially all the authority set forth in Section 2; or (ii) the Company
materially breaches this Agreement or the performance of its duties and
obligations hereunder; or (iii) any entity or person not now an executive
officer of the Company becomes either individually or as part of a group
the beneficial owner of 20% or more of the Company's common stock, the
Executive, by written notice to the Company, may elect to deem the
Executive's employment hereunder to have been terminated by the Company
without cause under Section 5(a) hereof, in which event the Executive shall
be entitled to the compensation payable pursuant to clauses (i)and (ii) of
Section 5(a). In such event, the Company shall release the Executive from
the provisions of Section 6.
(e) Voluntary Termination. The Executive, on 30 days prior written
notice to the Company, may terminate his employment voluntarily (i) at any time
following termination of the initial Term or (ii) at any time following the
death or disabling illness of a member of the Executive's immediate family or
similar personal, non-business related occurrence as a result of which the
Executive concludes he must devote a substantial amount of his time and energies
to his family or other personal matter and not to his business activities so as
to preclude his fulfilling his obligations under this Agreement. Upon any such
termination, the Company will pay the Executive (i) his annual salary at such
time pursuant to Section 3(a) through the date of such termination of
employment; (ii) any bonus which would have been payable through the date of
termination pursuant to Section 3(b); and (iii) than Executive shall be entitled
to received a portion of such stock options equal to the total number of options
to which the Executive would have been entitled to receive on his anniversary
date divided by 365, times the number of days elapsed from his prior anniversary
date to termination.
(f) Continuing Effect. Notwithstanding any termination of the
Executive's employment as provided in this Section 5 or otherwise, the
provisions of Sections 6 and 7 shall remain in full force and effect,
except as otherwise provided in Sections 5(a) and (d).
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<PAGE>
6. Non-competition Agreement.
(a) Competition with the Company. Until termination of his employment
and for a period of 12 months commencing on the date of termination, the
Executive, directly or indirectly, in association with or as a stockholder,
director, officer, consultant, employee, partner, joint venturer, member or
otherwise of or through any person, firm, corporation, partnership,
association or other entity, will not compete with the Company or any of
its affiliates in the offer, sale or marketing of products or services that
are competitive with the products or services offered by the Company,
within any metropolitan area in the United States or elsewhere in which the
Company is then engaged in the offer and sale of competitive products or
services; provided, however, the foregoing shall not prevent Executive from
accepting employment with an enterprise engaged in two or more lines of
business, one of which is the same or similar to the Company's business
(the "Prohibited Business") if Executive's employment is totally unrelated
to the Prohibited Business; provided, further, the foregoing shall not
prohibit Executive from owning up to 5% of the securities of any
publicly-traded enterprise provided Executive is not an employee, director,
officer, consultant to such enterprise or otherwise reimbursed for services
rendered to such enterprise.
(b) Solicitation of Customers. During the periods in which the
provisions of Section 6(a) shall be in effect, the Executive, directly or
indirectly, will not seek Prohibited Business from any Customer (as defined
below) on behalf of any enterprise or business other than the Company,
refer Prohibited Business from any Customer to any enterprise or business
other than the Company or receive commissions based on sales or otherwise
relating to the Prohibited Business from any Customer, or any enterprise or
business other than the Company. For purposes of this Section 6(b), the
term "Customer" means any person, firm, corporation, partnership,
association or other entity to which the Company or any of its affiliates
sold or provided goods or services during the 24-month period prior to the
time at which any determination is required to be made as to whether any
such person, firm, corporation, partnership, association or other entity is
a Customer.
(c) No Payment. The Executive acknowledges and agrees that no separate
or additional payment will be required to be made to him in consideration
of his undertakings in this Section 6.
7. Nondisclosure of Confidential Information. The Executive acknowledges
that during his employment he will learn and will have access to confidential
information regarding the Company and its affiliates, including without
limitation (i) confidential or secret plans, programs, documents, agreements or
other material relating to the business, services or activities of the Company
and its affiliates and (ii) trade secrets, market reports, customer
investigations, customer lists and other similar information that is proprietary
information of the Company or its affiliates (collectively referred to as
"confidential information"). The Executive acknowledges that such confidential
information as is acquired and used by the Company or its
5
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affiliates is a special, valuable and unique asset. All records, files,
materials and confidential information obtained by the Executive in the course
of his employment with the Company are confidential and proprietary and shall
remain the exclusive property of the Company or its affiliates, as the case may
be. The Executive will not, except in connection with and as required by his
performance of his duties under this Agreement, for any reason use for his own
benefit or the benefit of any person or entity with which he may be associated
or disclose any such confidential information to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever without the
prior written consent of the board of directors of the Company, unless such
confidential information previously shall have become public knowledge through
no action by or omission of the Executive.
8. Equitable Relief.
(a) The Company and the Executive recognize that the services to be
rendered under this Agreement by the Executive are special, unique and of
extraordinary character, and that in the event of the breach by the
Executive of the terms and conditions of this Agreement or if the
Executive, without the prior consent of the board of directors of the
Company, shall leave his employment for any reason and take any action in
violation of Section 6 or Section 7, the Company will be entitled to
institute and prosecute proceedings in any court of competent jurisdiction
referred to in Section 8(b) below, to enjoin the Executive from breaching
the provisions of Section 6 or Section 7. In such action, the Company will
not be required to plead or prove irreparable harm or lack of an adequate
remedy at law. Nothing contained in this Section 8 shall be construed to
prevent the Company from seeking such other remedy in arbitration in case
of any breach of this Agreement by the Executive, as the Company may elect.
(b) Any proceeding or action must be commenced in the federal courts,
or in the absence of federal jurisdiction in state court, in either case in
Florida where the Company maintains its principal offices. The Executive
and the Company irrevocably and unconditionally submit to the jurisdiction
of such courts and agree to take any and all future action necessary to
submit to the jurisdiction of such courts. The Executive and the Company
irrevocably waive any objection that they now have or hereafter irrevocably
waive any objection that they now have or hereafter may have to the laying
of venue of any suit, action or proceeding brought in any such court and
further irrevocably waive any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient
forum. Final judgment against the Executive or the Company in any such suit
shall be conclusive and may be enforced in other jurisdictions by suit on
the judgment, a certified or true copy or which shall be conclusive
evidence of the fact and the amount of any liability of the Executive or
the Company therein described, or by appropriate proceedings under any
applicable treaty or otherwise.
9. Assignability. The rights and obligations of the company under this
Agreement shall inure to the benefit of and be binding upon the successors and
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assigns of the Company. The Executive's obligations hereunder may not be
assigned or alienated and any attempt to do so by the Executive will be void.
10. Severability.
(a) The Executive expressly agrees that the character, duration and
geographical scope of the provisions set forth in this Agreement are
reasonable in light of the circumstances as they exist on the date hereof.
Should a decision, however, be made at a later date by a court of competent
jurisdiction that the character, duration or geographical scope of such
provisions is unreasonable, then it is the intention and the agreement of
the Executive and the Company that this Agreement shall be construed by the
court in such a manner as to impose only those restrictions on the
Executive's conduct that are reasonable in the light of the circumstances
and as are necessary to assure to the Company the benefits of this
Agreement. If, in any judicial proceeding, a court shall refuse to enforce
all of the separate covenants deemed included herein because taken together
they are more extensive than necessary to assure to the Company the
intended benefits of this Agreement, it is expressly understood and agreed
by the parties hereto that the provisions of this Agreement that, if
eliminated, would permit the remaining separate provisions to be enforced
in such proceeding shall be deemed eliminated, for the Purposes of such
proceeding, from this Agreement,
(b) If any provision of this Agreement otherwise is deemed to be
invalid or unenforceable or is prohibited by the laws of the state or
jurisdiction where it is to be performed, this Agreement shall be
considered divisible as to such provision and such provision shall be
inoperative in such state or jurisdiction and shall not be part of the
consideration moving from either of the parties to the other. The remaining
provisions of this Agreement shall be valid and binding and of like effect
as though such provision were not included.
11. Notices and Addresses. All notices, offers, acceptance and any other
acts under this Agreement (except payment) shall be in writing, and shall be
sufficiently given if delivered to the addressees in person, by Federal Express
or similar receipted delivery, by facsimile delivery or, if mailed, postage
prepaid, by certified mail, return receipt requested, as follows:
To the Company: Quest net Corp.
2740 East Oakland Park Blvd
Suite 206/8
Ft. Lauderdale, Florida 33306
To the Executive: Maxine A. Pereira
1955 NE 208 Ter
Miami, Florida 33179
7
<PAGE>
or to such other address as either of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
12. Counterpart. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature.
13. Arbitration. Except for any controversy or claim seeking equitable
relief as provided in Section 8 of this Agreement, any controversy or claim
arising out of or relating to this Agreement, or to the interpretation, breach
or enforcement thereof or any other dispute between the parties, shall be
submitted to one arbitrator and settled by arbitration in West Palm Beach,
Florida, in accordance with the rules, then obtaining, of the American
Arbitration Association. Any reward made by such arbitrator shall be final,
binding and conclusive on all parties hereto for all purposes, and judgment may
be entered thereon in any court having jurisdiction thereof.
14. Attorney's Fees. In the event that there is any controversy or claim
arising out of or relating to this Agreement, or to the interpretation, breach
or enforcement thereof, and any action or proceeding is commenced to enforce the
provisions of this Agreement, the prevailing party shall be entitled to a
reasonable attorney's fee, costs and expenses.
15. Governing Law. This Agreement and any dispute, disagreement, or issue
of construction or interpretation arising hereunder whether relating to its
execution, its validity, the obligations provided therein or performance shall
be governed or interpreted according to the internal laws of the State of
Florida without regard to choice of law considerations.
16. Entire Agreements. This Agreement constitutes the entire Agreement
between the parties and supersedes all prior oral and written agreements between
the parties hereto with respect to the subject matter hereof. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, except by a statement in writing signed by the party or
parties against which enforcement or the change, waiver discharge or termination
is sought.
17. Additional Documents. The parties hereto shall execute such additional
instruments as may be reasonably required by their counsel in order to carry out
the purpose and intent of this Agreement and to fulfill the obligations of the
parties hereunder.
18. Section and Paragraph Headings. The section and paragraph headings in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
8
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IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date and year first above written.
Quest Net Corp.
(illegible) By: /s/ Camilo Pereira
- --------------------------- -------------------------------
Camilo Pereira, President
Employee:
(illegible) /s/ Maxine A. Pereira
- --------------------------- -------------------------------
Maxine A. Pereira
9
Exhibit 10.8
SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
To: QUEST NET CORP.
2999 NE 191st Street, Suite PH8
Miami, FL 33180
This Subscription Agreement is made between QUEST NET CORP., ("Company"
or "Seller") a Florida corporation, and the undersigned prospective purchaser
("Purchaser") who is subscribing hereby for the Company's Common Stock, (the
"Shares"), at 80% of the five day average closing bid price of the Company's
Common Stock as reported by Bloomberg, LP for the five trading days immediately
prior to funding (the "Discounted Purchase Price"). The Shares being offered
will be separately transferable, to the extent that any such transfer is
permitted by law. The terms for the issuance of the Shares are set forth in
Section 4. This subscription is submitted to you in accordance with and subject
to the terms and conditions described in this Subscription Agreement together
with any Exhibits thereto, relating to an offering (the "Offering") of up to
$5,000,000 of Shares at the "Discounted Purchase Price". The Offering comprises
(i) an offering of the Shares to accredited investors (the "Regulation D
Offering") in accordance with the exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended (the "Act"), and Rule 506 of
Regulation D promulgated under the Act ("Regulation D").
1. SUBSCRIPTION.
(a) The undersigned hereby irrevocably subscribes for and agrees to
purchase 910,747 Shares ("Total Number of Shares") at a purchase price of $5.49
per Share (the "Purchase Price") for a total of $5,000,000 (the
<PAGE>
-------------------------
QUEST NET CORP.
-------------------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Maximum Offering $5,000,000
This offering consists of $5,000,000 of the Company's Common Stock pursuant
to the terms set forth herein.
--------------------------
SUBSCRIPTION AGREEMENT
--------------------------
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SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
To: QUEST NET CORP.
2999 NE 191st Street, Suite PH8
Miami, FL 33180
This Subscription Agreement is made between QUEST NET CORP., ("Company"
or "Seller") a Florida corporation, and the undersigned prospective purchaser
("Purchaser") who is subscribing hereby for the Company's Common Stock, (the
"Shares"), at 80% of the five day average closing bid price of the Company's
Common Stock as reported by Bloomberg, LP for the five trading days immediately
prior to funding (the "Discounted Purchase Price"). The Shares being offered
will be separately transferable, to the extent that any such transfer is
permitted by law. The terms for the issuance of the Shares are set forth in
Section 4. This subscription is submitted to you in accordance with and subject
to the terms and conditions described in this Subscription Agreement together
with any Exhibits thereto, relating to an offering (the "Offering") of up to
$5,000,000 of Shares at the "Discounted Purchase Price". The Offering comprises
(i) an offering of the Shares to accredited investors (the "Regulation D
Offering") in accordance with the exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended (the "Act"), and Rule 506 of
Regulation D promulgated under the Act ("Regulation D").
1. SUBSCRIPTION.
(a) The undersigned hereby irrevocably subscribes for and agrees to
purchase _______________ Shares ("Total Number of Shares") at a purchase price
of _________ per Share (the "Purchase Price") for a total of $__________________
(the
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"Aggregate Purchase Price"). The closing shall be deemed to have occurred on
the date agreed upon by the Company and the Purchaser (the "Closing Date").
(b) Upon receipt by the Escrow Agent of the requisite payment for the
Shares being purchased the certificates representing the Shares so purchased
will be forwarded by the Escrow Agent to the Purchaser and the name of such
Purchaser will be registered on the stock and transfer books of the Company as
the record owner of such Shares. The Escrow Agent shall not be liable for any
action taken or omitted by him in good faith and in no event shall the Escrow
Agent be liable or responsible except for the Escrow Agent's own gross
negligence or willful misconduct. The Escrow Agent has made no representations
or warranties in connection with this transaction and has not been involved in
the negotiation of the terms of this Agreement or any matters relative thereto.
Seller and Purchaser each agree to indemnify and hold harmless the Escrow Agent
from and with respect to any suits, claims, actions or liabilities arising in
any way out of this transaction including the obligation to defend any legal
action brought which in any way arises out of or is related to this Agreement.
The Escrow Agent is not rendering securities advice to anyone with respect to
this proposed transaction; nor is the Escrow Agent opining on the compliance of
the proposed transaction under applicable securities law.
2. REPRESENTATIONS AND WARRANTIES.
The undersigned hereby represents and warrants to, and agrees with, the
Company as follows:
(a) The undersigned has been furnished with, and has carefully
read the applicable form of Registration Rights Agreement annexed
hereto as Exhibit A (the "Registration Rights Agreement"), and is
familiar with and understands the terms of the Offering. With respect
to tax and other economic considerations involved in this investment,
the undersigned is not relying on the Company. The undersigned has
carefully considered and has, to the extent the undersigned believes
such discussion necessary, discussed with the undersigned's
professional legal, tax, accounting and financial advisors the
suitability of an investment in the Company, by purchasing the Shares,
for the undersigned's particular tax and financial situation and has
determined that the investment being made by the undersigned is a
suitable investment for the undersigned.
(b) The undersigned acknowledges that all documents, records, and
books pertaining to this investment which the undersigned has requested
have been made available for inspection by the undersigned or the
undersigned has had access thereto.
(c) The undersigned has had a reasonable opportunity to ask
questions of and receive answers from a person or persons acting on
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behalf of the Company concerning the Offering and all such
questions have been answered to the full satisfaction of the
undersigned.
(d) The undersigned will not sell or otherwise transfer the
Shares, without registration under the Act or applicable state
securities laws or an exemption therefrom. The Shares have not been
registered under the Act or under the securities laws of certain
states. The Shares shall be registered by the Company pursuant to the
terms of the Registration Rights Agreement attached hereto as Exhibit A
and incorporated herein and made a part hereof. Without limiting the
right to have the Shares registered and sell the Shares pursuant to
this Subscription Agreement, the undersigned represents that the
undersigned is purchasing the Shares for the undersigned's own account,
for investment and not with a view to resale or distribution except in
compliance with the Act. The undersigned does not now have or, in the
future, will not take any short position or hedge position in the
Company's Common Stock that would be in violation of the Act or the
securities laws of certain states, that would have the effect of being
manipulative on the Company's Common Stock price, or that would result
in a short position or hedge position of more than 4.9% of the
Company's issued and outstanding Common Stock. The undersigned has not
offered or sold any portion of the Shares being acquired nor does the
undersigned have any present intention of dividing the Shares with
others or of selling, distributing or otherwise disposing of any
portion of the Shares either currently or after the passage of a fixed
or determinable period of time or upon the occurrence or non-occurrence
of any predetermined event or circumstance in violation of the Act.
Except as provided in the Registration Rights Agreement, the Company
has no obligation to register the Shares.
(e) The undersigned recognizes that an investment in the Shares
involves substantial risks, including loss of the entire amount of such
investment. Further, the undersigned has carefully read and considered
the schedule entitled Threatened or Pending Litigation matters attached
hereto as Exhibit B.
(f) The undersigned acknowledges that each certificate
representing the Shares unless registered pursuant to the Registration
Rights Agreement, shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED OR
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT (I) PURSUANT TO AN EFFECTIVE REGISTRATION
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STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (II) TO
THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE
UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR
(III) IF AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
NOTWITHSTANDING THE FOREGOING, THE COMMON STOCK EVIDENCED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO THE REGISTRATION RIGHTS SET FORTH
IN EACH OF THAT CERTAIN SUBSCRIPTION AGREEMENT AND REGISTRATION
RIGHTS AGREEMENT BY AND BETWEEN THE HOLDER HEREOF AND THE COMPANY,
A COPY OF EACH IS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICE.
(g) If this Subscription Agreement is executed and delivered on
behalf of a corporation: (i) such corporation has the full legal right
and power and all authority and approval required (a) to execute and
deliver, or authorize execution and delivery of, this Subscription
Agreement and all other instruments (including, without limitation, the
Registration Rights Agreement) executed and delivered by or on behalf
of such corporation in connection with the purchase of the Shares and
(b) to purchase and hold the Shares: (ii) the signature of the party
signing on behalf of such corporation is binding upon such corporation;
and (iii) such corporation has not been formed for the specific purpose
of acquiring the Shares, unless each beneficial owner of such entity is
qualified as an accredited investor within the meaning of Rule 501(a)
of Regulation D and has submitted information substantiating such
individual qualification.
(h) The undersigned shall indemnify and hold harmless the Company
and each stockholder, executive, employee, representative, affiliate,
officer, director or control person of the Company, who is or may be a
party or is or may be threatened to be made a party to any threatened,
pending or contemplated action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of or arising from
any actual or alleged misrepresentation or misstatement of facts or
omission to represent or state facts made or alleged to have been made
by the undersigned to the Company or omitted or alleged to have been
omitted by the undersigned, concerning the undersigned or the
undersigned's subscription for and purchase of the Shares or the
undersigned's authority to invest or financial position in connection
with the Offering, including, without limitation, any such
misrepresentation, misstatement or omission contained in this
Subscription Agreement, the
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Questionnaire or any other document submitted by the undersigned,
against losses, liabilities and expenses for which the Company, or any
stockholder, executive, employee, representative, affiliate, officer,
director or control person of the Company has not otherwise been
reimbursed (including attorneys' fees and disbursements, judgments,
fines and amounts paid in settlement) actually and reasonably incurred
by the Company, or such officer, director stockholder, executive,
employee, representative, affiliate or control person in connection
with such action, suit or proceeding.
(i) The undersigned is not subscribing for the Shares as a result
of, or pursuant to, any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or
meeting.
(j) The undersigned or the undersigned's representatives, as the
case may be, has such knowledge and experience in financial, tax and
business matters so as to enable the undersigned to utilize the
information made available to the undersigned in connection with the
Offering to evaluate the merits and risks of an investment in the
Shares and to make an informed investment decision with respect
thereto.
(k) The Purchaser and its advisors, if any, have been furnished
with all materials relating to the business, finances, and operations
of the Company and materials relating to the offer and sale of the
Shares. The Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete
and satisfactory answers to any such inquiries. Without limiting the
generality of the foregoing, the Purchaser has also had the opportunity
to obtain and to review (1) the Company's Confidential Business Plan
and (2) the Company's audited financials for the calendar year ended
December 31, 1998, (the "Disclosure Documents").
(1) The Purchaser is purchasing the Common Stock for its own
account for investment, and not with a view toward the resale or
distribution thereof. Purchaser is neither an underwriter of, nor a
dealer in, the Common Stock issuable upon conversion thereof and is not
participating in the distribution or resale of the Common Stock
issuable upon conversion thereof.
3. SELLER REPRESENTATIONS.
(a) Concerning the Securities. This Agreement, the Registration Rights
Agreement and the issuance, sale and delivery of the Shares have been duly
authorized by all required corporate action on the part of Seller, and when
issued, sold and delivered in accordance with the terms hereof and thereof for
the
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<PAGE>
consideration expressed herein and therein, will be duly and validly issued and
enforceable as binding agreements of the Company in accordance with their terms,
subject to the laws of bankruptcy and creditors' rights generally. A minimum of
2,000,000 shares of Common Stock have been duly and validly reserved for
issuance and, upon issuance shall be duly and validly issued, fully paid, and
nonassessable (the "Reserved Shares"). The Company agrees that it will comply
with all terms of the Registration Rights Agreement attached hereto as Exhibit
A.
Prior to registration of all the Shares, if at anytime the registration
of all the Shares outstanding results in an insufficient number of Reserved
Shares being available to cover all the Shares sold in this Offering, then in
such event, the Company will move to call and hold a shareholder's meeting
within 45 days of such event for the purpose of authorizing additional Shares to
facilitate the registration. In such an event the Company shall recommend to all
shareholders to vote their shares in favor of increasing the authorized number
of shares of Common Stock. Seller represents and warrants that under no
circumstances will it deny or prevent Purchasers right to sell the Shares as
permitted under the terms of this Subscription Agreement or the Registration
Rights Agreement. Nothing in this Section shall limit the obligations of the
Company to make the payments set forth in paragraph 4(h).
(b) Authority to Enter Agreement. This Agreement has been duly
authorized, validly executed and delivered on behalf of Seller and is a valid
and binding agreement in accordance with its terms, subject to general
principals of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally.
(c) Non-contravention. The execution and delivery of this Agreement and
the Registration Rights Agreement by the Company, the issuance of the Shares,
and the consummation by the Company of the other transactions contemplated by
this Agreement the Registration Rights Agreement and the Shares do not and will
not conflict with or result in a breach by Seller of any of the terms or
provisions of, or constitute a default under, the articles of incorporation or
by-laws of Seller, or any indenture, mortgage, deed of trust, or other material
agreement or instrument to which Seller is a party or by which it or any of its
properties or assets are bound, or any existing applicable law, rule, or
regulation of the United States or any State thereof or any applicable decree,
judgment, or order of any Federal or State court, Federal or State regulatory
body, administrative agency or other United States governmental body having
jurisdiction over Seller or any of its properties or assets.
(d) Company Compliance. The Company and its subsidiaries are (i)
validly existing as a corporation in good standing under the laws of the State
of Florida and other jurisdictions of incorporation, and are duly qualified to
do business as a foreign corporation and is in good standing in all
jurisdictions where the Company owns or leases properties, maintains employees
or conducts
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business, except for jurisdictions in which the failure to so qualify would not
have a material adverse effect on the Company, and have all requisite corporate
power and authority to own its properties and conduct its business; (ii) The
Company and its subsidiaries are not in violation of any term or provision of
its Certificate of Incorporation or by-laws; (iii) not in default in the
performance or observance of any material obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
in any material mortgage, deed of trust, indenture or other instrument or
agreement to which they are a party, either singly or jointly, by which it or
any of their property is bound or subject except as set forth in Exhibit B.
Furthermore, the Company is not aware of any other facts, which it has not
disclosed which could have a material adverse effect on the business, condition,
(financial or otherwise), operations, earnings, performance, properties or
prospects of the Company and its subsidiaries taken as a whole.
(e) Pending Litigation. Except as otherwise disclosed in Exhibit B,
there is (i) no material action, suit or proceeding before or by any court,
arbitrator or governmental body now pending or, to the knowledge of the Company,
threatened or contemplated to which the Company or any of its subsidiaries is or
may be a party or to which the business or property of the Company or any of its
subsidiaries is or may be bound or subject, (ii) no law, statute, rule,
regulation, order or ordinance that has been enacted, adopted or issued by any
Governmental Body or that, to the knowledge of the Company, has been proposed by
any Governmental Body adversely affecting the Company or any of its
subsidiaries, (iii) no injunction, restraining order or order of any nature by a
federal, state or foreign court or Governmental Body of competent jurisdiction
to which the Company or any of its subsidiaries is subject that, in the case of
clauses (i), (ii) and (iii) above, (x) is reasonably likely to, singly or in the
aggregate, result in a material adverse effect on the business, condition,
(financial or otherwise), operations, earnings, performance, properties or
prospects of the Company effect, and its subsidiaries taken as a whole or (y)
would interfere with or materially adversely affect the issuance of the Shares
or would be reasonably likely to render this Subscription Agreement or the
Shares, or any portion thereof, invalid or unenforceable.
(f) Issuance of the Shares. No action has been taken and no law,
statute, rule, regulation, order or ordinance has been enacted, adopted or
issued by any Governmental Body that prevents the issuance of the Shares; no
injunction, restraining order or order of any nature by a federal or state court
of competent jurisdiction has been issued that prevents the issuance of the
Shares or suspends the sale of the Shares in any jurisdiction; and no action,
suit or proceeding is pending against or, to the best knowledge of the Company,
threatened against or affecting, the Company, any of its subsidiaries or, to the
best knowledge of the Company, before any court or arbitrator or any
Governmental Body that, if adversely determined, would prohibit, interfere with
or adversely affect the issuance or marketability of the Shares or render the
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Subscription Agreement or the Shares, or any portion thereof, invalid or
unenforceable.
(g) The Company shall indemnify and hold harmless the Purchaser and
each stockholder, executive, employee, representative, affiliate, officer,
director or control person of the Purchaser, who is or may be a party or is or
may be threatened to be made a party to any threatened, pending or contemplated
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of or arising from any actual or alleged
misrepresentation or misstatement of facts or omission to represent or state
facts made or alleged to have been made by the Company to the Purchaser or
omitted or alleged to have been omitted by the Company, concerning the Purchaser
or the Purchaser's subscription for and purchase of the Shares or the
Purchaser's authority to invest or financial position in connection with the
Offering, including, without limitation, any such misrepresentation,
misstatement or omission contained in this Subscription Agreement, the
Questionnaire or any other document submitted by the Company, against losses,
liabilities and expenses for which the Purchaser, or any stockholder, executive,
employee, representative, affiliate, officer, director or control person of the
Purchaser has not otherwise been reimbursed (including reasonable attorneys'
fees and disbursements, judgments, fines and amounts paid in settlement)
actually and reasonably incurred by the Purchaser, or such officer, director
stockholder, executive, employee, representative, affiliate or control person in
connection with such action, suit or proceeding.
(h) No Change. Other than filings required by the Blue Sky or federal
securities law, no consent, approval or authorization of or designation,
declaration or filing with any governmental or other regulatory authority on the
part of the Company is required in connection with the valid execution, delivery
and performance of this Agreement. Any required qualification or notification
under applicable federal securities laws and state Blue Sky laws of the offer,
sale and issuance of the Shares, has been obtained on or before the date hereof
or will have been obtained within the allowable period thereafter and a copy
thereof will be forwarded to Counsel for the Purchaser.
(i) True Statements. Neither this Agreement nor any of the Disclosure
Documents, as defined in Section 2 subsection (k) above, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements contained herein or therein not misleading in the
light of the circumstances under which such statements are made. There exists no
fact or circumstances which, to the knowledge of the Company, materially and
adversely affects the business, properties or assets, or conditions, financial
or otherwise, of the Company, which has not been set forth in this Agreement or
disclosed in such documents,
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(j) The Purchaser has been advised that the Company has not retained
any independent professionals to review or comment on this Offering or otherwise
protect the interests of the Purchaser. Although the Company has retained its
own counsel, neither such counsel nor any other firm, including Joseph B.
LaRocco, Esq., has acted on behalf of the Purchaser, and the Purchaser has not
and will not rely on the Company's legal counsel or Joseph B. LaRocco, Esq. with
respect to any matters herein described.
(k) There has never been represented, guaranteed, or warranted to the
undersigned by any broker, the Company, its officers, directors or agents, or
employees or any other person, expressly or by implication (i) the percentage of
profits and/or amount of or type of consideration, profit or loss to be
realized, if any, as a result of the Company's operations; and (ii) that the
past performance or experience on the part of the management of the Company, or
of any other person, will in any way result in the overall profitable operations
of the Company.
(l) Prior Shares Issued Under Regulation S or Regulation D. In the past
six months the Company raised $0 in Regulation S offerings for which it issued
no shares of its Common Stock. The Company has raised $1,000,000 in Regulation D
offerings in the past 12 months.
(m) Current Authorized Shares. As of May 3, 1999, there were 50,000,000
authorized shares of Common Stock of which approximately 21,202,383 shares of
Common Stock were deemed issued and outstanding on a fully diluted basis. There
are currently 100,000 shares of convertible preferred stock issued and
outstanding which the Company has the right to redeem at $10.00 per share.
Theses shares are convertible into common stock at a price equal to the average
bid and ask price of the three trading days prior to notice of conversion. Grupo
Internet Latino American currently owns 10,399,278 shares of the Company's
Common Stock.
(n) Disclosure Documents. The Disclosure Documents are all the
documents (other than preliminary materials) that the Company has delivered to
the Purchaser or its advisor. As of their respective dates, none of the
Disclosure Documents contained any untrue statement of a material fact or
omitted 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. The financial statements of the Company included
in the Disclosure Documents have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved, except as may be indicated in the notes thereto.
(o) Information Supplied. The information supplied by the Company to
Purchaser in connection with the offering of the Common Stock does not contain
any untrue statement of a material fact or omit to state a material fact
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necessary to make the statements, in the light of the circumstances in which
they were made, not misleading. There exists no fact or circumstances which, to
the knowledge of the Company, materially and adversely affects the business,
properties, assets, or conditions, financial or otherwise, of the Company, which
has not been set forth in this Agreement or disclosed in such documents.
(p) Delivery Instructions. On the Closing Date the Common Stock being
purchased hereunder shall be delivered to Joseph B. LaRocco, Esq. as Escrow
Agent, who will simultaneously wire to the Company the funds being held in
escrow, less consulting fees, at which time the Escrow Agent shall then have the
Common Stock delivered to the Purchaser, per the Purchaser's instructions.
Joseph LaRocco shall provide the Company with the information needed to complete
a Form 1099 with respect to the Consulting Fees and a receipt that such fees
were paid.
(q) No Default. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it or its property is bound, and
neither the execution of, nor the delivery by the Company of, nor the
performance by the Company of its obligations under, this Agreement, the
Registration Rights Agreement or the Shares, will conflict with or result in the
breach or violation of any of the terms or provisions of, or constitute a
default or result in the creation or imposition of any lien or charge on any
assets or properties of the Company under, (i) any material indenture, mortgage,
deed of trust or other material agreement applicable to the Company or
instrument to which the Company is a party or by which it is bound, (ii) any
statute applicable to the Company or its property, (iii) the Certificate of
Incorporation or By-Laws of the Company, (iv) any decree, judgment, order, rule
or regulation of any court or governmental agency or body having jurisdiction
over the Company or its properties, or (v) the Company's listing agreement for
its Common Stock, if any.
(r) Use of Proceeds. The Company represents that the proceeds of this
offering will be used during the next twelve months as follows:
Implementation of South Florida Wireless Communication $1,200,000
Acquisition $1,000,000
Consulting and other fees $ 350,000
Internet Exchange Points $1,000,000
Repayment of Debt $ 200,000
Marketing, Promotion, Sales Operational
Expenses and Working Capital $1,230,000
(s) Board Resolution/Opinion Letter. A copy of the Company's Minutes
authorizing this offering shall be attached hereto as Exhibit C and counsel for
the Company shall prepare a pre-closing opinion letter which shall be attached
hereto as Exhibit D.
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(t) The Company will concurrently with the effectiveness of the
Registration Statement file for registration under the Securities and Exchange
Act of 1934 a Form B-A to become a "reporting issuer".
(u) Camilo Pereira represents that he currently has proxies for at
least 65% of the shares of the outstanding Common Stock of the Company. In the
event the Company is listed on The Nasdaq SmallCap Market and the total number
of Shares plus the Additional Shares (as hereinafter defined) are 20% or greater
than the current number of Shares issued and outstanding, then in such event,
Camilo Pereira agrees that he shall vote the shares he owns and for which he has
proxies, in favor of issuing such Additional Shares that would be equal to or
greater than said 20%.
4. ISSUANCE OF SHARES AND REGISTRATION.
(a) Legend. Upon registration of the Shares, the Company shall deliver
to the Purchaser, or per the Purchaser's instructions, the shares of Common
Stock, subject to the following restrictive legend:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN INCLUDED IN THE COMPANY'S
REGISTRATION STATEMENT INITIALLY FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON __________ 199_, AND MAY BE SOLD IN ACCORDANCE WITH THE
COMPANY'S PROSPECTUS DATED __________ 199_, WHICH FORMS A PART OF SUCH
REGISTRATION STATEMENT, OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) Interest. Nothing contained in this Subscription Agreement shall be
deemed to establish or require the payment of interest to the Purchaser at a
rate in excess of the maximum rate permitted by governing law. In the event that
the rate of interest required to be paid exceeds the maximum rate permitted by
governing law, the rate of interest required to be paid thereunder shall be
automatically reduced to the maximum rate permitted under the governing law and
such excess shall be returned with reasonable promptness by the Purchaser to the
Company.
(c) Opinion Letter. It shall be the Company's responsibility to take
all necessary actions and to bear all such costs to issue the Certificate of
Common Stock as provided herein, including the responsibility and cost for
delivery of an opinion letter to the transfer agent, if so required. The person
in whose name the certificate of Common Stock is to be registered shall be
treated as a shareholder of record on and after the date of issuance. Upon
surrender of
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any Share certificates that are to be sold in part, the Company shall issue to
the Purchaser new Share Certificates equal to the unsold amount, in
denominations of not less than 50,000 Shares per certificate.
(d) Once the Common Stock has been registered, if the Common Stock,
with the legend appearing in Section 4(a), is not delivered per the written
instructions of the Purchaser, within 5 (five) business days after the Company
receives the Share certificates from the Purchaser, then in such event the
Company shall pay to Purchaser one-half of one percent (.50%) in cash, of the
dollar value of the Shares delivered to the Company per each day after the fifth
business day following said receipt by the Company, that the Common Stock is not
delivered.
To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 4 is due to the unavailability of authorized but
unissued shares of Common Stock, the provisions of this Section 4(d) shall not
apply but instead the provisions of Section 4(e) shall apply.
The Company shall make any payments incurred under this Section 4(d) in
immediately available funds within three (3) business days from the date of
issuance of the applicable Common Stock. Nothing herein shall limit a
Purchaser's right to pursue actual damages for the Company's failure to issue
and deliver Common Stock to the Purchaser within five (5) business days after
registration and after the Company receives the Share certificates from the
Purchaser.
(e) The Company shall at all times reserve and have available all
Common Stock necessary for registration of all the Shares purchased by all
Purchasers of the Shares. If, at any time the Company does not have sufficient
authorized but unissued shares of Common Stock available for registration
("Default", the date of such default being referred to herein as the "Default
Date"), the Company shall issue to the Purchaser all of the shares of Common
Stock which are available. The Company shall provide notice of such Default
("Notice of Default") to all Purchasers, within one (1) business day of such
default (with the original delivered by overnight or two-day courier).
The Company agrees to pay to all Purchasers of outstanding Shares
payments for a Default ("Default Payments") in the amount of (N/365) x (.24) x
the initial issuance price of the outstanding Shares held by each Purchaser
where N = the number of days from the Default Date to the date (the
"Authorization Date") that the Company authorizes a sufficient number of shares
of Common Stock to effect of all remaining Shares. The Company shall send notice
("Authorization Notice") to each Purchaser of outstanding Shares that additional
shares of Common Stock have been authorized, the Authorization Date and the
amount of Purchaser's accrued Default Payments. The accrued Default shall be
paid in cash which payments shall be made to such Purchaser of
15
<PAGE>
outstanding Shares by the fifth day of the following calendar month following
registration of all the Shares. Nothing herein shall limit the Purchaser's right
to pursue actual damages for the Company's failure to maintain a sufficient
number of authorized shares of Common Stock.
(f) Issuance Of Additional Shares Based Upon Price Reset:
If the Current Market Price (as defined below) for the sixty (60)
trading day period after the date of effectiveness of a Registration Statement
filed pursuant to the Registration Rights Agreement is less than 125% of the
Purchase Price, then the Company shall issue to the Purchaser, at no cost to the
Purchaser, within 5 business days of receipt of written notice from the
Purchaser, additional shares of Common Stock (the "Additional Shares") equal
to the difference between (i) the Aggregate Purchase Price divided by 80% of the
Current Market Price and (ii) the Total Number of Shares.
The "Current Market Price" per share of Common Stock is the average of
the closing bid prices of the Common Stock as reported by Bloomberg, LP for the
sixty (60) consecutive trading days following but not including the date the
Registration Statement is deemed effective.
Example: Aggregate Purchase Price = $5,000,000
Purchase Price (80% of $7.00) = $5.60
125% of Purchase Price = $7.00
Current Market Price = $6.00
80% of Current Market Price = $4.80
Total Number of Shares = $892,857 (5,000,000 / $5.60)
Additional Shares = ($5,000,000 / $4.80) - 892,857
148,810 = 1,041,667 - 892,857
The Company shall not issue any fractional shares of Common Stock as a
result of this Section 4. In the event Additional Shares are required to issued
hereunder, and the number of shares to be issued is not a whole number, then the
number of shares to be issued will be rounded to the nearest whole number.
The Company shall pay any documentary, stamps, or similar issue or
transfer tax due on the issue of Additional Shares. However, the Purchaser shall
pay any such taxes, which are due because such shares are issued in name other
than its name.
The Company shall reserve out of its authorized but unissued Common
Stock a minimum of 2,000,000 shares of Common Stock to permit the issuance of
all of the Additional Shares required to be issued hereunder, and shall reserve
such Additional Shares as may be needed. All Additional Shares shall be, when
issued in accordance herewith, duly authorized, validly issued, fully paid and
nonassessable.
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<PAGE>
In the event that the re-pricing would make Purchaser a 5% or more
holder of the Company's common stock if all the Additional Shares were issued at
one time, the Company shall only issue 4.9% to the Purchaser at a time and
whenever Purchaser's holdings fall to 4.0% or less, the Company shall issue an
additional 0.9% of Shares. Purchaser hereby agrees that it will vote all shares
of its common stock to retain Camilo Pereira as Chief Executive Officer and a
Director of the Company and to maintain the Board of Directors serving at the
time that the Purchaser would otherwise become a 5% or more holder, subject only
to termination for cause.
(g) Redemption Terms. The Company reserves the right, at its sole
option, to repurchase any of the Shares not previously sold by Purchaser at any
time up to one (1) year following the Closing Date. If the Company exercises
such right to repurchase on or before the one (1) year anniversary following the
Closing Date, it shall pay the Purchaser, in U.S. currency One Hundred
Twenty Five Percent (125%) of the amount paid for such repurchased Shares by the
Purchaser pursuant to the terms of this Agreement. The Company may exercise its
repurchase rights hereunder by notifying the Purchaser by facsimile at the
number listed in this Agreement or in accordance with Section 9 of this
Agreement. The Company shall state in such notice the number of Shares it
intends to repurchase, the amount that it will pay to effect such repurchase and
the date by which the Purchaser must deliver the Shares to Joseph B. LaRocco,
Escrow Agent (including the Escrow Agent's address) unless the Company is
already in receipt of those Shares to be repurchased. The Purchaser shall be
prohibited from selling or trading the Shares subject to the repurchase notice
after the notice has been received. The Company shall give the Purchaser at
least three (3) business day's notice of the above information and shall only be
permitted to give such notice after Rebecca Del Medico, Esq., or other mutually
acceptable attorney, is in receipt of that amount of funds necessary to effect
the redemption. On or before the date by which the Purchaser is to deliver the
original Shares to the Escrow Agent, the Company shall wire to the Escrow Agent
that amount necessary to pay the Purchaser to effect the repurchase. After the
Escrow Agent is in receipt of the original Shares and those funds necessary to
effectuate the repurchase, the Escrow Agent shall wire those funds to the
Purchaser and deliver to the Company the original Shares via overnight courier.
The Company shall make any payments required under the terms of this
subparagraph 4(g) to the Escrow Agent within five (5) business days following
the date the Company sends the Purchaser a notice to repurchase.
(h) The Company shall furnish to Purchaser such number of prospectuses
and other documents incidental to the registration of the Shares, including any
amendment of or supplements thereto.
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<PAGE>
5. LIMITS ON AMOUNT OF OWNERSHIP.
Notwithstanding the provisions hereof, in no event except if there is
(i) a public announcement that 50% or more of the Company is being acquired,
(ii) a public announcement that the Company is being merged, or (iii) a public
announcement that there is a change in control, shall the Purchaser be entitled
to own more than 4.99% of the outstanding shares of Common Stock. For purposes
of the proviso to the immediately preceding sentence, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), except as otherwise provided in clause (1) of
such proviso.
6. MERGERS AND ADJUSTMENTS
Until such time as the additional shares, if any, are issued:
(a) If the Company merges or consolidates with another corporation
or sells or transfers all or substantially all of its assets to another person
and the Purchaser is entitled to receive stock, securities or property in
respect of or in exchange for Common Stock, then as a condition of such merger,
consolidation, sale or transfer, the Company and any such successor, purchaser
or transferee shall agree that such Additional Shares shall be issued to
Purchaser on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer that the Purchaser would have received
immediately before such merger, consolidation, sale or transfer, subject to
adjustments which shall be as nearly equivalent as may be practicable to
adjustments provided herein.
(b) The Company shall not consolidate or merge into, or transfer
all or substantially all of its assets to, any person, unless such person assume
in writing the obligations of the Company under this Agreement and immediately
after such transaction no defaults exist. Any reference herein to the Company
shall refer to such surviving or transferee corporation and the obligations of
the Company shall terminate upon such written assumption.
(c) Adjustments. The number of Additional Shares issuable pursuant
to the terms of this Agreement shall be subject to adjustments as follows:
(i) In case the Company shall (A) pay a dividend on Common
Stock in Common Stock or securities convertible into, exchangeable for or
otherwise entitling a holder thereof to receive Common Stock, (B) declare a
dividend payable in cash on its Common Stock and at substantially the same time
offer its shareholders a right to purchase new Common Stock (or securities
convertible into, exchangeable for or otherwise entitling a holder thereof to
receive Common Stock) from the proceeds of such dividend (all Common Stock so
issued shall be deemed to have been issued as a stock dividend), (C) subdivide
its outstanding shares of Common Stock into a greater number of shares of Common
Stock, (D) combine its outstanding shares of Common Stock
18
<PAGE>
into a smaller number of shares of Common Stock, or (E) issue by
reclassification, reorganization or recapitalization of its Common Stock any
shares of Common Stock or other securities of the Company, the number of
Additional Shares that would have been issuable immediately prior thereto shall
be adjusted so that the Purchaser shall be entitled to receive after the
happening of any of the events described above that number and kind of shares as
the Purchaser would have received prior to the happening of such event or any
record date with respect thereto. Any adjustment made pursuant to this
subdivision shall become effective immediately after the close of business on
the record date in the case of a stock dividend and shall become effective
immediately after the close of business on the effective date in the case of a
stock split, subdivision, combination or reclassification.
(ii) In case the Company shall distribute, without receiving
consideration therefor, to all holders of its Common Stock evidences of its
indebtedness or assets (excluding cash dividends other than as described in
Section 6(c)(i)), or rights, options or warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock, then in such case, the number of Additional Shares that would thereafter
have been issuable shall be determined by multiplying the number of Additional
Shares theretofore issuable, by a fraction, of which the numerator shall be the
closing bid price per share of Common Stock on the record date for such
distribution, and of which the denominator shall be the closing bid price of the
Common Stock less the then fair value (as determined by the Board of Directors
of the Company, whose determination shall be conclusive) of the portion of the
assets or evidences of indebtedness so distributed or of such subscription
rights, options or warrants, or of such convertible or exchangeable securities
applicable to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
distribution.
(iii) Any adjustment in the number of shares of Common Stock
issuable hereunder otherwise required to be made by this Section 6 will not have
to be adjusted if such adjustment would not require an increase or decrease in
one percent (1%) or more in the number of Additional Shares issuable pursuant to
the terms of this Agreement. No adjustment in the number of Additional Shares
issuable pursuant to the terms of this Agreement will be made for the issuance
of shares of capital stock to directors, employees or independent contractors
pursuant to the Company's or any of its subsidiaries' stock option, for the
purpose of the Company's Common Stock warrants issued, issuable or to be issued
for services rendered by others to the Company, stock ownership or other benefit
plans or arrangements or trusts related thereto or for issuance of any shares of
Common Stock pursuant to any plan providing for the reinvestment of dividends or
interest payable on securities of the Company and the investment of additional
optional amounts in shares of Common Stock under such plan.
19
<PAGE>
7. DELIVERY INSTRUCTIONS.
Prior to the Closing Date, the Company shall deliver to the Escrow
Agent a signed Registration Rights Agreement in the form attached hereto as
Exhibit A. The Shares being purchased hereunder shall be delivered to Joseph B.
LaRocco, Esq. as Escrow Agent, who will hold them in escrow until funds have
been wired to the Company at which time the Escrow Agent shall then have the
Shares delivered to the Purchaser, per the Purchaser's instructions.
B. UNDERSTANDINGS.
The undersigned understands, acknowledges and agrees with the Company
as follows:
FOR ALL SUBSCRIBERS:
(a) This Subscription may be rejected, in whole or in part, by the
Company in its sole and absolute discretion at any time before the date set for
closing unless the Company has given notice of acceptance of the undersigned's
subscription by signing this Subscription Agreement.
(b) No U.S. federal or state agency or any agency of any other
jurisdiction has made any finding or determination as to the fairness of the
terms of the Offering for investment nor any recommendation or endorsement of
the Shares.
(c) The representations, warranties and agreements of the undersigned
and the Company contained herein and in any other writing delivered in
connection with the transactions contemplated hereby shall be true and correct
in all material respects on and as of the date of the sale of the Shares, as if
made on and as of such date and shall survive the execution and delivery of this
Subscription Agreement and the purchase of the Shares.
(d) IN MAKING AN INVESTMENT DECISION, PURCHASERS MUST RELY ON THEIR OWN
EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THE SHARES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THE
MEMORANDUM OR THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
(e) The Regulation D Offering is intended to be exempt from
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act
20
<PAGE>
and the provisions of Regulation D thereunder, which is in part dependent upon
the truth, completeness and accuracy of the statements made by the undersigned
herein and in the Questionnaire.
(f) it is understood that in order not to jeopardize the Offering's
exempt status under Section 4(2) of the Securities Act and Regulation D, any
transferee may, at a minimum, be required to fulfill the investor suitability
requirements thereunder.
(g) THE SHARES MAY NOT BE TRANSFERRED, RESOLD OR OTHERWISE DISPOSED OF
EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS SHOULD BE
AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME.
(h) NASAA UNIFORM LEGEND
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933 AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
(i) The undersigned acknowledges and is aware that except for the three
day rescission rights provided under Florida law, the undersigned is entitled to
cancel, terminate or revoke this subscription, and any agreements made in
connection herewith shall survive my death or disability.
(j) The undersigned has had the opportunity to ask questions of, and
receive answers from management of the Company regarding the terms and
conditions of this Subscription Agreement, and the transactions contemplated
thereby, as well as the affairs of the Company and related matters.
21
<PAGE>
(k) The undersigned understands that he may have access to whatever
additional information concerning the Company, its financial condition, its
business, its prospects, its management, its capitalization, and other similar
matters that he may desire, provided that the Company can acquire such
information without unreasonable effort or expense. In addition, as required by
ss.517.061(11)(a)(3), Florida Statutes, and Rule 3E-500.05(a) thereunder, the
undersigned understands that he may have, at the offices of the Company, at any
reasonable hour, after reasonable prior notice, access to the materials set
forth in the Rule which the Company can obtain without unreasonable effort or
expense.
(l) The undersigned has had the opportunity to obtain additional
information.
9. LITIGATION.
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
thereon, or arising out of, under, or in connection with, this agreement or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Company or Purchaser shall be brought and maintained exclusively
in the Federal courts of the state of New York. The Company hereby expressly and
irrevocably submits to the jurisdiction of the federal courts of the State of
New York for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property. The Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Purchaser and the Company hereby
knowingly, voluntarily and intentionally waive any rights they may have to a
trial by jury in respect of any litigation based hereon, or arising out of,
under, or in connection with, this agreement, or any course of conduct, course
of dealing, statements (whether oral or written) or actions of the Purchaser or
the Company. The Company acknowledges and agrees that it has received full and
sufficient consideration for this provision and that this provision is a
material inducement for the Purchaser entering into this agreement.
22
<PAGE>
(c) Submission To Jurisdiction. Any legal action or proceeding in
connection with this Agreement or the performance hereof may be brought
exclusively in the federal courts located in New York, and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
10. NOTICE.
All notices or other communications required or permitted hereunder
shall be in writing and shall be deemed given, delivered and received (a) when
delivered, if delivered personally, (b) four days after mailing. when sent by
registered or certified mail, return receipt requested and postage prepaid, (c)
the next business day after delivery to a private courier service, and (d) on
the date of delivery by telecopy, receipt confirmed, provided that a
confirmation copy is sent on the next business day by registered or certified
mail, return receipt requested and postage prepaid, in each case addressed as
follows:
If to Company, to:
QUEST NET CORP.
2999 NE 191st Street, Suite PH8
Miami, FL 33180
Attention: Camilo Pereira
Phone: 305-935-1080
Fax:
If to Investor, to:
_____________________________
_____________________________
_____________________________
Phone: ______________________
Fax: ________________________
or to such other address as the recipient party may indicate by a notice
delivered to the sending party (such change of address notice to be deemed
given, delivered and received only upon actual receipt thereof by the recipient
of such notice).
11. MISCELLANEOUS.
(a) All pronouns and any variations thereof used herein shall be deemed
to refer to the masculine, feminine, impersonal, singular, or plural, as the
identity of the person or persons may require.
23
<PAGE>
(b) Neither this Subscription Agreement nor any provision hereof shall
be waived, modified, changed, discharged, terminated, revoked or canceled,
except by an instrument in writing signed by the party effecting the same
against whom any change, discharge or termination is sought.
(c) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed: (i) if to the
Company, QUEST NET CORP., 2999 NE 191st Street, Suite PH8, Miami, FL 33180 or
(ii) if to the undersigned, at the address for correspondence set forth in the
Questionnaire, or at such other address as may have been specified by written
notice given in accordance with this paragraph 11(c).
(d) This Subscription Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of Florida,
as such laws are applied by Florida courts to agreements entered into, and to be
performed in, Florida by and between residents of Florida, and shall be binding
upon the undersigned, the undersigned's heirs, estate, legal representatives,
successors and assigns and shall inure to the benefit of the Company, its
successors and assigns. If any provision of this Subscription Agreement is
invalid or unenforceable under any applicable statue or rule of law, then such
provisions shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof that may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
(e) This Subscription Agreement, together with Exhibits A, B, C and D
attached hereto and made a part hereof, constitute the entire agreement between
the parties hereto with respect to the subject matter hereof and may be amended
only by a writing executed by both parties hereto. This Subscription Agreement
may be executed in counterparts. A facsimile transmission of an executed
counterpart of this Subscription Agreement shall be effective as an original.
[THE BALANCE OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK]
24
<PAGE>
QUEST NET CORP.
CORPORATION QUESTIONNAIRE
Investor Name: JAMES LLC
The information contained in this Questionnaire is being furnished in
order to determine whether the undersigned CORPORATION'S Subscription to
purchase the Common Stock described in the Subscription Agreement may be
accepted.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY. The undersigned CORPORATION understands, however, that the
Company may present this Questionnaire to such parties as it deems appropriate
if called upon to establish that the proposed offer and sale of the Common Stock
is exempt from registration under the Securities Act of 1933, as amended.
Further, the undersigned CORPORATION understands that the offering is required
to be reported to the Securities and Exchange Commission and to various state
securities and "blue sky" regulators.
IN ADDITION TO SIGNING THE SIGNATURE PAGE, THE UNDERSIGNED CORPORATION
MUST COMPLETE FORM W-9 ATTACHED HERETO.
I. PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES TO THE
CORPORATION.
| | 1. The undersigned CORPORATION: (a) has total assets in excess of
$5,000,000; (b) was not formed for the specific purpose of acquiring
the Common Stock and (c) has its principal place of business in ______.
| | 2. Each of the shareholders of the undersigned CORPORATION is able to
certify that such shareholder meets at least one of the following three
conditions:
(a) the shareholder is a natural person whose individual net worth*
or joint net worth with his or her spouse exceeds $1,000,000; or
(b) the shareholder is a natural person who had an individual
income* in excess of $200,000 in each of 1997 and 1998 and who
reasonably expects an individual income in excess of $200,000 in
1999; or
25
<PAGE>
(c) Each of the shareholders of the undersigned CORPORATION is able
to certify that such shareholder is a natural person who, together
with his or her spouse, has had a joint income in excess of
$300,000 in each of 1997 and 1998 and who reasonably expects a
joint income in excess of $300,000 during 1999; and the undersigned
CORPORATION has its principal place of business in _______________.
For purposes of this Questionnaire, the term "net worth" means the
excess of total assets over total liabilities. In determining income, an
investor should add to his or her adjusted gross income any amounts attributable
to tax-exempt income received, losses claimed as a limited partner in any
limited partnership, deductions claimed for depletion, contributions to IRA or
Keogh retirement plan, alimony payments and any amount by which income from
long-term capital gains has been reduced in arriving at adjusted gross income.
| | 3. The undersigned CORPORATION is:
(a) a bank as defined in Section 3(a)(2) of the Securities Act; or
(b) a savings and loan association or other institution as defined
in Section 3(a)(5)(A) of the Securities Act whether acting in its
individual or fiduciary capacity; or
(c) a broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934; or
(d) an insurance company as defined in Section 2(13) of the
Securities Act; or
(e) an investment company registered under the Investment Company
Act of 1940 or a business development company as defined in Section
2(a)(48) of the Investment Company Act of 1940.
|X| 4. The undersigned is an entity in which all of the equity owners are
accredited investors,
26
<PAGE>
II. OTHER CERTIFICATIONS.
By signing the Signature Page, the undersigned certifies the following:
(a) That the CORPORATION'S purchase of the Common Stock will be solely
for the CORPORATION'S own account and not for the account of any other
person or entity, and
(b) that the CORPORATION'S name, address of principal place of
business, place of incorporation and taxpayer identification number as
set forth in this Questionnaire are true, correct and complete.
Ill. GENERAL INFORMATION
(a) PROSPECTIVE PURCHASER (THE CORPORATION)
Name: JAMES LLC
Principal Place of Business: c/o Citco Trustees (Cayman), Ltd.
---------------------------------
Corporate Centre, West Bay Road, P.O. Box 31106 SMB, Grand Cayman,
- --------------------------------------------------------------------------------
Cayman Islands, BWI
- --------------------------------------------------------------------------------
Address for Correspondence (if different): As above
------------------
(Number and Street)
- --------------------------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number: 345 949-3977
-----------------------------------------
(Area Code) (Number)
Jurisdiction of Incorporation: Cayman Islands
-----------------
Date of Formation:
-------------------------------------------------------------
Taxpayer Identification Number:
------------------------------------------------
Number of Shareholders:
--------------------------------------------------------
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE
CORPORATION.
Name: CTC Corporation LTD
--------------------------------------------------------------------------
Position or Title: Sole Director
--------------------------------------------------------------
27
<PAGE>
QUEST NET CORP.
CORPORATION SIGNATURE PAGE
--------------------------
Your signature on this Corporation Signature Page evidences the
agreement by the Purchaser to be bound by the Questionnaire and the Subscription
Agreement.
1. The undersigned hereby represents that (a) the information contained
in the Questionnaire is complete and accurate and (b) the Purchaser will notify
QUEST NET CORP. immediately if any material change in any of the information
occurs prior to the acceptance of the undersigned Purchaser's subscription and
will promptly send QUEST NET CORP. written confirmation of such change.
2. The undersigned officer of the Purchaser hereby certifies that he
has read and understands this Subscription Agreement.
3. The undersigned officer of the Purchaser hereby represents and
warrants that he has been duly authorized by all requisite action on the part of
the Corporation to acquire the Common Stock and sign this Subscription Agreement
on behalf of Quest Net Corp. and further, that JAMES LLC has all requisite
authority to purchase the Common Stock and enter into this Subscription
Agreement.
910,747 27 May 1999
- ------------- -----------------------
Amount of Common Stock subscribed for Date
JAMES LLC
------------------------
(Purchaser)
By: /s/ (illegible)
------------------------
(Signature)
Name:
----------------------
(Please Type or Print)
CTC Corporation Ltd.
Title: Director For: JAMES LLC
----------------------
(Please Type or Print)
THE COMMON STOCK HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT.
28
<PAGE>
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this _________ day of ___________, 1999
QUEST NET CORP.
By: /s/ Camilo Pereira
-----------------------------------------
Camilo Pereira its President and CEO duly
authorized
33
Exhibit 10.9
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of May 27,
1999, by and among QUEST NET CORP, a Florida corporation (the "Company"), and
the undersigned, (the "Subscribers").
W I T N E S S E T H
WHEREAS, upon the terms and subject to the conditions of the
Subscription Agreement, dated as of May 27, 1999, between the Subscribers and
the Company (the "Subscription Agreement"), the Company has agreed to issue and
sell to the Subscribers Common Stock of the Company (the "Shares"), at $5.49
per Share; and
WHEREAS, to induce the Subscribers to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Shares;
NOW THEREFORE, in consideration of the mutual promises, representation,
warranties, covenants and conditions set forth in the Subscription Agreement and
this Registration Rights Agreement, the Company and the Subscribers agree as
follows:
1. Certain Definitions. As used in this Agreement the following terms
shall have the following respective meanings:
"Closing Date" shall mean the date funds are received by the Company
pursuant to the Subscription Agreement.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Company's Common Stock, no par value per
share.
"Registrable Shares" shall mean (i) the Common Stock, (ii) any Common
stock of the Company issued or issuable as Additional Shares pursuant to the
terms of the Subscription Agreement, or upon any stock split, stock dividend,
recapitalization or similar event; provided, however, that shares of Common
Stock or other securities shall no longer be treated as Registrable Shares if
(a) they have been sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, (b) they have been sold
in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933 so that all transfer restrictions and
restrictive legends
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with respect thereto are removed upon consummation of such sale or (c) they are
available for sale under Rule 144 without volume limitations or otherwise, in
the opinion of counsel to the Company, without compliance with the registration
and prospectus delivery requirements of the Securities Act of 1933 so that no
transfer restrictions or restrictive legends will appear upon the Common Stock
certificates following the consummation of such sale.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933 and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement. Said registration shall include all amendments,
post-effective amendments and supplements to any such registration statement as
may be necessary under the Act and the regulations of the Commission to keep
such registration effective with respect to the Registrable Shares until two (2)
years following the Closing Date.
"Registration Expenses" shall mean all expenses incurred by the Company
in compliance with Section 2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, reasonable fees and
disbursements of one counsel for Subscribers, and the reasonable expenses of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company). The Company shall not be responsible for any
Underwriting fees or Commissions.
"Registration Statement" means a registration statement of the Company
on Form S-1 (or any other available form) under the Securities Act of 1933
covering the Registrable Shares.
The "Reserved Shares" shall mean the shares of Common Stock purchased
pursuant to the terms of the Subscription Agreement and the Additional Shares,
issuable pursuant to the terms of the Subscription Agreement that have been duly
and validly reserved for issuance, and upon issuance which shall be duly and
validly issued, fully paid, and non-assessable.
The "Act" shall mean the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Shares.
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2. Registration.
(a) Mandatory Registration. The Company shall use its best efforts to
prepare and file with the SEC, no later than sixty (60) calendar days after the
Closing Date, a Registration Statement on Form S-1 (or any other applicable
form), covering a sufficient number of shares of Common Stock for the
Subscribers but in no event less than 1,700,000 shares of Common Stock. Due to
the fluctuation in the price of the Company's Common Stock during the past 60
days, the parties have agreed that an initial Registration Statement covering
1,700,000 Reserved Shares will probably cover the number of shares of Common
Stock to be issued pursuant to the terms of the Subscription Agreement. Such
Registration Statement shall state that, in accordance with the Securities Act,
it also covers such indeterminate number of additional shares of Common Stock as
may become issuable to prevent dilution resulting from Stock splits, or stock
dividends). The Company represents that only the Subscribers whose signatures
are set forth on the signature page of this Agreement shall have their Shares
registered in the Registration Statement. If at any time after the Closing Date,
the number of registered shares of common stock does not cover that number of
shares of common stock that would be issuable pursuant to the terms of the
Subscription Agreement, then the Company shall, within twenty (20) business days
after receipt of written notice from any Subscribers, either (i) amend the
Registration Statement filed by the Company pursuant to preceding sentence, if
such Registration Statement has not been declared effective by the SEC at that
time, to register all shares of Common Stock that would be issuable pursuant to
the terms of the Subscription Agreement or (ii) if such Registration Statement
has been declared effective by the SEC at that time, file with the SEC an
additional Registration Statement on Form S-1 (or any other available form), to
register such additional shares of Common Stock that exceed the aggregate number
of shares of Common Stock already registered.
(b) Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Subscribers acting by majority in interest of the Registrable Shares subject to
such underwritten offering shall have the right to select one legal counsel to
represent their interests, and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company. The
Subscribers(s) who hold the Registrable Shares to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Shares under federal or state securities
laws, which are payable by the Company pursuant to Section 5 hereof) with
respect to their Registrable Shares and the fees and expenses of such legal
counsel so selected by the Subscribers.
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(c) Certain Fees. The Company shall pay cash liquidated damages as
follows:
(i) 1.0% of the principal amount of the Shares if the Registration
Statement covering this offering is not filed within 60 calendar days following
the Closing Date;
(ii) 2.0% of the principal amount of the Shares for each 30-day period,
or portion thereof, 90 calendar days following the Closing Date that the
Registration Statement covering this offering is not filed;
(iii) 1.0% of the principal amount of the Shares for each 30 day
period, or portion thereof, that the registration ceases to remain effective
during the "Registration Period" as defined in Section 3(a);
(iv) 1.0% of the principal amount of the Shares if the Registration
Statement covering this offering is not declared effective within 120 calendar
days following the Closing Date; and
(v) 2.0% of the principal amount of the Shares for each 30-day period,
or portion thereof, 150 calendar days following the Closing Date that
registration is not declared effective.
The above damages shall continue until the obligation is fulfilled, and
shall be paid within 5 business days after each 30-day period. Failure of the
Company to make payment within said 5 business days shall be considered a
default. The Company acknowledges that its failure to meet any of its
obligations under either Section 2(c) (i), (ii) or (iii) of this Agreement will
cause the Subscribers to suffer damages in an amount that will be difficult to
ascertain. Accordingly, the parties agree that it is appropriate to include in
this Agreement a provision for liquidated damages. The parties acknowledge and
agree that the liquidated damages provision set forth in this section represents
the parties' good faith effort to qualify such damages and, as such, agree that
the form and amount of such liquidated damages are reasonable and will not
constitute a penalty. The payment of liquidated damages shall not relieve the
Company from its obligations to deliver the Common Stock pursuant to the terms
of this Agreement and the Subscription Agreement.
3. Obligation of the Company. In connection with the registration of
the Registrable Shares, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC within sixty (60) days of
the Closing Date, a Registration Statement with respect to not less than the
number of Registrable Shares provided in Section 2(a), above, and thereafter use
its best efforts to cause each Registration Statement relating to Registrable
Shares to become effective the earlier of (A) five business days after notice
from the
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Securities and Exchange Commission that the Registration Statement may be
declared effective, or (Bone hundred twenty (120) days after the Closing Date,
and keep the Registration Statement effective at all times until the earlier of
two (2) years following the Closing Date or the sale of all of the Shares, (the
"Registration Period") which Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
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 in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Shares of the Company covered by the Registration Statement until
such time as all of such Registrable Shares have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statement;
(c) Furnish to each Subscribers whose Registrable Shares are included
in the Registration Statement and its legal counsel identified to the Company,
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents,
as the Subscribers may reasonably request in order to facilitate the disposition
of the Registrable Shares owned by such Subscribers;
(d) Use reasonable efforts to (i) register and qualify the Registrable
Shares covered by the Registration Statement under such other securities or blue
sky laws of such jurisdictions as the Subscribers(s) who hold a majority in
interest of the Registrable Shares being offered reasonably request and in which
significant volumes of shares of Common Stock are traded, (ii) prepare and file
in those jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take such other actions as may be necessary to maintain such registrations
and qualification in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Shares for sale in such jurisdictions: provided, however, that the
Company shall not be required in connection therewith or as a condition thereto
to (A) qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(d), (B) subject itself to general
taxation in any such
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jurisdiction, (C) file a general consent to service of process in any such
jurisdiction, (D) provide any undertakings that cause more than nominal expense
or burden to the Company or (E) make any change in its articles of incorporation
or by-laws or any then existing contracts, which in each case the Board of
Directors of the Company determines to be contrary to the best interests of the
Company and its stockholders;
(e) As promptly as practicable after becoming aware of such event,
notify each Subscribers of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes 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 light of the circumstances under which they were
made, not misleading, and uses its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Subscribers as such Subscribers may
reasonably request;
(f) As promptly as practicable after becoming aware of such event,
notify each Subscribers who holds Registrable Shares being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of any notice of effectiveness or any stop order or other suspension of
the effectiveness of the Registration Statement at the earliest possible time;
(g) Use its best efforts, if eligible, either to (i) cause all the
Registrable Shares covered by the Registration Statement to be listed on a
national securities exchange and on each additional national securities exchange
on which securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable Shares is then permitted
under the rules of such exchange, or (ii) secure designation of all the
Registrable Shares covered by the Registration Statement on the National
Association of Securities Dealers Automated Quotations System ("NASDAQ") within
the meaning of Rule 11Aa2-1 of the SEC under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the quotation of the Registrable
Shares on the NASDAQ National Market System; or if, despite the Company's
commercially reasonable efforts to satisfy the preceding clause (i) or (ii), the
Company is unsuccessful in doing so, to secure NASD authorization and quotation
for such Registrable Shares on either the SmallCap Market or the
over-the-counter bulletin board and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such Registrable Shares;
(h) Provide a transfer agent for the Registrable Shares not later than
the effective date of the Registration Statement;
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(i) Cooperate with the Subscribers who hold Registrable Shares being offered to
facilitate the timely preparation and delivery of certificates for the
Registrable Shares to be offered pursuant to the Registration Statement and
enable such certificates for the Registrable Shares to be in such denominations
or amounts as the case may be, as the Subscribers may reasonably request and
registration in such names as the Subscribers may request; and, within five (5)
business days after a Registration Statement which includes Registrable Shares
is ordered effective by the SEC, the Company shall deliver, and shall cause
legal counsel selected by the Company to deliver, to the transfer agent for the
Registrable Shares (with copies to the Subscribers whose Registrable Shares are
included in such Registration Statement) an appropriate instruction and opinion
of such counsel; and
(j) Take all other reasonable actions necessary to expedite and
facilitate distribution to the Subscribers of the Registrable Shares pursuant to
the Registration Statement.
(k) The Company shall use its best efforts to effect such registration
(including, without limitation, the execution of an undertaking to file
amendments, post-effective amendments, and supplements appropriate qualification
under applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Act and the Regulations
of the Commission) as may be so requested and as would permit or facilitate the
sale and distribution of all or such Registrable Shares as are specified in such
request.
(1) After filing the Registration Statement with SEC, the Company shall
use its best efforts to cause each Registration Statement relating to the
Registrable Shares to become effective five days after notice from the SEC that
the Registration Statement may be declared effective, and keep the Registration
Statement effective at all times until the earliest (the "Registration Period")
of the date when the Subscribers may sell all Registrable Shares under Rule 144
without volume limitations or (ii) the date the Subscribers no longer own any of
the Registrable Shares, which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
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 in which they were made, not misleading.
4. Expenses of Registration. Except as set forth in this Agreement the
Company shall bear all Registration Expenses incurred in connection with any
registration, qualification or compliance of the Registrable Shares pursuant to
this Agreement. All Selling Expenses shall be born by the Subscribers.
7
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5. Registration Procedures. The Company shall advise the Subscribers of
the initiation of a registration under the Agreement and as to the completion
thereof. At its expenses the Company will:
(a) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act and the Regulations of the Commission with respect to the
disposition of securities covered by such registration statement; and
(b) Concerning the Securities. The issuance, sale and delivery
of the Shares have been duly authorized by all required corporate action on the
part of Company, and when issued, sold and delivered in accordance with the
terms hereof and thereof for the consideration expressed herein and therein,
will be duly and validly issued and enforceable in accordance with their terms,
subject to the laws of bankruptcy and creditors' rights generally. At least
1,700,000 Shares have been duly and validly reserved for issuance and, upon
issuance shall be duly and validly issued, fully paid, and non-assessable (the
"Reserved Shares").
Prior to issuance of all the Shares pursuant to the terms of the
Subscription Agreement, if at anytime there is an insufficient number of
Reserved Shares, then in such event, the Company will move to call and hold a
shareholder's meeting within 45 days of such event for the sole purpose of
authorizing additional Shares to facilitate the conversions. In such an event
the Company shall: (1) recommend its current or future officers, directors and
other control people to vote their shares in favor of increasing the authorized
number of shares of Common Stock and (2) recommend to all shareholders to vote
their shares in favor of increasing the authorized number of shares of Common
Stock. Company represents and warrants that under no circumstances will it deny
or prevent the Subscribers' right to receive Additional Shares as permitted
under the terms of the Subscription Agreement or this Registration Rights
Agreement.
6. Indemnification.
(a) The Company will indemnify and hold harmless the Subscribers, each
of its stockholders, executives, employees, representatives, affiliates,
officers, directors and partners, and each person controlling the Subscribers,
with respect to which registration has been effected pursuant to this Agreement
against all claims, losses, damages and liabilities (or actions, proceedings or
settlements in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus or
other document incident to any such registration, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of the Act or any rule or regulation thereunder applicable to the
Company and will reimburse the Subscribers, each of its
8
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stockholders, executives, employees, representatives, affiliates, officers,
directors and partners, and each person controlling the Subscribers for any
legal and any other expenses as they are reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided, however, that the indemnity contained in this Section 6(a) shall not
apply to amounts paid in settlement of any such claim, loss, damage, liability
or action if such Settlement is effected without the consent of the Company, and
provided further that the Company shall not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by the Subscribers and stated to be specifically for
use in the registration statement filed pursuant to this Agreement. The
foregoing indemnity agreement is further subject to the condition that insofar
as it relates to any untrue prospectus; such indemnity agreement shall not inure
to the benefit of the foregoing unindemnified parties if copies of a final
prospectus correcting the misstatement, or alleged misstatement, omission or
alleged omission upon which such loss, liability, claim or damage is based is
timely delivered to such indemnified party and a copy thereof was not furnished
to the person asserting the loss, liability, claim or damage.
(b) The Subscribers will indemnify the Company, each of its
stockholders, executives, employers, representatives, affiliates, directors,
officers and each person who controls the Company within the meaning of the Act
and the rules and regulations thereunder against all claims, losses, damages and
liabilities (or actions, proceedings, or settlements in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus or other document incident to any such
registration or based upon any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation of the Act or any rule of regulation
thereunder applicable to the Company and will reimburse the Company, and its
stockholders, executives, employers, representatives, affiliates, directors,
officers, partners, persons, underwriters or control persons for any legal or
any other expense reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to
the extent, and only to the extent, that such untrue statement (or alleged
untrue statement) or omission or alleged omission) relating to such holder is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by the Subscribers and stated to be specifically for use therein;
provided, however, that the obligations of the Subscribers shall be limited to
an amount equal to the proceeds to the Subscribers and provided further that
such indemnification obligations shall not apply if the Company modifies or
changes to a material extent the written information furnished by such Holder.
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(c) Each party entitled to indemnification under this Section 6
(an "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party, (whose approval shall not
unreasonably be withheld or delayed), and the Indemnified Party may participate
in such defense at such indemnified party's expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement. No
Indemnifying Party, in the defense of any such claim or litigation, shall except
with the consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
7. Information by Holder of Registrable Shares. The Company's
obligation to register the Registrable Shares shall be contingent upon the
Subscribers' timely furnishing to the Company such information regarding the
Subscribers and the distribution proposed by such holder of Registrable Shares
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration referred to in this Agreement.
8. Transfers or Assignments of Registration Rights. The Subscribers'
rights under this Agreement to cause the (Company to register the Registrable
Shares may be transferred or assigned by the Subscribers only to affiliates of
the Subscribers or to a purchaser of the Shares, or any portion of the Shares,
in the principal amount of at least $50,000 or at least 50 Shares and such
assignment shall only be effective upon delivery of written notice of such
assignment to the Company within thirty (30) days of the assignment. Upon such
assignment the assignee shall have all the rights and obligations of the
Subscribers hereunder.
9. Miscellaneous.
9.1 Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the State of Florida without giving effect to
conflict of laws principles.
9.2 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto.
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9.3 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
9.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, or delivered by hand or by messenger or courier delivery
service, addressed (a) if to the Subscribers, at the address listed in the
Subscription Agreement or at such other address as the Subscribers shall have
furnished to the Company in writing, or (b) if to the Company, at its executive
office, or at such other address as the Company shall have furnished to the
Subscribers in writing.
9.5 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Registrable Shares, upon any
breach or default of the Company under this Agreement, shall impair any such
right, power, or remedy of such holder nor shall it be construed to be a waiver
of any such breach or default, or an acquiesce therein, or of or in any similar
breach or default thereunder occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any holder of any breach or default under this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
9.6 Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument. An executed facsimile counterpart of this Agreement shall be
effective as an original.
9.7 Severability. In the case any provision of this agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
9.8 Amendments. This provision of this Agreement may be amended at any
time and from time to time, and particular provisions of this Agreement may be
waived, with and only with an agreement or consent in writing signed by the
Company and by the owners of all of the Registrable Shares as of the date of
such amendment or waiver.
9.9 Termination or Registration Rights. This Agreement shall terminate
at such time as there ceases to be any outstanding Shares.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
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The foregoing Registration Rights Agreement is hereby executed as of
the date first above written.
QUEST NET CORP.
By:
----------------------
JAMES, LLC
By [Illegible]
-----------------------
CTC Corporation Ltd.
Director
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The foregoing Registration Rights Agreement is hereby executed as of
the date first above written.
QUEST NET CORP.
By: (ILLEGIBLE)
----------------------
By
----------------------
By
----------------------
12
Exhibit 10.11
SOFTWARE PURCHASE AGREEMENT
This Agreement made as of August 19, 1998, by and between QUEST NET Corp., a
Colorado Corporation, 2740 E Oakland Park Boulevard, Suite 206, Fort Lauderdale,
Florida 33306 ("QUEST NET"), and Secure Transaction International Corp., a
Florida Corporation, 265 South Federal Highway, Suite 335, Deerfield Beach
Florida 33441 ("STIC").
W I T N E S E T H:
RECITALS
WHEREAS, QUEST NET has created software for the encryption of on-line
credit card processing, on-line casino transactions, on-line stock brokerage
transactions and encrypted financial transaction, as more fully described on
Exhibit A hereto and incorporated herein (the "Software"); and
WHEREAS, QUEST NET represents that it owns the exclusive rights, title
and interest in and to the Software and that QUEST NET has the exclusive legal
right to manufacture, sell and distribute the Software, either individually or
through others;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
hereto agree as follows:
1. PURCHASE AND SALE.
(a) Except as set forth in Section 1 (c) below, QUEST NET hereby sells,
assigns and transfers all rights, title, and interest to the Software and all
world rights related to the Software, including the right to publish same to
STIC. QUEST NET shall also provide "object" files and executable files, together
with example input and output of the program. The Software shall be accompanied
by a complete manual, which manual shall be sufficient to enable a user who is
untrained in the program to operate the program in its intended fashion. For the
purpose of the copyright code, STIC shall be considered the author and QUEST
NET shall execute any and all documents necessary to effectuate same. For the
purpose of this Agreement, the term "Software" shall also include the source
code, programming code, "object" files and executable files, example input and
output of the program and manuals.
(b) As a condition of the sale and in consideration of the Royalty
payment set forth below, QUEST NET hereby agrees to update the software, on an
"as needed basis" to avoid market obsolescence (the "Updates").
<PAGE>
(c) STIC hereby acknowledges that QUEST NET is not the original owner
of the Software and that prior commercial sales of the software have taken
place. These sales encompassed the use of the Software only and did not include
the source code or any other rights title or interest in the Software.
2. CONSIDERATION. For and in consideration of the sale of the Software, the
Updates, and the rights contained herein, QUEST NET shall receive the following:
(a) 50,000 shares of STIC's Series A Preferred Non-Voting Stock, $10.00
per share face value (the "Preferred Stock"), for an aggregate dollar amount of
US $500,000. The rights and preferences of the Preferred Stock are more fully
described in Exhibit "B" hereto and incorporated herein. The delivery of the
Preferred certificates will take place within fifteen (15) business days or less
from the delivery of the Software (the "Delivery Date").
The Preferred Stock shall be convertible, on a quarterly basis, at the
rate of 12,500 shares per quarter (the "Convertible Shares"), into shares of
STIC's common stock. For the purpose of this Agreement, the term "Quarter" or
"Quarterly Basis" shall mean that period of time beginning on the date the
Software is first commercially used and ending each three month period
thereafter. QUEST NET shall advise STIC, in writing, by the 30th day of the last
month of each quarter, of its intent to convert the Convertible Shares and STIC
shall have 15 days from the receipt of the notice of conversion to redeem the
Convertible Shares at a redemption price of $10.00 per share. If STIC does not
redeem the Convertible Shares within such 15 day period, QUEST NET shall have
the right to convert the Convertible Shares, at a conversion rate equal to (i)
the average 5 day bid price (as of the date of conversion) of STIC's common
stock, if the Company is publicly traded, or at the book value per share of the
Common Stock, if the common stock is not publicly traded.
In addition to the redemption right provided above, STIC shall have the
right to call the Preferred Stock not converted, in whole or in part, at any
time.
(b) A royalty fee of 2% of the gross sales generated by the use of the
Software (the "Royalty").
Royalty payments for Software use shall be made in U.S. currency by
STIC on the 15th day after the end of each month for usage paid and cleared
during the preceding month. In the event that STIC issues a credit, voids the
sale of, or returns the payment for Software usage or STIC is unable to collect
payment for usage, any Royalty paid to QUEST NET for such Software will be
deducted from QUEST NET's next Royalty payment. In the event that QUEST NET is
not due a Royalty payment, QUEST NET hereby agrees to remit to STIC the Royalty
paid for uncollected, void or credited usage within 30 days from the date of
notice from STIC.
2
<PAGE>
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
(a) QUEST NET represents and warrants that it has the right to sell, transfer,
and convey the Software, including but not limited to the programming code and
manuals to STIC. QUEST NET also represents and warrants that the Software does
not infringe upon any copyright, patent or other right held by others and that
the sale and transfer of the Software and all rights, title and interest thereto
does not breach or violate any understanding or agreement which QUEST NET is a
party to or by which it is bound.
QUEST NET shall indemnify and hold harmless STIC, its officers,
directors, employees, customers or agents (collectively referred to in this
Paragraph 3(b) as "STIC") for damages or expenses resulting from any claim, suit
or proceeding brought against STIC, arising from the marketing, sale or
distribution of the Software with regard to the issues of product liability and
infringements of any intellectual property or ownership rights, patents or
copyrights. STIC agrees that QUEST NET has the right to defend, or at its option
to settle, and QUEST NET agrees, at its own expense, to defend or at its option
to settle, any claim, suit or proceeding brought against STIC with regard to the
issue of product liability and infringements of any intellectual property or
ownership rights, patents or copyrights. QUEST NET agrees to pay any costs of
litigation, investigation or defense incurred by STIC, including reasonable
attorney fees, and final judgement, entered against STIC on such issue in any
such suit or proceeding. QUEST NET shall be relieved of the foregoing
obligations unless STIC notifies QUEST NET in writing, within ten business days
of receipt of notification of such suit, claim or proceeding, and gives QUEST
NET authority to proceed as contemplated herein.
(b) QUEST NET warrants that the code is workmanlike and has been properly tested
in keeping with good software design practice and that the Software will perform
as contemplated herein. In the event that the Software does not perform, STIC,
at its sole option, may require QUEST NET to rewrite the program until the
Software does perform or, in the event that the rewritten Software does not
perform, may terminate this Agreement, and cancel the Preferred Shares and
cancel any common stock issued upon conversion of the Preferred Stock. In the
event that this Agreement is terminated and STIC has redeemed any of the
Preferred Shares, QUEST NET will repay the redemption price to STIC within 30
days of such termination.
4. COMPETITION. During the period of time that Royalties are being paid to QUEST
NET pursuant to this Agreement, QUEST NET shall not contract with or perform
services for any competitor to STIC.
3
<PAGE>
5. RELATIONSHIP OF PARTIES. Except as set forth herein, neither party shall have
any right or authority to create any obligation on the part of the other party
or bind the other party to any agreement.
6. INVESTMENT REPRESENTATION. QUEST NET hereby acknowledges that the Preferred
Shares and the shares underlying the Preferred Shares are not being registered
under the Securities Act of 1933, as amended (the "Securities Act"), or under
any state securities statute. The Preferred Shares and the shares underlying the
Preferred Shares are being acquired by QUEST NET for its own account, for
investment purposes only, and not with a view to any distribution thereof. QUEST
NET agrees that no transfer or other disposition of the Preferred Shares or the
shares underlying the Preferred Shares or any interest therein will be made in
violation of the Securities Act or any state securities statute. QUEST NET will
execute an Investment Letter to this effect.
7. NOTICES. Any notice required or permitted by this Agreement shall be in
writing and shall be delivered by U.S. Certified Mail, return receipt requested,
or by special messenger service with receipt (such as Federal Express), by
facsimile delivery or by hand, to the parties at the addresses set forth above
or such substitute address of which notice is given in like manner.
The transmission confirmation receipt from the sender's facsimile machine shall
be conclusive evidence of successful facsimile delivery. Time shall be counted
to, or from, as the case may be, the delivery in person or by mailing.
8. GOVERNING LAW, VENUE AND ARBITRATION. This Agreement shall be deemed to be
executed in the State of Florida and governed by the laws of the State of
Florida. Any controversy or claim arising out of or relating to this Agreement
or to the interpretation, breach or enforcement thereof, except a claim for
injunctive relief, shall be submitted to an arbitrator and settled by
arbitration in Broward County Florida in accordance with the rules then
obtaining of the American Arbitration Association. Any award made by the
arbitrator shall be final, binding and conclusive on all parties hereto for all
purposes, and judgement may be entered thereon in any court having jurisdiction
thereof. Nothing contained herein shall serve to prohibit the parties from
seeking injunctive relief in a court of competent jurisdiction.
9. SEVERABILITY CLAUSE. In the event any parts of this Agreement are found to be
void, the remaining provisions of this Agreement shall nevertheless be binding
with the same effect as though the void parts were deleted.
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<PAGE>
10. SUCCESSORS. Subject to the provisions of this Agreement, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
11. SECTION AND PARAGRAPH HEADINGS. The section and paragraph headings in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
12. WAIVER AND AMENDMENT. The waiver by any party to this Agreement of a breach
of any provision hereof by any other party shall not be construed as a waiver of
any subsequent breach by any party. No provision of this Agreement may be
terminated, amended, supplemented, waived or modified other than by an
instrument in writing signed by the party against whom the enforcement of the
termination, amendment, supplement, waiver or modification is sought.
13. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument. The execution of this Agreement may be
by actual or facsimile signature, provided however that original signatures must
be provided within ten days from the date of signing.
14. ATTORNEY FEES AND COSTS. In the event any action is commenced, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
expenses.
15. ASSIGNMENT. This Agreement may be assigned in whole or in part by STIC to
any wholly owned subsidiary. No other assignment will be permitted by either
party without the other party prior written consent, which shall not be
unreasonably withheld.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all prior oral or written agreements regarding the
same subject matter.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
In the presence of: Secure Transaction International
Corporation
/s/ [ILLEGIBLE] BY: /s/ J. Forest Tytler
- ------------------------- --------------------------
J. Forest Tytler,
Chairman
QUEST NET International, Inc.
BY: /s/ Camilo Pereira
- ------------------------- -------------------------
Camilo Pereira,
President
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<PAGE>
EXHIBIT A
DESCRIPTION OF SOFTWARE
The Software is a secure, encrypted (at 128 bits) credit card processing program
that can be used in connection with online purchase transactions, online casino
transactions, online banking transactions, and online stock brokerage
transactions.
The Software will provide the following functions:
Secure Credit Card Machine
1. Process forms.
2. Send information to Visual Basic SQL Query Server.
3. Send transaction id and authorization to sites telling them
authorization code and/or user name, password and time limit.
4. Deal with Web 900 and other external verification programs.
Pay per View Services
1. This can be any machine giving out the data after the credit card has
been authorized.
2. Checks with the Visual Basic SQL Query Server to determine how much
credit is remaining on user's account.
Internal PC's
1. Queries SQ: database through Visual Basic SQL Query Server.
2. Adds updates/deletes customer information from databases.
Visual Basic SQL Ouery Server
1. Uses IC Verify and other programs to verify credit cards and other
financial information.
2. Query, add, and delete information in the three databases.
3. Waits for client connection and verifies IP address and other
information.
4. Performs the actual queries.
5. Returns output information to the client's application.
IC Verify Authorization Tools
1. Authorizes credit cards.
2. Authorizes checks
Microsoft SQL Databases
1. Stores all the data
2. Backup databases to tape archive periodically.
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<PAGE>
EXHIBIT B
Description of Series "A" Preferred Stock
The Series A Preferred Stock of STIC was properly authorized by the STIC's Board
of Directors and was filed with Secretary of State. The shares initially have a
designated face value of ten dollars ($10) per share. Fifty million (50,000,000)
shares of Preferred Stock have been authorized, 20,000,000 of which were
designated as Series A, 50,000 of which were reserved for issuance as
consideration for this transactions with QUEST NET. The Series A Preferred
shares have never traded in the market and have never been registered as a part
of any registration statement filed by STIC with the Securities and Exchange
Commission. The value of the shares was arbitrarily determined by STIC's Board
of Directors after taking into consideration, among other things, the features
of the Series A Preferred Stock and the prospects for the company's success in
connection with projects acquired with Series A Preferred Stock.
The features of the preferred stock to be issued hereunder are:
1. $10.00 face value per share.
2. Non-Voting
3. STIC has the right to redeem at any time, any and all Preferred Shares
by payment of the face value thereof.
4. The Preferred Shares shall be convertible, at a conversion rate equal
to (i) the average 5 day bid price (as of the date of conversion) of STIC's
common stock, if the Company is publicly traded, or at the book value per share
of the Common Stock, if the common stock is not publicly traded.
THE PREFERRED SHARES AND THE SHARES UNDERLYING THE PREFERRED SHARES ARE NOT
BEING REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER ANY STATE SECURITIES STATUTE. THE PREFERRED SHARES AND THE SHARE
UNDERLYING THE PREFERRED SHARES ARE BEING ACQUIRED BY QUEST NET FOR ITS OWN
ACCOUNT, FOR INVESTMENT PURPOSES ONLY, AND NOT WITH A VIEW TO ANY DISTRIBUTION
THEREOF. QUEST NET AGREES THAT NO TRANSFER OR OTHER DISPOSITION OF THE PREFERRED
SHARES OR THE SHARES UNDERLYING THE PREFERRED SHARES OR ANY INTEREST
8
<PAGE>
THEREIN WILL BE MADE IN VIOLATION OF THE SECURITIES ACT OR ANY STATE SECURITIES
STATUTE. QUEST NET WILL EXECUTE AN INVESTMENT LETTER TO THIS EFFECT.
FLORIDA LAW PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE PERSONS IN
FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER WITHIN THREE DAYS
AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE
COMPANY, AN AGENT OF THE COMPANY OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER
THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
OCCURS LATER. SUCH WITHDRAWAL WILL BE WITHOUT ANY FURTHER LIABILITY TO ANY
PERSON. TO ACCOMPLISH SUCH WITHDRAWAL, YOU NEED ONLY SEND A LETTER OR TELEGRAM
TO THE COMPANY AT THE ADDRESS SHOWN HEREIN INDICATING YOUR INTENTION TO
WITHDRAW. SUCH LETTER OR TELEGRAM MUST BE SENT AND POSTMARKED PRIOR TO THE END
OF THE AFOREMENTIONED THIRD BUSINESS DAY. IF SENDING A LETTER, AN INVESTOR
SHOULD SEND IT BY CERTIFIED MAIL. RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS
RECEIVED AND TO EVIDENCE THE TIME WHEN IT IS MAILED. ANY ORAL REQUESTS FOR
RESCISSION SHOULD BE ACCOMPANIED BY A REQUEST FOR WRITTEN CONFIRMATION THE ORAL
REQUEST WAS RECEIVED ON A TIMELY BASIS.
AS REQUIRED BY SECTION 517.061(11)(A)3 FLORIDA STATUTES, AND RULE
3E-500.05(5)(A) PROMULGATED THEREUNDER, YOU OR YOUR REPRESENTATIVES MAY HAVE, AT
THE OFFICES OF THE COMPANY AT ANY REASONABLE HOUR, AFTER REASONABLE PRIOR
NOTICE, ACCESS TO THE MATERIALS SET FORTH IN THE RULE WHICH THE COMPANY CAN
OBTAIN WITHOUT UNREASONABLE EFFORT OR EXPENSE.
9
Exhibit 10.12
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, entered into this 28 day of December
1998, by and between Quest Net Corp. ("Quest"), with its principal office
located in Fort Lauderdale, Florida and Grupo Internet Latinoamericano, S.A.
("Grupo Internet"), with its principal office located in Road Town, Tortola,
British Virgin Islands.
WHEREAS, Grupo Internet owns certain types of Internet provider equipment and
certain domains and sites as more fully described on Schedule 1 hereto and
incorporated herein ("the Assets").
WHEREAS, Grupo Internet wishes to sell, and Quest wishes to purchase
the Assets.
NOW THEREFORE, in consideration of the performance of the mutual
covenants set forth herein, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties intend to be legally bound
and agree as follows:
1. PURCHASE OF ASSETS. Quest agrees to purchase and Grupo Internet agrees to
sell the Assets set forth in Schedule 1, attached hereto and incorporated
herein.
(a) the Assets to be delivered at Closing (as hereinafter defined)
shall be of a quality usable and saleable in the ordinary course of
business.
1.1 Purchase Price. Quest shall pay Grupo Internet the sum of
$2,000,000.00 ("the Purchase Price"), payable by delivering to Grupo Internet
one half of the purchase price in Quest restricted common stock, valued at 25%
of the average bid and asked price for the three trading days prior to closing.
The balance of the Purchase Price (the "Balance") will be paid in Quest
Preferred Stock, as more fully described on Schedule 1.1 hereto, redeemable in
whole or part after two months from the date of this Agreement. The redemption
price of the Preferred Stock shall be equal to its face value. In the event that
the Preferred shares are not redeemed by Quest as set forth above, the Sellers
shall have the option to convert the Preferred shares not redeemed into free
trading common stock of Quest at a conversion price 25% of the average bid and
asked price for the three trading days prior to conversion per share.
1.2 Transfer of Assets. At Closing Quest shall deliver to Grupo
Internet the Certificates for the Common and Preferred Shares. At Closing Grupo
Internet shall deliver to Quest such documents as Quest shall reasonably deem
necessary to effect the transaction, including such instruments of sale,
transfer, and conveyance including a Bill of Sale as shall be effected to vest
in Quest all of Grupo Internet's rights and title to, and interest in the
Assets. Promptly after closing Grupo Internet shall take all steps necessary to
deliver to Quest (FOB in Miami Florida) the Assets.
2. NO ASSUMPTION OF LIABILITIES.
2.1 Except for the liabilities set forth on Schedule 2.1, Quest shall
not expressly, impliedly or by operation of the law assume any of the
liabilities of Grupo Internet which relate to or arise, out of the Assets and
which arise or are incurred up to the time of Closing or which arise from
transactions, acts or agreements entered into or performed by Grupo Internet up
to the time of Closing. In the event that a claim is made against Quest in
connection with such liabilities, Quest shall be entitled to and shall receive
to the fullest extent the indemnification provisions of Section 3.1 of this
Agreement.
2.2 Grupo Internet shall not expressly, impliedly or by operation of
the law assume any of the liabilities of Quest which relate to or arise out of
the Assets and which are incurred on and subsequent to, the date
<PAGE>
of Closing, provided however that Grupo Internet shall be liable for liabilities
which arise from transactions, acts or agreements entered into or performed by
Grupo Internet up to the time of Closing. In the event that a claim is made
against Grupo Internet or affiliates in connection with such liabilities, Quest
and affiliates shall be entitled to and shall receive, to the fullest extent,
the indemnification provisions of Section 3.2 of this Agreement.
2.3 At the time of the Closing, Grupo Internet will have no unpaid
creditors, including, federal, state and local tax liabilities which would leave
a lien on the Assets or claim against Grupo Internet or Quest for the amount of
their debt. This covenant is in lieu of compliance with the Bulk State Laws
Chapter 676, Florida Statute should that law be applicable.
3. INDEMNIFICATION.
3.1 Grupo Internet shall indemnify, protect and hold harmless Quest,
without the execution of any further documents from and against any losses,
damages, injuries, claims, demands and expenses, including reasonable attorneys
fees for all proceedings arising out of or connected with the action of Grupo
Internet, its agents and employees, arising out of the transaction entered into
or arising out of any statement of facts existing prior to the date of Closing
hereof, or arising out of any breach of a covenant contained herein, including
but not limited to any product liability claim or breach of warranty, express or
implied, arising out of the sale of the Assets by Grupo Internet prior to the
date of Closing. This indemnification provision is given in lieu of compliance
with the Bulk Transfer provision of Chapter 676, Florida Statutes, but it's
scope and operation shall not be limited to those creditors mentioned in said
Chapter.
3.2 Quest shall indemnify, protect and hold harmless Grupo Internet,
without the execution of any further documents, from and against any losses,
damages, injuries, claims, demands and expenses including reasonable attorneys
fees for all proceedings arising out of or connected with or in any manner
related to any action of Quest, it's agent and employees, arising out of the
transactions entered into or arising out of any statement of facts existing at
or subsequent to the date of Closing hereof, including but not limited to, any
product liability claim or breach of warranty, express or implied, arising out
of or in connection with the Assets at or subsequent to the date of Closing.
3.3 Each Party agrees that upon receipt by it of notice of any demand,
claim, action or proceeding with respect to any matter as to which the other
Party has agreed to indemnify it hereunder it will immediately give notice
thereof in writing to the other Party, together with all details of such demand,
assertion, claim, action or proceeding as it may then have. The Indemnifying
Party shall have the right to contest and defend any demand, claim, action or
proceeding with respect to which it agreed to indemnify the other Party under
the provision of this Agreement.
4. BROKERAGE. Quest and Grupo Internet severally warrant and represent that each
has not retained, and is not obligated to pay, any person or firm, brokerage,
finders fees, commission or other similar charges resulting from or arising out
of the transaction contemplated by this Agreement, and each to hold harmless and
indemnify the others from all such claims.
5. RISK OF LOSS. The risk of any loss, damage or destruction to any of the
Assets to be transferred to Quest hereunder shall be borne by Grupo Internet at
all times prior to the date the Assets are delivered to Quest FOB in Miami (the
"Delivery"). Upon Delivery and thereafter the risk of any loss, damage or
destruction to any of the Assets shall be borne by Quest.
2
<PAGE>
6. REPRESENTATIONS AND WARRANTIES BY QUEST. Quest represents and warrants as
follows:
(a) The authorized capital stock of Quest consists of 50,000,000 shares
of common stock, no par value, and 5,000,000 shares of non-voting Preferred
stock no par value. All of Quests' issued and outstanding shares of common stock
are fully paid and non-assessable and not issued in violation of the preemptive
rights of any person or entity;
(b) Quest is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Colorado with all requisite power
to carry on its business as it is now being, and as it is presently proposed to
be, conducted;
(c) The execution and delivery of this Agreement, compliance with and
fulfillment of the terms of this Agreement, do not and, at the Closing, will not
(i) constitute a default or result in the creation of any lien, security
interest, charge or encumbrance upon Quest other than liabilities which are
herein contemplated, nor does it give any third party the right to accelerate
any obligation against Quest, or (ii) conflict with any other material agreement
to which Quest is a party or by which it is bound;
(d) No insolvency proceedings of any character, including without
limitation, bankruptcy, receivership, composition or arrangement with creditors,
voluntarily or involuntarily, designating Quest as the bankrupt or the
insolvent, are pending, or to the knowledge of Quest threatened, and Quest has
not made an assignment for the benefit of creditors, nor has Quest taken any
action with a view to, or which would constitute the basis for, the institution
of such insolvency proceedings;
(e) All corporate action required to be taken by Quest to enter into
this Agreement has been taken; and
(f) Mr. Camilo Pereira is the duly elected and serving Chairman of
Quest and has been duly empowered to execute this Agreement, and any amendments
or modifications hereto, by and on behalf of Quest.
7. REPRESENTATIONS AND WARRANTIES BY GRUPO INTERNET. Grupo Internet hereby
represents and warrants as follows:
(a) Grupo Internet has valid and marketable title to the Assets, free
and clear of any and all security interests, pledges, claims, liens,
encumbrances or other rights of any other person or entity; except as set forth
on Schedule 7 hereto and incorporated herein,
(b) Grupo Internet has the absolute and unrestricted right, power,
authority, and capacity to sell the Assets,
(c) Grupo Internet is not a party to any written or oral agreement
which grants an option or right of first refusal or other arrangements to
acquire any of the Assets and that Grupo Internet confirms by the execution of
this Agreement that there are no contingent liabilities, factual or otherwise,
threatened or pending litigation, contractually assumed obligations or
unasserted possible claims which might affect the Assets or the transfer
thereof. Any undisclosed liability shall remain the sole responsibility of Grupo
Internet,
(d) No judgment is presently filed of record against Grupo Internet or
any officer or director of Grupo Internet, and there is no litigation,
arbitration, investigation, inquiry or other proceedings by or before any
federal, state, county or local governmental agency or authority, or by any
person or entity pending or to the knowledge of Grupo Internet, threatened
against Grupo Internet, that would affect the Assets or the transfer thereof and
Grupo Internet has no knowledge of any material basis for any such litigation,
proceeding, arbitration, claim, investigation, inquiry or proceeding,
3
<PAGE>
(e) Grupo Internet is a corporation duly organized and validly existing
and in good standing under the laws of British Virgin Islands. It has all
requisite corporate power and authority to carry on its business as now being
conducted, to enter into this Agreement and to carry out and perform the terms
and provisions of this Agreement,
(f) Juris Magister is the duly elected and serving Director of Grupo
Internet and has been duly empowered to execute this Agreement, and any
amendments and notifications hereby, by and on behalf of Grupo Internet,
(g) The execution, delivery and consummation of this Agreement have
been duly and validly authorized by the Board of Directors and, if necessary,
Grupo Internet of Grupo Internet in a manner provided by and as required by law,
(h) In order to induce Quest to issue the Common and Preferred Shares,
recognizing that Quest will be relying on the information and on the
representations set forth below, Grupo Internet hereby represents, warrants, and
agrees as follows:
(i) Grupo Internet has determined that the purchase of the common and
Preferred shares and the shares underlying the Preferred Shares of
Quest (the "Shares") is a suitable investment for Grupo Internet and
that Grupo Internet is able to bear economic risks including a total
loss of an investment in the Shares.
(ii) Grupo Internet is purchasing the Shares for its own account for
investment, and not with a view to or for sale in connection with the
distribution of the Shares nor with any present intention of selling or
otherwise disposing of all or any part of the Shares. Grupo Internet
hereby acknowledges its understanding that the Shares are not being
registered under the Securities Act of 1933 (the "Act"), or any state
securities laws on the ground that the issuance and sale of the Shares
to Grupo Internet is exempt under the Act and relevant state securities
laws as not involving a public offering. Grupo Internet agrees not to
sell the Shares unless they are subsequently registered or an exemption
from such registration is available. Grupo Internet authorizes Quest to
place a legend denoting the restrictions on the certificates to be
issued.
Grupo Internet further acknowledges its understanding that Quest's
reliance on such exemptions are, in part, based upon the foregoing
representations, warranties, and agreements by it and that the
statutory basis for such exemptions would not be present, if
notwithstanding such representations, warranties and agreements, Grupo
Internet were acquiring the Shares for resale on the occurrence or
non-occurrence of some pre-determined event. In order to induce Quest
to issue and sell the Shares to Grupo Internet, it is agreed that Quest
will have no obligation to recognize the ownership, beneficial or
otherwise, of such shares by anyone but Grupo Internet, except as set
forth herein.
(iii) Grupo Internet acknowledges and is aware that, except as set
forth herein, they will not transfer or assign the Shares, or any
interest therein, the assignment and transferability of the Shares will
be governed by this Agreement and all applicable laws.
(iv) Grupo Internet has acknowledged and is aware that, except for the
three day rescission rights provided under Florida law and as provided
in this Agreement, they are not entitled to cancel, terminate or revoke
this subscription, and any agreements of Grupo Internet in connection
herewith shall survive the termination of this Agreement.
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<PAGE>
(v) Grupo Internet has had the opportunity to ask questions of, and
receive answers from management of Quest regarding the terms and
conditions of this Agreement, and the transactions contemplated
thereby, as well as the affairs of Quest and related matters.
Grupo Internet may have access to whatever additional information
concerning Quest, its financial condition, its business, its prospects,
its management, its capitalization, and other similar matters that it
or its Quest representative, if any, desires, provided that Quest can
acquire such information without unreasonable effort or expense. In
addition, as required by Section 5l7.061(11)(a)(3), Florida Statutes,
and Rule 3E-500.05(a) thereunder, Grupo Internet and its representative
may have, at the offices of Quest, at any reasonable hour, after
reasonable prior notice, access to the materials set forth in the Rule
which Quest can obtain without unreasonable effort or expense.
(iv) Grupo Internet has had the opportunity to obtain additional
information necessary to verify the accuracy of the information
referred to in subparagraph (v) hereof.
Grupo Internet hereby agrees to indemnify and hold harmless Quest, its
respective officers, directors, shareholders, employees, agents and attorneys
against any and all losses, claims, demands, liabilities and expenses (including
reasonable attorney fees, expert witness and accounting fees and other
disbursements and costs or other expenses) incurred by each such person in
connection with defending or investigating any such claims or liabilities,
whether or not resulting in any liability to such person) to which any such
indemnified party may become subject under the Act, under any other statute, at
common law or otherwise, insofar as such losses, claims, demands, liabilities
and expenses (a) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact by Grupo Internet contained in this
Agreement, or (b) arise out of or are based upon any breach of any
representation, warranty or agreement by Grupo Internet contained herein.
The representations, warranties, and agreements contained herein shall survive
the delivery of and payment for, the Shares.
- --------------------------------------------------------------------------------
FLORIDA LAW PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE PERSONS IN
FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER WITHIN THREE DAYS
AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO QUEST NET,
AN AGENT OF QUEST NET OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER THE
AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
OCCURS LATER. PAYMENTS FOR TERMINATED SUBSCRIPTIONS VOIDED BY THE PURCHASER AS
PROVIDED FOR IN THIS PARAGRAPH WILL BE PROMPTLY REFUNDED WITHOUT INTEREST.
- --------------------------------------------------------------------------------
8. INVESTMENT REPRESENTATION. Grupo Internet hereby acknowledges that the Shares
and the Preferred are not being registered under the Securities Act of 1933, as
amended (the "Securities Act"), or under any state securities statute. The
Shares and the Preferred are being acquired by Grupo Internet for its own
account, for investment purposes only, and not with a view to any distribution
thereof. Grupo Internet agrees that no transfer or other disposition of the
Shares or the Preferred or any interest therein will be made in violation of the
Securities Act or any state securities statute.
9. FURTHER ASSURANCES. The parties agree to execute and deliver from time to
time at the request of any of the other parties to this Agreement and without
further consideration, such additional documents and to take such other action
necessary to consummate the transactions contemplated herein.
5
<PAGE>
10. NOTICES. All notices, offers, acceptance and any other acts under this
Agreement (except payment) shall be in writing, and shall be sufficiently given
if delivered to the addressees in person, by Federal Express or similar
receipted delivery, by facsimile delivery or, if mailed, postage prepaid, by
certified mail, return receipt requested as follows:
Quest Quest Net Corp.
2740 E Oakland Park Boulevard
Suite 206
Fort Lauderdale, Florida 33306
With Copy to: Rebecca J. Del Medico, Esq.
14 Tara Lakes Drive East
Boynton Beach, Florida 33436
Grupo Internet Grupo Internet Latinoamericano, S.A.
P.O. BOX 3175
Road Town, Tortola,
British Virgin Islands
With Copy to: Commonwealth Trust Limited
P.O. BOX 3321
Road Town, Tortola,
British Virgin Islands
or to such other address as either of them, by written notice to the other may
designate from time to time. The transmission confirmation receipt from the
sender's facsimile machine shall be conclusive evidence of successful facsimile
delivery. Time shall be counted to, or from, as the case may be, the delivery in
person or by mailing.
11. GOVERNING LAW. This Agreement and any dispute, disagreement, or issue of
construction or interpretation arising hereunder whether relating to its
execution, its validity, the obligations provided herein or performance shall be
brought in a court of competent jurisdiction in Broward County, Florida and
governed or interpreted according to the internal laws of the State of Florida.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement between
the parties and supersedes all prior oral or written agreements regarding the
same subject matter.
13. SEVERABILITY CLAUSE. In the event any parts of this Agreement are found to
be void, the remaining provisions of this Agreement shall nevertheless be
binding with the same effect as though the void parts were deleted.
14. SUCCESSORS. Subject to the provisions of this Agreement, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
15. SECTION AND PARAGRAPH HEADINGS. The section and paragraph headings in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
16. AMENDMENT. This Agreement may be amended only by an instrument in writing
executed by all parties hereto.
6
<PAGE>
17. SCHEDULES. The schedules attached to this Agreement are hereby incorporated
herein.
18. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument. The execution of this Agreement may be
by actual or facsimile signature, provided however that original signatures must
be provided within five business days from the date of signing.
19. BINDING ON PARTIES. In the event that less than all the parties hereto do
not execute this Agreement, this Agreement, nevertheless shall be binding upon
those parties who executed it.
IN WITNESS WHEREOF, the undersigned have executed this Agreement this 28 day of
December 1998.
Signed Sealed & Delivered in our presence.
QUEST NET CORP.
- ----------------------------- By: /s/ Camilo Pereira
--------------------------------
Camilo Pereira, Chairman
GRUPO INTERNET LATINOAMERICANO, S.A.
- ----------------------------- By: /s/ Juris Magister
--------------------------------
Juris Magister, Director
7
<PAGE>
SCHEDULE 1
ASSETS
1
<PAGE>
SCHEDULE 1.1
DESCRIPTION OF PREFERRED STOCK
Description of Preferred Stock
The Preferred Stock of Quest Net Corp. was properly authorized by its Board of
Directors and through corporate filings with Secretary of State. The shares to
be issued in connection with this Agreement shall have a designated face value
of ten dollars ($10) per share. Five million (5,000,000) shares of Preferred
are authorized. The Preferred shares have never traded in the market and have
never been registered as a part of any registration statement filed by Quest Net
with the Securities and Exchange Commission. The value of the shares to be
issued in connection with this Agreement was arbitrarily determined by Quest
Net's Board of Directors after taking into consideration, among other things,
the features of the Preferred Stock, the prospects for the company's success in
connection with projects acquired with Preferred Stock, overall market
conditions and the impact of such conditions on the trading of the Quest Net
common stock.
The preferred stock features issued pursuant to this Agreement are:
1. $10.00 face value per share.
2. Redeemable, in whole or in part, by Net Quest at any time. The
redemption price of the Preferred Stock shall be equal to its face value. In the
event that the Preferred shares are not redeemed by Net Quest within 6 months
from the date of issuance, Grupo Internet shall have the option to convert the
Preferred shares not redeemed into the common stock of Net Quest at a conversion
price equal to the average bid and asked price of the common stock for the three
trading days prior to conversion.
3. non-voting
2
<PAGE>
SCHEDULE 2.1
LIABILITIES
3
<PAGE>
SCHEDULE 7
SECURITY INTERESTS, PLEDGES, CLAIMS, LIENS, ENCUMBRANCES OR OTHER RIGHTS
OF ANY OTHER PERSON OR ENTITY IN THE ASSETS
4
<PAGE>
- --------------------------------------------------------------------------------
Miscellaneous Items
- --------------------------------------------------------------------------------
Quantity Description
- --------------------------------------------------------------------------------
1 1400W UPS - Stand Alone
3 1400W UPS - Rack Mounable
1 900W UPS - Stand Alone
6 15 Amp Power Breaker & Distribution Boards
1 DLT2500XT 4+1 Tape Backup System
1 Typhoon 4mm DAT Drive
1 Bay Networks BayStack 350T-HD 24 100/10 Ethernet Switch
1 Bay Networks BayStack 350T 16 Port 100/10 Ethernet Switch
1 10BaseT 24 Port Ethernet Hub
1 Cisco 2501 Frame Relay Router
1 Astrocom Frame Relay CSU/DSU
1 Kentrox Frame Relay CSU/DSU
2 Bay Networks BayStack Frame Relay Routers
3 Portmaster 2e Remote Access Controllers
1 Bay Networks M5000 Remote Access Concentrator
1 Bay Networks 58000 16 Port Switch For M5000
8 Bay Networks 5399 Remote Access Concentrator Modules
2 Kentrox Frame Relay/ATM IDSU
2 Cisco 7200 Seires Frame Relay/ATM Routers
1 Kentrox Frame Relay/ATM SMDSU
10 200W UPS - Stand Alone
2 8 Port 10BaseT Ethernet Hubs
1 OkiData 1050 Fax/Copy Machine
1 Toshiba 2532 Turbo Photocopier
8 12 Port Assend RAC Module (2 V.90, 6 V43+)
22 48 Port Assend RAC Module (V34+)
1 6x12 Port + Service Module Assend Max 2000
1 10x48 Port + 2 WAN + Service Module Assend Max 4000T
2 3Com Etherlink III 10BaseT/100BaseT Ethernet Cards
2 Kingston Tulip 10BaseT Ethernet Cards
2 Intel Etherexpress 10BaseT/100BaseT Elthernet Cards
12 Steel Rack Mounts (3 Shelves, Adjustable)
25 Assorted Length Network Cables
25 Assorted Clipart CDROM's
- --------------------------------------------------------------------------------
Page 1 of 8
<PAGE>
- --------------------------------------------------------------------------------
Network Servers
- --------------------------------------------------------------------------------
Server Name Description
- --------------------------------------------------------------------------------
Web Server 150 MHz Alpha MIPS Motherboard, 64MB EDO Ram,
2GB EIDE Hard Disk, RedHat Linux Alpha 4.2
Web Server 150 MHz Alpha MIPS Motherboard, 64MB EDO Ram,
2GB EIDE Hard Disk, RedHat Linux Alpha 4.2
Web Server 150 MHz Alpha MIPS Motherboard, 64MB EDO Ram,
2GB EIDE Hard Disk, RedHat Linux Alpha 4.2
Web Server 150 MHz Alpha MIPS Motherboard, 64MB EDO Ram,
2GB EIDE Hard Disk, RedHat Linux Alpha 4.2
Web Server Pentium 200MHz Motherboard, 64MB EDO Ram,
3GB EIDE Hard Disk, 8x ATAPI CDROM,
RedHat Linux 4.2
Web Server Pentium 166MHz Motherboard, 64MB EDO Ram,
3GB EIDE Hard Disk, 8x ATAPI CDROM,
Windows NT 4 Server
Web Indexer Cyrix 300MHz Motherboard, 256MB EDO Ram,
10GB SCSI II Hard Disk, Symbios Logic 16Bit
SCSI II Controller, Windows NT 4 Server
Web Spiders Pentium 200MHz Motherboard, 64MB EDO Ram,
4GB EIDE Hard Disk, Windows NT 4 Server
Annex Server Pentium 133MHz Motherboard, 64MB EDO Ram,
2GB EIDE Hard Disk, 8x ATAPI CDROM,
Windows NT 4 Server
Web Server Pentium 200MHz Motherboard, 64MB EDO Ram,
Red Hat Linux 4.2 4GB EIDE HD, 8x CDROM
- --------------------------------------------------------------------------------
Page 2 of 8
<PAGE>
- --------------------------------------------------------------------------------
Network Servers
- --------------------------------------------------------------------------------
Server ID Description
- --------------------------------------------------------------------------------
Primary Domain Dec Alpha Multi 166MHz Motherboard, 32MB
True Parity Ram, 2GB SCSI II Hard Disk, NT
4 Server
Secondary Domain Dec Alpha Multi 166MHz Motherboard, 32MB
True Parity Ram, 2GB SCSI II Hard Disk, NT
4 Server
Search Engine Pentium 200MHz Motherboard, 128MB EDO Ram,
Server 4GB EIDE Hard Disk, 4GB EIDE Hard Disk,
Red Hat Linux 5.2
Server Pentium 90MHz Motherboard, 90MB EDO Ram,
4GB EIDE Hard Disk, 8x ATAPI CDROM,
Red Hat Linux 4.2
Primary Web Serv Pentium Pro 200MHz Motherboard, 256MB DIMMS,
8GB SCSI II Hard Disk, 7GB SCSCI II Hard Disk,
24x ATAPI CDROM, Red Hat Linux 5.2,
Intel EtherExpress 100BaseT/10BaseT Ethernet
Secure Server Pentium 166MHz Motherboard, 32MB EDO Ram,
2GB EIDE Hard Disk, 8x ATAPI CDROM,
Windows NT 4 Server
Secondary DNS Pentium 166MHz Motherboard, 64MB EDO Ram,
2GB EIDE Hard Disk, 8x ATAPI CDROM,
Red Hat Linux 4.2
Web Server Pentium 100MHz Motherboard, 64MB EDO Ram,
4GB EIDE Hard Disk, 4GB EIDE Hard Disk,
8x ATAPI CDROM, Travan Surestore 4 Tape,
Windows NT 4 Server
- --------------------------------------------------------------------------------
Page 3 of 8
<PAGE>
- --------------------------------------------------------------------------------
OC-12 Smart Ring
- --------------------------------------------------------------------------------
Quantity Description
- --------------------------------------------------------------------------------
1 AT&T Light Guide Distribution Shelf
1 Lucent 21" Rack Mount
1 Lucent DSX 3/4 BNC Patch Bay
1 Lucent FLM150 T1/ISDN Patch Bay
1 Fujitsu FLM150 ADM
1 Lucent SLC Series 5 Power Bay
2 Lucent 336A1PU Power Rectifiers
2 Lucent 336A1PU Power Chargers
2 Lucent 336A1PU Power Batery Packs
5 Fujitsu FC9612 ADM Controller Cards
2 Fujitsu FC9612 ADM Smart Ring Fibre Couplers
3 Fujitsu FC9612 ADM T3 Controler Cards
1 Fujitsu FC9612 ADM Smart Ring Monitor/Switch
2 Fujitsu FC9612 ADM Power Monitor/Switch
6 Fujitsu FC9612 ADM Dual T1 Controller Cards
- --------------------------------------------------------------------------------
Page 4 of 8
<PAGE>
- --------------------------------------------------------------------------------
Miscellaneous Items
- --------------------------------------------------------------------------------
Quantity Description
- --------------------------------------------------------------------------------
1 Cold Fusion Professional 3.1
1 Borland Delphi Professional 3.0
2 MSDN DevNet CDROM Set (1997, 1998)
1 Adobe PhotoShop 4.01
1 Corel Draw 7.0
1 16 Port Ethernet Hub
1 Mv vision Internet Camera Server
4 2400x1200x24Bit Flat Bed Scanners
1 3.5MM To Video Feed Convertor
2 Aluminium Rack Mounts
8 Assorted Shape Shelves For Aluminium Rack Mount
1 Transfer Type CD Labeller
1 FloodGate-1 Anti Syn Flood Module
1 Firewall-1 Control Module
1 Firewall-1 Security Module
1 Firewall-1 Firewall Module
2 Frontpage 97 (Mac & PC)
1 Frontpage 98
4 Red Hat Linux (Intel/Alpha - 4.2/5.2)
1 Websuite 2
2 Solaris x86 (2.5.2 & 2.6)
1 IBM AntiVirus
1 Web Painter
1 Web Motion
3 Windows NT Server 4
2 Windows NT Workstation 4
1 ACT Database
7 Windows 95 (Release 1, 2B and 3)
1 MSQL Server 6.5
1 MSQL Worstation 6.5
1 PowerTCP 5
1 Rubicon 1.1 For Delphi 3
1 Corel Web Graphics
1 Barcode Anthing
- --------------------------------------------------------------------------------
Page 5 of 8
<PAGE>
- --------------------------------------------------------------------------------
Network Workstations
- --------------------------------------------------------------------------------
Workstation ID Description
- --------------------------------------------------------------------------------
PC Pentium 200MHz Motherboard, 128MB EDO Ram,
4GB SCSI II Hard Drive, 4GB EIDE Hard Drive,
3GB EIDE Hard Drive, 8x SCSI II CDROM,
2x SCSI II CDROM Writable, Matrox Millenium 4MB
Video Card, Sound Blaster 16Bit Sound Card,
Symbios Logic SCSI Card, Windows NT Workstation
PC Pentium 133MHz Motherboard, 80MB EDO Ram,
2GB EIDE Hard Drive, Sound Blaster 16Bit Sound
Card, 24x ATAPI CDROM, OkiData 4W Laser Printer,
Windows 95
PC Cyrix 586 233MHz Motherboard, 32MB EDO Ram,
2GB EIDE Hard Drive, Sound Blaster 16Bit Sound
Card, 24x ATAPI CDROM, HP672C Color Printer,
Windows 95
PC Pentium 200MHz Motherboard, 64MB EDO Ram,
2GB EIDE Hard Drive, 24x ATAPI CDROM, Sound
Blaster 16Bit Sound Card, HP672C Color Printer,
Windows NT 4 Server
PC AMD K5 233MHz Motherboard, 64MB EDO Ram,
3GB EIDE Hard Drive, 24x ATAPI CDROM,
Opti Audio OPL3 Sound Card, Windows 95
PC Pentium 133MHz Motherboard, 64MB EDO Ram,
3GB EIDE Hard Disk, 8x ATAPI CDROM,
Windows 95
PC AMD K5 233MHZ Motherboard, 64MB EDO Ram,
3GB EIDE Hard Drive, 24x ATAPI CDROM,
Windows 95
- --------------------------------------------------------------------------------
Page 6 of 8
<PAGE>
- --------------------------------------------------------------------------------
Network Servers
- --------------------------------------------------------------------------------
Server ID Description
- --------------------------------------------------------------------------------
Server Mail Pentium 166MHz Motherboard, 128MB EDO Ram,
4GB SCSCI II Hard Disk, 8x SCSI II CDROM,
Windows NT 4 Server
Electronic Mail Dec Alpha Multi 166MHz Motherboard, 64MB
True Parity Ram, 2GB SCSI II Hard Disk,
Red Hat Linux 4.2 Alpha
Mail Server Pentium 200MHz Motherboard, 64MB EDO Ram,
4GB EIDE Hard Disk, 4GB EIDE Hard Disk,
Red Hat Linux 5.2
Primary DNS Pentium 200MHz Motherboard, 128MB EDO Ram,
3GB SCSI II Hard Disk, 4GB SCSI II Hard Disk,
12x SCSI II CDROM, Red Hat Linux 4.2,
EtherExpress III 100BaseT Ethernet
Workstation Items Unless otherwise described all workstations come with
either a Kingston Tulip 10BaseT or 3Com Etherlink III
10BaseT Ethernet, Keyboard, Mouse (PS2 or Serial),
Mouse Pad, 15" or 17" Monitor (SVGA), SVGA
Graphics Card (1024x768x24Bit minimum), Sound
Card (Sound Blaster 16Bit or Compatible).
Misc Server Items Unless otherwise described all servers come with
either a Kingston Tulip 10BaseT or 3Com Etherlink III
10BaseT Ethernet, Keyboard, Mouse (PS2 or Serial),
VGA Graphics Card (640x480x256 minimum)
- --------------------------------------------------------------------------------
Page 7 of 8
<PAGE>
- --------------------------------------------------------------------------------
OC-3
- --------------------------------------------------------------------------------
Quantity Description
- --------------------------------------------------------------------------------
1 AT&T Light Guide Distribution Shelf
1 Lucent 21" Rack Mount
1 Lucent DSX 3/4 BNC Patch Bay
1 Lucent FLM150 T1/ISDN Patch Bay
1 Fujitsu FLM150 ADM
1 Lucent SLC Series 5 Power Bay
2 Lucent 336A1PU Power Rectifiers
2 Lucent 336A1PU Power Chargers
2 Lucent 336A1PU Power Batery Packs
5 Fujitsu FC9612 ADM Controller Cards
2 Fujitsu FC9612 ADM Switching Fibre Couplers
2 Fujitsu FC9612 ADM T3 Controler Cards
1 Fujitsu FC9612 ADM Fibre Optic Monitor/Switch
2 Fujitsu FC9612 ADM Power Monitor/Switch
6 Fujitsu FC9612 ADM Dual T1 Controller Cards
- --------------------------------------------------------------------------------
Page 8 of 8
Exhibit 10.13
SOFTWARE PURCHASE AGREEMENT
This Agreement made as of July 27, 1998, by and between SIMPLEX LTDA., a
Brazilian Corporation, Rua P-25 No. 774, Setor dos Funcionarios, Goiania,
Goisa, 74.000, Brazil ("SIMPLEX"), and QUEST NET CORP., a Colorado Corporation,
2740 E Oakland Park Boulevard, Suite 206, Fort Lauderdale, Florida 33306
("QUESTNET").
W I T N E S E T H:
RECITALS
WHEREAS, SIMPLEX has created software for the encryption of on-line
credit card processing, on-line casino transactions, on-line stock brokerage
transactions and encrypted financial transaction, as more fully described on
Exhibit A hereto and incorporated herein (the "Software"); and
WHEREAS, SIMPLEX represents that it owns the exclusive rights, title
and interest in and to the Software and that SIMPLEX has the exclusive legal
right to manufacture, sell and distribute the Software, either individually or
through others;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
hereto agree as follows:
1. PURCHASE AND SALE.
(a) Except as set forth in Section 1 (c) below, SIMPLEX hereby sells,
assigns and transfers all rights, title, and interest to the Software and all
world rights related to the Software, including the right to publish same to
QUESTNET. SIMPLEX shall also provide "object" files and executable files,
together with example input and output of the program. The Software shall be
accompanied by a complete manual, which manual shall be sufficient to enable a
user who is untrained in the program to operate the program in its intended
fashion. For the purpose of the copyright code, QUESTNET shall be considered
the author and SIMPLEX shall execute any and all documents necessary to
effectuate same. For the purpose of this Agreement, the term "Software" shall
also include the source code, programming code, "object" files and executable
files, example input and output of the program and manuals.
(b) As a condition of the sale and in consideration of the Royalty
payment set forth below, SIMPLEX hereby agrees to update the software, on an "as
needed basis" to avoid market obsolescence (the "Updates").
<PAGE>
(c) QUESTNET hereby acknowledges that SIMPLEX is not the original
owner of the Software and that prior commercial sales of the software have taken
place. These sales encompassed the use of the Software only and did not include
the source code or any other rights title or interest in the Software.
2. CONSIDERATION. For and in consideration of the sale of the Software,
the Updates, and the rights contained herein, SIMPLEX shall receive the
following:
(a) 60,000 shares of QUESTNET's Series A Preferred Non-Voting Stock,
$10.00 per share face value (the "Preferred Stock"), for an aggregate dollar
amount of US $600,000. The rights and preferences of the Preferred Stock are
more fully described in Exhibit "B" hereto and incorporated herein. The delivery
of the Preferred certificates will take place within fifteen (15) business days
or less from the delivery of the Software (the "Delivery Date").
The Preferred Stock shall be convertible, sixty days, from the delivery
of the software "Source Code" (the "Convertible Shares"), into shares of
QUESTNET's common stock. SIMPLEX shall advise QUESTNET, in writing, of its
intent to convert the Convertible Shares and QUESTNET shall have 15 days from
the receipt of the notice of conversion to redeem the Convertible shares at a
redemption price of $10.00 per share. If QUESTNET does not redeem the
Convertible Shares within such 15 day period, SIMPLEX shall have the right to
convert the Convertible Shares, at a conversion rate equal to (i) the average 5
day bid price (as of the date of conversion) of QUESTNET's common stock.
In addition to the redemption right provided above, QUESTNET shall
have the right to call the Preferred Stock not converted, in whole or in part,
at any time.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
(a) SIMPLEX represents and warrants that it has the right to sell,
transfer, and convey the Software, including but not limited to the programming
code and manuals to QUESTNET. SIMPLEX also represents and warrants that the
Software does not infringe upon any copyright, patent or other right held by
others and that the sale and transfer of the Software and all rights, title and
interest thereto does not breach or violate any understanding or agreement which
SIMPLEX is a party to or by which it is bound.
SIMPLEX shall indemnify and hold harmless QUESTNET, its officers,
directors, employees, customers or agents (collectively referred to in this
Paragraph 3(b) as "QUESTNET") for damages or expenses resulting from any claim,
suit or proceeding brought against QUESTNET, arising from the marketing, sale
or distribution of the Software with regard to the issues of product liability
and
2
<PAGE>
infringements of any intellectual property or ownership rights, patents or
copyrights. QUESTNET agrees that SIMPLEX has the right to defend, or at its
option to settle, and SIMPLEX agrees, at its own expense, to defend or at its
option to settle, any claim, suit or proceeding brought against QUESTNET with
regard to the issue of product liability and infringements of any intellectual
property or ownership rights, patents or copyrights. SIMPLEX agrees to pay any
costs of litigation, investigation or defense incurred by QUESTNET, including
reasonable attorney fees, and final judgement, entered against QUESTNET on such
issue in any such suit or proceeding. SIMPLEX shall be relieved of the foregoing
obligations unless QUESTNET notifies SIMPLEX in writing, within ten business
days of receipt of notification of such suit, claim or proceeding, and gives
SIMPLEX authority to proceed as contemplated herein.
(b) SIMPLEX warrants that the code is workmanlike and has been properly
tested in keeping with good software design practice and that the Software will
perform as contemplated herein. In the event that the Software does not perform,
QUESTNET, at its sole option, may require SIMPLEX to rewrite the program until
the Software does perform or, in the event that the rewritten Software does not
perform, may terminate this Agreement, and cancel the Preferred Shares and
cancel any common stock issued upon conversion of the Preferred Stock. In the
event that this Agreement is terminated and QUESTNET has redeemed any of the
Preferred Shares, SIMPLEX will repay the redemption price to QUESTNET within 30
days of such termination.
4. COMPETITION. During the period of time that Royalties are being paid
to SIMPLEX pursuant to this Agreement, SIMPLEX shall not contract with or
perform services for any competitor to SIMPLEX.
5. RELATIONSHIP OF PARTIES. Except as set forth herein, neither party
shall have any right or authority to create any obligation on the part of the
other party or bind the other party to any agreement.
6. NOTICES. Any notice required or permitted by this Agreement shall be
in writing and shall be delivered by U.S. Certified Mail, return receipt
requested, or by special messenger service with receipt (such as Federal
Express), by facsimile delivery or by hand, to the parties at the addresses set
forth above or such substitute address of which notice is given in like manner.
The transmission confirmation receipt from the sender's facsimile machine shall
be conclusive evidence of successful facsimile delivery. Time shall be counted
to, or from, as the case may be, the delivery in person or by mailing.
3
<PAGE>
7. GOVERNING LAW, VENUE AND ARBITRATION. This Agreement shall be deemed
to be executed in the State of Florida and governed by the laws of the State of
Florida. Any controversy or claim arising out of or relating to this Agreement
or to the interpretation, breach or enforcement thereof, except a claim for
injunctive relief, shall be submitted to an arbitrator and settled by
arbitration in Broward County Florida in accordance with the rules then
obtaining of the American Arbitration Association. Any award made by the
arbitrator shall be final, binding and conclusive on all parties hereto for all
purposes, and judgement may be entered thereon in any court having jurisdiction
thereof. Nothing contained herein shall serve to prohibit the parties from
seeking injunctive relief in a court of competent jurisdiction.
8. SEVERABILITY CLAUSE. In the event any parts of this Agreement are
found to be void, the remaining provisions of this Agreement shall nevertheless
be binding with the same effect as though the void parts were deleted.
9. SUCCESSORS. Subject to the provisions of this Agreement, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
10. SECTION AND PARAGRAPH HEADINGS. The section and paragraph headings
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
11. WAIVER AND AMENDMENT. The waiver by any party to this Agreement of
a breach of any provision hereof by any other party shall not be construed as a
waiver of any subsequent breach by any party. No provision of this Agreement may
be terminated, amended, supplemented, waived or modified other than by an
instrument in writing signed by the party against whom the enforcement of the
termination, amendment, supplement, waiver or modification is sought.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature, provided however that
original signatures must be provided within ten days from the date of signing.
13. ATTORNEY FEES AND COSTS. In the event any action is commenced, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
expenses.
14. ASSIGNMENT. This Agreement may be assigned in whole or in part by
QUESTNET to any wholly owned subsidiary. No other assignment will be permitted
by either party without the other party prior written consent, which shall not
be unreasonably withheld.
4
<PAGE>
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior oral or written agreements
regarding the same subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
In the presence of: QUEST NET CORP.
BY: /s/ George Elia
--------------------------
George Elia, Vice President
SIMPLEX LTDA.
BY: /s/ Robson Martins
-------------------------
Robson Martins, Director
5
<PAGE>
EXHIBIT A
DESCRIPTION OF SOFTWARE
The Software is a secure, encrypted (at 128 bits) credit card processing program
that can be used in connection with online purchase transactions, online casino
transactions, online banking transactions, and online stock brokerage
transactions.
The Software will provide the following functions:
Secure Credit Card Machine
1. Process forms.
2. Send information to Visual Basic SQL Query Server.
3. Send transaction id and authorization to sites telling them
authorization code and/or user name, password and time limit.
4. Deal with Web 900 and other external verification programs.
Pay per View Services
1. This can be any machine giving out the data after the credit card has
been authorized.
2. Checks with the Visual Basic SQL Query Server to determine how much
credit is remaining on user's account.
Internal PC's
1. Queries SQ: database through Visual Basic SQL Query Server.
2. Adds, updates/deletes customer information from databases.
Visual Basic SQL Query Server
1. Uses IC Verify and other programs to verify credit cards and other
financial information.
2. Query, add, and delete information in the three databases.
3. Waits for client connection and verifies IP address and other
information.
4. Performs the actual queries.
5. Returns output information to the client's application.
IC Verify Authorization Tools
1. Authorizes credit cards.
2. Authorizes checks
Microsoft SQL Databases
1. Stores all the data
2. Backup databases to tape archive periodically.
6
<PAGE>
EXHIBIT B
Description of Series "A" Preferred Stock
The Series A Preferred Stock of QUESTNET was properly authorized by the
QUESTNET's Board of Directors and was filed with Secretary of State. The shares
initially have a designated face value of ten dollars ($10) per share. Five
million (5,000,000) shares of Preferred Stock have been authorized, 1,000,000 of
which were designated as Series A, 60,000 of which were reserved for issuance as
consideration for this transactions with SIMPLEX. The Series A Preferred shares
have never traded in the market and have never been registered as a part of any
registration statement filed by QUESTNET with the Securities and Exchange
Commission. The value of the shares was arbitrarily determined by QUESTNET's
Board of Directors after taking into consideration, among other things, the
features of the Series A Preferred Stock and the prospects for the company's
success in connection with projects acquired with Series A Preferred Stock.
The features of the preferred stock to be issued hereunder are:
1. $10.00 face value per share.
2. Non-Voting
3. QUESTNET has the right to redeem at any time, any and all Preferred
Shares by payment of the face value thereof.
4. The Preferred Shares shall be convertible, at a conversion rate equal
to (i) the average 5 day bid price (as of the date of conversion) of QUESTNET's
common stock.
7
Exhibit 10.16
NETWORK SALES AND SERVICE AGREEMENT
This Agreement made as of August 19, 1998, by and between QUEST NET Corp., a
Colorado Corporation, 2740 E Oakland Park Boulevard, Suite 206, Fort Lauderdale,
Florida 33306 ("QUEST NET"), "), Real-Time Cash, Inc. a Florida Corporation, 265
South Federal Highway, Suite 335, Deerfield Beach Florida 33441 ("REAL TIME")
and REAL-TIME's parent company, Secure Transaction International Corp., a
Florida Corporation, 265 South Federal Highway, Suite 335, Deerfield Beach
Florida 33441 ("STIC").
W I T N E S E T H:
RECITALS
--------
WHEREAS, QUEST NET operates data communications and message switching
networks and provides data network and communications services and related
equipment and devices, individually or through affiliates, suppliers and agents
(collectively referred to herein as QUEST NET); and
WHEREAS REAL TIME wishes to purchase and use QUEST NET Network Services
(as defined in Section 2 below); and
WHEREAS QUEST NET wishes to grant to REAL TIME the right to purchase
and use the QUEST NET Services; and
WHEREAS, STIC is the parent corporation of REAL-TIME, its wholly owned
subsidiary and,
WHEREAS, STIC intends to become a company whose securities are publicly
traded, and
WHEREAS, STIC's Board of Directors has authorized the conversion of
REAL-TIME preferred stock into the common stock of STIC.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
hereto agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings for
purposes of this Agreement:
1.1 "QUEST NETNet" shall mean the commercially available data,
communications and message switching network owned, controlled, and/or directly
managed by QUEST NET, its subsidiaries, affiliated companies, and agents.
<PAGE>
1.2 "Documentation" shall mean and shall be deemed to be included in all
references to Equipment and/or Software hereunder and includes all reference
materials, operation and technical specifications, guides, user manuals or other
manuals or other materials in whatever form or on whatever media. REAL TIME may
not disclose, distribute or copy documentation nor print copies of any
documentation provided in electronic, digital, on-line or other form, except for
its own inter-company use, without QUEST NET' express written consent.
1.3 "Equipment" shall mean any equipment, devices, items, or other
materials supplied by QUEST NET to REAL TIME, or used by QUEST NET in connection
with the Services provided to REAL TIME. REAL TIME is responsible for returning
all QUEST NET supplied Equipment, which is in REAL TIME's possession, in good
working order (reasonable wear and tear excepted) at the termination or
expiration of this Agreement.
1.4 " Facility or Facilities" shall mean REAL TIME's offices located at 265
South Federal Highway, Suite 335, Deerfield Beach Florida 33441, from which
interconnection between REAL TIME and QUEST NET will be provided hereunder, or
any other physical location to which REAL TIME may relocate its offices, from
which interconnection will be provided hereunder, or such other physical
location, which the parties subsequently agree to in writing. QUEST NET shall
provide REAL TIME, within 30 days prior to installation of the Interconnection
and Equipment, or sooner upon the request of REAL TIME, with applicable
Facilities Requirements which specify the power, insurance, environmental
controls, cabling access, security and other requirements needed for the
installation of the Interconnection and Equipment. QUEST NET, at Real Time's
cost, shall be responsible for assuring that appropriate power, insurance,
environmental controls, cabling access, security and other requirements are
installed available and properly maintained in the Facility during the term of
this Agreement.
1.5 "Internet" shall mean the United States public communications networks
running the standard protocol known as "TCP/IP, among other communication
protocols.
1.6 "NOC" shall mean any QUEST NET designed Network Operations Center
staffed by QUEST NET personnel and responsible for coordinating and managing the
operations of QUEST NETNet and coordinating any interconnections between QUEST
NETNet and REAL TIME, as well as other network operators and telecommunications
carriers.
1.7 "Site Renter"' shall mean an item of Equipment provided by QUEST
NET, which uses the standard Internet communications protocol known as TCP/IP at
REAL TIME's Facility to interconnect REAL TIME to QUEST NET.
1.8 "Software" shall mean any programming software, computer code, and
instructions, including network design and other similar information or
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intangible property provided by QUEST NET to REAL TIME, or used by QUEST NET in
connection with providing services to REAL TIME under this Agreement.
2. TERM. The term of this Agreement shall be for a period of five (5)
years from the date that this Agreement is countersigned by QUEST NET, unless
terminated earlier by REAL TIME. Thereafter, this Agreement shall automatically
renew for additional twelve months periods unless notice is given by either
party, in writing, at least 30 days prior to the expiration of the Term, or any
renewal thereof of its intent not to renew. Such renewal(s) shall be at the
average monthly market rates in effect at the time of each renewal, less
negotiated discounts and upon such other terms and conditions as the parties may
mutually agree upon.
3. SCOPE OF SERVICES. For the purpose of this Agreement, REAL-
TIME Services shall consist of the following data, communications network
services, message switching and communication services, together with all
Equipment and Software.
3.1. Attachment Services. QUEST NET attachment services shall consist
of a high-speed network connection between REAL TIME and QUEST NETNet at the
Facility. Such connection will facilitate communications between REAL TIME and
the Internet. The QUEST NETNet attachment will be installed, managed, and
operated by QUEST NET. QUEST NET will provide REAL TIME with all Equipment and
Software necessary to connect REAL TIME to QUEST NETNet and its attached
networks using the Internet standard referred to as TCP/IP protocol as well as
any necessary carrier circuits between REAL TIME's Facilities and QUEST NETNet.
3.2 Connectivity and Communication Circuits. QUEST NET will contract
with the appropriate communications carriers or other suppliers where necessary
to provide connectivity between REAL TIME and QUEST NETNet. QUEST NET and such
carriers and/or suppliers will be responsible for the physical management of the
circuits, attachments and operations hereunder and for access coordination and
central office services to help ensure end-to end responsibility for the
initiation and management of REAL TIME's connections.
3.3 Attachment Management and Operations. QUEST NET will provide for
prompt coordination and management of problem diagnosis, REAL TIME's
determination and resolution on REAL TIME's network attachment via REAL TIME's
designated NOC for any problems associated with QUEST NET Services. Equipment
located at the NOC will be operational 24 hours a day, on a continuous basis in
order to respond to operation and technical problems with Services, Equipment or
Software. Account and billing information, requests to upgrade, notify or add
Services or other customer service inquiries will be handled by REAL TIME's
QUEST NET Account Executive.
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3.4 Site Routers. QUEST NET will provide, Install, manage, operate and
service all necessary Site Routers, routing equipment and/ or communication
circuits at REAL TIME's Facilities. REAL TIME may elect, by written notice, when
ordering either the initial services or any additional services hereunder, to
provide and be responsible for any required routers, routing equipment and/or
communications circuits to be installed and maintained at REAL TIME's
Facilities, provided, however, that REAL TIME must ensure compliance with any
technical specifications, operational character and REAL TIME's and other
compatibility requirements for Interconnection, as contemplated hereunder. QUEST
NET may periodically release updates to REAL TIME's Site Routers. QUEST NET will
install such updates provided that QUEST NET maintenance personnel are given
access to the Facility for such installation. In the event that access is denied
to QUEST NET, REAL TIME will be responsible for such installation.
3.5 End Nodal Switching System. QUEST NET will also provide, if
necessary, Equipment which comprises an end nodal switching system ("ENSS").
This Equipment may be changed from time to time at QUEST NET' sole and absolute
discretion, based on engineering changes, changes made to REAL TIME's
Facilities, service upgrades, or shift in selection of models or suppliers of
items of Equipment. Provided, however, that, in the event such change is
necessary to ensure the quality of Services provided to REAL TIME, such change
shall be a mandatory obligation of QUEST NET.
3.6 Network News. Without additional charge, and upon REAL TIME's
request, QUEST NET will provide REAL TIME with access to those news services,
which QUEST NET finds available at no charge for interconnection, or access
through QUEST NETNet. REAL TIME may elect to receive any or all of the available
news services and receive any information REAL TIME's selected providers choose
to make available. QUEST NET shall have no responsibility or liability for the
availability or content of such network news, including but not limited to its
accuracy, relevancy, propriety, or appropriateness. REAL TIME's use of such
service shall be the sole responsibility of REAL TIME.
3.7 Network Addressing and Domain Name Services (DNS). Network
addresses associated with REAL TIME's network and its designated networks which
have connectivity to QUEST NETNet, will be listed and/or advertised across QUEST
NETNet and other QUEST NET managed networks in the same manner as QUEST NET
lists and/or advertises all such addresses. Such listings or advertising may be
subject to QUEST NET' policies and the rules, regulations and other criteria
applicable to the Internet and/or other networks. REAL TIME agrees to accept all
necessary actions that QUEST NET takes to comply with same. QUEST NET and its
agents will work closely with REAL TIME's technical staff to implement the
required technical communications, filters and routing tables necessary to
ensure REAL TIME's network interoperability with the QUEST NETNet.
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3.8 Network Backbone Services. Pursuant to the terms of this Agreement
and for the consideration set forth herein, QUEST NET will (i) provide Internet
backbone services, based upon the actual usage (ii) lease to REAL TIME the
hardware necessary to operate a minimum of three T3 lines, while configuring
same to operate in concert with the necessary router system and (iii) lease to
REAL TIME space for equipment in a "co-location" area providing the necessary
electrical supply, UPS backup and air conditioning. In addition, QUEST NET will
provide Technical Support on an ongoing basis to assist REAL TIME in the
operation of their business. QUEST NET will monitor all usage and will make
available to REAL TIME the Bandwidth necessary to operate its business. REAL
TIME shall be responsible for all applicable local loop charges. The charges for
these services shall not exceed the estimated costs set forth in Section 4
below, provided however that if REAL TIME exceeds the estimated yearly Bandwidth
usage, requires additional equipment or incurs additional port charges the
additional costs shall be billed at the same rate set forth in Section 4.
4. COSTS AND PAYMENT.
4.1 Costs. The costs of the services to be provided will be at the
rates set forth on Exhibit "A" hereto and incorporated herein.
4.2 Payment. As pre-payment of the services to be rendered hereunder,
REAL TIME shall issue to QUEST NET 500,000 shares of the Company's Series A
Preferred Non-Voting Stock, $10.00 per share face value (the "Preferred Stock"),
for an aggregate dollar amount of US $5,000,000. The rights and preferences of
the Preferred Stock are more fully described in Exhibit "B" hereto and
incorporated herein The delivery of the Preferred certificates will take place
within ten business (10) days or less from the execution of this Agreement (the
"Delivery Date"). REAL TIME shall have the right to call the Preferred Stock not
converted, in whole or in part, at any time.
4.3 Conversion and Redemption of Preferred Stock. QUEST NET shall
provide to REAL TIME a monthly report showing the actual costs of Services,
giving effect to the 20% prepayment discount, provided by QUEST NET (the "Actual
Costs"). Within fifteen days from the receipt of the invoice, REAL TIME or STIC
shall have the option to redeem that number of the Preferred Shares with a face
value equal to the Actual Costs (the "Redeemable Shares"), at a redemption price
of $10.00 per share. If REAL TIME or STIC does not redeem the Redeemable Shares
within such fifteen day period, QUEST NET shall have the right to convert the
Redeemable Shares, at a conversion rate equal to (i) the average 5 day bid
price (as of the date of conversion) of STIC's common stock (the " Common
Stock"), if the Common Stock is publicly traded, or at the book value per share
of the Common Stock, if the Common Stock is not publicly traded. If, upon
termination of this Agreement, by passage of time or otherwise, the Actual Costs
are less than the prepaid contract price, QUEST NET shall return to
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REAL TIME that number of Preferred Shares equal to the difference between the
Prepaid Contract Price and the Actual Costs.
6. MAINTENANCE SERVICES. REAL TIME will make its Facilities and/or
Software available to QUEST NET for prevention and remedial maintenance and/or
appropriate QUEST NET security checks. Except for remedial maintenance to
correct Service problems, QUEST NET will give REAL TIME at least 24 hours notice
and, whenever practical, will arrange same at mutually agreeable times to
minimize any disruption to REAL TIME's operations.
6. SERVICE LEVEL COMMITMENTS.
6.1 Commencement of Operations. Within 15 days after the execution of this
Agreement and the designation of a site by REAL TIME software and Services will
be fully operational.
6.2 Unavailability of Services. If the Services are unavailable for
four (4) hours or more in any calendar month, REAL TIME shall be entitled to a
credit equal to one (1) day's Service for each full four (4) hour period of
unavailability, to be taken by REAL TIME as a credit against subsequent invoices
for such Services, anytime within the immediately following two (2) months. In
the event that Services are unavailable for more than four (4) hours at any one
time, QUEST NET shall, at its sole cost, switch REAL TIME to another provider of
the Services until such time as QUEST NET can resume providing Services. The
period of unavailability will commence when REAL TIME notifies QUEST NET of
unavailability or when QUEST NET notifies REAL TIME of same, and shall end when
QUEST NET restores availability of the Service. If QUEST NET is unable to resume
providing Services for a period of 5 days or more, REAL TIME shall have the
option, at its sole discretion, to terminate this Agreement.
The term "unavailable shall mean that the Services are not available
for use by or being provided to REAL TIME. Services shall not be considered
unavailable because of (i) any regularly scheduled downtime or preventive or
other maintenance of which REAL TIME has been notified of in advance and has
agreed to; (ii) any maintenance or service interruptions requested by REAL TIME;
(iii) downtime or Service interruptions resulting from REAL TIME's acts or
failure to act in a timely and/or proper manner when notified to do so by QUEST
NET, including, without limitation, failure to install or properly use updates
or to make available the Facilities or components for testing or repair or to
otherwise comply with QUEST NET's instructions and service requirements; or (iv)
regular configuration or re-configuration periods.
7. SOFTWARE LICENSE. Subject to the terms of this Agreement, REAL TIME
is hereby granted a non-exclusive license and right to use the Software provided
hereunder, solely in connection with the Equipment and/ or
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Services to which the Software relates. REAL TIME's license and right to use the
Software will terminate immediately upon termination of this Agreement or if
the Services or Equipment to which the Software relates is no longer in use by
REAL TIME. REAL TIME may not duplicate, distribute, loan, lease or modify, the
Software or create derivative works without the consent of QUEST NET. REAL TIME
may not reverse engineer, decompile, or disassemble the Software.
8. NETWORK INFORMATION, COMMUNICATION AND SECURITY. The network connection
provided by QUEST NET may be used to facilitate communication between REAL
TIME's network and systems operated by REAL TIME and the other systems connected
by QUEST NETNet and the Internet. QUEST NET makes no representations or
warranties with respect to QUEST NETNet, the Services, Equipment, Software or
Documentation with regard to the blockage or prevention of the transmission of
viruses, worms or other programs, communications, data or other tangible or
intangible items which actually will or have the potential to be disruptive or
damaging to computers and related software
REAL TIME agrees to implement reasonable internal procedures to promote
efficient use of QUEST NETNet and to minimize and avoid, whenever commercially
practical, unnecessary network traffic, disruption, and interference with other
users of the interconnected network.
9. COMPLIANCE WITH LAWS. REAL TIME shall comply with all material
applicable present and future federal, state, county, local and, where
necessary, foreign laws, ordinances and regulations, including those governing
the export of goods or services from the United States, relating to the
Services, Equipment, Software, QUEST NETNet, Documentation and/or any other
materials, services or interconnection hereunder
10. LIMITED WARRANTY. QUEST NET warrants that the Services, Equipment
and Software will perform substantially in accordance with the QUEST NET'
Documentation, and any updates thereto and as represented to REAL TIME by QUEST
NET. QUEST NET also warrants that the Equipment or other tangible items provided
hereunder will be free from defects in material and workmanship under normal use
(the "Limited Warranty"). The Limited Warranty will be void if: (i) REAL TIME,
without QUEST NET's approval, modifies or alters the Services, Equipment or
Software uses or connects same in a manner inconsistent with QUEST NET's
requirements and specifications, or (ii) the failure results from accident,
abuse, misapplication or other use by REAL TIME, inconsistent with QUEST NET's
Documentation.
11. LIMITATION OF LIABILITIES AND REMEDIES. QUEST NET makes no attempt
to verify accurate or complete receipt of any transmission, message or
communication and except as set forth in this Agreement, is not responsible for
any alteration or loss of data resulting from delays, non
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deliveries, incorrect deliveries or interruptions, unless caused by the
negligence, misconduct, carelessness, misfeasance or malfeasance of QUEST NET.
In addition, QUEST NET has no obligation, liability or responsibility for, nor
does QUEST NET monitor the contents of any communications, messages, data or
information REAL TIME transmits or receives via the Services or Equipment,
except for those sent by QUEST NET to REAL TIME. Provided however, that QUEST
NET will be responsible for and monitor control and supervise data and
information used for operational engineering purposes and the efficient
operation of QUEST NETNet and interconnections thereto, including REAL TIME's.
12. UPGRADE OF SERVICE. REAL TIME may elect to upgrade the level of
service provided hereunder at any time without incurring a service charge for
the service upgrade, provided that the service upgrade will be in effect for at
least one year. The cost of any such upgrades will be invoiced and paid, from
the prepaid amount, as set forth in Section 4 above.
13. UNITED STATES GOVERNMENT RESTRICTED RIGHTS. The Software and
associated documentation are provided with RESTRICTED RIGHTS. Use, duplication
or disclosure is subject to restrictions set forth in DFARS 252.227-7013,
subparagraph (c) (1)(ii) [the Rights in Technical Data Computer Software clause]
or 48CFR52.227-19, subparagraphs (e) (1) and (2) [Commercial Computer Software
Restricted Rights], as applicable.
14. RELATIONSHIP OF PARTIES, Except as set forth herein, neither party
shall have any right or authority to create any obligation on the part of the
other party or bind the other party to any agreement.
15. INVESTMENT REPRESENTATION. QUEST NET hereby acknowledges that the
Preferred Shares and the shares underlying the Preferred Shares are not being
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or under any state securities statute. The Preferred Shares and the shares
underlying the Preferred Shares are being acquired by QUEST NET for its own
account, for investment purposes only, and not with a view to any distribution
thereof. QUEST NET agrees that no transfer or other disposition of the Preferred
Shares or the shares underlying the Preferred Shares or any interest therein
will be made in violation of the Securities Act or any state securities statute.
QUEST NET will execute an Investment Letter to this effect.
16. NOTICE. Any notice required or permitted by this Agreement shall
be in writing and shall be delivered by U.S. Certified Mail, return receipt
requested, or by special messenger service with receipt (such as Federal
Express), by facsimile delivery or by hand at the addresses set forth above, or
such substitute address of which notice is given in like manner. The
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transmission confirmation receipt from the sender's facsimile machine shall be
conclusive evidence of successful facsimile delivery. Time shall be counted to,
or from, as the case may be, the delivery in person or by mailing.
17. GOVERING LAW, VENUE AND ARBITRATION. This Agreement shall be deemed
to be executed in the State of Florida and governed by the laws of the State of
Florida. Any controversy or claim arising out of or relating to this Agreement
or to the Interpretation, breach or enforcement thereof, except a claim for
injunctive relief, shall be submitted to an arbitrator and settled by
arbitration in Broward County Florida in accordance with the rules then
obtaining of the American Arbitration Association. Any award made by the
arbitrator shall be final, binding and conclusive on all parties hereto for all
purposes, and judgement may be entered thereon in any court having jurisdiction
thereof. Nothing contained herein shall serve to prohibit the parties from
seeking injunctive relief in a court of competent jurisdiction.
18. SEVERABILITY CLAUSE. In the event any parts of this Agreement are
found to be void, the remaining provisions of this Agreement shall nevertheless
be binding with the same effect as though the void parts were deleted.
19. SUCCESSORS. Subject to the provisions of this Agreement, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
20. SECTION AND PARAGRAPH HEADINGS. The section and paragraph headings
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
21. WAIVER AND AMENDMENT. The waiver by any party to this Agreement of
a breach of any provision hereof by any other party shall not be construed as a
waiver of any subsequent breach by any party. No provision of this Agreement may
be terminated, amended, supplemented, waived or modified other than by an
instrument in writing signed by the party against whom the enforcement of the
termination, amendment, supplement, waiver or modification is sought.
22. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature, provided however that
original signatures must be provided within ten days from the date of signing.
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23. ATTORNEY FEES AND COSTS. In the event any action is commenced, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
expenses.
24. ASSIGNMENT. This Agreement may be assigned by REAL TIME to a
wholly owned subsidiary. No other assignment will be permitted by either party
without the other party prior written consent, which shall not be unreasonably
withheld.
25. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior oral or written agreements
regarding the same subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year set forth below.
Dated: August 19, 1998
In the presence of:
Real-Time Cash, Inc.
By: /s/ J. Forrest Tytler
-----------------------------
J. Forrest Tytler, Chairman
Secure Transaction International
Corporation
/s/ (illegible) By: /s/ J. Forrest Tytler
- ---------------------------- ---------------------------
J. Forrest Tytler, Chairman
QUEST NET Corp.
BY: /s/ Camilo Periera
- ---------------------------- --------------------------
Camilo Periera, President
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EXHIBIT A
COST OF SERVICES
1. SETUP COSTS $6,000
2. BANDWIDTH
BANDWIDTH MONTHLY MONTHLY
DISCOUNTED
45 Mbps $55,5000x3 $165,000 $132,000
* MONTHLY PRICE BASED ON 95% USAGE.
** AVAILABILITY: ALL BACKBONE CITIES
***EXCLUSIVE OF ANY BELL SOUTH CHARGES WHICH MUST BE PAID BY STIC.
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EXHIBIT B
Description of Series "A" Preferred Stock
The Series A Preferred Stock of REAL TIME was properly authorized by the REAL
TIME's Board of Directors and will be filed with Secretary of State. The shares
initially have a designated face value of ten dollars ($10) per share. One
Hundred Million (100,000,000) shares of Preferred Stock have been authorized,
500,000 of which were designated as Series A and reserved for issuance as
consideration for this Transaction. The Series A Preferred shares have never
traded in the market and have never been registered as a part of any
registration statement filed by REAL TIME with the Securities and Exchange
Commission. The value of the shares was arbitrarily determined by REAL TIME's
Board of Directors after taking into consideration, among other things, the
features of the Series A Preferred Stock and the prospects for the company's
success in connection with projects acquired with Series A Preferred Stock.
The preferred stock features are:
1. $10.00 face value per share.
2. Non Voting
3. REAL TIME has the right to redeem at any time, any and all Preferred
Shares by payment of the face value thereof.
4. The Preferred Shares shall be convertible, at a conversion rate equal to (i)
the average 5 day bid price (as of the date of conversion) of STIC's common
stock (the "Common Stock"), if the Common Stock is publicly traded, or at the
book value per share of the Common Stock, if the Common Stock is not publicly
traded.
THE PREFERRED SHARES AND THE SHARES UNDERLYING THE PREFERRED SHARES ARE NOT
BEING REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER ANY STATE SECURITIES STATUTE. THE PREFERRED SHARES AND THE SHARE
UNDERLYING THE PREFERRED SHARES ARE BEING ACQUIRED By QUEST NET FOR ITS OWN
ACCOUNT, FOR INVESTMENT PURPOSES ONLY, AND NOT WITH A VIEW TO ANY DISTRIBUTION
THEREOF. QUEST NET AGREES THAT NO TRANSFER OR OTHER DISPOSITION OF THE PREFERRED
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SHARES OR THE SHARES UNDERLYING THE PREFERRED SHARES OR ANY INTEREST THEREIN
WILL BE MADE IN VIOLATION OF THE SECURITIES ACT OR ANY STATE SECURITIES STATUTE.
QUEST NET WILL EXECUTE AN INVESTMENT LETTER TO THIS EFFECT.
FLORIDA LAW PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE PERSONS IN
FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER WITHIN THREE DAYS
AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE
COMPANY, AN AGENT OF THE COMPANY OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER
THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
OCCURS LATER. SUCH WITHDRAWAL WILL BE WITHOUT ANY FURTHER LIABILITY TO ANY
PERSON. TO ACCOMPLISH SUCH WITHDRAWAL, YOU NEED ONLY SEND A LETTER OR TELEGRAM
TO THE COMPANY AT THE ADDRESS SHOWN HEREIN INDICATING YOUR INTENTION TO
WITHDRAW. SUCH LETTER OR TELEGRAM MUST BE SENT AND POSTMARKED PRIOR TO THE END
OF THE AFOREMENTIONED THIRD BUSINESS DAY. IF SENDING A LETTER, AN INVESTOR
SHOULD SEND IT BY CERTIFIED MAIL. RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS
RECEIVED AND TO EVIDENCE THE TIME WHEN IT IS MAILED. ANY ORAL REQUESTS FOR
RESCISSION SHOULD BE ACCOMPANIED BY A REQUEST FOR WRITTEN CONFIRMATION THE ORAL
REQUEST WAS RECEIVED ON A TIMELY BASIS.
AS REQUIRED BY SECTION 517.061(11)(A)3 FLORIDA STATUTES, AND RULE
3E-500.05(5)(A) PROMULGATED THEREUNDER, YOU OR YOUR REPRESENTATIVES MAY HAVE, AT
THE OFFICES OF THE COMPANY AT ANY REASONABLE HOUR, AFTER REASONABLE PRIOR
NOTICE, ACCESS TO THE MATERIALS SET FORTH IN THE RULE WHICH THE COMPANY CAN
OBTAIN WITHOUT UNREASONABLE EFFORT OR EXPENSE.
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Exhibit 10.17
NETWORK SALES AND SERVICE AGREEMENT
This Agreement made as of August 19, 1998, by and between QUEST NET Corp., a
Colorado Corporation, 2740 E Oakland Park Boulevard, Suite 206, Fort Lauderdale,
Florida 33306 ("QUEST NET"), "), Real-Time Encryption, Inc. a Florida
Corporation, 265 South Federal Highway, Suite 335, Deerfield Beach Florida 33441
("REAL TIME") and REAL-TIME's parent company, Secure Transaction International
Corp., a Florida Corporation, 265 South Federal Highway, Suite 335, Deerfield
Beach Florida 33441 ("STIC").
W I T N E S E T H:
RECITALS
WHEREAS, QUEST NET operates data communications and message switching
networks and provides data network and communications services and related
equipment and devices, individually or through affiliates, suppliers and agents
(collectively referred to herein as QUEST NET); and
WHEREAS, REAL TIME wishes to purchase and use QUEST NET Network
Services (as defined in Section 2 below); and
WHEREAS, QUEST NET wishes to grant to REAL TIME the right to purchase
and use the QUEST NET Services; and
WHEREAS, STIC is the parent corporation of REAL-TIME, its wholly owned
subsidiary and,
WHEREAS, STIC intends to become a company whose securities are
publicly traded, and
WHEREAS, STIC's Board of Directors has authorized the conversion of
REAL-TIME preferred stock into the common stock of STIC.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
hereto agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings for
purposes of this Agreement:
1.1 "QUEST NETNet" shall mean the commercially available data, communications
and message switching network owned, controlled, and/or directly managed by
QUEST NET, its subsidiaries, affiliated companies, and agents.
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1.2 "Documentation" shall mean and shall be deemed to be included in all
references to Equipment and/or Software hereunder and includes all reference
materials, operation and technical specifications, guides, user manuals or other
manuals or other materials in whatever form or on whatever media. REAL TIME may
not disclose, distribute or copy documentation nor print copies of any
documentation provided in electronic, digital, on-line or other form, except for
its own inter-company use, without QUEST NET' express written consent.
1.3 "Equipment" shall mean any equipment, devices, items, or other materials
supplied by QUEST NET to REAL TIME, or used by QUEST NET in connection with the
Services provided to REAL TIME. REAL TIME is responsible for returning all QUEST
NET supplied Equipment, which is in REAL TIME's possession, in good working
order (reasonable wear and tear excepted) at the termination or expiration of
this Agreement.
1.4 " Facility or Facilities" shall mean REAL TIME's offices located at 265
South Federal Highway, Suite 335, Deerfield Beach Florida 33441, from which
interconnection between REAL TIME and QUEST NET will be provided hereunder, or
any other physical location to which REAL TIME may relocate its offices, from
which interconnection will be provided hereunder, or such other physical
location, which the parties subsequently agree to in writing. QUEST NET shall
provide REAL TIME, within 30 days prior to installation of the Interconnection
and Equipment, or sooner upon the request of REAL TIME, with applicable
Facilities Requirements which specify the power, insurance, environmental
controls, cabling access, security and other requirements needed for the
installation of the Interconnection and Equipment. QUEST NET, at Real Time's
cost, shall be responsible for assuring that appropriate power, insurance,
environmental controls, cabling access, security and other requirements are
installed available and properly maintained in the Facility during the term of
this Agreement.
1.5 "Internet" shall mean the United States public communications networks
running the standard protocol known as "TCP/IP, among other communication
protocols.
1.6 "NOC" shall mean any QUEST NET designed Network Operations Center staffed by
QUEST NET personnel and responsible for coordinating and managing the operations
of QUEST NETNet and coordinating any interconnections between QUEST NETNet and
REAL TIME, as well as other network operators and telecommunications carriers.
1.7 "Site Renter" shall mean an item of Equipment provided by QUEST NET, which
uses the standard Internet communications protocol known as TCP/IP at REAL
TIME's Facility to interconnect REAL TIME to QUEST NET.
1.8 "Software" shall mean any programming software, computer code, and
instructions, including network design and other similar information or
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intangible property provided by QUEST NET to REAL TIME, or used by QUEST NET in
connection with providing services to REAL TIME under this Agreement.
2. TERM. The term of this Agreement shall be for a period of five (5) years from
the date that this Agreement is countersigned by QUEST NET, unless terminated
earlier by REAL TIME. Thereafter, this Agreement shall automatically renew for
additional twelve months periods unless notice is given by either party, in
writing, at least 30 days prior to the expiration of the Term, or any renewal
thereof of its intent not to renew. Such renewal(s) shall be at the average
monthly market rates in effect at the time of each renewal, less negotiated
discounts and upon such other terms and conditions as the parties may mutually
agree upon.
3. SCOPE OF SERVICES. For the purpose of this Agreement, REAL-TIME Services
shall consist of the following data, communications network services, message
switching and communication services, together with all Equipment and Software.
3.1. Attachment Services. QUEST NET attachment services shall consist of a
high-speed network connection between REAL TIME and QUEST NETNet at the
Facility. Such connection will facilitate communications between REAL TIME and
the Internet. The QUEST NETNet attachment will be installed, managed, and
operated by QUEST NET. QUEST NET will provide REAL TIME with all Equipment and
Software necessary to connect REAL TIME to QUEST NETNet and its attached
networks using the Internet standard referred to as TCP/IP protocol as well as
any necessary carrier circuits between REAL TIME's Facilities and QUEST NETNet.
3.2 Connectivity and Communication Circuits. QUEST NET will contract with the
appropriate communications carriers or other suppliers where necessary to
provide connectivity between REAL TIME and QUEST NETNet. QUEST NET and such
carriers and/or suppliers will be responsible for the physical management of the
circuits, attachments and operations hereunder and for access coordination and
central office services to help ensure end-to end responsibility for the
initiation and management of REAL TIME's connections.
3.3 Attachment Management and Operations. QUEST NET will provide for prompt
coordination and management of problem diagnosis, REAL TIME's determination and
resolution on REAL TIME's network attachment via REAL TIME's designated NOC for
any problems associated with QUEST NET Services. Equipment located at the NOC
will be operational 24 hours a day, on a continuous basis in order to respond to
operation and technical problems with Services, Equipment or Software. Account
and billing information, requests to upgrade, notify or add Services or other
customer service inquiries will be handled by REAL TIME's QUEST NET Account
Executive.
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3.4 Site Routers. QUEST NET will provide, install, manage, operate and service
all necessary Site Routers, routing equipment and/ or communication circuits at
REAL TIME's Facilities. REAL TIME may elect, by written notice, when ordering
either the initial services or any additional services hereunder, to provide and
be responsible for any required routers, routing equipment and/or communications
circuits to be installed and maintained at REAL TIME's Facilities, provided,
however, that REAL TIME must ensure compliance with any technical
specifications, operational character and REAL TIME's and other compatibility
requirements for interconnection, as contemplated hereunder. QUEST NET may
periodically release updates to REAL TIME's Site Routers. QUEST NET will install
such updates provided that QUEST NET maintenance personnel are given access to
the Facility for such installation. In the event that access is denied to QUEST
NET, REAL TIME will be responsible for such installation.
3.5 End Nodal Switching System. QUEST NET will also provide, if necessary,
Equipment which comprises an end nodal switching system ("ENSS"). This Equipment
may be changed from time to time at QUEST NET' sole and absolute discretion,
based on engineering changes, changes made to REAL TIME's Facilities, service
upgrades, or shift in selection of models or suppliers of items of Equipment.
Provided, however, that, in the event such change is necessary to ensure the
quality of Services provided to REAL TIME, such change shall be a mandatory
obligation of QUEST NET.
3.6 Network News. Without additional charge, and upon REAL TIME's request, QUEST
NET will provide REAL TIME with access to those news services, which QUEST NET
finds available at no charge for interconnection, or access through QUEST
NETNet. REAL TIME may elect to receive any or all of the available news services
and receive any information REAL TIME's selected providers choose to make
available. QUEST NET shall have no responsibility or liability for the
availability or content of such network news, including but not limited to its
accuracy, relevancy, propriety, or appropriateness. REAL TIME's use of such
service shall be the sole responsibility of REAL TIME.
3.7 Network Addressing and Domain Name Services (DNS). Network addresses
associated with REAL TIME's network and its designated networks which have
connectivity to QUEST NETNet, will be listed and/or advertised across QUEST
NETNet and other QUEST NET managed networks in the same manner as QUEST NET
lists and/or advertises all such addresses. Such listings or advertising may be
subject to QUEST NET' policies and the rules, regulations and other criteria
applicable to the Internet and/or other networks. REAL TIME agrees to accept all
necessary actions that QUEST NET takes to comply with same. QUEST NET and its
agents will work closely with REAL TIME's technical staff to implement the
required technical communications, filters and routing tables necessary to
ensure REAL TIME's network interoperability with the QUEST NETNet
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3.8 Network Backbone Services. Pursuant to the terms of this Agreement and for
the consideration set forth herein, QUEST NET will (i) provide Internet backbone
services, based upon the actual usage (ii) lease to REAL TIME the hardware
necessary to operate a minimum of three T3 lines, while configuring same to
operate in concert with the necessary router system and (iii) lease to REAL TIME
space for equipment in a "co-location" area providing the necessary electrical
supply, UPS backup and air conditioning. In addition, QUEST NET will provide
Technical Support on an ongoing basis to assist REAL TIME in the operation of
their business. QUEST NET will monitor all usage and will make available to REAL
TIME the Bandwidth necessary to operate its business. REAL TIME shall be
responsible for all applicable local loop charges. The charges for these
services shall not exceed the estimated costs set forth in Section 4 below,
provided however that if REAL TIME exceeds the estimated yearly Bandwidth usage,
requires additional equipment or incurs additional port charges the additional
costs shall be billed at the same rate set forth in Section 4.
4. COSTS AND PAYMENT
4.1 Costs. The costs of the services to be provided will be at the rates set
forth on Exhibit "A" hereto and incorporated herein.
4.2 Payment. As pre-payment of the services to be rendered hereunder, REAL TIME
shall issue to QUEST NET 1,800,000 shares of the Company's Series A Preferred
Non-Voting Stock, $10.00 per share face value (the "Preferred Stock"), for an
aggregate dollar amount of US $18,000,000. The rights and preferences of the
Preferred Stock are more fully described in Exhibit "B" hereto and incorporated
herein The delivery of the Preferred certificates will take place within ten
business (10) days or less from the execution of this Agreement (the "Delivery
Date"). REAL TIME shall have the right to call the Preferred Stock not
converted, in whole or in part, at any time.
4.3 Conversion and Redemption of Preferred Stock. QUEST NET shall provide to
REAL TIME a monthly report showing the actual costs of Services, giving effect
to the 20% prepayment discount, provided by QUEST NET (the "Actual Costs").
Within fifteen days from the receipt of the invoice, REAL TIME or STIC shall
have the option to redeem that number of the Preferred Shares with a face value
equal to the Actual Costs (the "Redeemable Shares"), at a redemption price of
$10.00 per share. If REAL TIME or STIC does not redeem the Redeemable Shares
within such fifteen day period, QUEST NET shall have the right to convert the
Redeemable Shares, at a conversion rate equal to (i) the average 5 day bid price
(as of the date of conversion) of STIC's common stock (the " Common Stock"), if
the Common Stock is publicly traded, or at the book value per share of the
Common Stock, if the Common Stock is not publicly traded. If, upon termination
of this Agreement, by passage of time or otherwise, the Actual Costs are less
than the prepaid contract price, QUEST NET shall return to
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REAL TIME that number of Preferred Shares equal to the difference between the
Prepaid Contract Price and the Actual Costs.
5. MAINTENANCE SERVICE. REAL TIME will make its Facilities and/or Software
available to QUEST NET for prevention and remedial maintenance and/or
appropriate QUEST NET security checks. Except for remedial maintenance to
correct Service problems, QUEST NET will give REAL TIME at least 24 hours notice
and, whenever practical, will arrange same at mutually agreeable times to
minimize any disruption to REAL TIME's operations.
6. SERVICE LEVEL COMMITMENTS.
6.1 Commencement of Operations. Within 15 days after the execution of this
Agreement and the designation of a site by REAL TIME software and Services will
be fully operational.
6.2 Unavailability of Services. If the Services are unavailable for four (4)
hours or more in any calendar month, REAL TIME shall be entitled to a credit
equal to one (1) day's Service for each full four (4) hour period of
unavailability, to be taken by REAL TIME as a credit against subsequent invoices
for such Services, anytime within the immediately following two (2) months. In
the event that Services are unavailable for more than four (4) hours at any one
time, QUEST NET shall, at its sole cost, switch REAL TIME to another provider of
the Services until such time as QUEST NET can resume providing Services. The
period of unavailability will commence when REAL TIME notifies QUEST NET of
unavailability or when QUEST NET notifies REAL TIME of same, and shall end when
QUEST NET restores availability of the Service. If QUEST NET is unable to resume
providing Services for a period of 5 days or more, REAL TIME shall have the
option, at its sole discretion, to terminate this Agreement.
The term "unavailable shall mean that the Services are not available for use by
or being provided to REAL TIME. Services shall not be considered unavailable
because of (i) any regularly scheduled downtime or preventive or other
maintenance of which REAL TIME has been notified of in advance and has agreed
to; (ii) any maintenance or service interruptions requested by REAL TIME; (iii)
downtime or Service interruptions resulting from REAL TIME's acts or failure to
act in a timely and/or proper manner when notified to do so by QUEST NET,
including, without limitation, failure to install or properly use updates or to
make available the Facilities or components for testing or repair or to
otherwise comply with QUEST NET's instructions and service requirements; or (iv)
regular configuration or re-configuration periods.
7. SOFTWARE LICENSE Subject to the terms of this Agreement, REAL TIME is hereby
granted a non-exclusive license and right to use the Software provided
hereunder, solely in connection with the Equipment and/ or
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Services to which the Software relates. REAL TIME's license and right to use the
Software will terminate immediately upon termination of this Agreement or if the
Services or Equipment to which the Software relates is no longer in use by REAL
TIME. REAL TIME may not duplicate, distribute, loan, lease or modify, the
Software or create derivative works without the consent of QUEST NET. REAL TIME
may not reverse engineer, decompile, or disassemble the Software.
8. NETWORK INFORMATION, COMMUNICATION AND SECURITY. The network connection
provided by QUEST NET may be used to facilitate communication between REAL
TIME's network and systems operated by REAL TIME and the other systems connected
by QUEST NETNet and the Internet. QUEST NET makes no representations or
warranties with respect to QUEST NETNet, the Services, Equipment, Software or
Documentation with regard to the blockage or prevention of the transmission of
viruses, worms or other programs, communications, data or other tangible or
intangible items which actually will or have the potential to be disruptive or
damaging to computers and related software
REAL TIME agrees to implement reasonable internal procedures to promote
efficient use of QUEST NETNet and to minimize and avoid, whenever commercially
practical, unnecessary network traffic, disruption, and interference with other
users of the interconnected network.
9. COMPLIANCE WITH LAWS. REAL TIME shall comply with all material applicable
present and future federal, state, county, local and, where necessary, foreign
laws, ordinances and regulations, including those governing the export of goods
or services from the United States, relating to the Services, Equipment,
Software, QUEST NETNet, Documentation and/or any other materials, services or
interconnection hereunder
10. LIMITED WARRANTY. QUEST NET warrants that the Services, Equipment and
Software will perform substantially in accordance with the QUEST NET'
Documentation, and any updates thereto and as represented to REAL TIME by QUEST
NET. QUEST NET also warrants that the Equipment or other tangible items provided
hereunder will be free from defects in material and workmanship under normal use
(the "Limited Warranty"). The Limited Warranty will be void if: (i) REAL TIME,
without QUEST NET's approval, modifies or alters the Services, Equipment or
Software uses or connects same in a manner inconsistent with QUEST NET's
requirements and specifications, or (ii) the failure results from accident,
abuse, misapplication or other use by REAL TIME, inconsistent with QUEST NET's
Documentation.
11. LIMITATION OF LIABILITIES AND REMEDIES. QUEST NET makes no attempt to verify
accurate or complete receipt of any transmission, message or communication and
except as set forth in this Agreement, is not responsible for any alteration or
loss of data resulting from delays, non
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deliveries, incorrect deliveries or interruptions, unless caused by the
negligence, misconduct, carelessness, misfeasance or malfeasance of QUEST NET.
In addition, QUEST NET has no obligation, liability or responsibility for, nor
does QUEST NET monitor the contents of any communications, messages, data or
information REAL TIME transmits or receives via the Services or Equipment,
except for those sent by QUEST NET to REAL TIME. Provided however, that QUEST
NET will be responsible for and monitor control and supervise data and
information used for operational engineering purposes and the efficient
operation of QUEST NETNet and interconnections thereto, including REAL TIME's.
12. UPGRADE OF SERVICE. REAL TIME may elect to upgrade the level of service
provided hereunder at any time without incurring a service charge for the
service upgrade, provided that the service upgrade will be in effect for at
least one year. The cost of any such upgrades will be invoiced and paid, from
the prepaid amount, as set forth in Section 4 above.
13. UNITED STATES GOVERNMENT RESTRICTED RIGHTS. The Software and associated
documentation are provided with RESTRICTED RIGHTS. Use, duplication or
disclosure is subject to restrictions set forth in DFARS 252.227-7013,
subparagraph (c) (1)(ii) [the Rights in Technical Data Computer Software clause]
or 48CFR52.227-19, subparagraphs (e) (1) and (2) [Commercial Computer Software
Restricted Rights], as applicable.
14. RELATIONSHIP OF PARTIES. Except as set forth herein, neither party shall
have any right or authority to create any obligation on the part of the other
party or bind the other party to any agreement.
15. INVESTMENT REPRESENTATION. QUEST NET hereby acknowledges that the Preferred
Shares and the shares underlying the Preferred Shares are not being registered
under the Securities Act of 1933, as amended (the "Securities Act"), or under
any state securities statute. The Preferred Shares and the shares underlying the
Preferred Shares are being acquired by QUEST NET for its own account, for
investment purposes only, and not with a view to any distribution thereof. QUEST
NET agrees that no transfer or other disposition of the Preferred Shares or the
shares underlying the Preferred Shares or any interest therein will be made in
violation of the Securities Act or any state securities statute. QUEST NET will
execute an Investment Letter to this effect.
16. NOTICES. Any notice required or permitted by this Agreement shall be in
writing and shall be delivered by U.S. Certified Mail, return receipt requested,
or by special messenger service with receipt (such as Federal Express), by
facsimile delivery or by hand at the addresses set forth above, or such
substitute address of which notice is given in like manner. The
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transmission confirmation receipt from the sender's facsimile machine shall be
conclusive evidence of successful facsimile delivery. Time shall be counted to,
or from, as the case may be, the delivery in person or by mailing.
17. GOVERNING LAW, VENUE AND ARBITRATION. This Agreement shall be deemed to be
executed in the State of Florida and governed by the laws of the State of
Florida. Any controversy or claim arising out of or relating to this Agreement
or to the interpretation, breach or enforcement thereof, except a claim for
injunctive relief, shall be submitted to an arbitrator and settled by
arbitration in Broward County Florida in accordance with the rules then
obtaining of the American Arbitration Association. Any award made by the
arbitrator shall be final, binding and conclusive on all parties hereto for all
purposes, and judgement may be entered thereon in any court having jurisdiction
thereof. Nothing contained herein shall serve to prohibit the parties from
seeking injunctive relief in a court of competent jurisdiction.
18. SEVERABILITY CLAUSE. In the event any parts of this Agreement are found to
be void, the remaining provisions of this Agreement shall nevertheless be
binding with the same effect as though the void parts were deleted.
19. SUCCESSORS. Subject to the provisions of this Agreement, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
20. SECTION AND PARAGRAPH HEADINGS. The section and paragraph headings in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
21. WAIVER AND AMENDMENT. The waiver by any party to this Agreement of a breach
of any provision hereof by any other party shall not be construed as a waiver of
any subsequent breach by any party. No provision of this Agreement may be
terminated, amended, supplemented, waived or modified other than by an
instrument in writing signed by the party against whom the enforcement of the
termination, amendment, supplement, waiver or modification is sought.
22. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument. The execution of this Agreement may be
by actual or facsimile signature, provided however that original signatures must
be provided within ten days from the date of signing.
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23. ATTORNEY FEES AND COSTS. In the event any action is commenced, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
expenses.
24. ASSIGNMENT. This Agreement may be assigned by REAL TIME to a wholly owned
subsidiary. No other assignment will be permitted by either party without the
other party prior written consent, which shall not be unreasonably withheld.
25. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all prior oral or written agreements regarding the
same subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year set forth below.
Dated: August 19, 1998
In the presence of:
Real-Time Encryption, Inc.
By: /s/ J. Forrest Tytler
---------------------------
J. Forrest Tytler, Chairman
Secure Transaction International
Corporation
[Illegible] BY: /s/ J. Forrest Tytler
- ------------------------ ---------------------------
J. Forrest Tytler, Chairman
QUEST NET Corp.
BY: /s/ Camilo Periera
- ------------------------ ---------------------------
Camilo Periera, President
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EXHIBIT A
COST OF SERVICES
1. SETUP COSTS $6,000
2. BANDWIDTH
BANDWIDTH MONTHLY MONTHLY
DISCOUNTED
45 Mbps $55,5000x3 $165,000 $132,000
* MONTHLY PRICE BASED ON 95% USAGE.
** AVAILABILITY: ALL BACKBONE CITIES
*** EXCLUSIVE OF ANY BELL SOUTH CHARGES WHICH MUST BE PAID BY STIC.
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EXHIBIT B
Description of Series "A" Preferred Stock
The Series A Preferred Stock of REAL TIME was properly authorized by the REAL
TIME's Board of Directors and will be filed with Secretary of State. The shares
initially have a designated face value of ten dollars ($10) per share. Fifty
million (50,000,000) shares of Preferred Stock have been authorized, 1,800,000
of which were designated as Series A and reserved for issuance as consideration
for this Transaction. The Series A Preferred shares have never traded in the
market and have never been registered as a part of any registration statement
filed by REAL TIME with the Securities and Exchange Commission. The value of the
shares was arbitrarily determined by REAL TIME's Board of Directors after taking
into consideration, among other things, the features of the Series A Preferred
Stock and the prospects for the company's success in connection with projects
acquired with Series A Preferred Stock.
The preferred stock features are:
1. $10.00 face value per share.
2. Non Voting
3. REAL TIME has the right to redeem at any time, any and all Preferred Shares
by payment of the face value thereof.
4. The Preferred Shares shall be convertible, at a conversion rate equal to (i)
the average 5 day bid price (as of the date of conversion) of STIC's common
stock (the "Common Stock"), if the Common Stock is publicly traded, or at the
book value per share of the Common Stock, if the Common Stock is not publicly
traded.
THE PREFERRED SHARES AND THE SHARES UNDERLYING THE PREFERRED SHARES ARE NOT
BEING REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER ANY STATE SECURITIES STATUTE. THE PREFERRED SHARES AND THE SHARE
UNDERLYING THE PREFERRED SHARES ARE BEING ACQUIRED By QUEST NET FOR ITS OWN
ACCOUNT, FOR INVESTMENT PURPOSES ONLY, AND NOT WITH A VIEW TO ANY DISTRIBUTION
THEREOF. QUEST NET AGREES THAT NO TRANSFER OR OTHER DISPOSITION OF THE PREFERRED
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SHARES OR THE SHARES UNDERLYING THE PREFERRED SHARES OR ANY INTEREST THEREIN
WILL BE MADE IN VIOLATION OF THE SECURITIES ACT OR ANY STATE SECURITIES STATUTE.
QUEST NET WILL EXECUTE AN INVESTMENT LETTER TO THIS EFFECT.
FLORIDA LAW PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE PERSONS IN
FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER WITHIN THREE DAYS
AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE
COMPANY, AN AGENT OF THE COMPANY OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER
THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
OCCURS LATER. SUCH WITHDRAWAL WILL BE WITHOUT ANY FURTHER LIABILITY TO ANY
PERSON. TO ACCOMPLISH SUCH WITHDRAWAL, YOU NEED ONLY SEND A LETTER OR TELEGRAM
TO THE COMPANY AT THE ADDRESS SHOWN HEREIN INDICATING YOUR INTENTION TO
WITHDRAW. SUCH LETTER OR TELEGRAM MUST BE SENT AND POSTMARKED PRIOR TO THE END
OF THE AFOREMENTIONED THIRD BUSINESS DAY. IF SENDING A LETTER, AN INVESTOR
SHOULD SEND IT BY CERTIFIED MAIL. RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS
RECEIVED AND TO EVIDENCE THE TIME WHEN IT IS MAILED. ANY ORAL REQUESTS FOR
RESCISSION SHOULD BE ACCOMPANIED BY A REQUEST FOR WRITTEN CONFIRMATION THE ORAL
REQUEST WAS RECEIVED ON A TIMELY BASIS.
AS REQUIRED BY SECTION 517.061(11)(A)3 FLORIDA STATUTES, AND RULE
3E-500.05(5)(A) PROMULGATED THEREUNDER, YOU OR YOUR REPRESENTATIVES MAY HAVE, AT
THE OFFICES OF THE COMPANY AT ANY REASONABLE HOUR, AFTER REASONABLE PRIOR
NOTICE, ACCESS TO THE MATERIALS SET FORTH IN THE RULE WHICH THE COMPANY CAN
OBTAIN WITHOUT UNREASONABLE EFFORT OR EXPENSE.
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Exhibit 10.18
NETWORK SALES AND SERVICE AGREEMENT
This Agreement made as of August 19, 1998, by and between QUEST NET Corp., a
Colorado Corporation, 2740 E Oakland Park Boulevard, Suite 206, Fort Lauderdale,
Florida 33306 ("QUEST NET"), "), Real-Time Wireless, Inc. a Florida
Corporation, 265 South Federal Highway, Suite 335, Deerfield Beach Florida 33441
("REAL TIME") and REAL-TIME's parent company, Secure Transaction International
Corp., a Florida Corporation, 265 South Federal Highway, Suite 335, Deerfield
Beach Florida 33441 ("STIC").
W I T N E S E T H:
RECITALS
WHEREAS, QUEST NET operates data communications and message switching
networks and provides data network and communications services and related
equipment and devices, individually or through affiliates, suppliers and agents
(collectively referred to herein as QUEST NET); and
WHEREAS, REAL TIME wishes to purchase and use QUEST NET Network
Services (as defined in Section 2 below); and
WHEREAS, QUEST NET wishes to grant to REAL TIME the right to purchase
and use the QUEST NET Services; and
WHEREAS, STIC is the parent corporation of REAL-TIME, its wholly owned
subsidiary and,
WHEREAS, STIC intends to become a company whose securities are
publicly traded, and
WHEREAS, STIC's Board of Directors has authorized the conversion of
REAL-TIME preferred stock into the common stock of STIC.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
hereto agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings for
purposes of this Agreement:
1.1 "QUEST NETNet" shall mean the commercially available data, communications
and message switching network owned, controlled, and/or directly managed by
QUEST NET, its subsidiaries, affiliated companies, and agents.
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1.2 "Documentation" shall mean and shall be deemed to be included in all
references to Equipment and/or Software hereunder and includes all reference
materials, operation and technical specifications, guides, user manuals or other
manuals or other materials in whatever form or on whatever media. REAL TIME may
not disclose, distribute or copy documentation nor print copies of any
documentation provided in electronic, digital, on-line or other form, except for
its own inter-company use, without QUEST NET' express written consent.
1.3 "Equipment" shall mean any equipment, devices, items, or other materials
supplied by QUEST NET to REAL TIME, or used by QUEST NET in connection with the
Services provided to REAL TIME. REAL TIME is responsible for returning all QUEST
NET supplied Equipment, which is in REAL TIME's possession, in good working
order (reasonable wear and tear excepted) at the termination or expiration of
this Agreement.
1.4 " Facility or Facilities" shall mean REAL TIME's offices located at 265
South Federal Highway, Suite 335, Deerfield Beach Florida 33441, from which
interconnection between REAL TIME and QUEST NET will be provided hereunder, or
any other physical location to which REAL TIME may relocate its offices, from
which interconnection will be provided hereunder, or such other physical
location, which the parties subsequently agree to in writing. QUEST NET shall
provide REAL TIME, within 30 days prior to installation of the Interconnection
and Equipment, or sooner upon the request of REAL TIME, with applicable
Facilities Requirements which specify the power, insurance, environmental
controls, cabling access, security and other requirements needed for the
installation of the Interconnection and Equipment. QUEST NET, at Real Time's
cost, shall be responsible for assuring that appropriate power, insurance,
environmental controls, cabling access, security and other requirements are
installed available and properly maintained in the Facility during the term of
this Agreement.
1.5 "Internet" shall mean the United States public communications networks
running the standard protocol known as "TCP/IP, among other communication
protocols.
1.6 "NOC" shall mean any QUEST NET designed Network Operations Center staffed by
QUEST NET personnel and responsible for coordinating and managing the operations
of QUEST NETNet and coordinating any interconnections between QUEST NETNet and
REAL TIME, as well as other network operators and telecommunications carriers.
1.7 "Site Renter" shall mean an item of Equipment provided by QUEST NET, which
uses the standard Internet communications protocol known as TCP/IP at REAL
TIME's Facility to interconnect REAL TIME to QUEST NET.
1.8 "Software" shall mean any programming software, computer code, and
instructions, including network design and other similar information or
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intangible property provided by QUEST NET to REAL TIME, or used by QUEST NET in
connection with providing services to REAL TIME under this Agreement.
2. TERM. The term of this Agreement shall be for a period of three (3) years
from the date that this Agreement is countersigned by QUEST NET, unless
terminated earlier by REAL TIME. Thereafter, this Agreement shall automatically
renew for additional twelve months periods unless notice is given by either
party, in writing, at least 30 days prior to the expiration of the Term, or any
renewal thereof of its intent not to renew. Such renewal(s) shall be at the
average monthly market rates in effect at the time of each renewal, less
negotiated discounts and upon such other terms and conditions as the parties may
mutually agree upon.
3. SCOPE OF SERVICES. For the purpose of this Agreement, REAL-TIME Services
shall consist of the following data, communications network services, message
switching and communication services, together with all Equipment and Software.
3.1. Attachment Services. QUEST NET attachment services shall consist of a
high-speed network connection between REAL TIME and QUEST NETNet at the
Facility. Such connection will facilitate communications between REAL TIME and
the Internet. The QUEST NETNet attachment will be installed, managed, and
operated by QUEST NET. QUEST NET will provide REAL TIME with all Equipment and
Software necessary to connect REAL TIME to QUEST NETNet and its attached
networks using the Internet standard referred to as TCP/IP protocol as well as
any necessary carrier circuits between REAL TIME's Facilities and QUEST NETNet.
3.2 Connectivity and Communication Circuits. QUEST NET will contract with the
appropriate communications carriers or other suppliers where necessary to
provide connectivity between REAL TIME and QUEST NETNet. QUEST NET and such
carriers and/or suppliers will be responsible for the physical management of the
circuits, attachments and operations hereunder and for access coordination and
central office services to help ensure end-to end responsibility for the
initiation and management of REAL TIME's connections.
3.3 Attachment Management and Operations. QUEST NET will provide for prompt
coordination and management of problem diagnosis, REAL TIME's determination and
resolution on REAL TIME's network attachment via REAL TIME's designated NOC for
any problems associated with QUEST NET Services. Equipment located at the NOC
will be operational 24 hours a day, on a continuous basis in order to respond to
operation and technical problems with Services, Equipment or Software. Account
and billing information, requests to upgrade, notify or add Services or other
customer service inquiries will be handled by REAL TIME's QUEST NET Account
Executive.
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3.4 Site Routers. QUEST NET will provide, install, manage, operate and service
all necessary Site Routers, routing equipment and/ or communication circuits at
REAL TIME's Facilities. REAL TIME may elect, by written notice, when ordering
either the initial services or any additional services hereunder, to provide and
be responsible for any required routers, routing equipment and/or communications
circuits to be installed and maintained at REAL TIME's Facilities, provided,
however, that REAL TIME must ensure compliance with any technical
specifications, operational character and REAL TIME's and other compatibility
requirements for interconnection, as contemplated hereunder. QUEST NET may
periodically release updates to REAL TIME's Site Routers. QUEST NET will install
such updates provided that QUEST NET maintenance personnel are given access to
the Facility for such installation. In the event that access is denied to QUEST
NET, REAL TIME will be responsible for such installation.
3.5 End Nodal Switching System. QUEST NET will also provide, if necessary,
Equipment which comprises an end nodal switching system ("ENSS"). This Equipment
may be changed from time to time at QUEST NET' sole and absolute discretion,
based on engineering changes, changes made to REAL TIME's Facilities, service
upgrades, or shift in selection of models or suppliers of items of Equipment.
Provided, however, that, in the event such change is necessary to ensure the
quality of Services provided to REAL TIME, such change shall be a mandatory
obligation of QUEST NET.
3.6 Network News. Without additional charge, and upon REAL TIME's request, QUEST
NET will provide REAL TIME with access to those news services, which QUEST NET
finds available at no charge for interconnection, or access through QUEST
NETNet. REAL TIME may elect to receive any or all of the available news services
and receive any information REAL TIME's selected providers choose to make
available. QUEST NET shall have no responsibility or liability for the
availability or content of such network news, including but not limited to its
accuracy, relevancy, propriety, or appropriateness. REAL TIME's use of such
service shall be the sole responsibility of REAL TIME.
3.7 Network Addressing and Domain Name Services (DNS). Network addresses
associated with REAL TIME's network and its designated networks which have
connectivity to QUEST NETNet, will be listed and/or advertised across QUEST
NETNet and other QUEST NET managed networks in the same manner as QUEST NET
lists and/or advertises all such addresses. Such listings or advertising may be
subject to QUEST NET' policies and the rules, regulations and other criteria
applicable to the Internet and/or other networks. REAL TIME agrees to accept all
necessary actions that QUEST NET takes to comply with same. QUEST NET and its
agents will work closely with REAL TIME's technical staff to implement the
required technical communications, filters and routing tables necessary to
ensure REAL TIME's network interoperability with the QUEST NETNet
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3.8 Network Backbone Services. Pursuant to the terms of this Agreement and for
the consideration set forth herein, QUEST NET will (i) provide Internet backbone
services, based upon the actual usage (ii) lease to REAL TIME the hardware
necessary to operate a minimum of three T3 lines, while configuring same to
operate in concert with the necessary router system and (iii) lease to REAL TIME
space for equipment in a "co-location" area providing the necessary electrical
supply, UPS backup and air conditioning. In addition, QUEST NET will provide
Technical Support on an ongoing basis to assist REAL TIME in the operation of
their business. QUEST NET will monitor all usage and will make available to REAL
TIME the Bandwidth necessary to operate its business. REAL TIME shall be
responsible for all applicable local loop charges. The charges for these
services shall not exceed the estimated costs set forth in Section 4 below,
provided however that if REAL TIME exceeds the estimated yearly Bandwidth usage,
requires additional equipment or incurs additional port charges the additional
costs shall be billed at the same rate set forth in Section 4.
4. COSTS AND PAYMENT.
4.1 Costs. The costs of the services to be provided will be at the rates set
forth on Exhibit "A" hereto and incorporated herein.
4.2 Payment. As pre-payment of the services to be rendered hereunder, REAL TIME
shall issue to QUEST NET 1,500,000 shares of the Company's Series A Preferred
Non-Voting Stock, $10.00 per share face value (the "Preferred Stock"), for an
aggregate dollar amount of US $15,000,000. The rights and preferences of the
Preferred Stock are more fully described in Exhibit "B" hereto and incorporated
herein The delivery of the Preferred certificates will take place within ten
business (10) days or less from the execution of this Agreement (the "Delivery
Date"). REAL TIME shall have the right to call the Preferred Stock not
converted, in whole or in part, at any time.
4.3 Conversion and Redemption of Preferred Stock. QUEST NET shall provide to
REAL TIME a monthly report showing the actual costs of Services, giving effect
to the 20% prepayment discount, provided by QUEST NET (the "Actual Costs").
Within fifteen days from the receipt of the invoice, REAL TIME or STIC shall
have the option to redeem that number of the Preferred Shares with a face value
equal to the Actual Costs (the "Redeemable Shares"), at a redemption price of
$10.00 per share. If REAL TIME or STIC does not redeem the Redeemable Shares
within such fifteen day period, QUEST NET shall have the right to convert the
Redeemable Shares, at a conversion rate equal to (i) the average 5 day bid price
(as of the date of conversion) of STIC's common stock (the " Common Stock"), if
the Common Stock is publicly traded, or at the book value per share of the
Common Stock, if the Common Stock is not publicly traded. If, upon termination
of this Agreement, by passage of time or otherwise, the Actual Costs are less
than the prepaid contract price, QUEST NET shall return to
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REAL TIME that number of Preferred Shares equal to the difference between the
Prepaid Contract Price and the Actual Costs.
5. MAINTENANCE SERVICE. REAL TIME will make its Facilities and/or Software
available to QUEST NET for prevention and remedial maintenance and/or
appropriate QUEST NET security checks. Except for remedial maintenance to
correct Service problems, QUEST NET will give REAL TIME at least 24 hours notice
and, whenever practical, will arrange same at mutually agreeable times to
minimize any disruption to REAL TIME's operations.
6. SERVICE LEVEL COMMITMENTS.
6.1 Commencement of Operations. Within 15 days after the execution of this
Agreement and the designation of a site by REAL TIME software and Services will
be fully operational.
6.2 Unavailability of Services. If the Services are unavailable for four (4)
hours or more in any calendar month, REAL TIME shall be entitled to a credit
equal to one (1) day's Service for each full four (4) hour period of
unavailability, to be taken by REAL TIME as a credit against subsequent invoices
for such Services, anytime within the immediately following two (2) months. In
the event that Services are unavailable for more than four (4) hours at any one
time, QUEST NET shall, at its sole cost, switch REAL TIME to another provider of
the Services until such time as QUEST NET can resume providing Services. The
period of unavailability will commence when REAL TIME notifies QUEST NET of
unavailability or when QUEST NET notifies REAL TIME of same, and shall end when
QUEST NET restores availability of the Service. If QUEST NET is unable to resume
providing Services for a period of 5 days or more, REAL TIME shall have the
option, at its sole discretion, to terminate this Agreement.
The term "unavailable shall mean that the Services are not available for use by
or being provided to REAL TIME. Services shall not be considered unavailable
because of (i) any regularly scheduled downtime or preventive or other
maintenance of which REAL TIME has been notified of in advance and has agreed
to; (ii) any maintenance or service interruptions requested by REAL TIME; (iii)
downtime or Service interruptions resulting from REAL TIME's acts or failure to
act in a timely and/or proper manner when notified to do so by QUEST NET,
including, without limitation, failure to install or properly use updates or to
make available the Facilities or components for testing or repair or to
otherwise comply with QUEST NET's instructions and service requirements; or (iv)
regular configuration or re-configuration periods.
7. SOFTWARE LICENSE. Subject to the terms of this Agreement, REAL TIME is hereby
granted a non-exclusive license and right to use the Software provided
hereunder, solely in connection with the Equipment and/ or
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Services to which the Software relates. REAL TIME's license and right to use the
Software will terminate immediately upon termination of this Agreement or if the
Services or Equipment to which the Software relates is no longer in use by REAL
TIME. REAL TIME may not duplicate, distribute, loan, lease or modify, the
Software or create derivative works without the consent of QUEST NET. REAL TIME
may not reverse engineer, decompile, or disassemble the Software.
8. NETWORK INFORMATION, COMMUNICATION AND SECURITY. The network connection
provided by QUEST NET may be used to facilitate communication between REAL
TIME's network and systems operated by REAL TIME and the other systems connected
by QUEST NETNet and the Internet. QUEST NET makes no representations or
warranties with respect to QUEST NETNet, the Services, Equipment, Software or
Documentation with regard to the blockage or prevention of the transmission of
viruses, worms or other programs, communications, data or other tangible or
intangible items which actually will or have the potential to be disruptive or
damaging to computers and related software
REAL TIME agrees to implement reasonable internal procedures to promote
efficient use of QUEST NETNet and to minimize and avoid, whenever commercially
practical, unnecessary network traffic, disruption, and interference with other
users of the interconnected network.
9. COMPLIANCE WITH LAWS. REAL TIME shall comply with all material applicable
present and future federal, state, county, local and, where necessary, foreign
laws, ordinances and regulations, including those governing the export of goods
or services from the United States, relating to the Services, Equipment,
Software, QUEST NETNet, Documentation and/or any other materials, services or
interconnection hereunder
10. LIMITED WARRANTY. QUEST NET warrants that the Services, Equipment and
Software will perform substantially in accordance with the QUEST NET'
Documentation, and any updates thereto and as represented to REAL TIME by QUEST
NET. QUEST NET also warrants that the Equipment or other tangible items provided
hereunder will be free from defects in material and workmanship under normal use
(the "Limited Warranty"). The Limited Warranty will be void if: (i) REAL TIME,
without QUEST NET's approval, modifies or alters the Services, Equipment or
Software uses or connects same in a manner inconsistent with QUEST NET's
requirements and specifications, or (ii) the failure results from accident,
abuse, misapplication or other use by REAL TIME, inconsistent with QUEST NET's
Documentation.
11. LIMITATION OF LIABILITIES AND REMEDIES. QUEST NET makes no attempt to verify
accurate or complete receipt of any transmission, message or communication and
except as set forth in this Agreement, is not responsible for any alteration or
loss of data resulting from delays, non
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deliveries, incorrect deliveries or interruptions, unless caused by the
negligence, misconduct, carelessness, misfeasance or malfeasance of QUEST NET.
In addition, QUEST NET has no obligation, liability or responsibility for, nor
does QUEST NET monitor the contents of any communications, messages, data or
information REAL TIME transmits or receives via the Services or Equipment,
except for those sent by QUEST NET to REAL TIME. Provided however, that QUEST
NET will be responsible for and monitor control and supervise data and
information used for operational engineering purposes and the efficient
operation of QUEST NETNet and interconnections thereto, including REAL TIME's.
12. UPGRADE OF SERVICE. REAL TIME may elect to upgrade the level of service
provided hereunder at any time without incurring a service charge for the
service upgrade, provided that the service upgrade will be in effect for at
least one year. The cost of any such upgrades will be invoiced and paid, from
the prepaid amount, as set forth in Section 4 above.
13. UNITED STATES GOVERNMENT RESTRICTED RIGHTS. The Software and associated
documentation are provided with RESTRICTED RIGHTS. Use, duplication or
disclosure is subject to restrictions set forth in DFARS 252.227-7013,
subparagraph (c) (1)(ii) [the Rights in Technical Data Computer Software clause]
or 48CFR52.227-19, subparagraphs (e) (1) and (2) [Commercial Computer Software
Restricted Rights], as applicable.
14. RELATIONSHIP OF PARTIES. Except as set forth herein, neither party shall
have any right or authority to create any obligation on the part of the other
party or bind the other party to any agreement.
15. INVESTMENT REPRESENTATION. QUEST NET hereby acknowledges that the Preferred
Shares and the shares underlying the Preferred Shares are not being registered
under the Securities Act of 1933, as amended (the "Securities Act"), or under
any state securities statute. The Preferred Shares and the shares underlying the
Preferred Shares are being acquired by QUEST NET for its own account, for
investment purposes only, and not with a view to any distribution thereof. QUEST
NET agrees that no transfer or other disposition of the Preferred Shares or the
shares underlying the Preferred Shares or any interest therein will be made in
violation of the Securities Act or any state securities statute. QUEST NET will
execute an Investment Letter to this effect.
16. NOTICES. Any notice required or permitted by this Agreement shall be in
writing and shall be delivered by U.S. Certified Mail, return receipt requested,
or by special messenger service with receipt (such as Federal Express), by
facsimile delivery or by hand at the addresses set forth above, or such
substitute address of which notice is given in like manner. The
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transmission confirmation receipt from the sender's facsimile machine shall be
conclusive evidence of successful facsimile delivery. Time shall be counted to,
or from, as the case may be, the delivery in person or by mailing.
17. GOVERNING LAW, VENUE AND ARBITRATION. This Agreement shall be deemed to be
executed in the State of Florida and governed by the laws of the State of
Florida. Any controversy or claim arising out of or relating to this Agreement
or to the interpretation, breach or enforcement thereof, except a claim for
injunctive relief, shall be submitted to an arbitrator and settled by
arbitration in Broward County Florida in accordance with the rules then
obtaining of the American Arbitration Association. Any award made by the
arbitrator shall be final, binding and conclusive on all parties hereto for all
purposes, and judgement may be entered thereon in any court having jurisdiction
thereof. Nothing contained herein shall serve to prohibit the parties from
seeking injunctive relief in a court of competent jurisdiction.
18. SEVERABILITY CLAUSE. In the event any parts of this Agreement are found to
be void, the remaining provisions of this Agreement shall nevertheless be
binding with the same effect as though the void parts were deleted.
19. SUCCESSORS. Subject to the provisions of this Agreement, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
20. SECTION AND PARAGRAPH HEADINGS. The section and paragraph headings in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
21. WAIVER AND AMENDMENT. The waiver by any party to this Agreement of a breach
of any provision hereof by any other party shall not be construed as a waiver of
any subsequent breach by any party. No provision of this Agreement may be
terminated, amended, supplemented, waived or modified other than by an
instrument in writing signed by the party against whom the enforcement of the
termination, amendment, supplement, waiver or modification is sought.
22. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument. The execution of this Agreement may be
by actual or facsimile signature, provided however that original signatures must
be provided within ten days from the date of signing.
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23. ATTORNEY FEES AND COSTS. In the event any action is commenced, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
expenses.
24. ASSIGNMENT. This Agreement may be assigned by REAL TIME to a wholly owned
subsidiary. No other assignment will be permitted by either party without the
other party prior written consent, which shall not be unreasonably withheld.
25. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all prior oral or written agreements regarding the
same subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year set forth below.
Dated: August 19, 1998
In the presence of:
Real-Time Wireless, Inc.
By: /s/ J. Forrest Tytler
---------------------------
J. Forrest Tytler, Chairman
Secure Transaction International
Corporation
[Illigible] BY /s/ J. Forrest Tytler
- ------------------------ ---------------------------
J. Forrest Tytler, Chairman
QUEST NET Corp.
BY: /s/ Camilo Periera
- ------------------------ ---------------------------
Camilo Periera, President
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Exhibit A
COST OF SERVICES
1. SETUP COSTS $6,000
2. BANDWIDTH
BANDWIDTH MONTHLY MONTHLY
DISCOUNTED
45 Mbps $55,5000x3 $165,000 $132,000
* MONTHLY PRICE BASED ON 95% USAGE.
** AVAILABILITY: ALL BACKBONE CITIES
*** EXCLUSIVE OF ANY BELL SOUTH CHARGES WHICH MUST BE PAID BY STIC.
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EXHIBIT B
Description of Series "A" Preferred Stock
The Series A Preferred Stock of REAL TIME was properly authorized by the REAL
TIME's Board of Directors and will be filed with Secretary of State. The shares
initially have a designated face value of ten dollars ($10) per share. One
Hundred Million (100,000,000) shares of Preferred Stock have been authorized,
1,500,000 of which were designated as Series A and reserved for issuance as
consideration for this Transaction. The Series A Preferred shares have never
traded in the market and have never been registered as a part of any
registration statement filed by REAL TIME with the Securities and Exchange
Commission. The value of the shares was arbitrarily determined by REAL TIME's
Board of Directors after taking into consideration, among other things, the
features of the Series A Preferred Stock and the prospects for the company's
success in connection with projects acquired with Series A Preferred Stock.
The preferred stock features are:
1. $10.00 face value per share.
2. Non Voting
3. REAL TIME has the right to redeem at any time, any and all Preferred Shares
by payment of the face value thereof.
4. The Preferred Shares shall be convertible, at a conversion rate equal to (i)
the average 5 day bid price (as of the date of conversion) of STIC's common
stock (the "Common Stock"), if the Common Stock is publicly traded, or at the
book value per share of the Common Stock, if the Common Stock is not publicly
traded.
THE PREFERRED SHARES AND THE SHARES UNDERLYING THE PREFERRED SHARES ARE NOT
BEING REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER ANY STATE SECURITIES STATUTE. THE PREFERRED SHARES AND THE SHARE
UNDERLYING THE PREFERRED SHARES ARE BEING ACQUIRED BY QUEST NET FOR ITS OWN
ACCOUNT, FOR INVESTMENT PURPOSES ONLY, AND NOT WITH A VIEW TO ANY DISTRIBUTION
THEREOF. QUEST NET AGREES THAT NO TRANSFER OR OTHER DISPOSITION OF THE PREFERRED
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SHARES OR THE SHARES UNDERLYING THE PREFERRED SHARES OR ANY INTEREST THEREIN
WILL BE MADE IN VIOLATION OF THE SECURITIES ACT OR ANY STATE SECURITIES STATUTE.
QUEST NET WILL EXECUTE AN INVESTMENT LETTER TO THIS EFFECT.
FLORIDA LAW PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE PERSONS IN
FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER WITHIN THREE DAYS
AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE
COMPANY, AN AGENT OF THE COMPANY OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER
THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
OCCURS LATER. SUCH WITHDRAWAL WILL BE WITHOUT ANY FURTHER LIABILITY TO ANY
PERSON. TO ACCOMPLISH SUCH WITHDRAWAL, YOU NEED ONLY SEND A LETTER OR TELEGRAM
TO THE COMPANY AT THE ADDRESS SHOWN HEREIN INDICATING YOUR INTENTION TO
WITHDRAW. SUCH LETTER OR TELEGRAM MUST BE SENT AND POSTMARKED PRIOR TO THE END
OF THE AFOREMENTIONED THIRD BUSINESS DAY. IF SENDING A LETTER, AN INVESTOR
SHOULD SEND IT BY CERTIFIED MAIL. RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS
RECEIVED AND TO EVIDENCE THE TIME WHEN IT IS MAILED. ANY ORAL REQUESTS FOR
RESCISSION SHOULD BE ACCOMPANIED BY A REQUEST FOR WRITTEN CONFIRMATION THE ORAL
REQUEST WAS RECEIVED ON A TIMELY BASIS.
AS REQUIRED BY SECTION 517.061(11)(A)3 FLORIDA STATUTES, AND RULE
3E-500.O5(5)(A) PROMULGATED THEREUNDER, YOU OR YOUR REPRESENTATIVES MAY HAVE, AT
THE OFFICES OF THE COMPANY AT ANY REASONABLE HOUR, AFTER REASONABLE PRIOR
NOTICE, ACCESS TO THE MATERIALS SET FORTH IN THE RULE WHICH THE COMPANY CAN
OBTAIN WITHOUT UNREASONABLE EFFORT OR EXPENSE.
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PROFESSIONAL CONSULTING AGREEMENT
This Agreement made as of August 19, 1998, by and between QUEST NET Corp., a
Colorado Corporation, 2740 E Oakland Park Boulevard, Suite 206, Fort Lauderdale,
Florida 33306 ("QUEST NET"), "), Real-Time Phone Services, Inc. a Florida
Corporation, 265 South Federal Highway, Suite 335, Deerfield Beach Florida 33441
("REAL TIME") and REAL-TIME's parent company, Secure Transaction International
Corp., a Florida Corporation, 265 South Federal Highway, Suite 335, Deerfield
Beach Florida 33441 ("STIC").
WHEREAS, QUEST NET has substantial experience in computer technology
including data communications and message switching networks and the creating
and marketing of software, especially in the field of encryption; and
WHEREAS, QUEST NET operates data communications and message switching
networks and provides data network and communications services and related
equipment and devices, individually or through affiliates, suppliers and agents;
and
WHEREAS, QUEST NET, through its business operations and contacts is
made aware of new products and market opportunities that could benefit
REAL-TIME; and
WHEREAS, REAL-TIME wishes to enlist QUEST NET as a technology and
marketing consultant to provide assistance to REAL-TIME on an on-going basis
with regard to new product and market opportunities in the areas of computer
technology including data communications and message switching networks and the
creating and marketing of software, especially in the field of encryption; and
WHEREAS, STIC is the parent corporation of REAL-TIME, its wholly owned
subsidiary and,
WHEREAS, STIC intends to become a company whose securities are publicly
traded, and
WHEREAS, STIC's Board of Directors has authorized the conversion of
REAL-TIME preferred stock into the common stock of STIC.
NOW, THEREFORE, for the mutual promises and other consideration
described herein, the parties hereto agree as follows:
1. Services to be Provided by QUEST NET. QUEST NET's duties will
consist of (i) providing technology and marketing advice and analysis of new
product and market opportunities in the areas of computer technology (the
"Opportunities"), including data communications, message switching networks and
encryption and other related software (the "Software"); (ii) evaluating and
presenting to REAL-TIME the Opportunities; (iii) facilitating REAL-TIME's
relationship with the computer technology community and (iv) assisting REAL-TIME
to (a) introduce its encryption software product into various markets throughout
the United States and (b) help expand the
Exhibit 10.19
PROFESSIONAL CONSULTING AGREEMENT
This Agreement made as of August 19, 1998, by and between QUEST NET
Corp., a Colorado Corporation, 2740 E Oakland Park Boulevard, Suite 206, Fort
Lauderdale, Florida 33306 ("QUEST NET"), "), Real-Time Wireless, Inc. a Florida
Corporation, 265 South Federal Highway, Suite 335, Deerfield Beach Florida 33441
("REAL TIME") and REAL-TIME's parent company, Secure Transaction International
Corp., a Florida Corporation, 265 South Federal Highway, Suite 335, Deerfield
Beach Florida 33441 ("STIC").
WHEREAS, QUEST NET has substantial experience in computer technology
including data communications and message switching networks and the creating
and marketing of software, especially in the field of encryption; and
WHEREAS, QUEST NET operates data communications and message switching
networks and provides data network and communications services and related
equipment and devices, individually or through affiliates, suppliers and agents;
and
WHEREAS, QUEST NET, through its business operations and contacts is
made aware of new products and market opportunities that could benefit
REAL-TIME; and
WHEREAS, REAL-TIME wishes to enlist QUEST NET as a technology and
marketing consultant to provide assistance to REAL-TIME on an on-going basis
with regard to new product and market opportunities in the areas of computer
technology including data communications and message switching networks and the
creating and marketing of software, especially in the field of encryption; and
WHEREAS, STIC is the parent corporation of REAL-TIME, its wholly owned
subsidiary and,
WHEREAS, STIC intends to become a company whose securities are publicly
traded, and
WHEREAS, STIC's Board of Directors has authorized the conversion of
REAL-TIME preferred stock into the common stock of STIC.
NOW, THEREFORE, for the mutual promises and other consideration
described herein, the parties hereto agree as follows:
1. Services to be Provided by QUEST NET. QUEST NET's duties will
consist of (i) providing technology and marketing advice and analysis of new
product and market opportunities in the areas of computer technology (the
"Opportunities"), including data communications, message switching networks and
encryption and other related software (the "Software"); (ii) evaluating and
presenting to REAL-TIME the Opportunities; (iii) facilitating REAL-TIME's
relationship with the computer technology community and (iv) assisting REAL-TIME
to (a) introduce its encryption software product into various markets throughout
the United States and (b) help expand the
<PAGE>
distribution of its encryption software into those markets. QUEST NET will
provide such assistance on an on-going basis. QUEST NET will respond to all
telephone calls from REAL-TIME within a time period of 2 hours from the time the
call was placed.
2. Term. The term of this Agreement shall be for a period of 5 years
from the date hereof.
3 Compensation for Services. In consideration of services to be
rendered hereunder, QUEST NET shall receive a consulting fee of $50,000 per
year, payable in advance by the issuance of 25,000 shares of REAL-TIME's Series
A Preferred Non-Voting Stock, $10.00 per share face value (the "Preferred
Stock"). The Preferred Stock shall be convertible into the common stock of STIC.
The other rights and preferences of the Preferred Stock are more fully described
in Exhibit "A" hereto and incorporated herein. The delivery of the Preferred
certificates will take place within twenty (20) business days from the execution
of this Agreement (the "Delivery Date"). REAL-TIME or STIC shall have the right
to redeem the Preferred Stock not converted, in whole or in part, at any time by
paying the face value thereof.
For each three-month period during the Term of this Agreement, QUEST
NET shall have the right to convert up to 1,250 shares of the Preferred Stock by
providing to REAL-TIME and STIC a notice of conversion. Within fifteen days from
the receipt of the notice, REAL-TIME or STIC shall have the option to redeem
that number of the Preferred Shares noticed for conversion (the "Redeemable
Shares"), at a redemption price of $10.00 per share. If REAL-TIME or STIC do not
redeem the Redeemable Shares within such fifteen day period, QUEST NET shall
have the right to convert the Redeemable Shares into common stock of STIC, at a
conversion rate equal to (i) the average 5 day bid price (as of the date of
conversion) of STIC's common stock, if STIC's common stock is publicly traded,
or at the book value per share of STIC's Common Stock, if such common stock is
not publicly traded.
4. Reimbursement for Expenses. QUEST NET shall bear all of its expenses
and costs without reimbursement from REAL-TIME.
5. Termination. In addition to any other remedy available at law or in
equity, in the event of any breach of this agreement by QUEST NET the number of
shares to be retained by QUEST NET shall be based upon 25,000 times a fraction
whose numerator is the number of days after the date hereof and whose
denominator is 1,825. All remaining shares shall be canceled.
If QUEST NET is unable, for any reason, to perform the duties for
REAL-TIME for 15 consecutive days, it shall be treated as a breach by QUEST NET.
6. Finders Fees. QUEST NET shall not receive any finders' fees,
commissions or other remuneration in connection with any transaction it assists
REAL-TIME with during the term of this Agreement.
7. Representations and Warranties. QUEST NET represents and
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warrants that services to be provided by QUEST NET under this Agreement will be
performed by competent, trained personnel in a workmanlike manner. QUEST NET and
its personnel shall comply with all applicable statues, rules, and regulations
governing all aspects of the services to be performed under this Agreement.
REAL-TIME understands and acknowledges that QUEST NET cannot guarantee that the
services provided hereunder will achieve any particular objective or fulfill any
specified goals.
In order to induce REAL-TIME to issue the Preferred Shares, recognizing
that REAL-TIME will be relying on the information and on the representations set
forth below, QUEST NET hereby represents, warrants, and agrees as follows:
(a) QUEST NET has determined that the purchase of the Preferred shares
and the shares underlying the Preferred Shares of REAL-TIME (the "Shares")
is a suitable investment for QUEST NET and that QUEST NET is able to bear
economic risks including a total loss of an investment in the Shares.
(b) QUEST NET is purchasing the Shares for its own account for
investment, and not with a view to or for sale in connection with the
distribution of the Shares nor with any present intention of selling or
otherwise disposing of all or any part of the Shares. QUEST NET hereby
acknowledges its understanding that the Shares are not being registered
under the Securities Act of 1933 (the "Act"), or any state securities laws
on the ground that the issuance and sale of the Shares to QUEST NET is
exempt under the Act and relevant state securities laws as not involving a
public offering. QUEST NET agrees not to sell the Shares unless they are
subsequently registered or an exemption from such registration is
available. QUEST NET authorizes REAL-TIME to place a legend denoting the
restrictions on the certificates to be issued.
QUEST NET further acknowledges its understanding that REAL-TIME's reliance
on such exemptions are, in part, based upon the foregoing representations,
warranties, and agreements by it and that the statutory basis for such
exemptions would not be present, if notwithstanding such representations,
warranties and agreements, QUEST NET was acquiring the Shares for resale on
the occurrence or non-occurrence of some pre-determined event. In order to
induce REAL-TIME to issue and sell the Shares to QUEST NET, it is agreed
that REAL-TIME will have no obligation to recognize the ownership,
beneficial or otherwise, of such shares by anyone but QUEST NET, except as
set forth herein.
(c) QUEST NET acknowledges and is aware that, except as set forth
herein, the it will not transfer or assign the Shares, or any interest
therein; the assignment and transferability of the Shares will be governed
by this Agreement and all applicable laws.
(d) QUEST NET has acknowledged and is aware that, except for the three
day rescission rights provided under Florida law, it is not entitled to
cancel, terminate or revoke this subscription, and any agreements of QUEST
NET in connection herewith shall survive the termination of this Agreement.
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(e) QUEST NET has had the opportunity to ask questions of, and receive
answers from management of REAL-TIME regarding the terms and conditions of
this Agreement, and the transactions contemplated thereby, as well as the
affairs of REAL-TIME and related matters.
QUEST NET may have access to whatever additional information
concerning REAL-TIME, its financial condition, its business, its prospects,
its management, its capitalization, and other similar matters that it or
its purchaser representative, if any, desires, provided that REAL-TIME can
acquire such information without unreasonable effort or expense. In
addition, as required by Section 517.061(11)(a)(3), Florida Statutes, and
Rule 3E-500.05(a) thereunder, QUEST NET and its purchaser representative
may have, at the offices of REAL-TIME, at any reasonable hour, after
reasonable prior notice, access to the materials set forth in the Rule
which REAL-TIME can obtain without unreasonable effort or expense.
(f) QUEST NET has had the opportunity to obtain additional information
necessary to verify the accuracy of the information referred to in
subparagraph (e) hereof.
QUEST NET hereby agrees to indemnify and hold harmless REAL-TIME its
respective officers, directors, shareholders, employees, agents and attorneys
against any and all losses, claims, demands, liabilities and expenses (including
reasonable attorney fees, expert witness and accounting fees and other
disbursements and costs or other expenses) incurred by each such person in
connection with defending or investigating any such claims or liabilities,
whether or not resulting in any liability to such person) to which any such
indemnified party may become subject under the Act, under any other statute, at
common law or otherwise, insofar as such losses, claims, demands, liabilities
and expenses (a) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in this Agreement, or (b) arise
out of or are based upon any breach of any representation, warranty or agreement
contained herein.
The representations, warranties, and agreements contained herein shall
survive the delivery of and payment for, the Shares.
- --------------------------------------------------------------------------------
FLORIDA LAW PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE PERSONS IN
FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER WITHIN THREE DAYS
AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO REAL-TIME,
AN AGENT OF REAL-TIME OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER THE
AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
OCCURS LATER. PAYMENTS FOR TERMINATED SUBSCRIPTIONS VOIDED BY PURCHASERS AS
PROVIDED FOR IN THIS PARAGRAPH WILL BE PROMPTLY REFUNDED WITHOUT INTEREST.
- --------------------------------------------------------------------------------
4
<PAGE>
8. Governing Law, Venue, and Arbitration. This Agreement shall be deemed to be
executed in the State of Florida and governed by the laws of the State of
Florida. Any controversy or claim arising out of or relating to this Agreement
or to the interpretation, breach or enforcement thereof, except a claim for
injunctive relief, shall be submitted to an arbitrator and settled by
arbitration in Broward County, Florida, in accordance with the rules then
obtaining of the American Arbitration Association. Any award made by the
arbitrator shall be final, binding, and conclusive on all parties hereto for all
purposes, and judgment may be entered thereon in any court having jurisdiction
thereof. Nothing contained herein shall serve to prohibit the parties from
seeking injunctive relief in a court of competent jurisdiction.
9. Severability. In the event any parts of this Agreement are found to
be void, the remaining provisions of this Agreement shall nevertheless be
binding with the same effect as though the void parts were deleted.
10. Successors. Subject to the provisions of this Agreement, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
11. Section and Paragraph Headings. The section and paragraph headings
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
12. Waiver and Amendment. The waiver by any party to this Agreement of
a breach of any provision hereof by any other party shall not be construed as a
waiver of any subsequent breach by any party. No provision of this Agreement may
be terminated, amended, supplemented, waived or modified other than by an
instrument in writing signed by the party against whom the enforcement of the
termination, amendment, supplement, waiver or modification is sought.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature, provided however that
original signatures must be provided within ten days from the date of signing.
14. Attorney Fees and Costs. In the event any action is commenced, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
expenses.
15. Assignment. This Agreement may be assigned by REAL-TIME to any
other wholly owned subsidiary of STIC. No other assignment will be permitted by
either party without the other party prior written consent, which shall not be
unreasonably withheld.
16. Relationship of Parties. Except as set forth herein, neither party
shall have any right or authority to create any obligation on the part of the
other party or bind the other party to any agreement.
5
<PAGE>
17. Notices. Any notice required or permitted by this Agreement shall
be in writing and shall be delivered by U.S. Certified Mail, return receipt
requested, or by special messenger service with receipt (such as Federal
Express), by facsimile delivery or by hand, to the parties at the addresses set
forth above or such substitute address of which notice is given in like manner.
The transmission confirmation receipt from the sender's facsimile machine shall
be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
18. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior oral or written agreements
regarding the same subject matter.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer, or as to an individual
party, has executed this Agreement in his own hand, as of the date first written
above.
Dated: August 19, 1998
In the presence of:
Real-Time Wireless, Inc.
BY: /s/ J. Forrest Tytler
---------------------------
J. Forrest Tytler, Chairman
Secure Transaction International
Corporation
[Illigible] BY /s/ J. Forrest Tytler
- ------------------------ ---------------------------
J. Forrest Tytler, Chairman
Quest Net Corp.
BY: /s/ Camilo Pereira
- ------------------------ ---------------------------
Camilo Pereira, President
6
<PAGE>
EXHIBIT A
Description of Series "A" Preferred Stock
The Series A Preferred Stock of REAL-TIME was properly authorized by the
REAL-TIME's Board of Directors and filed with Secretary of State. The shares
initially have a designated face value of ten dollars ($10) per share. One
Hundred million (100,000,000) shares of Preferred Stock have been authorized,
175,000 of which have been designated as Series A and 25,000 of which were
reserved for issuance as consideration for this Transaction. The Series A
Preferred shares are convertible into the common stock of STIC. The Series A
Preferred shares and the common stock of STIC have never traded in the market
and have never been registered as a part of any registration statement filed by
REAL-TIME or STIC with the Securities and Exchange Commission. The value of the
shares was arbitrarily determined by REAL-TIME's Board of Directors after taking
into consideration, among other things, the features of the Series A Preferred
Stock and the prospects for the company's success in connection with projects
acquired with Series A Preferred Stock.
The preferred stock features are:
1. $10.00 face value per share.
2. No voting Rights
3. REAL-TIME has the right to redeem at any time, any and all Preferred Shares
by payment of the face value thereof.
4. The Preferred Shares shall be convertible into the common stock of STIC, at a
conversion rate equal to (i) the average 5 day bid price (as of the date of
conversion) of STIC's common stock, if STIC's common stock is publicly traded,
or at the book value per share of STIC's common stock, if such common stock is
not publicly traded.
THE PREFERRED SHARES AND THE SHARES UNDERLYING THE PREFERRED SHARES ARE NOT
BEING REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER ANY STATE SECURITIES STATUTE. THE PREFERRED SHARES AND THE
SHARE UNDERLYING THE PREFERRED SHARES ARE BEING ACQUIRED BY QUEST NET FOR ITS
OWN ACCOUNT, FOR INVESTMENT PURPOSES ONLY, AND NOT WITH A VIEW TO ANY
DISTRIBUTION THEREOF. QUEST NET AGREES THAT NO TRANSFER OR OTHER DISPOSITION OF
THE PREFERRED SHARES OR THE SHARES UNDERLYING THE PREFERRED SHARES OR ANY
INTEREST THEREIN WILL BE MADE IN VIOLATION OF THE SECURITIES ACT
7
<PAGE>
OR ANY STATE SECURITIES STATUTE. QUEST NET WILL EXECUTE AN INVESTMENT LETTER
TO THIS EFFECT.
FLORIDA LAW PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE PERSONS IN
FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER WITHIN THREE DAYS
AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE
COMPANY, AN AGENT OF THE COMPANY OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER
THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
OCCURS LATER. SUCH WITHDRAWAL WILL BE WITHOUT ANY FURTHER LIABILITY TO ANY
PERSON. TO ACCOMPLISH SUCH WITHDRAWAL, YOU NEED ONLY SEND A LETTER OR TELEGRAM
TO THE COMPANY AT THE ADDRESS SHOWN HEREIN INDICATING YOUR INTENTION TO
WITHDRAW. SUCH LETTER OR TELEGRAM MUST BE SENT AND POSTMARKED PRIOR TO THE END
OF THE AFOREMENTIONED THIRD BUSINESS DAY. IF SENDING A LETTER, AN INVESTOR
SHOULD SEND IT BY CERTIFIED MAIL. RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS
RECEIVED AND TO EVIDENCE THE TIME WHEN IT IS MAILED. ANY ORAL REQUESTS FOR
RESCISSION SHOULD BE ACCOMPANIED BY A REQUEST FOR WRITTEN CONFIRMATION THE ORAL
REQUEST WAS RECEIVED ON A TIMELY BASIS.
AS REQUIRED BY SECTION 517.061(11)(A)3 FLORIDA STATUTES, AND RULE
3E-500.05(5)(A) PROMULGATED THEREUNDER, YOU OR YOUR REPRESENTATIVES MAY HAVE, AT
THE OFFICES OF THE COMPANY AT ANY REASONABLE HOUR, AFTER REASONABLE PRIOR
NOTICE, ACCESS TO THE MATERIALS SET FORTH IN THE RULE WHICH THE COMPANY CAN
OBTAIN WITHOUT UNREASONABLE EFFORT OR EXPENSE.
Exhibit 10.20
PROFESSIONAL CONSULTING AGREEMENT
This Agreement made as of August 19, 1998, by and between QUEST NET
Corp., a Colorado Corporation, 2740 E Oakland Park Boulevard, Suite 206, Fort
Lauderdale, Florida 33306 ("QUEST NET"), "), Real-Time Encryption, Inc. a
Florida Corporation, 265 South Federal Highway, Suite 335, Deerfield Beach
Florida 33441 ("REAL TIME") and REAL-TIME's parent company, Secure Transaction
International Corp., a Florida Corporation, 265 South Federal Highway, Suite
335, Deerfield Beach Florida 33441 ("STIC").
WHEREAS, QUEST NET has substantial experience in computer technology
including data communications and message switching networks and the creating
and marketing of software, especially in the field of encryption; and
WHEREAS, QUEST NET operates data communications and message switching
networks and provides data network and communications services and related
equipment and devices, individually or through affiliates, suppliers and agents;
and
WHEREAS, QUEST NET, through its business operations and contacts is
made aware of new products and market opportunities that could benefit
REAL-TIME; and
WHEREAS, REAL-TIME wishes to enlist QUEST NET as a technology and
marketing consultant to provide assistance to REAL-TIME on an on-going basis
with regard to new product and market opportunities in the areas of computer
technology including data communications and message switching networks and the
creating and marketing of software, especially in the field of encryption; and
WHEREAS, STIC is the parent corporation of REAL-TIME, its wholly owned
subsidiary and,
WHEREAS, STIC intends to become a company whose securities are publicly
traded, and
WHEREAS, STIC's Board of Directors has authorized the conversion of
REAL-TIME preferred stock into the common stock of STIC.
NOW, THEREFORE, for the mutual promises and other consideration
described herein, the parties hereto agree as follows:
1. Services to be Provided by QUEST NET. QUEST NET's duties will
consist of (i) providing technology and marketing advice and analysis of new
product and market opportunities in the areas of computer technology (the
"Opportunities"), including data communications, message switching networks and
encryption and other related software (the "Software"); (ii) evaluating and
presenting to REAL-TIME the Opportunities; (iii) facilitating REAL-TIME's
relationship with the computer technology community and (iv) assisting REAL-TIME
to (a) introduce its encryption software product into various markets throughout
the United States and (b) help expand the
<PAGE>
distribution of its encryption software into those markets. QUEST NET will
provide such assistance on an on-going basis. QUEST NET will respond to all
telephone calls from REAL-TIME within a time period of 2 hours from the time the
call was placed.
2. Term. The term of this Agreement shall be for a period of 5 years
from the date hereof.
3 Compensation for Services. In consideration of services to be
rendered hereunder, QUEST NET shall receive a consulting fee of $50,000 per
year, payable in advance by the issuance of 25,000 shares of REAL-TIME's Series
A Preferred Non-Voting Stock, $10.00 per share face value (the ""Preferred
Stock"). The Preferred Stock shall be convertible into the common stock of STIC.
The other rights and preferences of the Preferred Stock are more fully described
in Exhibit "A" hereto and incorporated herein. The delivery of the Preferred
certificates will take place within twenty (20) business days from the execution
of this Agreement (the "Delivery Date"). REAL-TIME or STIC shall have the right
to redeem the Preferred Stock not converted, in whole or in part, at any time by
paying the face value thereof.
For each three-month period during the Term of this Agreement, QUEST
NET shall have the right to convert up to 1,250 shares of the Preferred Stock by
providing to REAL-TIME and STIC a notice of conversion. Within fifteen days from
the receipt of the notice, REAL-TIME or STIC shall have the option to redeem
that number of the Preferred Shares noticed for conversion (the "Redeemable
Shares"), at a redemption price of $10.00 per share. If REAL-TIME or STIC do not
redeem the Redeemable Shares within such fifteen day period, QUEST NET shall
have the right to convert the Redeemable Shares into common stock of STIC, at a
conversion rate equal to (i) the average 5 day bid price (as of the date of
conversion) of STIC's common stock, if STIC's common stock is publicly traded,
or at the book value per share of STIC's Common Stock, if such common stock is
not publicly traded.
4. Reimbursement for Expenses. QUEST NET shall bear all of its expenses
and costs without reimbursement from REAL-TIME.
5. Termination. In addition to any other remedy available at law or in
equity, in the event of any breach of this agreement by QUEST NET the number of
shares to be retained by QUEST NET shall be based upon 25,000 times a fraction
whose numerator is the number of days after the date hereof and whose
denominator is 1,825. All remaining shares shall be canceled.
If QUEST NET is unable, for any reason, to perform the duties for
REAL-TIME for 15 consecutive days, it shall be treated as a breach by QUEST NET.
6. Finders Fees. QUEST NET shall not receive any finders' fees,
commissions or other remuneration in connection with any transaction it assists
REAL-TIME with during the term of this Agreement.
7. Representations and Warranties. QUEST NET represents and
2
<PAGE>
warrants that services to be provided by QUEST NET under this Agreement will be
performed by competent, trained personnel in a workmanlike manner. QUEST NET and
its personnel shall comply with all applicable statues, rules, and regulations
governing all aspects of the services to be performed under this Agreement.
REAL-TIME understands and acknowledges that QUEST NET cannot guarantee that the
services provided hereunder will achieve any particular objective or fulfill any
specified goals.
In order to induce REAL-TIME to issue the Preferred Shares, recognizing
that REAL-TIME will be relying on the information and on the representations set
forth below, QUEST NET hereby represents, warrants, and agrees as follows:
(a) QUEST NET has determined that the purchase of the Preferred shares
and the shares underlying the Preferred Shares of REAL-TIME (the "Shares")
is a suitable investment for QUEST NET and that QUEST NET is able to bear
economic risks including a total loss of an investment in the Shares.
(b) QUEST NET is purchasing the Shares for its own account for
investment, and not with a view to or for sale in connection with the
distribution of the Shares nor with any present intention of selling or
otherwise disposing of all or any part of the Shares. QUEST NET hereby
acknowledges its understanding that the Shares are not being registered
under the Securities Act of 1933 (the "Act"), or any state securities laws
on the ground that the issuance and sale of the Shares to QUEST NET is
exempt under the Act and relevant state securities laws as not involving a
public offering. QUEST NET agrees not to sell the Shares unless they are
subsequently registered or an exemption from such registration is
available. QUEST NET authorizes REAL-TIME to place a legend denoting the
restrictions on the certificates to be issued.
QUEST NET further acknowledges its understanding that REAL-TIME's reliance
on such exemptions are, in part, based upon the foregoing representations,
warranties, and agreements by it and that the statutory basis for such
exemptions would not be present, if notwithstanding such representations,
warranties and agreements, QUEST NET was acquiring the Shares for resale on
the occurrence or non-occurrence of some pre-determined event. In order to
induce REAL-TIME to issue and sell the Shares to QUEST NET, it is agreed
that REAL-TIME will have no obligation to recognize the ownership,
beneficial or otherwise, of such shares by anyone but QUEST NET, except as
set forth herein.
(c) QUEST NET acknowledges and is aware that, except as set forth
herein, the it will not transfer or assign the Shares, or any interest
therein; the assignment and transferability of the Shares will be governed
by this Agreement and all applicable laws.
(d) QUEST NET has acknowledged and is aware that, except for the three
day rescission rights provided under Florida law, it is not entitled to
cancel, terminate or revoke this subscription, and any agreements of QUEST
NET in connection herewith shall survive the termination of this Agreement.
3
<PAGE>
(e) QUEST NET has had the opportunity to ask questions of, and receive
answers from management of REAL-TIME regarding the terms and conditions of
this Agreement, and the transactions contemplated thereby, as well as the
affairs of REAL-TIME and related matters.
QUEST NET may have access to whatever additional information
concerning REAL-TIME, its financial condition, its business, its prospects,
its management, its capitalization, and other similar matters that it or
its purchaser representative, if any, desires, provided that REAL-TIME can
acquire such information without unreasonable effort or expense. In
addition, as required by Section 517.061(11)(a)(3), Florida Statutes, and
Rule 3E-500.05(a) thereunder, QUEST NET and its purchaser representative
may have, at the offices of REAL-TIME, at any reasonable hour, after
reasonable prior notice, access to the materials set forth in the Rule
which REAL-TIME can obtain without unreasonable effort or expense.
(f) QUEST NET has had the opportunity to obtain additional information
necessary to verify the accuracy of the information referred to in
subparagraph (e) hereof.
QUEST NET hereby agrees to indemnify and hold harmless REAL-TIME its
respective officers, directors, shareholders, employees, agents and attorneys
against any and all losses, claims, demands, liabilities and expenses (including
reasonable attorney fees, expert witness and accounting fees and other
disbursements and costs or other expenses) incurred by each such person in
connection with defending or investigating any such claims or liabilities,
whether or not resulting in any liability to such person) to which any such
indemnified party may become subject under the Act, under any other statute, at
common law or otherwise, insofar as such losses, claims, demands, liabilities
and expenses (a) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in this Agreement, or (b) arise
out of or are based upon any breach of any representation, warranty or agreement
contained herein.
The representations, warranties, and agreements contained herein shall
survive the delivery of and payment for, the Shares.
- --------------------------------------------------------------------------------
FLORIDA LAW PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE PERSONS IN
FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER WITHIN THREE DAYS
AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO REAL-TIME,
AN AGENT OF REAL-TIME OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER THE
AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
OCCURS LATER. PAYMENTS FOR TERMINATED SUBSCRIPTIONS VOIDED BY PURCHASERS AS
PROVIDED FOR IN THIS PARAGRAPH WILL BE PROMPTLY REFUNDED WITHOUT INTEREST.
- --------------------------------------------------------------------------------
4
<PAGE>
8. Governing Law, Venue, and Arbitration. This Agreement shall be deemed to be
executed in the State of Florida and governed by the laws of the State of
Florida. Any controversy or claim arising out of or relating to this Agreement
or to the interpretation, breach or enforcement thereof, except a claim for
injunctive relief, shall be submitted to an arbitrator and settled by
arbitration in Broward County, Florida, in accordance with the rules then
obtaining of the American Arbitration Association. Any award made by the
arbitrator shall be final, binding, and conclusive on all parties hereto for all
purposes, and judgment may be entered thereon in any court having jurisdiction
thereof. Nothing contained herein shall serve to prohibit the parties from
seeking injunctive relief in a court of competent jurisdiction.
9. Severability. In the event any parts of this Agreement are found to
be void, the remaining provisions of this Agreement shall nevertheless be
binding with the same effect as though the void parts were deleted.
10. Successors. Subject to the provisions of this Agreement, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
11. Section and Paragraph Headings. The section and paragraph headings
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
12. Waiver and Amendment. The waiver by any party to this Agreement of
a breach of any provision hereof by any other party shall not be construed as a
waiver of any subsequent breach by any party. No provision of this Agreement may
be terminated, amended, supplemented, waived or modified other than by an
instrument in writing signed by the party against whom the enforcement of the
termination, amendment, supplement, waiver or modification is sought.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature, provided however that
original signatures must be provided within ten days from the date of signing.
14. Attorney Fees and Costs. In the event any action is commenced, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
expenses.
15. Assignment. This Agreement may be assigned by REAL-TIME to any
other wholly owned subsidiary of STIC. No other assignment will be permitted by
either party without the other party prior written consent, which shall not be
unreasonably withheld.
16. Relationship of Parties. Except as set forth herein, neither party
shall have any right or authority to create any obligation on the part of the
other party or bind the other party to any agreement.
5
<PAGE>
17. Notices. Any notice required or permitted by this Agreement shall
be in writing and shall be delivered by U.S. Certified Mail, return receipt
requested, or by special messenger service with receipt (such as Federal
Express), by facsimile delivery or by hand, to the parties at the addresses set
forth above or such substitute address of which notice is given in like manner.
The transmission confirmation receipt from the sender's facsimile machine shall
be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
18. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior oral or written agreements
regarding the same subject matter.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer, or as to an individual
party, has executed this Agreement in his own hand, as of the date first written
above.
In the presence of:
Real-Time Encryption, Inc.
Illegible BY: /s/ J. Forrest Tytler
- ------------------------ ---------------------------
J. Forrest Tytler, Chairman
Secure Transaction International
Corporation
[Illegible] BY /s/ J. Forrest Tytler
- ------------------------ ---------------------------
J. Forrest Tytler, Chairman
Quest Net, Corp.
BY: /s/ Camilo Pereira
- ------------------------ ---------------------------
Camilo Pereira, President
6
<PAGE>
EXHIBIT A
Description of Series "A" Preferred Stock
The Series A Preferred Stock of REAL-TIME was properly authorized by the
REAL-TIME's Board of Directors and filed with Secretary of State. The shares
initially have a designated face value of ten dollars ($10) per share. Ten
Hundred million (10,000,000) shares of Preferred Stock have been authorized,
1,825,000 of which have been designated as Series A and 25,000 of which were
reserved for issuance as consideration for this Transaction. The Series A
Preferred shares are convertible into the common stock of STIC. The Series A
Preferred shares and the common stock of STIC have never traded in the market
and have never been registered as a part of any registration statement filed by
REAL-TIME or STIC with the Securities and Exchange Commission. The value of the
shares was arbitrarily determined by STIC's and REAL-TIME's Board of Directors
after taking into consideration, among other things, the features of the Series
A Preferred Stock and the prospects for the company's success in connection with
projects acquired with Series A Preferred Stock.
The preferred stock features are:
1. $10.00 face value per share.
2. No voting Rights
3. REAL-TIME has the right to redeem at any time, any and all Preferred Shares
by payment of the face value thereof.
4. The Preferred Shares shall be convertible into the common stock of STIC, at a
conversion rate equal to (i) the average 5 day bid price (as of the date of
conversion) of STIC's common stock, if STIC's common stock is publicly traded,
or at the book value per share of STIC's common stock, if such common stock is
not publicly traded.
THE PREFERRED SHARES AND THE SHARES UNDERLYING THE PREFERRED SHARES ARE NOT
BEING REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER ANY STATE SECURITIES STATUTE. THE PREFERRED SHARES AND THE
SHARE UNDERLYING THE PREFERRED SHARES ARE BEING ACQUIRED BY QUEST NET FOR ITS
OWN ACCOUNT, FOR INVESTMENT PURPOSES ONLY, AND NOT WITH A VIEW TO ANY
DISTRIBUTION THEREOF. QUEST NET AGREES THAT NO TRANSFER OR OTHER DISPOSITION OF
THE PREFERRED SHARES OR THE SHARES UNDERLYING THE PREFERRED SHARES OR ANY
INTEREST THEREIN WILL BE MADE IN VIOLATION OF THE SECURITIES ACT
7
<PAGE>
OR ANY STATE SECURITIES STATUTE. QUEST NET WILL EXECUTE AN INVESTMENT LETTER
TO THIS EFFECT.
FLORIDA LAW PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE PERSONS IN
FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER WITHIN THREE DAYS
AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE
COMPANY, AN AGENT OF THE COMPANY OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER
THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
OCCURS LATER. SUCH WITHDRAWAL WILL BE WITHOUT ANY FURTHER LIABILITY TO ANY
PERSON. TO ACCOMPLISH SUCH WITHDRAWAL, YOU NEED ONLY SEND A LETTER OR TELEGRAM
TO THE COMPANY AT THE ADDRESS SHOWN HEREIN INDICATING YOUR INTENTION TO
WITHDRAW. SUCH LETTER OR TELEGRAM MUST BE SENT AND POSTMARKED PRIOR TO THE END
OF THE AFOREMENTIONED THIRD BUSINESS DAY. IF SENDING A LETTER, AN INVESTOR
SHOULD SEND IT BY CERTIFIED MAIL. RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS
RECEIVED AND TO EVIDENCE THE TIME WHEN IT IS MAILED. ANY ORAL REQUESTS FOR
RESCISSION SHOULD BE ACCOMPANIED BY A REQUEST FOR WRITTEN CONFIRMATION THE ORAL
REQUEST WAS RECEIVED ON A TIMELY BASIS.
AS REQUIRED BY SECTION 517.061(11)(A)3 FLORIDA STATUTES, AND RULE
3E-500.05(5)(A) PROMULGATED THEREUNDER, YOU OR YOUR REPRESENTATIVES MAY HAVE, AT
THE OFFICES OF THE COMPANY AT ANY REASONABLE HOUR, AFTER REASONABLE PRIOR
NOTICE, ACCESS TO THE MATERIALS SET FORTH IN THE RULE WHICH THE COMPANY CAN
OBTAIN WITHOUT UNREASONABLE EFFORT OR EXPENSE.
8
Exhibit 10.21
PROFESSIONAL CONSULTING AGREEMENT
This Agreement made as of August 19, 1998, by and between QUEST NET
Corp., a Colorado Corporation, 2740 E Oakland Park Boulevard, Suite 206, Fort
Lauderdale, Florida 33306 ("QUEST NET"), "), Real-Time Phone Services, Inc. a
Florida Corporation, 265 South Federal Highway, Suite 335, Deerfield Beach
Florida 33441 ("REAL TIME") and REAL-TIME's parent company, Secure Transaction
International Corp., a Florida Corporation, 265 South Federal Highway, Suite
335, Deerfield Beach Florida 33441 ("STIC").
WHEREAS, QUEST NET has substantial experience in computer technology
including data communications and message switching networks and the creating
and marketing of software, especially in the field of encryption; and
WHEREAS, QUEST NET operates data communications and message switching
networks and provides data network and communications services and related
equipment and devices, individually or through affiliates, suppliers and agents;
and
WHEREAS, QUEST NET, through its business operations and contacts is
made aware of new products and market opportunities that could benefit
REAL-TIME; and
WHEREAS, REAL-TIME wishes to enlist QUEST NET as a technology and
marketing consultant to provide assistance to REAL-TIME on an on-going basis
with regard to new product and market opportunities in the areas of computer
technology including data communications and message switching networks and the
creating and marketing of software, especially in the field of encryption; and
WHEREAS, STIC is the parent corporation of REAL-TIME, its wholly owned
subsidiary and,
WHEREAS, STIC intends to become a company whose securities are publicly
traded, and
WHEREAS, STIC's Board of Directors has authorized the conversion of
REAL-TIME preferred stock into the common stock of STIC.
NOW, THEREFORE, for the mutual promises and other consideration
described herein, the parties hereto agree as follows:
1. Services to be Provided by QUEST NET. QUEST NET's duties will
consist of (i) providing technology and marketing advice and analysis of new
product and market opportunities in the areas of computer technology (the
"Opportunities"), including data communications, message switching networks and
encryption and other related software (the "Software"); (ii) evaluating and
presenting to REAL-TIME the Opportunities; (iii) facilitating REAL-TIME's
relationship with the computer technology community and (iv) assisting REAL-TIME
to (a) introduce its encryption software product into various markets throughout
the United States and (b) help expand the
<PAGE>
distribution of its encryption software into those markets. QUEST NET will
provide such assistance on an on-going basis. QUEST NET will respond to all
telephone calls from REAL-TIME within a time period of 2 hours from the time the
call was placed.
2. Term. The term of this Agreement shall be for a period of 5 years
from the date hereof.
3 Compensation for Services. In consideration of services to be
rendered hereunder, QUEST NET shall receive a consulting fee of $50,000 per
year, payable in advance by the issuance of 25,000 shares of REAL-TIME's Series
A Preferred Non-Voting Stock, $10.00 per share face value (the "Preferred
Stock"). The Preferred Stock shall be convertible into the common stock of STIC.
The other rights and preferences of the Preferred Stock are more fully described
in Exhibit "A" hereto and incorporated herein. The delivery of the Preferred
certificates will take place within twenty (20) business days from the execution
of this Agreement (the "Delivery Date"). REAL-TIME or STIC shall have the right
to redeem the Preferred Stock not converted, in whole or in part, at any time by
paying the face value thereof.
For each three-month period during the Term of this Agreement, QUEST
NET shall have the right to convert up to 1,250 shares of the Preferred Stock by
providing to REAL-TIME and STIC a notice of conversion. Within fifteen days from
the receipt of the notice, REAL-TIME or STIC shall have the option to redeem
that number of the Preferred Shares noticed for conversion (the "Redeemable
Shares"), at a redemption price of $10.00 per share. If REAL-TIME or STIC do not
redeem the Redeemable Shares within such fifteen day period, QUEST NET shall
have the right to convert the Redeemable Shares into common stock of STIC, at a
conversion rate equal to (i) the average 5 day bid price (as of the date of
conversion) of STIC's common stock, if STIC's common stock is publicly traded,
or at the book value per share of STIC's Common Stock, if such common stock is
not publicly traded.
4. Reimbursement for Expenses. QUEST NET shall bear all of its expenses
and costs without reimbursement from REAL-TIME.
5. Termination. In addition to any other remedy available at law or in
equity, in the event of any breach of this agreement by QUEST NET the number of
shares to be retained by QUEST NET shall be based upon 25,000 times a fraction
whose numerator is the number of days after the date hereof and whose
denominator is 1,825. All remaining shares shall be canceled.
If QUEST NET is unable, for any reason, to perform the duties for
REAL-TIME for 15 consecutive days, it shall be treated as a breach by QUEST NET.
6. Finders Fees. QUEST NET shall not receive any finders' fees,
commissions or other remuneration in connection with any transaction it assists
REAL-TIME with during the term of this Agreement.
7. Representations and Warranties. QUEST NET represents and
2
<PAGE>
warrants that services to be provided by QUEST NET under this Agreement will be
performed by competent, trained personnel in a workmanlike manner. QUEST NET and
its personnel shall comply with all applicable statues, rules, and regulations
governing all aspects of the services to be performed under this Agreement.
REAL-TIME understands and acknowledges that QUEST NET cannot guarantee that the
services provided hereunder will achieve any particular objective or fulfill any
specified goals.
In order to induce REAL-TIME to issue the Preferred Shares, recognizing
that REAL-TIME will be relying on the information and on the representations set
forth below, QUEST NET hereby represents, warrants, and agrees as follows:
(a) QUEST NET has determined that the purchase of the Preferred shares
and the shares underlying the Preferred Shares of REAL-TIME (the "Shares")
is a suitable investment for QUEST NET and that QUEST NET is able to bear
economic risks including a total loss of an investment in the Shares.
(b) QUEST NET is purchasing the Shares for its own account for
investment, and not with a view to or for sale in connection with the
distribution of the Shares nor with any present intention of selling or
otherwise disposing of all or any part of the Shares. QUEST NET hereby
acknowledges its understanding that the Shares are not being registered
under the Securities Act of 1933 (the "Act"), or any state securities laws
on the ground that the issuance and sale of the Shares to QUEST NET is
exempt under the Act and relevant state securities laws as not involving a
public offering. QUEST NET agrees not to sell the Shares unless they are
subsequently registered or an exemption from such registration is
available. QUEST NET authorizes REAL-TIME to place a legend denoting the
restrictions on the certificates to be issued.
QUEST NET further acknowledges its understanding that REAL-TIME's reliance
on such exemptions are, in part, based upon the foregoing representations,
warranties, and agreements by it and that the statutory basis for such
exemptions would not be present, if notwithstanding such representations,
warranties and agreements, QUEST NET was acquiring the Shares for resale on
the occurrence or non-occurrence of some pre-determined event. In order to
induce REAL-TIME to issue and sell the Shares to QUEST NET, it is agreed
that REAL-TIME will have no obligation to recognize the ownership,
beneficial or otherwise, of such shares by anyone but QUEST NET, except as
set forth herein.
(c) QUEST NET acknowledges and is aware that, except as set forth
herein, the it will not transfer or assign the Shares, or any interest
therein; the assignment and transferability of the Shares will be governed
by this Agreement and all applicable laws.
(d) QUEST NET has acknowledged and is aware that, except for the three
day rescission rights provided under Florida law, it is not entitled to
cancel, terminate or revoke this subscription, and any agreements of QUEST
NET in connection herewith shall survive the termination of this Agreement.
3
<PAGE>
(e) QUEST NET has had the opportunity to ask questions of, and receive
answers from management of REAL-TIME regarding the terms and conditions of
this Agreement, and the transactions contemplated thereby, as well as the
affairs of REAL-TIME and related matters.
QUEST NET may have access to whatever additional information
concerning REAL-TIME, its financial condition, its business, its prospects,
its management, its capitalization, and other similar matters that it or
its purchaser representative, if any, desires, provided that REAL-TIME can
acquire such information without unreasonable effort or expense. In
addition, as required by Section 517.061(11)(a)(3), Florida Statutes, and
Rule 3E-500.05(a) thereunder, QUEST NET and its purchaser representative
may have, at the offices of REAL-TIME, at any reasonable hour, after
reasonable prior notice, access to the materials set forth in the Rule
which REAL-TIME can obtain without unreasonable effort or expense.
(f) QUEST NET has had the opportunity to obtain additional information
necessary to verify the accuracy of the information referred to in
subparagraph (e) hereof.
QUEST NET hereby agrees to indemnify and hold harmless REAL-TIME its
respective officers, directors, shareholders, employees, agents and attorneys
against any and all losses, claims, demands, liabilities and expenses (including
reasonable attorney fees, expert witness and accounting fees and other
disbursements and costs or other expenses) incurred by each such person in
connection with defending or investigating any such claims or liabilities,
whether or not resulting in any liability to such person) to which any such
indemnified party may become subject under the Act, under any other statute, at
common law or otherwise, insofar as such losses, claims, demands, liabilities
and expenses (a) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in this Agreement, or (b) arise
out of or are based upon any breach of any representation, warranty or agreement
contained herein.
The representations, warranties, and agreements contained herein shall
survive the delivery of and payment for, the Shares.
- --------------------------------------------------------------------------------
FLORIDA LAW PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE PERSONS IN
FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER WITHIN THREE DAYS
AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO REAL-TIME,
AN AGENT OF REAL-TIME OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER THE
AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
OCCURS LATER. PAYMENTS FOR TERMINATED SUBSCRIPTIONS VOIDED BY PURCHASERS AS
PROVIDED FOR IN THIS PARAGRAPH WILL BE PROMPTLY REFUNDED WITHOUT INTEREST.
- --------------------------------------------------------------------------------
4
<PAGE>
8. Governing Law, Venue, and Arbitration. This Agreement shall be deemed to be
executed in the State of Florida and governed by the laws of the State of
Florida. Any controversy or claim arising out of or relating to this Agreement
or to the interpretation, breach or enforcement thereof, except a claim for
injunctive relief, shall be submitted to an arbitrator and settled by
arbitration in Broward County, Florida, in accordance with the rules then
obtaining of the American Arbitration Association. Any award made by the
arbitrator shall be final, binding, and conclusive on all parties hereto for all
purposes, and judgment may be entered thereon in any court having jurisdiction
thereof. Nothing contained herein shall serve to prohibit the parties from
seeking injunctive relief in a court of competent jurisdiction.
9. Severability. In the event any parts of this Agreement are found to
be void, the remaining provisions of this Agreement shall nevertheless be
binding with the same effect as though the void parts were deleted.
10. Successors. Subject to the provisions of this Agreement, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
11. Section and Paragraph Headings. The section and paragraph headings
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
12. Waiver and Amendment. The waiver by any party to this Agreement of
a breach of any provision hereof by any other party shall not be construed as a
waiver of any subsequent breach by any party. No provision of this Agreement may
be terminated, amended, supplemented, waived or modified other than by an
instrument in writing signed by the party against whom the enforcement of the
termination, amendment, supplement, waiver or modification is sought.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature, provided however that
original signatures must be provided within ten days from the date of signing.
14. Attorney Fees and Costs. In the event any action is commenced, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
expenses.
15. Assignment. This Agreement may be assigned by REAL-TIME to any
other wholly owned subsidiary of STIC. No other assignment will be permitted by
either party without the other party prior written consent, which shall not be
unreasonably withheld.
16. Relationship of Parties. Except as set forth herein, neither party
shall have any right or authority to create any obligation on the part of the
other party or bind the other party to any agreement.
5
<PAGE>
17. Notices. Any notice required or permitted by this Agreement shall
be in writing and shall be delivered by U.S. Certified Mail, return receipt
requested, or by special messenger service with receipt (such as Federal
Express), by facsimile delivery or by hand, to the parties at the addresses set
forth above or such substitute address of which notice is given in like manner.
The transmission confirmation receipt from the sender's facsimile machine shall
be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
18. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior oral or written agreements
regarding the same subject matter.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer, or as to an individual
party, has executed this Agreement in his own hand, as of the date first written
above.
In the presence of:
Real-Time Phone Services, Inc.
[Illigible] By: /s/ J. Forrest Tytler
- ----------------------- ---------------------------
J. Forrest Tytler, Chairman
Secure Transaction International
Corporation
[Illigible] By /s/ J. Forrest Tytler
- ----------------------- ---------------------------
J. Forrest Tytler, Chairman
Quest Net, Corp.
BY: /s/ Camilo Pereira
- ----------------------- ---------------------------
Camilo Pereira, President
6
<PAGE>
EXHIBIT A
Description of Series "A" Preferrgd Stock
The Series A Preferred Stock of REAL-TIME was properly authorized by the
REAL-TIME's Board of Directors and filed with Secretary of State. The shares
initially have a designated face value of ten dollars ($10) per share. One
Hundred million (100,000,000) shares of Preferred Stock have been authorized,
25,000 of which have been designated as Series A and reserved for issuance as
consideration for this Transaction. The Series A Preferred shares are
convertible into the common stock of STIC. The Series A Preferred shares and the
common stock of STIC have never traded in the market and have never been
registered as a part of any registration statement filed by REAL-TIME or STIC
with the Securities and Exchange Commission. The value of the shares was
arbitrarily determined by STIC's and REAL-TIME's Board of Directors after taking
into consideration, among other things, the features of the Series A Preferred
Stock and the prospects for the company's success in connection with projects
acquired with Series A Preferred Stock.
The preferred stock features are:
1. $10.00 face value per share.
2. No voting Rights
3. REAL-TIME has the right to redeem at any time, any and all Preferred Shares
by payment of the face value thereof.
4. The Preferred Shares shall be convertible into the common stock of STIC, at a
conversion rate equal to (i) the average 5 day bid price (as of the date of
conversion) of STIC's common stock, if STIC's common stock is publicly traded,
or at the book value per share of STIC's common stock, if such common stock is
not publicly traded.
THE PREFERRED SHARES AND THE SHARES UNDERLYING THE PREFERRED SHARES ARE NOT
BEING REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER ANY STATE SECURITIES STATUTE. THE PREFERRED SHARES AND THE
SHARE UNDERLYING THE PREFERRED SHARES ARE BEING ACQUIRED BY QUEST NET FOR ITS
OWN ACCOUNT, FOR INVESTMENT PURPOSES ONLY, AND NOT WITH A VIEW TO ANY
DISTRIBUTION THEREOF. QUEST NET AGREES THAT NO TRANSFER OR OTHER DISPOSITION OF
THE PREFERRED SHARES OR THE SHARES UNDERLYING THE PREFERRED SHARES OR ANY
INTEREST THEREIN WILL BE MADE IN VIOLATION OF THE SECURITIES ACT
7
<PAGE>
OR ANY STATE SECURITIES STATUTE. QUEST NET WILL EXECUTE AN INVESTMENT LETTER
TO THIS EFFECT.
FLORIDA LAW PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE PERSONS IN
FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER WITHIN THREE DAYS
AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE
COMPANY, AN AGENT OF THE COMPANY OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER
THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
OCCURS LATER. SUCH WITHDRAWAL WILL BE WITHOUT ANY FURTHER LIABILITY TO ANY
PERSON. TO ACCOMPLISH SUCH WITHDRAWAL, YOU NEED ONLY SEND A LETTER OR TELEGRAM
TO THE COMPANY AT THE ADDRESS SHOWN HEREIN INDICATING YOUR INTENTION TO
WITHDRAW. SUCH LETTER OR TELEGRAM MUST BE SENT AND POSTMARKED PRIOR TO THE END
OF THE AFOREMENTIONED THIRD BUSINESS DAY. IF SENDING A LETTER, AN INVESTOR
SHOULD SEND IT BY CERTIFIED MAIL. RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS
RECEIVED AND TO EVIDENCE THE TIME WHEN IT IS MAILED. ANY ORAL REQUESTS FOR
RESCISSION SHOULD BE ACCOMPANIED BY A REQUEST FOR WRITTEN CONFIRMATION THE ORAL
REQUEST WAS RECEIVED ON A TIMELY BASIS.
AS REQUIRED BY SECTION 517.061(11)(A)3 FLORIDA STATUTES, AND RULE
3E-500.05(5)(A) PROMULGATED THEREUNDER, YOU OR YOUR REPRESENTATIVES MAY HAVE, AT
THE OFFICES OF THE COMPANY AT ANY REASONABLE HOUR, AFTER REASONABLE PRIOR
NOTICE, ACCESS TO THE MATERIALS SET FORTH IN THE RULE WHICH THE COMPANY CAN
OBTAIN WITHOUT UNREASONABLE EFFORT OR EXPENSE.
8
<PAGE>
PROFESSIONAL CONSULTING AGREEMENT
This Agreement made as of August 19, 1998, by and between QUEST NET
Corp., a Colorado Corporation, 2740 E Oakland Park Boulevard, Suite 206, Fort
Lauderdale, Florida 33306 ("QUEST NET"), "), Real-Time Cash, Inc. a Florida
Corporation, 265 South Federal Highway, Suite 335, Deerfield Beach Florida 33441
("REAL TIME") and REAL-TIME's parent company, Secure Transaction International
Corp., a Florida Corporation, 265 South Federal Highway, Suite 335, Deerfield
Beach Florida 33441 ("STIC").
WHEREAS, QUEST NET has substantial experience in computer technology
including data communications and message switching networks and the creating
and marketing of software, especially in the field of encryption; and
WHEREAS, QUEST NET operates data communications and message switching
networks and provides data network and communications services and related
equipment and devices, individually or through affiliates, suppliers and agents;
and
WHEREAS, QUEST NET, through its business operations and contacts is
made aware of new products and market opportunities that could benefit
REAL-TIME; and
WHEREAS, REAL-TIME wishes to enlist QUEST NET as a technology and
marketing consultant to provide assistance to REAL-TIME on an on-going basis
with regard to new product and market opportunities in the areas of computer
technology including data communications and message switching networks and the
creating and marketing of software, especially in the field of encryption; and
WHEREAS, STIC is the parent corporation of REAL-TIME, its wholly owned
subsidiary and,
WHEREAS, STIC intends to become a company whose securities are publicly
traded, and
WHEREAS, STIC's Board of Directors has authorized the conversion of
REAL-TIME preferred stock into the common stock of STIC.
NOW, THEREFORE, for the mutual promises and other consideration
described herein, the parties hereto agree as follows:
1. Services to be Provided by QUEST NET. QUEST NET's duties will
consist of (i) providing technology and marketing advice and analysis of new
product and market opportunities in the areas of computer technology (the
"Opportunities"), including data communications, message switching networks and
encryption and other related software (the "Software"); (ii) evaluating and
presenting to REAL-TIME the Opportunities; (iii) facilitating REAL-TIME's
relationship with the computer technology community and (iv) assisting REAL-TIME
to (a) introduce its encryption software product into various markets throughout
the United States and (b) help expand the
<PAGE>
distribution of its encryption software into those markets. QUEST NET will
provide such assistance on an on-going basis. QUEST NET will respond to all
telephone calls from REAL-TIME within a time period of 2 hours from the time the
call was placed.
2. Term. The term of this Agreement shall be for a period of 5 years
from the date hereof.
3 Compensation for Services. In consideration of services to be
rendered hereunder, QUEST NET shall receive a consulting fee of $50,000 per
year, payable in advance by the issuance of 25,000 shares of REAL-TIME's Series
A Preferred Non-Voting Stock, $10.00 per share face value (the "Preferred
Stock"). The Preferred Stock shall be convertible into the common stock of STIC.
The other rights and preferences of the Preferred Stock are more fully described
in Exhibit "A" hereto and incorporated herein. The delivery of the Preferred
certificates will take place within twenty (20) business days from the execution
of this Agreement (the "Delivery Date"). REAL-TIME or STIC shall have the right
to redeem the Preferred Stock not converted, in whole or in part, at any time by
paying the face value thereof.
For each three-month period during the Term of this Agreement, QUEST
NET shall have the right to convert up to 1,250 shares of the Preferred Stock by
providing to REAL-TIME and STIC a notice of conversion. Within fifteen days from
the receipt of the notice, REAL-TIME or STIC shall have the option to redeem
that number of the Preferred Shares noticed for conversion (the "Redeemable
Shares"), at a redemption price of $10.00 per share. If REAL-TIME or STIC do not
redeem the Redeemable Shares within such fifteen day period, QUEST NET shall
have the right to convert the Redeemable Shares into common stock of STIC, at a
conversion rate equal to (i) the average 5 day bid price (as of the date of
conversion) of STIC's common stock, if STIC's common stock is publicly traded,
or at the book value per share of STIC's Common Stock, if such common stock is
not publicly traded.
4. Reimbursement for Expenses. QUEST NET shall bear all of its expenses
and costs without reimbursement from REAL-TIME.
5. Termination. In addition to any other remedy available at law or in
equity, in the event of any breach of this agreement by QUEST NET the number of
shares to be retained by QUEST NET shall be based upon 25,000 times a fraction
whose numerator is the number of days after the date hereof and whose
denominator is 1,825. All remaining shares shall be canceled.
If QUEST NET is unable, for any reason, to perform the duties for
REAL-TIME for 15 consecutive days, it shall be treated as a breach by QUEST NET.
6. Finders Fees. QUEST NET shall not receive any finders' fees,
commissions or other remuneration in connection with any transaction it assists
REAL-TIME with during the term of this Agreement.
7. Representations and Warranties. QUEST NET represents and
2
<PAGE>
warrants that services to be provided by QUEST NET under this Agreement will be
performed by competent, trained personnel in a workmanlike manner. QUEST NET and
its personnel shall comply with all applicable statues, rules, and regulations
governing all aspects of the services to be performed under this Agreement.
REAL-TIME understands and acknowledges that QUEST NET cannot guarantee that the
services provided hereunder will achieve any particular objective or fulfill any
specified goals.
In order to induce REAL-TIME to issue the Preferred Shares, recognizing
that REAL-TIME will be relying on the information and on the representations set
forth below, QUEST NET hereby represents, warrants, and agrees as follows:
(a) QUEST NET has determined that the purchase of the Preferred shares
and the shares underlying the Preferred Shares of REAL-TIME (the "Shares")
is a suitable investment for QUEST NET and that QUEST NET is able to bear
economic risks including a total loss of an investment in the Shares.
(b) QUEST NET is purchasing the Shares for its own account for
investment, and not with a view to or for sale in connection with the
distribution of the Shares nor with any present intention of selling or
otherwise disposing of all or any part of the Shares. QUEST NET hereby
acknowledges its understanding that the Shares are not being registered
under the Securities Act of 1933 (the "Act"), or any state securities laws
on the ground that the issuance and sale of the Shares to QUEST NET is
exempt under the Act and relevant state securities laws as not involving a
public offering. QUEST NET agrees not to sell the Shares unless they are
subsequently registered or an exemption from such registration is
available. QUEST NET authorizes REAL-TIME to place a legend denoting the
restrictions on the certificates to be issued.
QUEST NET further acknowledges its understanding that REAL-TIME's reliance
on such exemptions are, in part, based upon the foregoing representations,
warranties, and agreements by it and that the statutory basis for such
exemptions would not be present, if notwithstanding such representations,
warranties and agreements, QUEST NET was acquiring the Shares for resale on
the occurrence or non-occurrence of some pre-determined event. In order to
induce REAL-TIME to issue and sell the Shares to QUEST NET, it is agreed
that REAL-TIME will have no obligation to recognize the ownership,
beneficial or otherwise, of such shares by anyone but QUEST NET, except as
set forth herein.
(c) QUEST NET acknowledges and is aware that, except as set forth
herein, the it will not transfer or assign the Shares, or any interest
therein; the assignment and transferability of the Shares will be governed
by this Agreement and all applicable laws.
(d) QUEST NET has acknowledged and is aware that, except for the three
day rescission rights provided under Florida law, it is not entitled to
cancel, terminate or revoke this subscription, and any agreements of QUEST
NET in connection herewith shall survive the termination of this Agreement.
3
<PAGE>
(e) QUEST NET has had the opportunity to ask questions of, and receive
answers from management of REAL-TIME regarding the terms and conditions of
this Agreement, and the transactions contemplated thereby, as well as the
affairs of REAL-TIME and related matters.
QUEST NET may have access to whatever additional information
concerning REAL-TIME, its financial condition, its business, its prospects,
its management, its capitalization, and other similar matters that it or
its purchaser representative, if any, desires, provided that REAL-TIME can
acquire such information without unreasonable effort or expense. In
addition, as required by Section 517.061(11)(a)(3), Florida Statutes, and
Rule 3E-500.05(a) thereunder, QUEST NET and its purchaser representative
may have, at the offices of REAL-TIME, at any reasonable hour, after
reasonable prior notice, access to the materials set forth in the Rule
which REAL-TIME can obtain without unreasonable effort or expense.
(f) QUEST NET has had the opportunity to obtain additional information
necessary to verify the accuracy of the information referred to in
subparagraph (e) hereof.
QUEST NET hereby agrees to indemnify and hold harmless REAL-TIME its
respective officers, directors, shareholders, employees, agents and attorneys
against any and all losses, claims, demands, liabilities and expenses (including
reasonable attorney fees, expert witness and accounting fees and other
disbursements and costs or other expenses) incurred by each such person in
connection with defending or investigating any such claims or liabilities,
whether or not resulting in any liability to such person) to which any such
indemnified party may become subject under the Act, under any other statute, at
common law or otherwise, insofar as such losses, claims, demands, liabilities
and expenses (a) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in this Agreement, or (b) arise
out of or are based upon any breach of any representation, warranty or agreement
contained herein.
The representations, warranties, and agreements contained herein shall
survive the delivery of and payment for, the Shares.
- --------------------------------------------------------------------------------
FLORIDA LAW PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE PERSONS IN
FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER WITHIN THREE DAYS
AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO REAL-TIME,
AN AGENT OF REAL-TIME OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER THE
AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
OCCURS LATER. PAYMENTS FOR TERMINATED SUBSCRIPTIONS VOIDED BY PURCHASERS AS
PROVIDED FOR IN THIS PARAGRAPH WILL BE PROMPTLY REFUNDED WITHOUT INTEREST.
- --------------------------------------------------------------------------------
4
<PAGE>
8. Governing Law, Venue, and Arbitration. This Agreement shall be deemed to be
executed in the State of Florida and governed by the laws of the State of
Florida. Any controversy or claim arising out of or relating to this Agreement
or to the interpretation, breach or enforcement thereof, except a claim for
injunctive relief, shall be submitted to an arbitrator and settled by
arbitration in Broward County, Florida, in accordance with the rules then
obtaining of the American Arbitration Association. Any award made by the
arbitrator shall be final, binding, and conclusive on all parties hereto for all
purposes, and judgment may be entered thereon in any court having jurisdiction
thereof. Nothing contained herein shall serve to prohibit the parties from
seeking injunctive relief in a court of competent jurisdiction.
9. Severability. In the event any parts of this Agreement are found to
be void, the remaining provisions of this Agreement shall nevertheless be
binding with the same effect as though the void parts were deleted.
10. Successors. Subject to the provisions of this Agreement, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
11. Section and Paragraph Headings. The section and paragraph headings
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
12. Waiver and Amendment. The waiver by any party to this Agreement of
a breach of any provision hereof by any other party shall not be construed as a
waiver of any subsequent breach by any party. No provision of this Agreement may
be terminated, amended, supplemented, waived or modified other than by an
instrument in writing signed by the party against whom the enforcement of the
termination, amendment, supplement, waiver or modification is sought.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature, provided however that
original signatures must be provided within ten days from the date of signing.
14. Attorney Fees and Costs. In the event any action is commenced, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
expenses.
15. Assignment. This Agreement may be assigned by REAL-TIME to any
other wholly owned subsidiary of STIC. No other assignment will be permitted by
either party without the other party prior written consent, which shall not be
unreasonably withheld.
16. Relationship of Parties. Except as set forth herein, neither party
shall have any right or authority to create any obligation on the part of the
other party or bind the other party to any agreement.
5
<PAGE>
17. Notices. Any notice required or permitted by this Agreement shall
be in writing and shall be delivered by U.S. Certified Mail, return receipt
requested, or by special messenger service with receipt (such as Federal
Express), by facsimile delivery or by hand, to the parties at the addresses set
forth above or such substitute address of which notice is given in like manner.
The transmission confirmation receipt from the sender's facsimile machine shall
be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
18. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior oral or written agreements
regarding the same subject matter.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer, or as to an individual
party, has executed this Agreement in his own hand, as of the date first written
above.
Dated: August 19, 1998
In the presence of:
Real-Time Cash, Inc.
BY: /s/ J. Forrest Tytler
---------------------------
J. Forrest Tytler, Chairman
Secure Transaction International
Corporation
[Illigible] BY /s/ J. Forrest Tytler
- ------------------------ ---------------------------
J. Forrest Tytler, Chairman
Quest Net, Corp.
BY: /s/ Camilo Pereira
- ------------------------ ---------------------------
Camilo Pereira, President
6
<PAGE>
EXHIBIT A
Description of Series "A" Preferred Stock
The Series A Preferred Stock of REAL-TIME was properly authorized by the
REAL-TIME's Board of Directors and filed with Secretary of State. The shares
initially have a designated face value of ten dollars ($10) per share. One
Hundred million (100,000,000) shares of Preferred Stock have been authorized,
525,000 of which have been designated as Series A and 25,000 of which were
reserved for issuance as consideration for this Transaction. The Series A
Preferred shares are convertible into the common stock of STIC. The Series A
Preferred shares and the common stock of STIC have never traded in the market
and have never been registered as a part of any registration statement filed by
REAL-TIME or STIC with the Securities and Exchange Commission. The value of the
shares was arbitrarily determined by REAL-TIME's Board of Directors after taking
into consideration, among other things, the features of the Series A Preferred
Stock and the prospects for the company's success in connection with projects
acquired with Series A Preferred Stock.
The preferred stock features are:
1. $10.00 face value per share.
2. No voting Rights
3. REAL-TIME has the right to redeem at any time, any and all Preferred Shares
by payment of the face value thereof.
4. The Preferred Shares shall be convertible into the common stock of STIC, at a
conversion rate equal to (i) the average 5 day bid price (as of the date of
conversion) of STIC's common stock, if STIC's common stock is publicly traded,
or at the book value per share of STIC's common stock, if such common stock is
not publicly traded.
THE PREFERRED SHARES AND THE SHARES UNDERLYING THE PREFERRED SHARES ARE NOT
BEING REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER ANY STATE SECURITIES STATUTE. THE PREFERRED SHARES AND THE
SHARE UNDERLYING THE PREFERRED SHARES ARE BEING ACQUIRED BY QUEST NET FOR ITS
OWN ACCOUNT, FOR INVESTMENT PURPOSES ONLY, AND NOT WITH A VIEW TO ANY
DISTRIBUTION THEREOF. QUEST NET AGREES THAT NO TRANSFER OR OTHER DISPOSITION OF
THE PREFERRED SHARES OR THE SHARES UNDERLYING THE PREFERRED SHARES OR ANY
INTEREST THEREIN WILL BE MADE IN VIOLATION OF THE SECURITIES ACT
7
<PAGE>
OR ANY STATE SECURITIES STATUTE. QUEST NET WILL EXECUTE AN INVESTMENT LETTER
TO THIS EFFECT.
FLORIDA LAW PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE PERSONS IN
FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER WITHIN THREE DAYS
AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE
COMPANY, AN AGENT OF THE COMPANY OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER
THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
OCCURS LATER. SUCH WITHDRAWAL WILL BE WITHOUT ANY FURTHER LIABILITY TO ANY
PERSON. TO ACCOMPLISH SUCH WITHDRAWAL, YOU NEED ONLY SEND A LETTER OR TELEGRAM
TO THE COMPANY AT THE ADDRESS SHOWN HEREIN INDICATING YOUR INTENTION TO
WITHDRAW. SUCH LETTER OR TELEGRAM MUST BE SENT AND POSTMARKED PRIOR TO THE END
OF THE AFOREMENTIONED THIRD BUSINESS DAY. IF SENDING A LETTER, AN INVESTOR
SHOULD SEND IT BY CERTIFIED MAIL. RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS
RECEIVED AND TO EVIDENCE THE TIME WHEN IT IS MAILED. ANY ORAL REQUESTS FOR
RESCISSION SHOULD BE ACCOMPANIED BY A REQUEST FOR WRITTEN CONFIRMATION THE ORAL
REQUEST WAS RECEIVED ON A TIMELY BASIS.
AS REQUIRED BY SECTION 517.061(11)(A)3 FLORIDA STATUTES, AND RULE
3E-500.05(5)(A) PROMULGATED THEREUNDER, YOU OR YOUR REPRESENTATIVES MAY HAVE, AT
THE OFFICES OF THE COMPANY AT ANY REASONABLE HOUR, AFTER REASONABLE PRIOR
NOTICE, ACCESS TO THE MATERIALS SET FORTH IN THE RULE WHICH THE COMPANY CAN
OBTAIN WITHOUT UNREASONABLE EFFORT OR EXPENSE.
Exhibit 20
PUBLIC NOTICE
[logo]
FEDERAL COMMUNICATIONS COMMISSION
1919 M STREET N.W.
WASHINGTON D.C. 20554
----------------------------------------------------------------------
News media information 202-418-0550
Fax-On-Demand 202-418-2830; Internet: http://www.fcc.gov (or 91041
ftp.fcc.gov)
Report No. TEL-00040S Wednesday December 9, 1998
STREAMLINED INTERNATIONAL SECTION 214, CABLE LANDING
LICENSE AND SECTION 310(B)(4)
APPLICATIONS ACCEPTED FOR FILING (Formal Section 63.18 and 1.767)
APPLICATIONS SUBJECT TO STREAMLINED PROCESSING
The applications listed below have been found, upon initial review, to be
acceptable for filing and subject to the streamlined processing procedures set
forth in Section 63.12 of the Commission's Rules, 47 C.F.R. Section 63.12. These
applications are for authority (1) under Section 214 of the Communications Act:
(a) to transfer control of or assign the authorization of a carrier; (b) to be a
facilities-based carrier; and/or (c) to resell the switched services of other
common carriers to provide international switched telecommunications services
between the United States and international points; and/or (d) to resell the
private line services of other common carriers to provide: (i)
non-interconnected international private line services between the United States
and international points, and/or (ii) switched services to a country for which
the Commission has authorized the provision of switched services over private
lines; or (2) under Section 310(b)(4) of the Communications Act, to exceed the
25 percent foreign ownership benchmark.
Pursuant to Section 63.12 of the rules, the applications listed above will be
granted 35 days after the date of this public notice [see Section 1.4 (b) (4)],
and the applicant may commence operations on the 36th day, unless the
application is formally opposed within the meaning of Section 63.12 (c)(4) or
the Commission has informed the applicant in writing, within 28 days of the date
of this public notice, that the application, on further examination, has been
deemed ineligible for streamlined processing. In these instances, the
application will be acted upon only by formal written order of the Commission,
and operation may not commence except in accordance with such order.
Unless otherwise specified, interested parties may file comments with respect to
these applications within 21 days of the date of this public notice. It is
requested that such comments refer to the application file number shown above.
Copies of the applications are available for public inspection in Room 102, 2000
M St., N.W. All applications listed are subject to further consideration and
review, and may be returned and/or dismissed if not found to be in accordance
with the Commission's Rules, Regulations, and other requirements.
- --------------------------------------------------------------------------------
ITC-214-19981005-00741 AUNET CORPORATION
International Telecommunications Certificate
Global or Limited Global Facilities-Based AND Resale Service
Application for authority to operate as a facilities-based carier in accordance
with the provisions of Section 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of section 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
ITC-214-19981104-00763 TRICOM INTERNATIONAL INC.
International Telecommunications Certificate
Global or Limited Global Facilities-Based AND Resale Service
Application for authority to operate as a facilities-based carrier in accordance
with the provisions of Section 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of Section 63.18(e)(2) of the rules.
Pursuant to Section 63.12(c)(4) of the Commission's Rules, the application of
Tricom international, Inc. (ITC-214-19981104-00763) has been re-classified as
non-streamlined processing and will be acted on by formal written order. This
application appeared on Public Notice Report No. TEL-00029S for Streamline
process, released November 13, 1998.
- --------------------------------------------------------------------------------
Page 1 of 3
<PAGE>
- --------------------------------------------------------------------------------
ITC-214-19981106-00824 QUANTREX COMMUNICATIONS, INC.
International Telecommunications Certificate
Global or Limited Global Facilities-Based AND Resale Service
Other Companies:
Application for authority to operate as a facilities-based carrier in accordance
with the provisions of Section 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of Section 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
ITC-214-19981124-00825 COMCELL, INC.
International Telecommunications Certificate
Global or Limited Global Resale Service
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
ITC-214-19981124-00826 QUEST NET CORP.
International Telecommunications Certificate
Global or Limited Global Resale Service
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
ITC-214-19981125-00827 SANTA ROSA COMMUNICATIONS, INC.
International Telecommunications Certificate
Global or Limited Global Resale Service
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
ITC-214-19981127-00828 GRAPHTEL, INC.
International Telecommunications Certificate
Global or Limited Global Facilities-Based AND Resale Service
Application for authority to operate as a facilities-based carrier in accordance
with the provisions of Section 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of Sectio 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
ITC-214-19981127-00829 SINGLE SOURCE, INC.
International Telecommunications Certificate
Global or Limited Global Resale Service
Application for authority to provide service in accordance with the provisons of
Section 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
ITC-214-19981130-00830 BELGACOM, INC.
International Telecommunications Certificate
Global or Limited Global Facilities-Based AND Resale Service
Application for authority to operate as a facilities-based carrier in accordance
with the provisions of Section 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of Section 63.18(e)(2) of the rules to
its affiliated markets under Section 63.18(e)(6) of the rules to the United
Kingdom, Germany, France, The Netherlands, and Belgium. Applicant certifies that
it will comply with the dominant carrier regulations adopted in the Foreign
Participation Order on the U.S.-Belgium route.
- --------------------------------------------------------------------------------
ITC-214-19981130-00831 MARTEL COMMUNICATION, INC.
International Telecommunications Certificate
Global or Limited Global Facilities-Based AND Resale Service
Application for authority to operate as a facilities-based carrier in accordance
with the provisions of Section 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of Section 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
ITC-214-19981201-00832 BLEDA NETCOM, INC. (d/b/a ATA NETWORKS, INC.)
International Telecommunications Certificate
Global or Limited Global Resale Service
Applicant for authority to provide service in accordance with the provisions of
Section 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
REMINDER:
Applicants must certify that neither the applicant nor any party to the
application is subject to a denial of federal benefits by Federal and/or state
courts under authority granted in 21 U.S.C.
The Commission recently amended its Part 63 rules in IB Docket No. 97-142, Rules
and Policies on Foreign Participation in the U.S. Telecommunications Market, FCC
97-398, rel. Nov. 26, 1997, 62 Fed. Reg. 64,741 (Dec. 9, 1997); 63 Fed. Reg.
5743 (Feb. 4, 1998) (Foreign Participation Order). Applicants are advised to
review the new rules, which became effective February 9, 1998. These rules are
contained in Appendix C to the Commission's order and published in the Federal
Register. The rules adopted in the Foreign Participation Order amended many of
the rules adopted in Streamlining the International Section 214 Authorization
Process and Tariff Requirements, 11 FCC Red
Page 2 of 3
TO: The Securities and Exchange Commission
Washington, D.C.
RE: Quest Net Corp.
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Quest Net Corp. and the
financial statements of Quest Net Corp. and Wings Online, Inc. on Form SB-2 of
our report dated July 10, 1999, appearing in the Prospectus, which is part of
this Registration Statement, and of our report dated July 10, 1999 relating to
the financial statement schedules appearing elsewhere in this Registration
Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
/s/ Cordovano and Harvey, P.C.
- ----------------------------------
Cordovano and Harvey, P.C.
Denver Colorado
August 26, 1999
