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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER__ 1999
COMMISSION FILE NO. 333-84945
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D. C. 20549
AMENDMENT NO. 2 TO FORM SB-2
REGISTRATION STATEMENT UNDERTHE SECURITIES ACT OF 1933
QUEST NET CORP.
(Exact Name of Registrant As Specified In Its Charter)
FLORIDA [4813] 84-1331134
(State of Incorporation) Primary Standard Industrial IRS Employer
(Classification Code Number I.D. Number)
2999 NE 191ST STREET, PH-8
AVENTURA, FLORIDA 33180
(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
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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<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------------------------ ---------------- -------------------- ------------------- -----------------
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)
- ------------------------------------------ ---------------- -------------------- ------------------- -----------------
- ------------------------------------------ ---------------- -------------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C>
COMMON STOCK, $.0 PAR VALUE 1,700,000 $2.03 $3,451,000 $959.39
- ------------------------------------------ ---------------- -------------------- ------------------- -----------------
- ------------------------------------------ ---------------- -------------------- ------------------- -----------------
TOTAL (4) 1,700,000 $2.03 $3,451,000 $959.39
- ------------------------------------------ ---------------- -------------------- ------------------- -----------------
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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 November 9, 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 Quest's good faith estimate of the shares
required to be issued pursuant to the terms of the Subscription Agreement,
based on the fluctuation in the price of Quest's Common stock during the 7
months immediately preceding the filing of this Registration Statement. The
actual number of shares to be issued is subject to adjustment and could be
materially less or more than the 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.
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QUEST NET CORP.
CROSS REFERENCE SHEET
FORM SB-2 ITEM NUMBERS AND CAPTION HEADING IN PROSPECTUS
- ---------------------------------- ---------------------
<S> <C>
1. Front of the Registration Statement and
Outside Front Cover of Prospectus......................................Cover Page of Form SB-2 and
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
</TABLE>
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SUBJECT TO COMPLETION, DATED NOVEMBER 10, 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.
QUEST
INTERNET PERFORMANCE
[LOGO]
1,700,000 SHARES OF COMMON STOCK
We are a provider of secure, full-service global Internet and
Intranet broadband digital and wireless networking solutions for businesses and
individuals. Our common stock is traded on the OTC Bulletin Board under the
symbol "QNET". On November 9, 1999, the closing bid and asked price of the
common stock as reported on the OTC Bulletin Board was $2.00 and $2.06
respectively.
The selling security holders named under Plan of
Distribution-Selling Security Holders, are selling the shares for this offering.
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.
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.
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.
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 REFERRED TO IN THIS PROSPECTUS AS "QUEST", OUR, WE OR
US".
QUEST
We are a provider of secure, full-service global Internet and Intranet
broadband digital and wireless networking solutions for businesses and
individuals.
We have a high bandwidth low-delay connection to the Internet Web
(referred to as an ATM).
We offer:
o Dedicated high speed Internet access.
o Metropolitan and wide area network data transport services, including
virtual private networks.
o Wireless Internet connection.
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The solutions provided by us include:
o Dedicated and wireless Internet connectivity.
o Co-location, hosting, 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 to the islands in the
Caribbean Sea, including Cuba.
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 1,700,000
EQUITY SECURITIES OUTSTANDING
COMMON STOCK 22,206,062
PREFERRED SHARES -0-
WARRANTS 47,000
OPTIONS 777,999
o The number of shares being registered is our good faith estimate,
based on the fluctuation in the price of our Common stock during
the 7 months immediately preceding the filing of this Registration
Statement.
o The number of shares outstanding does not include warrants to
purchase 47,000 shares and options to purchase 777,999 shares.
o We redeemed 100,000 shares of Preferred Stock in July 1999, at a
redemption price of $10.00 per share.
o 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.
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".
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR AN INVESTOR TO EVALUATE OUR
BUSINESS AND PROSPECTS
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.
WE HAVE HAD HISTORY OF LIMITED REVENUES THIS MAY CONTINUE TO BE THE CASE.
From inception to June 30, 1999, we generated revenues of approximately
$1,070,198 and incurred operating expenses of $10,013.079. At June 30, 1999, we
had an accumulated deficit of approximately $8,598,558 after discounts and
dividends.
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WE HAVE HAD HISTORY OF A LIMITED CUSTOMER BASE AND THIS MAY CONTINUE TO BE THE
CASE.
At present, our customer base consists of 104 hosting sites, 3 IP
Co-locations (excluding wireless), 35 dial up customers (excluding wireless),
and 48 wireless connections. Our ability to operate profitably depends on
increasing our customer base and achieving sufficient gross profit margins. We
cannot assure you that we will be able to increase our customer base or to
operate profitably.
WE ARE SUBJECT TO ALL OF THE SUBSTANTIAL RISKS INHERENT IN AN INTERNET BUSINESS,
WHICH MAY HARM OUR ABILITY TO OPERATE SUCCESSFULLY.
We are subject to all of the substantial risks inherent in an Internet
related business, any one of which may harm our ability to operate successfully.
These include, but are not limited to:
o Our inability to develop, maintain and/or increase levels of traffic on
our Internet sites.
o Our inability to attract or retain customers.
Our inability to generate significant Web-based revenue from our
customers.
o 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.
Our inability to upgrade and develop competitive systems and
infrastructures.
o The failure of our servers and networking systems to efficiently
handle our Web traffic.
o Technical difficulties and system downtime or Internet brownouts.
IF WE CANNOT MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS COULD BE HARMED.
We are currently experiencing a period of significant growth. As part
of this growth, we will have to:
o Implement new operational procedures and controls.
o Train and manage our employees.
o Expand and coordinate the operations of our various subsidiaries.
o Expand our wireless network throughout Florida and into other states.
o Hire additional staff.
o Expand existing offices and open new offices.
If we cannot manage the growth of our network, staff, offices, and
business and coordinate the activities of our technical, accounting, finance,
marketing, and sales staff effectively, we will:
o Commit funds that may not produce revenue.
o Increase our operational overhead.
o Expend management time and effort on operations that may not succeed.
IF WE CANNOT INTEGRATE NEW BUSINESSES, OPERATIONS, TECHNOLOGY, AND PERSONNEL OUR
GROWTH AND OUR BUSINESS COULD BE HARMED.
If we acquire new businesses, we will need to integrate new operations,
technologies and personnel. Acquisitions and business combinations entail
numerous operational risks, including:
o Difficulty in the assimilation of acquired operations, technologies or
products.
o Diversion of management's attention from other business operations.
Risks of entering markets in which we have limited or no experience.
Potential loss of key employees of acquired businesses.
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IF WE RAISE ADDITIONAL CAPITAL THROUGH THE ISSUANCE OF EQUITY OR CONVERTIBLE
DEBT, YOUR PROPORTIONATE INTEREST WILL BE DILUTED.
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 senior rights, preferences, or privileges.
WE MAY NOT BE ABLE TO RAISE ADDITIONAL CAPITAL ON THE MOST FAVORABLE TERMS
We may not be able to obtain financing on favorable terms, or at all,
which will limit our ability to:
Expand.
o Take advantage of unanticipated opportunities, develop or enhance
services.
Otherwise respond to competitive pressures.
This limitation could harm our business and decrease the value of the
shares or cause us to go out of business. If we are unable to continue our
operations, your entire investment in us will be lost. 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.
ACCEPTANCE AND EFFECTIVENESS OF INTERNET ADVERTISING AND ELECTRONIC COMMERCE IS
UNPROVEN
The E-Commerce and web-hosting portions of our business are dependent
on an increase in the use of the Internet for advertising and electronic
commerce. 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 this portion of our business to grow, become
competitive, or succeed. The following factors may contribute to slow or minimal
use:
o Many advertisers have little or no experience using the Internet
for advertising purposes.
o The adoption of Internet advertising requires the acceptance of a
new way of conducting business, exchanging information and
advertising products and services.
o Potential advertisers may believe Internet advertising to be
undesirable or less effective for promoting their products and
services relative to traditional advertising media.
o Filter software programs that limit or prevent advertising
from being delivered to an Internet user's computer are
commonly available.
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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. Our customers often maintain confidential
information on our servers.
Our data centers, equipment and networks, and our customers'
information are subject to damage and unauthorized access from:
o Human error and tampering.
o Breaches of security.
o Natural disasters.
o Power loss.
o Capacity limitations.
o Software defects.
o Telecommunications failures.
o Intentional acts of vandalism, including computer viruses.
All of which, will cause interruptions in service or reduced capacity
for our customers. These events 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
any one of the events listed above or other unanticipated problems could
seriously damage our business and reputation and cause us to lose customers.
The time and expense required to eliminate computer viruses and
alleviate other security problems could be significant and could impair our
service quality.
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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.
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.
WE ARE DEPENDENT ON INTERNET NETWORK ACCESS SERVICES WE RECEIVE FROM OTHERS ,
ANY DISRUPTION OF THESE SERVICES COULD HARM OUR BUSINESS
We rely on third-party networks, local telephone companies, and other
companies to provide data communications capacity. Any disruption of these
services could cause our customers to find other providers and prohibit us from
obtaining new customers.
OUR BUSINESS DEPENDS IN PART ON OUR NETWORK SERVICE PROVIDER'S NUMEROUS PEERING
RELATIONSHIPS. THEIR INABILITY TO MAINTAIN THEIR PEERING RELATIONSHIPS COULD BE
COSTLY AND HARMFUL TO OUR BUSINESS.
The Internet is composed of many Internet service providers that
operate their own networks and interconnect with other Internet Service
Providers at various peering points.
If our network service provider's network or infrastructure fails to
continue to meet industry requirements for peering or it loses its peering
relationships for any reason, our transmission rates could be reduced, resulting
in a decrease in the quality of service we provide to our customers.
THE "GOING CONCERN" EMPHASIS 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", emphasis may reduce our
ability to raise additional financing.
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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.
We established a program during 1998 to ensure that, to the extent
reasonably possible, all systems are Year 2000 compliant.
Although there is inherent uncertainty in the Year 2000 issue, based
on the results of our Y2K program, we currently do not believe that the Year
2000 issues will have a material effect on our internal network, computer
systems, or operations.
We are dependent on a number of third party network service providers.
Although we are not presently aware of any third party Year 2000 issues that are
likely to result in any disruption of our services, the failure of our third
party network service providers to properly correct a Year 2000 problem could
result in the interruption or failure of certain normal business activities or
operations.
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.
YOU MAY NOT BE ABLE TO RESELL SHARES OF OUR STOCK AT OR FOR MORE THAN THE PRICE
YOU PAID.
The price of our common stock and Internet and telecommunication
stock in general, have recently experienced extreme volatility that often has
been unrelated to the operating performance of any specific public companies.
During the period from July 10, 1998 to November 9, 1999 the bid and ask price
of our common stock has ranged from a high of $30.71 to a low of $.43. If
continued, these broad market and industry fluctuations may adversely affect the
trading price of our common stock, regardless of our actual operating
performance. This volatility may negatively impact the liquidity and value of
your shares.
POTENTIAL LACK OF LIQUIDITY OF OUR COMMON STOCK
Our common stock trades on the OTC Electronic Bulletin Board. Stocks
trading on the OTC Electronic Bulletin Board generally attract a smaller number
of market makers and a less active public market.
Moreover, since our common stock is traded on the OTC Electronic
Bulletin Board, investors may find it difficult to dispose of or obtain accurate
quotations as to the value of our common stock.
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WE MAY NOT BE ABLE TO QUALIFY FOR OR MAINTAIN LISTING ON THE NASDAQ SMALLCAP
MARKET
We are in the process of applying for listing on the NASDAQ Small Cap
Market. The trading of our common stock on the NASDAQ Small Cap 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 minimum
$4.00 per share 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 $1 per share.
Our failure to meet such maintenance requirements could result in the
de-listing of the common stock from trading on the NASDAQ Small Cap Market. Our
failure to be listed or to maintain listing on the NASDAQ Small Cap may restrict
investors' interest in the common stock and materially adversely affect the
trading market, the price of our common stock, and our ability to secure equity
or debt financing.
WE ARE SUBJECT TO PENNY STOCK REGULATIONS AND RESTRICTIONS
The Securities Exchange 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 November 9, 1999, the closing trade price
of our common stock was $2.03 per share and therefore is designated as a "penny
stock". 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 will restrict the ability of
Broker / Dealers to sell our common stock and may affect the ability of
Investors to sell their shares.
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WE HAVE A SUBSTANTIAL AMOUNT OF STOCK THAT WILL BECOME AVAILABLE FOR RESALE
UNDER RULE 144
We have issued an outstanding 22,206,022 shares of common stock of
which 19,996,960 shares are "restricted securities" as that term is defined
under Rule 144 promulgated under the Securities Act. Substantially all of these
shares, except those held by affiliates, will be available for resale in January
2000.
Future sales of such shares made under 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
Our Articles of Incorporation authorize the issuance of "blank check",
preferred stock. 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. Any such
designations and issuances, could:
Adversely affect the voting power or other rights of the holders of our
common stock.
Substantially dilute the common shareholder's interest.
Depress the price of our common stock.
THE ISSUANCE OF "BLANK CHECK" PREFERRED STOCK COULD DELAY, DETER, OR PREVENT A
TAKE OVER, MERGER OR CHANGE OF CONTROL AND MAY PREVENT YOU FROM REALIZING A
PREMIUM RETURN
Our Certificate of Incorporation gives the Board of Directors the
sole authority to issue "blank check" preferred stock. The issuance of "blank
check" preferred stock could have the effect of delaying, deterring, or
preventing a merger, take over or change in control without any action by the
shareholders. The Board of Directors, by the issuance of preferred stock, could
make it more difficult for a third party to acquire us, even if the acquisition
would be beneficial to you. You may not realize the premium return that
stockholders may realize in conjunction with corporate takeovers.
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UNITED STATES REGULATORY AND LEGAL UNCERTAINTIES COULD HAVE SIGNIFICANT
COSTS OR OTHERWISE HARM OUR BUSINESS.
We provide Internet access and business services, in part, using
telecommunications services provided by carriers that are subject to the
jurisdiction of state and federal regulators. Due to the increasing popularity
and use of the Internet, state and federal regulators may adopt additional laws
and regulations relating to content, user privacy, pricing, and copyright
infringement. We cannot predict the impact, if any, that future regulation or
regulatory changes may have on our business.
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. 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:
o Unexpected changes in regulatory requirements.
o Ability to secure and maintain the necessary physical and
telecommunications infrastructure.
o Challenges in staffing and managing foreign operations.
o Employment laws and practices in foreign countries.
Any of these could adversely affect our proposed 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 and will 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.
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<PAGE>
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 our Internet traffic, or to effectively manage our rapidly expanding
operations.
WE LACK UNIQUE SERVICES OR MARKET NICHE IN AN INDUSTRY CHARACTERIZED BY
SIGNIFICANT OVERCAPACITY FOR CURRENT DEMAND
The market for Internet access is highly competitive and fragmented
with over 4,800 Internet service providers, primarily in local markets and
averaging less than 5,000 customers each. Multiple Internet access providers
serve every local market we have entered, or intend to enter. We offer the same
type of services as other Internet service providers. Due to our lack of working
capital in the past, we have not obtained any significant market share.
WE CANNOT BE CERTAIN THAT WE WILL BE ABLE TO COMPETE WITH SIGNIFICANT PRICING
PRESSURE BY OUR COMPETITORS.
As a result of increased competition in our industry, we expect to
encounter significant pricing pressure. We cannot be certain that we will be
able to offset the effects of any required price reductions through an increase
in the number of our subscribers, higher revenues from our business services,
cost reductions or otherwise, or that we will have the resources to continue to
compete successfully.
WE MAY NOT BE ABLE TO COMPETE IN THE INTERNET SERVICE MARKET
We operate in the Internet services market, which is extremely
competitive. Our current and prospective competitors include many large
companies that have substantially greater market presence, financial, technical,
marketing, and other resources than we have. We compete directly or indirectly
with the following categories of companies:
o Established online services, such as America Online, the Microsoft
Network, CompuServe, and Prodigy.
o Local, regional, and national Internet service providers, such as
MindSpring, Earthlink, Network, Inc., Internet America, and PSINet.
o National telecommunications companies, such as AT&T Corp., MCI
WorldCom, Inc., Sprint, and GTE.
o Regional Bell operating companies, such as BellSouth and SBC
Communications.
Our competition is likely to increase. We believe this will probably
happen as large diversified telecommunications and media companies acquire
Internet service providers and as Internet service providers consolidate into
larger, more competitive companies.
Diversified competitors may bundle other services and products with
Internet connectivity services, potentially placing us at a significant
competitive disadvantage. As a result, our business may suffer.
WE MAY NOT BE ABLE TO COMPETE IN THE LONG-DISTANCE TELEPHONE MARKET
We intend to enter the long distance telephone market at the
beginning of the year 2000. We will compete with long distance carriers and
other long distance resellers and providers, including large carriers such as
AT&T, MCI WorldCom and Sprint and new entrants to the long distance market. Many
of our competitors are significantly larger and have substantially greater
market presence and financial, technical, operational, marketing and other
resources. We will face stiff price competition and may not be able to compete.
13
<PAGE>
QUEST 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 are in the process of developing
a marketing and sales force with technical expertise and marketing capability.
There can be no assurance that we will be able to:
o Establish such sales force.
o Gain market acceptance for our services.
o Retain a qualified Director of Sales.
o Develop our sales force.
o Obtain and retain qualified sales personnel on acceptable terms,
if at all.
o Meet our proposed marketing schedules or plans.
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.
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 Chairman/Chief Executive Officer, 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 addition 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 our business. See
"Management".
14
<PAGE>
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 own, 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, including the
election of our Board of Directors. These shareholders can designate the members
of our Board of Directors and can decide our operations and business strategy.
You may disagree with these shareholders decisions. Even if you do not like our
Directors, you will not be able to remove them from office.
Additionally, such persons would be able to influence significantly
a proposed amendment to our charter, a merger proposal, a proposed sale of
assets or other major corporate transaction or a non-negotiated takeover
attempt. Their influence may not be beneficial to you. If they prevent or delay
a merger or takeover, you may not realize the premium return that stockholders
may realize in conjunction with corporate takeovers.
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:
o Plans to expand our existing wireless operations.
o Plans to enter the international optical fiber market.
o Introductions of new products and services.
o Estimates of market sizes and addressable markets for our services and
products.
o Anticipated revenues from designated markets during 1999 and later
years.
o Statements regarding the Year 2000 issue.
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
Although we declared a three-for-one stock dividend in December 1998,
it is not anticipated that we will pay any dividends on our common stock in the
future. The Board of Directors intends to follow a policy of retaining 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.
15
<PAGE>
CAPITALIZATION
The following table shows our capitalization at June 30, 1999. The
Preferred Shares listed below were redeemed in July 1999 at a redemption price
of $10.00 per share.
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 13,021,002
10,000 options $25,800
Preferred Stock -- no par value, 1,000,000
authorized 5,000,000 shares issued and
outstanding at June 30, 1999 100,0001
Additional Paid in Capital -0-
Accumulated Deficit (8,598,558)
Total Stockholders' Equity 5,422,444
SELECTED FINANCIAL INFORMATION
The following selected financial information is derived from the
Consolidated Financial Statements appearing elsewhere in this Prospectus and
should be read in conjunction with the Consolidated Financial Statements and
Notes. Financial Information is for the period from July 1, 1997 to June
30,1999. Investors should note that the Preferred Shares were redeemed in July
1999 at a redemption price of $10.00 per share.
16
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
1999 1998
<S> <C> <C>
SELECTED INCOME STATEMENT DATA:
Net Revenues.................................................................$ 1,070,198 -0-
Income (Loss) from Operations................................................$(8,935,417) $(4,761)
Income (Loss) before Income Taxes and
Extraordinary Item ........................................................$(8,932,794) $(4,761)
Net Income (Loss) per Share
Basic......................................................................$ (0.67) *
Diluted....................................................................$ (0.67) *
Shares Used for Computing Net Loss
Per Share
Basic........................................................................13,322,111 960,028
Diluted......................................................................13,322,111 960,028
</TABLE>
SELECTED BALANCE SHEET DATA:
JUNE 30,1999
Cash..............................................$4,298,289
Total Current Assets..............................$4,340,804
Total Assets......................................$6,675,143
Current Liabilities...............................$1,252,699
Stockholders' Equity..............................$5,422,444
Stockholders Equity gives effect to the 10 to 1 reverse stock split in
October 1998 and the 3 for 1 stock
dividend in January 1999.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following information should be read in conjunction with our
Consolidated 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 $189.00 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.
Our costs and expenses primarily fall into the following categories:
o Telecommunications and operations;
o Employee stock compensation plans;
o Sales and marketing;
o General and administrative;
o 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.
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<PAGE>
Our amortization expense primarily relates to the amortization of
goodwill and a non-compete agreement acquired in our purchase of an 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.
19
<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 certain assets of Pact
Communication Group, Inc. and began our Internet operations.
REVENUE
For the year ended June 30, 1999, we had $136,361 in 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.
During the year ended June 30, 1999, we sold software to Secure
Transaction International Corp. for $500,000. We also provided installation and
modification services to the software totaling approximately 396,000. We are
currently seeking payment through litigation for those and other services. At
June 30, 1999, we recorded a charge of $867,842 to allow for the doubtful
collection of this account receivable. We cannot determine what the outcome of
the lawsuit will be. See "Legal Proceedings- SECURE TRANSACTION INTERNATIONAL
CORP. ET. AL."
EXPENSES AND NET LOSS FROM OPERATIONS
Cost of Internet related services for the year ended June 30, 1999
increased to $95,088 from $-0- for the period ended June 30,1009. Our cost of
Internet related services primarily consists of telecommunication costs,
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.
Cost of revenues-software sales and development, for the year ended
June 30, 1999 increased to $600,000 from $-o- for the period ended June 30,
1998. Our software sales and development costs consist primarily of our
acquisition costs for the software sold to Secure Transaction International
Corp. Labor related to any modification of the software after it was sold has
been charged to salaries expense.
Stock based compensation for the year ended June 30, 1999 increased to
$7,029,485 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.
20
<PAGE>
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 $8,932,794.
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 $32,600 in consulting services recorded at the market price of
$903,999. 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 common 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 September 1998 for 300,000 shares of our common stock.
The conversion rate of $.8610 per share was based on 80% of the five-day average
bid price for the common stock prior to the date of conversion. The gain on
conversion of $341,700 has been credited to retained earnings.
In December 1998, we issued 100,000 shares 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.
21
<PAGE>
In February 1999, we acquired all of the outstanding stock of Wings
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 $4,298,289. 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 governments 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 Quest.
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 capital 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.
22
<PAGE>
BUSINESS
EXPLANATION AND BACKGROUND OF THE INTERNET
The Internet is a global collection of interconnected computer networks
that allows commercial organizations, educational institutions, government
agencies, and individuals to communicate electronically, access and share
information, and conduct business. As businesses have begun to use e-mail, file
transfer and area networks, commercial usage has become a major component of
Internet traffic.
In the mid-1990s, Internet service providers began to offer access,
e-mail, customized content and other specialized services, and products aimed at
allowing both commercial and residential customers to obtain information from,
transmit information to, and use resources available on the Internet.
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 technology.
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.
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<PAGE>
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.
In July 1998, we acquired certain of the assets of Pact Communication
Group, Inc., a privately held Florida corporation. Pact was a provider of
Internet system and network management solutions. Pact's solutions include
server hosting, Internet connectivity, collaborative management, and Internet
technology.
Pact commenced active operations in September 1996 and incurred losses,
as of March 20, 1998 of approximately $132,537. From its inception through March
20, 1998, Pact generated revenues of approximately $482,053 and incurred
operating expenses of $614,590.
Mr. Pereira and Ms. Pereira were the founders of Pact, and both served
as officers and directors. At the time of the asset purchase, Mr. and Ms.
Pereira were the majority shareholders of Pact and Mr. Pereira was president and
a director. In July 1998, in connection with the asset purchase, Mr. Pereira
resigned from Pact and became an officer and director of Quest. Mr. and Ms.
Pereira sold their stock interest in Pact on September 8, 1998.
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.
24
<PAGE>
OUR BUSINESS
We offer dedicated high speed Internet access, metropolitan and wide
area network data transport services, including virtual private networks, to
commercial clients and other Internet Service Providers and wireless Internet
connection at a speed of up to 8 Mbps to a distance of 10 miles on a license
free spectrum. We have recently instituted a marketing program for residential
wireless Internet connection for condominiums.
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 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.
We utilize our proprietary technology and equipment to provide a total
solution for Internet connections to individuals and commercial entities, most
of which provide some form of Internet value-added service, such as hosting and
e-commerce, to others. 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.
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.
Until July 1999, when we terminated our agreement, we serviced our
dial-up customers nationwide through more than 228 Points of Presence that were
provided through contractual agreements with PSINet.
In September 1998 and February 1999, we entered into two, four- year
contracts with World Com to provide us with certain network transit capacity at
a cost of approximately $30,000 per month, per contract to provide us with
dedicated fiber connection to the metropolitan area exchange (MAE), which would
have allowed us to increase our peering arrangements with other Tier 1 Internet
providers. A Tier 1 Internet Service Provider is a provider that has its own IP
Assignment (unique numbers, that route Internet addresses) and has dedicated
connection from its central office to the peering point, or exchanging point at
the Metropolitan Area Exchange ("MAE"). WorldCom was unable to timely provide
the necessary fiber facility and allocation of bandwidth in order to commence
the services and the contract was terminated in July 1999.
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<PAGE>
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 a large 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 to selected
geographical locations throughout the United States, 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:
o Expanding our wireless operations throughout Florida and eventually
nationwide.
o Expanding our premier Web site hosting capabilities.
o Addressing industry-specific customer needs.
o Developing next generation service offerings.
o Expanding our capabilities through selective strategic alliances and
acquisitions.
o Entering the international optical fiber market using Cuba as our
entry point.
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>
QUEST'S OPERATING STRUCTURE
QUEST NET CORP.
<S> <C> <C> <C> <C>
IPQUEST GLOBALBOT QUESTEL CORP. QUEST WIRELESS CORP. QUEST FIBER CORP.
CORP.
DIAL-UP SERVICES
WEB HOSTING SERVICES
DEDICATED SERVICES ADVERTISING SERVICES LONG DISTANCE SERVICES WIRELESS INTERNET SERVICES
SEARCH ENGINE SERVICES CONTENT SERVICES
WINGS ONLINE
E-COMMERCE SERVICES E-COMMERCE SERVICES
</TABLE>
26
<PAGE>
OUR SERVICES
Our services fall into four main classifications: INTERNET WIRELESS
SERVICES, CONNECTION SERVICES, ADVERTISING SERVICES, ACCESS SERVICES, AND
CONTENT SERVICES, each serving a different market and a different customer base.
INTERNET WIRELESS SERVICES
Today most Internet connections are made via regular telephone lines. We
utilize the latest wireless technology to allow high speed Internet
connectivity.
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.
Our main operations are now concentrated on offering Internet Wireless
Service in South Florida. We offer Internet wireless services through our Quest
Wireless subsidiary. 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.
27
<PAGE>
The figure to the right depicts a typical wireless Internet Network.
GRAPHIC MISSING
The Wireless Internet system operates using microwave frequencies, which
do not require a license. A link to our Internet network is established by
installing a microwave antenna and wireless router at the customers' location.
We provide the hardware for the duration of service. The wireless router, in
turn, provides firewall and routing services to connect the customers' computers
to the Internet. For security, the wireless router assigns non-routable
addresses that cannot be reached from the outside, but allows the machines to
access resources outside your network. 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 8 Mbps to a distance of 10 miles, which can be
increased by relay hops.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
DIRECTIONAL ANTENNA 10 MILES 10 MILES DIRECTIONAL ANTENNA
DIRECTIONAL ANTENNA
USER USER
</TABLE>
28
<PAGE>
The figure below is a simple schematic visualizing a wireless system
compared to a conventional wired backbone.
WIRELESS BACKBONE
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.
29
<PAGE>
In June 1999, we signed an agreement with Wireless Inc., a leader in
wireless networking, for wireless access equipment and installation valued at
$2.5 million. Initially, this equipment will be used to complete the expansion
of our wireless network throughout South Florida. The South Florida installation
of the WaveNet IP central units has begun and we expect the South Florida
installations to be completed within one year.
The second stage will be to deploy the network on the entire East Coast
of Florida and eventually the entire state of Florida. We plan to establish a
presence in several major metropolitan cities, including Jacksonville, Tampa,
Orlando, and Sarasota by the end of July 2000. 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 the wire
infrastructure 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.
In order to develop and implement our expansion strategy, we entered into
a two-year Internet Access Service Agreement with Qwest and UUNet to provide us
with certain network transit capacity.
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 would provide for scalable bandwidth that
could meet our clients' needs well into the next century.
As of October 30, 1999, Wireless has generated revenues of approximately
$3,616.50.
30
<PAGE>
WIRELESS MARKETING AND PRICING
Quest Wireless markets its wireless services primarily to owners of
existing commercial and residential properties as well as to new property
developers. We provide the equipment needed for the wireless connections at a
reduced cost to the developers. This gives the developer a state-of-the art;
value-added item to attract tenants and increases their bottom-line profits
because they receive compensation based on a percent of their tenants Internet
usage.
We have created the concept of an "IQ Building". The IQ Building is
completely hi-tech, wired, and wireless Internet Voice and Data building. The IQ
Building is equipped with advanced communications technology such as fiber
optics, maximum bandwidth, and other leading edge telecommunication services.
In March 1999, we completed our first completely hi-tech, wired, and
wireless Internet Voice and Data IQ Building at the Concord Center II of
Aventura Florida, which houses our corporate headquarters. The Concord Center II
is the first building that we 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 IQ Building. We offer up to 8 Mbps of Internet access, up
to 10 miles from the IQ Building. We have now completed two additional IQ
buildings.
Moreover, as we market our Wireless Service, we are also able to offer
our CONNECTION, ADVERTISING, ACCESS, AND CONTENT SERVICES, as a bundled package
deal to our Wireless customers and their employees. In the future, we will also
include office and residential discounted long distance service in the service
package. In addition, we are test marketing the feasibility of including
computers and monitors in the Wireless marketing package.
We also take advantage of the need for this technology by marketing our
Wireless service package to small businesses and larger corporations that
require fast and reliable access to the Internet but would rather not have the
expense of hard wiring and maintenance or the connection setup delays.
31
<PAGE>
<TABLE>
<CAPTION>
Our present Wireless Pricing structure is as follows:
--------------------------------------------------------------------------------------------------------
WIRELESS SERVICE PRICING STRUCTURE
-------------------------- ------------------------- ----------------------------- ---------------------
SERVICE TYPE PRICE PER MONTH INSTALLATION FEE ACTIVATION FEE
-------------------------- ------------------------- ----------------------------- ---------------------
<S> <C> <C> <C>
Single Account $ 59.00 N/A $99.00
-------------------------- ------------------------- ----------------------------- ---------------------
Shared Account $189.00 $189 for 3 computers $99.00
$ 89 for each
additional computer.
-------------------------- ------------------------- ----------------------------- ---------------------
Dedicated Account $699.00 $2,599 $99.00
-------------------------- ------------------------- ----------------------------- ---------------------
Residential Account $59.00 FREE $99.00
-------------------------- ------------------------- ----------------------------- ---------------------
</TABLE>
INTERNET WIRED CONNECTION (ACCESS) SERVICES
Internet Wired access services require a local network connection from
a customer to an Internet service provider's local facilities.
For large, communication-intensive users, these connections are
typically dedicated connections direct from the customer to the Internet service
provider. For residential, small, and medium sized business users, these
connections are generally connections obtained by dialing into a local exchange.
Once a local connection is made to the Internet service provider's
local facilities, information can be transmitted and obtained over a
packet-switched data network. This network may consist of segments provided by
many interconnected networks operated by a number of Internet service providers.
This collection of interconnected networks makes up the Internet.
Communications on the Internet are governed by Internet protocol, an
inter-networking standard that enables communication across the Internet
regardless of the hardware and software used.
Wired connection services to the Internet are provided through our
IPQuest subsidiary. The Internet connection or access market is comprised of
Internet Service Providers, 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.
In April 1999, we entered into a three-year contract with e.spire
Communications, Inc. 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
high speed dedicated Internet connection.
32
<PAGE>
<TABLE>
<CAPTION>
Pricing for dial-up services are described in the following table.
-----------------------------------------------------------------------------------------------
DIAL-UP SERVICE PRICING STRUCTURE
SERVICE TYPE PRICE PER MONTH TERMS
<S> <C> <C>
U.S. Customers $19.95 Monthly
Dial on Demand (ETRN) 49.95 Monthly
T1 Frame (56K) 150.00 Local Loop & Installation
T1 Frame (1.5 Mb/s) 895.00 2 Year Contract, Local Loop & Install
---------------------------- -------------------- ---------------------------------------------
</TABLE>
From July 1998, the date it became operational to October 30, 1999, IP
Quest generated approximately $14,587 in revenue from Dial up revenue.
IPQuest is in the process of launching a no-frills $9.95 per month
unlimited Internet access, which will include one E-mail address per subscriber.
This service will be offered in Dade, Broward, and Palm Beach County Florida
beginning late December 1999.
HOSTING SERVICES
IPQuest 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
customers' in-house resources and will handle everything from setup to a search
engine registration to provide the customers' 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.
33
<PAGE>
<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. 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.
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.
34
<PAGE>
From July 1999 to October 30, 1999, IP Quest generated approximately
$85,355 in revenue from Hosting Services.
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.
GRAPHIC HERE
WIRELESS BACKBONE WIRED BACKBONE
35
<PAGE>
E-COMMERCE SERVICES
We have recently launched our GlobalBot subsidiary, which develops and
operates dedicated search engines and also offers 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. 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.
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.
We are in the final stages of developing search engines, which combine
librarian's skill with the computer's ability to automate and index information.
A prototype can be evaluated at globalbot.net.
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. At present Wings Online is the only site that is operational and
generating revenues. Moreover, Wing Online, Inc., a wholly owned subsidiary of
Globalbot, is Globalbot's only source of revenue at this time. From July 1998 to
October 31, 1999, Wings Online generated revenue of $106,683.64.
Wings Online is used as a market place to purchase airplanes, parts,
and accessories, locate aviation services, financing, or insurance, and as an
employment forum for 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.
36
<PAGE>
The Boats Online and Cars Online sites are not currently operational,
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 registered domains
for the following proposed e-commerce sites, Yacht Online.com and Motor Bikes
Online. These sites are under construction and will follow the same format as
the Wings Online site..
FUTURE OPERATIONS
The following is our proposed plan to expand our business operations
over the next several years. This plan is contingent on several factors,
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 that it will be successful.
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 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 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.
We anticipate that we will be able to provide Search Engine Advertising
Services by the middle of January 2000.
37
<PAGE>
INTERNET KIOSK SERVICES
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 assets
that were acquired consisted of kiosk systems, a video studio, digital cameras,
software licenses, magnetic insertion card readers, electronic equipment, and
computers.
AVX is a Virginia based manufacturer and developer of Axcess Internet
Kiosk Systems. Axcess encompasses a public-proof browser, which prevents
vandalism and allows easy navigation with a touch pad mouse and keyboard.
Statistics show that over 80% of public Internet access use is for email. Axcess
software features the best email system in a public browser. Finally, Axcess
utilizes a unique 3" wide thermal printer that provides customers a receipt at
the close of their transaction.
The Axcess Internet Kiosk Internet System is comprised of a computer
and monitor, set in a kiosk type cabinet that contains a mechanism for accessing
the Internet through the use of cash or credit cards. The Kiosk Internet System
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. Due to our concentration on the Wireless
operations, the deployment of the Kiosk Internet Systems has been tabled until
we obtain additional personnel.
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 information is increasing. We intend to position ourselves to provide
telecommunications and Internet services to take advantage of this growing
demand.
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. Quest
Net Corp. SA (PTY) LTD name has been changed to Africainternet LTD.
Africainternet Corp., an Idaho corporation, is the Majority Shareholder of
Africainternet LTD. and Mr. Pereira is a Majority Shareholder of Africainternet
Corp.
38
<PAGE>
In May 1999, the Board of Directors, with Mr. Pereira abstaining,
approved the purchase of 49% of the authorized but unissued common stock of
Africainternet LTD., a South African Internet company, for $4,000,000. The
purchase price was to be paid in our restricted common stock, valued at market
as of the date of the closing of the transaction. The transaction was unduly
delayed while waiting for the South African Government to approve the payment of
the purchase price in our restricted common stock. The purchase has not been
approved to date. Due to the delay, the transaction is in the process of being
restructured. If the new structure is satisfactory, we anticipate concluding
this transaction by December 31, 1999.
We will be seeking other acquisitions and strategic partners South
Africa as the opportunity arises.
OPTICAL FIBER NETWORK SERVICES
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.
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 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.
As soon as the political tension between the United States and Cuba is
resolved, we plan to enter the international optical fiber market using Cuba as
a starting point, through our Quest Fiber subsidiary.
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 MISSING
39
<PAGE>
PROJECT UNIDAD is intended to be a high capacity, fiber optic
communication network connecting Cuba's major population center with the United
States 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 is expected to 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. If and 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.
Based upon the average of three independent quotes from venders that
specialize in fiber optics, 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. Most vendors in the Fiber Optic industry provide vendor
financing, we have an oral commitment from one vender for financing for the
Project. In addition, we have had indications of interest for financing from a
representative for several banks. However, there can be no assurance that the
actual financing will take place or that it will be on terms acceptable to us.
40
<PAGE>
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.
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 Departments, 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.
In June 1999, our Chairman/Chief Executive Officer received a license
from the United States Department of the Treasury to travel to Cuba to discuss
Project Unidad with Cuban officials. The license travel was for discussion
purposes only. In August 1999, Mr. Pereira traveled to Cuba to discuss the
Project. Cuban officials expressed an interest in the project however, 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
Governments.
In order to begin the Project, a landing license for the United States
must be obtained from the Federal Communications Commission to build the fiber
optic cable. A license will only be granted once the Office of Foreign Asset
Control (i.e.: the Department of State, Department of Commerce, and the Treasury
Department) consent. In order the obtain a landing license in Cuba we will be
working with the Monopoly Telephone Company of Cuba, who will apply to the
Ministry of Telecommunication for the license.
Once both landing licenses are obtained, we will then have to obtain
the approval of the United States Army Corp of Engineers and the Florida State
and local governments before construction begins.
The United States landing license was applied for under Section 214 of
the Communication Act of 1934 in June 1999. We are unable to determine when, if
ever a license will be granted.
41
<PAGE>
<TABLE>
<CAPTION>
THE CUBAN MARKET
ALL DATA HAS BEEN OBTAINED FROM PUBLISHED, FREELY AVAILABLE SOURCES. IN
ALL CASES NON-PROPRIETARY INFORMATION WAS USED.
------------------------------------------------------------------------
CUBA DEMOGRAPHICS & TELECOMMUNICATIONS INDICATORS
------------------------------------------------------------------------
---------------------------------- -------------------------------------
<S> <C>
Population 11 million
---------------------------------- -------------------------------------
---------------------------------- -------------------------------------
Population, Havana 2.1 million
---------------------------------- -------------------------------------
---------------------------------- -------------------------------------
Human Development Ranking 89th out of 173 countries
---------------------------------- -------------------------------------
---------------------------------- -------------------------------------
Literacy rate 98.5%
---------------------------------- -------------------------------------
---------------------------------- -------------------------------------
# of schools of higher education 46
---------------------------------- -------------------------------------
---------------------------------- -------------------------------------
GDP $13 Billion
---------------------------------- -------------------------------------
---------------------------------- -------------------------------------
Main telephone lines 356,000
---------------------------------- -------------------------------------
---------------------------------- -------------------------------------
Annual Minutes per Subscriber 34.8
---------------------------------- -------------------------------------
---------------------------------- -------------------------------------
International Telephone Circuits 1900
---------------------------------- -------------------------------------
---------------------------------- -------------------------------------
Teledensity 3.2 million
---------------------------------- -------------------------------------
---------------------------------- -------------------------------------
# Households 3.2 Million
---------------------------------- -------------------------------------
---------------------------------- -------------------------------------
Residential Main Line% 7.3%
---------------------------------- -------------------------------------
---------------------------------- -------------------------------------
Residential Connection Charges US$ 100
---------------------------------- -------------------------------------
---------------------------------- -------------------------------------
Residential Monthly US $6.3
Subscriptions
---------------------------------- -------------------------------------
</TABLE>
42
<PAGE>
o Data from "1998 World Telecommunication Development
Report," Published by ITU, Geneva, Switzerland and
"Culturegram 1996", published by Bringham Young
University.
o Data represents 1996 demographics, the latest year
for which information is available
<TABLE>
<CAPTION>
VOICE CHANNELS FROM US TO CUBA, AS OF 1996
---------------- ------------------ --------------
Carrier Link Authorized
by the FCC
---------------- ------------------ --------------
---------------- ------------------ --------------
<S> <C> <C> <C>
AT&T Undersea Cable 143
---------------- ------------------ --------------
---------------- ------------------ --------------
AT&T P.R. Interlsat 150
---------------- ------------------ --------------
---------------- ------------------ --------------
Sprint Intelsat 120
---------------- ------------------ --------------
---------------- ------------------ --------------
WorldCom Intersputnil 390
---------------- ------------------ --------------
---------------- ------------------ --------------
Total 953
---------------- ------------------ --------------
</TABLE>
43
<PAGE>
o "Cuban Telecommunication Infrastructure and Investment," L. Press,
as presented at the Conference of the Association for the Study of the
Cuban Economy, August 1996
Cuba is the largest Caribbean Sea country, larger than 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 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.
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, Intelsat, and a 35-year-old copper undersea Cable owned
by AT&T. Data describing the domestic network is currently not available. We
have not been able to obtain any statistics with regard to the number of
installed computers and Internet usage in Cuba.
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.
The cable will be a gateway to gateway. Quest will not be involved in
computer installation, ISP's, wireless, server networks, or other infrastructure
to connect customers within Cuba to our proposed cable.
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.
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 subsidiary.
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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:
(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.
In September 1999, we applied for a Competitive Local Exchange Carrier
License. We anticipate that this license will be issued no later than January
2000. By February 2000, we plan to offer our long distance service as an add-on
or bundled service to businesses and their employees that have contracted for
our wireless services and to our wireless residential customers. Our operations
will consist of leasing transmission lines from long distance carriers at a
volume discount and reselling the long distance services to customers.
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.
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. In late October 1999, we hired a sales and
marketing director, and seven sales persons. The sales staff is employed on an
independent contractors basis, and are paid a weekly draw against commissions.
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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
wireless and other connection services, 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:
o a large amount of Web traffic
o reached critical mass
o a multi-functional Web site
o brand recognition, user affinity and loyalty
o a broad demographic range
o an ability to deliver targeted audiences
o open access for visitors
Our marketing and sales director 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 South Florida, but anticipate
expanding geographically over the next few years.
CUSTOMER BASE
o Our primary target markets are comprised of:
o owners of existing commercial and residential properties as well as to
new property developers.
o small businesses that resell connectivity services in some value-added
way, such as small size web designers and web hosting companies that
seek to provide a complete solution to its clients but do not own their
own network or Internet facility.
o 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 dial up customer base from approximately 200 customers nationwide to 3 IP
Co-locations (excluding wireless) and 35 dial up customers (excluding wireless).
We have also reduced our operating costs accordingly by not having to service
customers nationwide at this time.
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In addition to the dial up and IP Co-location accounts, we now have 104
non-affiliated hosting sites, and 48 wireless connections.
Although there is a lot of fluctuation of clients, since Internet
clients tend to try out many providers before settling with a single provider,
we have been successful in retaining several of our Florida customers since we
began offering Internet services. In addition, as our clients Internet needs
grow, we have been able to provide them with additional services.
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 eight sales
representatives. As our capacity and operations grow we will be hiring a Vice
President of Marketing and Sales to build a quality in-house direct sales force.
Our sales effort will focus mainly on the commercial sector, selling the IQ
Building concept, and 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.
o Telemarketing We plan to contract with a national telemarketing firm to
enlist twelve telemarketers at a charge of $30 per hour to sell our
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.
o 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
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.
o 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.
o Trade Shows Trade shows are a critical component for generating
awareness because of their popularity among Internet users. Thousands
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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 as 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.
o 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.
o Other We have a website (www.ipquest.com) where information about Quest
and our services 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 AND ADVERTISING
We have retained a public relations firm and an advertising firm to
assist us in gaining attention from the media and establishing a corporate and
product 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.
Our initial advertising activities will consist of billboard, print,
and other media corporate recognition activities.
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 our 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.
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WIRELESS CONNECTIVITY THROUGHOUT FLORIDA
Installation of the WaveNet 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 to 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 our other
services such as wireless and in the future, our long distance telephone
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 an 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.
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INTRODUCE NEW PRODUCTS AND SERVICES
Our objective is to eventually become the leading provider of Internet
system and management solutions nationwide. We realize 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 Internet Service Providers.
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- WE LACK UNIQUE SERVICES OR MARKET NICHE
IN AN INDUSTRY CHARACTERIZED BY SIGNIFICANT OVERCAPACITY FOR CURRENT DEMAND",
"We cannot be certain that we will be able to compete with significant pricing
pressure by our competitors", and "WE MAY NOT BE ABLE TO COMPETE IN THE INTERNET
SERVICE MARKET WE MAY NOT BE ABLE TO COMPETE IN THE LONG-DISTANCE TELEPHONE
MARKET".
Our potential competitors in our individual markets are as follows:
PRESENT COMPETITORS
INTERNET ACCESS SERVICES
We are a 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.
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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), TekNow (Phoenix, AZ) and RTS Wireless. The Florida competition
includes , Fuzion Wireless Communications (Boca Raton, FL), Intermedia Wireless
Communication, Winstar Communication, CableVision, Tellegent Communication and
Airwave Direct Net One. We believe that we have several advantages over these
competitors, including:
o As one of the first license free microwave 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.
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.
COMPETITORS FOR FUTURE OPERATIONS
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.
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We established a program during 1998 and completed it in October 1999
to ensure that, to the extent reasonably possible, all systems are Year 2000
compliant.
The Year 2000 Program was designed with the assistance of an outside
consultant. It consisted of five phases:
o Inventory of systems, equipment, software and hardware including
those of significant third-party suppliers and customers.
o Analysis of the systems to determine compliance or non-compliance.
o Remediation and contingency plan development.
o Remediation.
o Testing of affected systems.
A team consisting of our staff from Information Technology, Finance and
Operations was established as the Y2K Readiness Team. With the assistance of our
outside consultant, the team designed an aggressive schedule to identify systems
requiring compliance upgrades and tested the systems.
Although there is inherent uncertainty in the Year 2000 issue, based
on the results of our Year 2000 Program, we currently do not believe that the
Year 2000 issue will have a material effect on our internal network, computer
systems or operations.
We have not established contingency plans in case of failure of our
internal network and computer systems since we currently believe that such
systems are Year 2000 compliant.
We are dependent on a number of third party network service providers.
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 inquiries to certain third party
suppliers and customers requesting information regarding their vulnerability to
Year 2000 issues. Based on our review and inquiry we believe that that they have
minimum vulnerability to Year 2000 issues.
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We have not established contingency plans in case of failure of our
third party network service providers since we currently believe that they have
minimum vulnerability to Year 2000 issues.
Although we are not presently aware of any third party Year 2000 issues
that are likely to result in any disruption of our services, the failure of our
third party network service providers to properly correct a Year 2000 problem
could result in the interruption or failure of certain normal business
activities or operations.
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. . 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.
NON-REPORTING STATUS
We are not currently a reporting company under the Securities and
Exchange Act 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.
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, our sales staff and our Globalbot subsidiary. These leases expire
five years from their date of commencement. Our telephone number is (305)
935-1080.
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LEGAL PROCEEDINGS
SECURE TRANSACTION INTERNATIONAL CORP ET AL.
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., 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 Secure
Transaction and its subsidiaries for bandwidth, consulting services and
software. As payment for the services Secure Transaction and its subsidiaries
issued redeemable preferred stock that was convertible into Secure Transaction
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 Secure Transaction and its
subsidiaries. We have asked the court for rescission, compensatory damages,
attorneys' fees, costs, and expenses.
The defendants filed a motion to dismiss, which was denied. The
defendants have filed an answer to our complaint. Secure Transaction also filed
a counter claim alleging breach of contract, failure to deliver, and conversion.
They have asked for damages in excess of $15,000, but did not state a specific
amount. The lawsuit is in the discovery stage. At present, we are unable to
predict the outcome this lawsuit.
PSINET
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 stemmed from PSINET's
inability to provide us with the services we contracted for.
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 Quest, less
any sums Quest owes PSINet, the return of any PSINet equipment that Quest has in
its possession, and the assignment to Quest of approximately $80,000 in debt
owed to PSINet by Pact. Quest has agreed to use commercially reasonable efforts
to obtain from Pact and return to PSINet all PSINet equipment in Pact's
possession.
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HERMAN HENIN
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 alleged that he did not receive a proper distribution
of Quest shares from Pact after our acquisition of certain of the assets of
Pact, 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. On August 14, 1999, Mr. Henin filed an
Amended Complaint alleging that the transaction between Quest and Pact was a "DE
FACTO MERGER" and that Quest 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.
On November 10, 1999, there was a hearing on our Motion to Dismiss. The
Court dismissed the breach of fiduciary duty claim and the fraud claim against,
however it ruled that the breach of contract and specific performance claim
could proceed. At present we are unable to predict the outcome of this lawsuit,
however we intend to vigorously defend it.
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 Officer and Director
Rebecca J. Del Medico 48 N/A President and Chief
Operating Officer
Paul K. Zeller 46 N/A Executive Vice President and
Chief Financial Officer
Maxine Pereira 34 1999-2000 Executive Vice-President, and
Director.
David Block 32 1999-2000 Director
Victor Coppola 56 1999-2000 Director
</TABLE>
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Directors serve 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, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD OF DIRECTORS
Mr. Pereira has been our Chairman/Chief Operating Officer since July
1998 and served as our President from January 1999 to October 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., now Quest Net Corp., purchased certain of Pact's assets in
July 1998. Mr. Pereira `s employment contract was part of the asset purchase.
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 Florida, which
manufactures and markets food equipment in Hong Kong, 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, and June 1997, due to the heavy financial burden of
sustaining PACT Communications, Inc., Mr. Pereira filed personal bankruptcy
actions under Chapter 7 and Chapter 13, respectively, in the United States
Bankruptcy Court for the Southern District of Florida. An order of discharge was
entered on February 18, 1997 for the Chapter 7 action. Mr. Pereira is current
with all of his payments under the Chapter 13 action. In September 1999, Mr.
Pereira petitioned the court to accelerate his payments in order to discharge
his debts under the Chapter 13 action. The request was denied.
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.
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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.
REBECCA DEL MEDICO, PRESIDENT/CHIEF OPERATING OFFICER, GENERAL COUNSEL
Ms. Del Medico was appointed President of Quest in October 1999. Ms
Del Medico served as Quest's special counsel from September 1998 to October
1999. Ms. Del Medico has served as a director of Environmental Monitoring and
Testing Corporation, a publicly traded company, from June 1994 through March
1997 and October 1998 to November 1999, when she resigned.
From September 1997 to date, Ms. Del Medico has served as general
counsel to Imaging Diagnostic Systems, Inc., a publicly traded company. Since
May 1996, Ms. Del Medico has been of counsel to the law firm of Lerner & Pearce,
P.A. From October 1994 to April 1996 Ms. Del Medico was general counsel to Sky
Scientific, Inc., a now-defunct public company that was located in Boca Raton,
Florida.
Since June 1992 to October 1994 and from April 1996 to October 1999,
Ms. Del Medico practiced law as a sole practitioner. Ms. Del Medico has 13 years
experience counseling public companies in the areas of operations, mergers and
acquisition, and contract negotiations as well as SEC and NASDAQ compliance.
From 1991 to July 1992 Ms. Del Medico was associated with the law firm
of Lewis, Vergosen & Rosenbach, P.A. in West Palm Beach, Florida.
Ms. Del Medico holds a Juris Doctorate degree from Nova University Law
School and is a member of the Florida Bar.
PAUL K. ZELLER, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Paul K. Zeller joined Quest Net Corp. on September 7, 1999. Mr. Zeller
is Executive Vice President of Finance and our Chief Financial Officer.
From 1996 till joining Quest, Mr. Zeller was founder and President of
Zelco Enterprises, Inc., a Florida corporation that specialized in financial and
management consulting to both private and public corporations.
Mr. Zeller began his business career in 1974 at Texaco Inc. (World
Headquarters), as a member of the corporate staff. Responsibilities included
providing administrative and human resource support to all refining, marketing,
and sales operations in Europe.
In 1978 he accepted an opportunity to join Joseph E. Seagram & Sons,
Inc. in New York City as a member of International Operations and Administration
Staff. He was appointed to a Director level position in 1982 and was a member of
a five-person management team responsible for multiple businesses throughout
Latin America/Asia Pacific, which represented revenues in excess of $1 Billion.
In 1985 he was offered and accepted the position of Vice President
Corporate Administration with W.R. Grace & Co. in New York City.
Responsibilities were global in nature. At that time, Grace had 117,000
employees and over $7 Billion in revenues.
Upon leaving Grace in 1994, Paul was asked to accept a key project
assignment for Ryder System Inc. in Miami, as the Assistant to the Executive VP
Human Resources. In 1995, a developmental stage corporation, Sky Scientific,
Inc. a now-defunct public company that was located in Boca Raton, Florida,
recruited him as their Executive Vice President and Chief Operating Officer, to
assist them with a operating and financial strategic turn around.
Mr. Zeller received his Bachelor's Degree in 1974 from The Citadel and
his Master's Degree in 1976 from New York University.
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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 Quest 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.
VICTOR V. COPPOLA, OUTSIDE DIRECTOR
Victor Coppola has been a director of Quest 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 firm 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 , 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.
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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 Coopers & Lybrand to be part of a select
four-man team responsible for developing a program to train Coopers & Lybrand
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 Coopers & Lybrand's National Middle Market Business
Services Group, which is now one of the focal points of Coopers & Lybrand's
practice.
Mr. Coppola 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.
Mr. Coppola 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.
In October 1999, the Board of Directors, with outside directors
abstaining, voted to compensate outside directors $150 per meeting attended, and
to reimburse outside directors for travel expenses to attend meetings.
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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
SUMMARY OF COMPENSATION TABLE
THE FOLLOWING TABLE does not include:
o 150,000 shares granted to Mr. Pereira as of July 1, 1999. The value of
these shares at the time of grant was $975,000. The number of shares
actually issued was 135,022. The remaining shares were cancelled, as
repayment of $97,360 in advances made to Mr. Pereira.
o 1,250 shares granted to Ms. Pereira for her services as a Director.
o 25,000 shares granted to Ms. Pereira as of July 1, 1999. The value of
these shares at the time of the grant was $168,750.
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<TABLE>
<CAPTION>
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>
Camilo Pereira, CEO and 1999 $125,000 N/A $440,625 1,310,693
Director
- ------------------------- ------- ---------------- -------------- --------------- ------------------
- ------------------------- ------- ---------------- -------------- --------------- ------------------
Maxine Pereira 1999 $48,000 N/A $154,675 N/A
- ------------------------- ------- ---------------- -------------- --------------- ------------------
</TABLE>
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
$133,700; Maxine Pereira $48,000. Mr. Pereira receives a car allowance of $1,000
per month. Ms. Pereira receives a car allowance of $500 per month.
In October 1999, we entered into a five-year employment agreement with
Rebecca J. Del Medico, our President. Pursuant to the terms of the employment
agreements Ms Del Medico is paid a base annual salary of $110,000. Ms. Del
Medico also receives a car allowance of $500 per month and an expense allowance
of $500 per month.
Mr. Zeller, our executive Vice President/Chief Financial Officer is
employed pursuant to an oral agreement. His annual base salary is $75,000. Mr.
Zeller also receives a car allowance of $500 per month.
Each employment agreement provides for health insurance, vacations, and
related benefits, a cost of living adjustment and the following equity and other
incentives.
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o 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.
o 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.
o Mr. Pereira's 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".
o Ms. Del Medico's employment agreement states that she is
entitled to receive 150,000 shares of Quest's common stock in
equal installments of 50,000 shares during the first year of
employment and options to purchase up to 600,000 shares of the
Company's common stock, at $3.09 per share (110% of fair
market value on date of grant). The options vest in equal
installments over a four-year period beginning the second year
of her employment.
o Mr. Zeller has been granted options to purchase 90,000 shares
of the Company's common stock at an exercise price of $3.25
per share. The options will vest in increments of 15,000
shares on each six months anniversary of his employment
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The following table sets forth certain information with regard to the
Options/SAR granted to Management for the fiscal year ended June 31, 1999.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No. of Securities %of Total Options Exercise or Market Price
Underlying Options Granted to Employees Base Price On Date of Expiration
Name Granted In Fiscal Year ($/Share) Grant Date
- -------------- ---------------- -------------------- ----------------- ----------- --------------
<S> <C> <C> <C> <C>
Camilo 1,310,693 97.4% $.012 $2.75 Exercised
Pereira
- -------------- ---------------- -------------------- ----------------- ----------- --------------
</TABLE>
EQUITY INCENTIVE PLAN
On October 29, 1999, the Board of Directors approved an Equity
Incentive Plan. The Shareholders must approve the Plan within one year. The
maximum number of shares that can be granted under the 1999 plan is 15,000,000
shares of common stock and 5,000,000 shares of preferred stock. The series,
rights, and preferences of the preferred shares are to be determined by the
Company's Board of Directors.
Under the Plan, the exercise price of the incentive options to
employees must be equal to at least 100% of the fair market value of the Common
Stock, as of the date of grant. The exercise price of incentive options to
executive officers, or affiliated persons, must be at least 110% of the fair
market value as of the date of grant.
Pursuant to stock option agreements, Ms. Del Medico has the option
to purchase 600,000 shares of common stock or preferred stock. These options
vest in equal installments over a four-year period, beginning in October 2000,
at an exercise price of $3.09 per share (110% of the fair market value of the
shares, on the date of grant).
GOVERNMENT REGULATION
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 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.
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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.
CERTAIN TRANSACTIONS
Camilo Pereira and Maxine Pereira are husband and wife. Further, Camilo
Pereira and Maxine Pereira is 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.
Pursuant to an action by our Board of Directors, 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. Earning assets are defined as all assets that
have a potential to earn revenues for Quest. 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. At the time the options were issued the
price of our common stock was $2.75.
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 Internet 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
Africainternet LTD., a South African Internet company, for $4,000,000. The
purchase price was to be paid in our restricted common stock, valued at market
as of the date of the closing of the transaction. The transaction was unduly
delayed while waiting for the South African Government to approve the payment of
the purchase price in our restricted common stock. The purchase has not been
approved to date. Due to the delay, the transaction is in the process of being
restructured. If the new structure is satisfactory, we anticipate concluding
this transaction by December 31, 1999.
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<PAGE>
In March 1999, we issued 100,000 shares to Maxine Pereira, an officer
of Quest, pursuant to her employment agreement. At the time of issuance the
value of the shares was $154,000. The agreement called for the issuance of
25,000 shares on January 1, 1999. Quest 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 Quest 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 to David Plant, the father of Maxine Pereira and father-in-law of Camilo
Pereira, for consulting services rendered. The consulting services were valued
at $7,600. At the time of issuance these shares were valued at $303,999. Mr.
Pereira held a power of attorney for these shares until October 1999, when the
power was terminated. 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 $1,724,520 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. Quest 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 Quest and another entity owned by Mr. Pereira, paid on behalf of
Quest certain expenses totaling $103,976. Mr. Pereira also advances $35,000 to
Quest 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 Quest 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, Quest paid
certain expenses related to ventures Mr. Pereira is associated with, but have no
relative business purpose to Quest. 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.
In November 1999, Quest instituted a policy that prohibits payment of
any new expenses unrelated to its business. In addition, the Policy provides
that Quest will not enter into any transaction or loan with a related party
unless the transaction or loan is on terms that are no less favorable to us than
we could obtain from unrelated third parties. A majority of the disinterested,
"independent" members of our board of directors must review and approve or
ratify any transaction involving related parties or conflicts of interest.
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PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of our common
stock as November 9, 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 and 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 SHARES OF COMMON STOCK
- ------------------- ------------ ----------------------
<S> <C> <C>
Camilo Pereira 17,732,088 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
Rebecca J. Del Medico 96,000 *
2999 NE 191st Street, PH-8
Aventura, Florida 33180
Paul K. Zeller 4,000 *
2999 NE 191st Street, PH-8
Aventura, Florida 33180
David Block 11,130 *
2999 NE 191st Street, PH-8
Aventura, Florida 33180
Victor Coppola -0- -0-
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 (6) persons
</TABLE>
*Represents less than 1% of the outstanding shares of common stock.
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<PAGE>
o Except as indicated below, 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.
o Percentage of ownership is based on 22,206,022 shares of common stock
outstanding as of November 9, 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
November 9, 1999 are deemed outstanding for computing the
percentage of that person and the group.
o Mr. Pereira shares include 136,000 shares owned by his wife, Maxine
Pereira, of which he disclaims beneficial ownership. Also includes the
10,929,278 shares owned by Grupo Internet Latinoamericano, S.A. that
are subject to a proxy held by Mr. Pereira.
o Ms. Pereira's shares include 6,681,788 shares owned by her husband,
Camilo Pereira, of which she disclaims beneficial ownership.
o All officers and directors as a group includes 10,929,278 shares owned
by Grupo Internet Latinoamericano, S.A. which are subject to a proxy
held by Mr. Pereira.
o Sandra van Staden and Selma Atkinson are the directors of and have
control over Gruppo Internet Latinoamericano, S.A.
o Rosane Regis Oliveira has voting control over Simplex Ltd.
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 and low bid 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/BID LOW/BID
FISCAL YEAR 1998
September 1998 $ 3.0625 $ .8128
December 1998 $ 9.75 $ .51
March 1999 $ 15.00 $ 5.00
June 1999 $ 10.1255 $ 4.56
September 1999 $ 9.250 $ 2.875
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<PAGE>
On November 9, 1999, the closing trade price of the common stock as reported on
the OTC Bulletin Board was $2.03. As of such date, there were approximately 300
holders of record of our common stock.
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.
VOLATILITY AND FLUCTUATION OF OUR COMMON STOCK
The price of our common stock and Internet and Telecommunication stock
in general, is highly volatile. During the period from July 10, 1998 to November
9, 1999 the bid and ask price of our common stock has ranged from a high of
$30.71 to a low of $.43. This volatility may negatively impact the liquidity and
value of your shares.
The market price of our common stock could continue to fluctuate
substantially due to a variety of factors, including:
o 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.
o Our performance and whether or not we meet our projections.
o General economic and market conditions.
o Quarterly fluctuations in results of operations.
o The commencement of or major developments in litigation. Announcement
of key developments or new products or services by competitors.
o Announcement and market acceptance of acquisitions.
o Changes in earnings estimates by analysts.
o Press coverage of favorable or unfavorable developments in our
business.
o Loss of key personnel.
o Changes in accounting principles or policies.
o Sales of common stock by existing stockholders.
o Economic and political conditions
The market price for our common stock may also be affected by our
inability to meet analysts' expectations. Any failure to meet these
expectations, even slightly, could have an adverse effect on the market price of
our common stock.
In addition, the market prices of securities issued by many companies
may change for reasons unrelated to the operating performance of these
companies.
Following periods of volatility in the market price of other companies'
securities, class action securities litigation has often been instituted. 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.
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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 22,206,062 shares of common stock and no shares of
Preferred stock. In October 1998, the shareholder is 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
Quest, to share ratably in all assets remaining after payment of liabilities.
The holders of common stock have no preemptive or conversions 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. 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. Any such
designations and issuances, could:
o Adversely affect the voting power or other rights of the holders of our
common stock.
o Substantially dilute the common shareholder's interest.
o Depress the price of our common stock.
In addition the issuance of "blank check preferred stock could be
utilized as an anti-takeover measures, which could have the effect of delaying,
deterring, or preventing a change in control without any action by the
shareholders.
DIVIDEND POLICY
It is the current policy of the Board of Directors to retain any
earnings to provide for the growth of Quest. Consequently, we do not expect to
pay cash dividends in the future.
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SELLING SECURITY HOLDERS
In June 1999, we sold to the Selling Security Holder, James LLC,
910,747 shares of common stock for gross proceeds of $5,000,000. 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 1,700,000 shares of common stock owned by or to be issued to the
Selling Security Holder.
Under the terms of a registration statement between Quest 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 Quest 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.
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)
Due to the fluctuation in the price of Quest's Common Stock Quest's and
the Selling Security Holder'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. This estimate was based on average quarterly low ask price
from September 1998 to June 1999 ($2.72) divided by the net proceeds of the
offering ($5,000,000) which equaled 1,838,235 shares. By negotiations with the
Selling Security Holder, this number was reduced to 1,700,000 shares. In the
event that additional shares will be required to be issued, Quest will file a
new registration statement to cover the additional shares. Any shares that are
not issued will be deregistered. As of November 9, 1999, if the Registration
Statement were effective for 60 days, we would be required to issue an
additional 966,130 shares in accordance with the terms of the Subscription
Agreement.
If the Registration Statement is not declared effective within 120 day
from June 3, 1999, Quest is required to pay, as liquidated damages, 1.0% of the
principal amount of the Shares. After 150 calendar days Quest is required to pay
2.0% of the principal amount of the Shares for each 30-day period, or portion
thereof, that the registration statement is not declared effective.
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 the
director of and has voting control over CTC Corporation LTD.
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. Of the 1,700,000 shares of common stock being registered, 910,747
shares represent the total beneficial holdings of the Selling Security Holder at
this time. CTC Corporation LTD does not hold any of our securities.
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.
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<PAGE>
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 Quest 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 prevailing prices
and terms or at prices related to the then market price, or in negotiated
transactions.
o One or more of the following methods may be used to sell the shares:
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.
o Purchases by the broker-dealer as principal and resale by such broker
or dealer for its account pursuant to this Prospectus.
o 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
considered "underwriters" within the meaning of the Securities Act. In
connection with such sales, any profits realized by the Selling Security Holder
and any compensation of such broker-dealer may be considered an underwriting
discount or commission.
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.
In addition they have been advised that they:
o Cannot engage in any stabilization activity in connection with Quest's
securities.
o Must furnish each broker through which securities covered by this
Prospectus may be offered the number of copies of this Prospectus
that are required by each broker.
o Must not bid for or purchase any securities of Quest.
o Must not attempt to induce any person to purchase any of Quest's
securities other than as permitted under the Exchange Act Release
34-38067 (December 20, 1996)
o Must coordinate their sales under this Prospectus with each other and
Quest 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:
The date on which such Selling Security Holder's shares may be resold
pursuant to Rule 144 under the Securities Act.
O 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 "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.
72
<PAGE>
INTERESTS OF NAMED EXPERTS AND COUNSEL
Certain legal matters in connection with the securities being offered
hereby will be passed upon for Quest by Rebecca J. Del Medico, Esq., President
and General Counsel for Quest. Ms. Del Medico currently owns approximately
96,000 shares of common stock of Quest.
In connection with Ms. Del Medico's employment agreement, she is
entitled to receive 150,000 shares of the Company's common stock in equal
installments of 50,000 shares the first year of employment and options to
purchase up to 600,000 shares of the Company's common stock, at $3.09 per share
(110% of fair market value on date of grant). The options vest in equal
installments over a four-year period beginning the second year of her
employment.
EXPERTS
The consolidated audited Financial Statements of Quest Net Corp.
appearing in this Prospectus and Registration Statement have been audited by
Cordovano and Harvey, P.C., independent certified public accountants, for the
periods and to the extent set forth in their report thereon appearing elsewhere
herein and in the Registration Statement and are included in reliance upon such
report given under the authority of such firm 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. President and General Counsel for Quest,
will pass upon the validity of the issuance of the Shares for Quest.
73
<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 $8,932,794
for the year ended 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.
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
ASSETS
<S> <C>
CURRENT ASSETS
Cash....................................................................... $ 4,298,289
Accounts receivable, net of $867,842 allowance ............................ 11,084
Accounts receivable, other................................................. 2,276
Prepaid expenses........................................................... 29,155
-----------------
TOTAL CURRENT ASSETS 4,340,804
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
-----------------
$ 6,675,143
=================
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;
100,000 shares issued and outstanding, respectively..................... 1,000,000
Common stock, no par value; 50,000,000 shares authorized;
22,045,500 shares issued and outstanding ................................ 12,988,011
47,000 outstanding common stock warrants................................. 7,191
10,000 outstanding common stock options.................................. 25,800
Deficit accumulated during development stage............................... (8,598,558)
-----------------
TOTAL SHAREHOLDERS' EQUITY 5,422,444
-----------------
$ 6,675,143
=================
</TABLE>
See accompanying notes to the consolidated financial statements.
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........................................ 7,029,485 - 7,029,485
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 10,005,615 4,761 10,013,079
--------------- --------------- --------------
OPERATING LOSS (8,935,417) (4,761) (8,942,881)
NON-OPERATING INCOME (EXPENSE)
Interest expense................................................ (5,943) - (5,943)
Interest income................................................. 8,566 - 8,566
--------------- --------------- --------------
NET LOSS BEFORE INCOME TAXES $ (8,932,794) $ (4,761) $ (8,940,258)
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 $ (8,932,794) $ (4,761) $ (8,940,258)
=============== =============== ==============
NET LOSS PER SHARE:
Basic........................................................... $ (0.67) *
=============== ===============
Diluted......................................................... $ (0.67) *
=============== ===============
SHARES USED FOR COMPUTING NET LOSS PER SHARE:
Basic........................................................... 13,322,111 960,028
=============== ===============
Diluted......................................................... 13,322,111 960,028
=============== ===============
* Less than $.01 per share
</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>
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 - - -
September 21, 1998, conversion of preferred shares............. (60,000) (600,000) 300,000 258,300 -
November 2, 1998, shares issued for services, valued at market
value of stock............................................... - - 200,000 600,000 -
November 2, 1998, shares issued for services at market value
of stock (Note B)............................................ - - 101,333 303,999 -
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
September 21, 1998, conversion of preferred shares............. 341,700 -
November 2, 1998, shares issued for services, valued at market
value of stock............................................... - 600,000
November 2, 1998, shares issued for services at market value
of stock (Note B)............................................ - 303,999
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).................................................... - 1,724,520
December, 1998, shares issued for cash......................... - 50,000
* Restated (See Note D)
</TABLE>
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 Warrants
---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <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 8, 1999, shares issued for services at market value of
stock........................................................ - - 677 8,801 -
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............... - - - - 7,191
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 market
value of stock................................................ - - 4,000 29,375 -
May 3, 1999, shares issued in exchange for property............. - - 39,894 300,000 -
May 17, 1999, 10,000 options granted at fair value (Note E)..... - - - - 25,800
May 27, 1999, shares issued for cash, net of $350,000 offering
costs......................................................... - - 910,747 4,650,000 -
Net loss for the year ended June 30, 1999....................... - - - - -
---------- ----------- ----------- ------------ ----------
BALANCE, JUNE 30, 1999 100,000 $1,000,000 22,045,500 $12,988,011 $ 32,991
========== =========== =========== ============ ==========
(restubbed table)
Deficit
Accumulated
During Total
Development Shareholders'
Stage Equity
------------ ------------
January 5, 1999, shares issued for compensation at market value
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 8, 1999, shares issued for services at market value of
stock........................................................ - 8,801
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
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 market
value of stock................................................ - 29,375
May 3, 1999, shares issued in exchange for property............. - 300,000
May 17, 1999, 10,000 options granted at fair value (Note E)..... - 25,800
May 27, 1999, shares issued for cash, net of $350,000 offering
costs......................................................... - 4,650,000
Net loss for the year ended June 30, 1999....................... (8,932,794) (8,932,794)
------------ ------------
BALANCE, JUNE 30, 1999 $(8,598,558) $ 5,422,444
============ ============
</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................................................. $(8,932,794) $ (4,761) $(8,940,258)
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...................... 7,029,485 - 7,029,485
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)
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 5,572,050 70 5,576,320
------------- --------------- ---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 4,298,246 (1,454) 4,298,289
Cash and cash equivalents, beginning......................... 43 1,497 -
------------- --------------- ---------------
Cash and cash equivalents, ending............................ $ 4,298,289 $ 43 $ 4,298,289
============= =============== ===============
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 $8,932,794 for the year ended 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 subsidiary Wings Online, Inc. The Company formed
five other wholly-owned subsidiaries, IPQuest Corp., Quest Wireless Corp.,
Globalbot Corp., QuesTel Corp. and Quest Fiber Corp, which had no revenues and
insignificant accounting transactions during the periods presented. The
accounting transactions of those five subsidiaries consisted primarily of costs
to form the corporations and cash transferred from the parent company to open
bank accounts. 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 $4,246,891 of its
$4,298,289 cash in one money market account. The maximum loss that would have
resulted from that risk totaled $4,246,891 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 internet-related services are provided.
Revenue from the sale of software is recognized when the software is delivered
to the customer. Revenue related to the maintenance and further modification of
software previously sold is recognized as the work is performed.
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. The affiliate also
performed consulting services for the Company valued at $7,600. For payment of
those services the Company issued 101,333 shares of the Company's common stock
to the affiliate and recorded the charge for the services at the market value of
the stock issued, $303,999.
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
redeemable 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 the average five day bid price for the Company's common stock as of the
date of conversion. Notice of conversion was received by the Company on
September 21, 1998. The five day average bid price prior to conversion was
$.8610 per share. The preferred stock was converted into 300,000 common shares.
The conversion rate in accordance with the preferred stock agreement was 696,864
common shares. The Company has recorded a credit to retained earnings to reflect
the gain of $341,700 on conversion of its preferred stock.
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 $1,724,520. The preferred stock was redeemable six months
from date of issuance. In the event of non-redemption, the holder had the right
to convert the preferred shares in the common stock of the Company at a
conversion price equal to the average bid and asked price of the common stock
for the three trading days prior to conversion. The preferred stock was valued
at $1,000,000 based on the stated and redemption value of the preferred stock of
$10.00 per share. The remaining purchase price of $724,520 was allocated to the
common stock. 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. The preferred stock was redeemed for $1,000,000 subsequent to June
30, 1999.
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.
F-14
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note D: Shareholders' equity continued
- ---------------------------------------
Common stock continued
- ----------------------
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.
Earnings per share calculations have been retroactively restated for all periods
presented to give effect to the dividend.
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 $1,724,520 above) and $32,600 in services
valued at the market value of the stock issued, $903,999. 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.
F-15
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note D: Shareholders' equity continued
- ---------------------------------------
Common stock continued
- ----------------------
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.
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 market value
of the stock issued, $29,375.
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 market value of
the stock issued, $8,801.
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, to an employee, 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 an officer, who resigned subsequent to
the granting of the options. 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. The fair value of the options
as determined in accordance with SFAS No. 123 is $25,800 and has been charged to
operations.
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.
F-18
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note E: Stock based compensation continued
- -------------------------------------------
SFAS 123 continued
- ------------------
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 to five years, and no expected dividends. During
the year ended June 30, 1999, the weighted-average exercise price and fair
values of options granted were $5.97 and $2.03, respectively on the date of
grant for options granted with an exercise price equal to the market price of
the stock. The weighted-average exercise price and fair values of options on the
date of grant for options granted with an exercise price less than the market
price of the stock on the grant date was $.012 and $3.04, respectively. There
were no options granted that exceeded the market price of the underlying stock
on date of grant.
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
decreased to the pro forma amounts indicated below:
Amount
------------------
As reported:
Net loss...................................... $(8,932,794)
Net loss per share - basic and diluted........ $ (0.67)
Pro Forma:
Net loss...................................... $(9,021,219)
Net loss per share - basic and diluted........ $ (0.68)
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)
Through
June 30, 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............. (15.20%) (15.20%)
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......... (17.05) (19.25%) (17.05)
-------------- -------------- -------------------
- % -% - %
============== ============== ===================
</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................................... $ 1,523,658 $ 1,064
Valuation allowance..................................... (1,523,658) (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 $1,522,594 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. The common stock was valued at the
average bid and asked price for the three trading days prior to closing which
was $6.82. Wings was acquired from an independent and unaffiliated third party.
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 $41,453 has been recorded in the accompanying consolidated financial
statements for the year ended June 30, 1999.
The Company has recorded the transaction as a purchase in accordance with
Accounting Principles Board Opinion No. 16. The accompanying consolidated
financial statements include the results of operations of Wings from the date of
the acquisition, February 15, 1999 through June 30, 1999.
The following pro forma condensed consolidated statement of operations gives
effect to the acquisition of Wings as if it had occurred at the beginning of the
period presented. The pro forma financial information should be read in
conjunction with the separate audited financial statements and notes thereto of
each of the companies included in the pro forma.
The pro forma condensed consolidated statement of operations are not necessarily
indicative of results of operations had the acquisition occurred at the
beginning of the periods presented nor of results to be expected in the future.
F-21
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note G: Acquisitions continued
- -------------------------------
Wings Online, Inc. continued
- ----------------------------
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended June 30, 1999
<TABLE>
<CAPTION>
Pro forma
Quest Net Wings Adjustments Consolidated
--------- ----- ----------- ------------
<S> <C> <C> <C> <C>
Revenues............................................$ 1,070,198 $ 105,169 (58,705) $ 1,116,662
Operating expenses..................................(10,005,615) (97,668) (7,798) (10,111,081)
(Loss) income from operations....................... (8,935,417) 7,501 (66,503) (8,994,419)
Interest expense.................................... (5,943) - - (5,943)
Interest income..................................... 8,566 - - 8,566
Net (loss) income................................... (8,932,794) 7,501 (66,503) (8,991,796)
Net (loss) income per share - basic and diluted.....$ (0.67) $ 37.50 $ (0.67)
Basic and diluted shares outstanding................ 13,322,111 200 13,322,111
</TABLE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended June 30, 1998
<TABLE>
<CAPTION>
Pro forma
Quest Net Wings Adjustments Consolidated
--------- ----- ----------- ------------
<S> <C> <C> <C> <C>
Revenues............................................$ - $ 46,161 - $ 46,161
Operating expenses.................................. (4,761) (25,456) (110,542) (140,759)
(Loss) income from operations....................... (4,761) 20,705 (110,542) (94,598)
Net (loss) income................................... (4,761) 20,705 (110,542) (94,598)
Net (loss) income per share - basic and diluted..... * $ 103.52 $ (0.10)
Basic and diluted shares outstanding................ 960,028 200 29,126 989,354
* Less than $.01 per share
</TABLE>
Pro forma adjustments
- ---------------------
The year ended June 30, 1999:
- -----------------------------
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.
F-22
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note G: Acquisitions continued
- -------------------------------
Wings Online, Inc., pro forma adjustments continued
- ---------------------------------------------------
The year ended June 30, 1998:
- -----------------------------
The adjustments include the amortization expense resulting from the non-compete
agreement as if the agreement was amortized for the full year of $110,542 and
the 29,326 share increase to weighted shares outstanding to give effect of the
shares issued in the acquisition.
The 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.
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. Subsequent to the
transaction with Pactcom, a former shareholder and officer of Pactcom became and
officer and director of the Company, 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.
F-23
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note G: Acquisitions continued
- -------------------------------
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.
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 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.
F-24
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note H: Commitments and contingencies continued
- ------------------------------------------------
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.
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
F-25
<PAGE>
QUEST NET CORP.
---------------
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
F-26
<PAGE>
<TABLE>
<CAPTION>
WINGS ONLINE, INC.
------------------
Index to Financial Statements
Page
----
<S> <C>
Independent auditors' report.................................................... F-28
Statements of operations, from July 1, 1998 through February 14, 1999
and for the year ended June 30, 1998....................................... F-29
Statement of shareholder's equity, July 1, 1997 through
February 14, 1999.......................................................... F-30
Statements of cash flows, from July 1, 1998 through February 14, 1999
and for the year ended June 30, 1998....................................... F-31
Summary of significant accounting policies...................................... F-32
Notes to financial statements................................................... F-34
</TABLE>
F-27
<PAGE>
To the Board of Directors and Shareholders
Wings Online, Inc.
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying statements of operations, shareholders' equity
and cash flows of Wings Online, Inc. (an "S" Corporation) from July 1, 1998
through February 14, 1999 and for the year ended June 30, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Wings Online,
Inc. for the period from July 1, 1998 through February 14, 1999 and for the year
ended June 30, 1998 in conformity with generally accepted accounting principles.
Cordovano and Harvey, P.C.
Denver, Colorado
July 10, 1999
F-28
<PAGE>
<TABLE>
<CAPTION>
WINGS ONLINE, INC.
------------------
Statements of Operations
July 1, 1998 For The
Through Year Ended
February 14, June 30,
1999 1998
----------------- -----------------
<S> <C> <C>
SALES............................................................................ $ 46,463 $ 46,161
COST OF SALES.................................................................... 9,082 7,458
----------------- -----------------
GROSS PROFIT 37,381 38,703
EXPENSES
Selling, general and administrative......................................... 27,293 17,998
----------------- -----------------
NET INCOME $ 10,088 $ 20,705
================= =================
Basic earnings per common share.................................................. $ 50.44 $ 103.53
================= =================
Basic weighted average common shares outstanding................................. 200 200
================= =================
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Pro Forma Statements of Operations
- ----------------------------------------------------------------------------------------------------------------------
July 1, 1998 For The
Through Year Ended
February 14, June 30,
1999 1998
----------------- -----------------
<S> <C> <C>
NET INCOME BEFORE INCOME TAXES $ 10,088 $ 20,705
INCOME TAX EXPENSE............................................................... (1,985) (4,074)
----------------- -----------------
PRO FORMA NET INCOME $ 8,103 $ 16,631
================= =================
Pro forma basic earnings per common share........................................ $ 40.52 $ 83.16
================= =================
Pro forma 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 February 14, 1999
Additional
Preferred Stock Common Stock Paid-In
Shares Par Value Shares Par Value Capital
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1997..................... - $ - 200 $ - $ 200
Net income for the year ended
June 30, 1998.......................... - - - - -
--------------- --------------- --------------- --------------- ---------------
BALANCE, JUNE 30, 1998 - - 200 - 200
Distributions paid to shareholders........ - - - - -
Net income for the period ended
February 14, 1999...................... - - - - -
--------------- --------------- --------------- --------------- ---------------
BALANCE, FEBRUARY 14, 1999 - $ - 200 $ - $ 200
=============== =============== =============== =============== ===============
(restubbed table)
Total
Retained Shareholders'
Earnings Equity
--------------- ---------------
Balance, July 1, 1997..................... $ (935) $ (735)
Net income for the year ended
June 30, 1998.......................... 20,705 20,705
--------------- ---------------
BALANCE, JUNE 30, 1998 19,770 19,970
Distributions paid to shareholders........ (26,686) (26,686)
Net income for the period ended
February 14, 1999...................... 10,088 10,088
--------------- ---------------
BALANCE, FEBRUARY 14, 1999 $ 3,172 $ 3,372
=============== ===============
</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
July 1, 1998 For The
Through Year Ended
February 14, June 30,
1999 1998
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................................... $ 10,088 $ 20,705
Transactions not requiring cash:
Depreciation and amortization.............................................. 3,383 3,528
Loss on write-off of organization costs.................................... 125 -
Changes in current assets and current liabilities:
Decrease in receivables and other current assets........................... 13,911 -
Increase in accounts payable and other
current liabilities..................................................... 9,136 377
--------------- ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 36,643 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
--------------- ---------------
NET CASH (USED IN) FINANCING ACTIVITIES (26,686) (22,123)
--------------- ---------------
NET CHANGE IN CASH (1,535) (20)
Cash, beginning of period.......................................................... 1,535 1,555
--------------- ---------------
CASH, END OF PERIOD $ - $ 1,535
=============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- -------------------------------------------------
Cash paid during the period for:
Interest...................................................................... $ 830 $ 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
February 14, 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
February 14, 1999
Recently issued accounting pronouncements
- -----------------------------------------
The Company has adopted the following new accounting pronouncements for the year
ended June 30, 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
February 14, 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 period ended February 14, 1999,
the Company advanced the officers, who were the only shareholders,
an additional $13,350 of which the officers repaid $1,292. As a
result, the officers owed the Company $26,686 at February 14, 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.
On June 3, 1999 and February 14, 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.
Note C: Property and equipment
- --------------------------------
Property and equipment consisted of the following at February 14,
1999:
Furniture and fixtures........................ $ 4,868
Equipment..................................... 13,209
-------------------
18,077
Less: accumulated depreciation................ (5,907)
-------------------
$ 12,170
===================
Depreciation expense totaled $3,308 and $3,459 for the period from
July 1, 1998 through February 14, 1999 and for the year ended June
30, 1998, respectively.
F-34
<PAGE>
WINGS ONLINE, INC.
------------------
Notes to Financial Statements
February 14, 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>
<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 1,700,000 SHARES
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY QUEST. THIS PROSPECTUS QUEST NET CORP.
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED COMMON STOCK
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. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY PROSPECTUS
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..............................14
Selected Financial Information..............14 QUEST NET CORP.
Management Discussion and 2999 NE 191ST STREET, PH-8
Analysis of Financial Condition AVENTURA, FLORIDA 33180
and Results of Operation....................15 (305) 935-1080
Business....................................19
Legal Proceedings...........................44
Management..................................45
Certain Transactions........................53
Principal Stockholders......................55
Market Price of Securities..................56
Description of Securities...................57
Dividend Policy.............................58
Selling Security Holders....................58 ___, 1999
Plan of Distribution........................60
Interests Of Named Experts .................61
Experts.....................................61
Legal Matters...............................62
Financial Information.......................F-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 Quest 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.
II-1
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES
ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING QUEST
PURSUANT TO THE PROVISIONS SET FORTH ABOVE, QUEST 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 ......................... $ 1,803.03
Legal Fees ............................... $ 50,000
Accounting Fees........................... $ 31,002.57
Edgar Formatting Fees $
Miscellaneous ............................ $ 2,000
Total .............................$ 84,805.60
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following information 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 10-to-1 stock split on October 16, 1998.
Each of the investors, employees, consultants, and others who received
securities were:
o Provided with and had access to financial and other information
concerning Quest and its operations.
o Had the opportunity to ask questions concerning Quest and its
operations.
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. 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. 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
II-2
<PAGE>
our common stock. 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. The issuance of these securities was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act. In September we
received a notice of conversion and in November 1999, we issued 300,000 shares
of our common stock to complete the conversion.
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 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
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 Quest, including officers,
an aggregate of 1,485,693 shares of our common stock pursuant to the terms of
their employment agreements. 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 $1,724,520 in exchange for an aggregate of 100,000
shares of our redeemable preferred stock and 2,607,660 shares of our common
stock. The issuance of these securities was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act. Quest 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
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 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 issuance of these securities was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act.
II-3
In January 1999, we issued 10,000 shares of common stock pursuant to an
employment agreement. 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 Quest. 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 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 to a consultant for services rendered, valued at $7,600. The shares were
issued pursuant to Regulation D Rule 504. 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 issuance of
these securities was exempt from the registration requirements of the Act
pursuant to Section 3(b) of the Act.
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 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 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 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 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 Quest, pursuant to her employment agreement. The agreement called for the
issuance of 25,000 shares on January 1, 1999. Quest 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
II-4
<PAGE>
additional 75,000 shares that would have been issued to Ms. Pereira pursuant to
the dividend, if Quest had performed its obligations under the employment
agreement.
In March 1999, Quest issued 4,000 shares of its common stock for
consulting services valued at $5,000. 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 issuance
of these securities was exempt from the registration requirements of the Act
pursuant to Section 4(2) of the Act.
In June 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 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 Quest paid consulting fees of $350,000.
From March 1999 to date, we have issued options to purchase an
aggregate of 1,998,692 shares of common stock to Mr. Pereira, an officer of
Quest, employees, and consultants. The exercise price of the options ranged from
$.012 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 Quest.
In September 1999, we issued approximately 540 shares of common stock
to a non-affiliated third party consultant for public relations services
performed
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)****
4.4 Warrant (Jeffery Stein)****
II-5
<PAGE>
4.5 Equity Incentive Plan
4.6 Equity Incentive Agreement (Rebecca J. Del Medico)
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.)****
10.22 Employment Agreement (Rebecca J. Del Medico)
20 Long Distance Public Notice****
20.1 License (Cuba Travel)****
21 Subsidiaries of Quest***
24. Consent of Cordovano and Harvey, P.C.
24.2 Consent of Rebecca J. Del Medico, P.A.**
- ----------------------
* Pricing Information Omitted pursuant to a Request for Confidentiality
** 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.
**** Filed on August 11, 1999, as an Exhibit to Amendment No.1 to the
Registration Statement on Form SB-2.
ITEM 28. UNDERTAKINGS
(a) Quest 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
II-6
<PAGE>
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) Quest 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) Quest 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 Quest, Quest has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Quest of expenses incurred
or paid by a director, officer or controlling person of Quest 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, Quest 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.
II-7
<PAGE>
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. 2
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 9th
day of November 1999.
<TABLE>
<CAPTION>
QUEST NET CORP.
<S> <C>
By: /S/ CAMILO PEREIRA____________
Camilo Pereira, Chairman/Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment No. 2 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
Dated: November 9, 1999 By: /S/ CAMILO PEREIRA_____________
-------------------------------
Camilo Pereira, Chairman of the
Board and Director,
Dated: November 9, 1999 By: /S/PAUL K. ZELLER______________
-------------------------------
Executive Vice President-Finance (PRINCIPAL FINANCIAL
OFFICER)
Dated: November 9, 1999 By: /S/ MAXINE PEREIRA_____________
-------------------------------
Maxine Pereira, Executive Vice-President and Director
Dated: November 9, 1999 By: /S/ DAVID BLOCK_______________
------------------------------
David Block, Director
By: _______________________________
Victor V. Coppola, Director
</TABLE>
II-8
<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)****
4.4 Warrant (Scott Goldstein)****
4.5 Warrant (Sheldon Goldstein)****
4.6 Warrant (DSF Capital)****
4.4 Warrant (Jeffery Stein)****
4.5 Incentive Equity Plan
4.6 Equity Incentive Agreement (Rebecca J. Del Medico)
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)****
10.22 Asset Purchase Agreement (AVX, Inc.)****
10.23 Stock Purchase Agreement (Wings Online)****
10.24 Network Sales and Service Agreement (Real Time Cash, Inc.)****
10.25 Network Sales and Service Agreement (Real Time Encryption, Inc.)****
10.26 Network Sales and Service Agreement (Real Time Wireless, Inc.)****
10.27 Professional Consulting Agreement (Real Time Wireless, Inc.)****
10.28 Professional Consulting Agreement (Real Time Encryption, Inc.)****
10.29 Professional Consulting Agreement (Real Time Phone Services, Inc.)****
10.22 Employment Agreement (Rebecca J. Del Medico)
20 Long Distance Public Notice****
20.1 License (Cuba Travel)****
21 Subsidiaries of Quest***
24. Consent of Cordovano and Harvey, P.C.
24.2 Consent of Rebecca J. Del Medico, P.A.**
</TABLE>
- ----------------------
* Pricing Information Omitted pursuant to a Request for Confidentiality
** 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.
**** Filed on August 11, 1999, as an Exhibit to Amendment No.1 to the
Registration Statement on Form SB-2.
ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (hereinafter referred to as the
"Agreement") is made and entered into this 24th day of June, 1998, by and
between AP Sales, Inc., a/k/a Quest Corp., a Colorado corporation (hereinafter
referred to as the "Buyer"), 4096 West Union Avenue, Denver, Colorado 80236, and
PACT Communication Group, Inc., a Florida corporation (hereinafter referred to
as the "Seller"), 2740 East Oakland Park Boulevard, Suites #206/208, Fort
Lauderdale, Florida 33306.
RECITALS:
A. WHEREAS, the Seller, a privately-held Florida corporation, conducts
business, primarily, as a provider of Internet system and network management
solutions for enterprises with mission-critical Internet operations, including
server hosting, Internet connectivity, collaborative management and Internet
technology services.
B. WHEREAS, the Seller desires to sell, assign, transfer, convey and
deliver to the Buyer, and the Buyer desires to purchase, acquire and receive
from the Seller, certain assets of the Seller in exchange therefor of the
consideration described in Article IV below, on the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
promises, covenants, agreements, representations and warranties set forth
hereinafter, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE
Subject to the terms and conditions set forth in the Agreement, the
Seller hereby agrees to sell, assign, transfer, convey and deliver to the Buyer,
and the Buyer hereby agrees to purchase, acquire and receive from the Seller, on
the Closing Date, as defined in Article XII hereof, good, marketable and
indefeasible title to certain of the Seller's assets, as defined in Article II
hereof, free and clear of all security interests, liens, pledges, restrictions,
charges and encumbrances whatsoever.
ARTICLE II
ASSETS
A. The assets to be sold, assigned, transferred, conveyed and delivered
to the Buyer shall include the following:
<PAGE>
1. All items of inventory, equipment and furniture listed in that
certain document comprised of six pages (including the cover page) titled
"Inventory of Assets" which is attached hereto as Exhibit A and incorporated
herein by this reference, including the following:
a. "Office Internal Network PC's" (items 1 through 7)
b. "Pact Communication Group Hosting Servers" (items 1
through 12).
c. "Misc. Items Shared With Or Used By Above Computers"
(32 items).
d. "Pact Communication Group Licensed (sic) Software"
(19 items).
2. That certain Contract Service Arrangement Agreement, Case Number
SE98-0365-01, dated February 26, 1998, between BellSouth Telecommunications,
Inc. ("BellSouth"), a Georgia corporation, and Pact and Associates, Inc. (now
the Company); that certain Agreement between BellSouth and the Company dated
February 26, 1998, providing that BellSouth will provide BellSouth Primary Rate
ISDN "PRI" to the Company for variable rate periods of 24 to 72 months; that
certain Agreement For Alternative Network Service Arrangement (ANSA) for ISDN
Individual Line Service or Primary Rate ISDN Service; that certain Channel
Services Payment Plan Agreement between BellSouth and the Company providing for
BellSouth to provide T1--hicap service during the period of 36 months commencing
April 16, 1998; and an OC-3+ SMARTRing with the capability of up to 622 Mbps and
a 45 mb access to the Internet cloud.
3. That certain Internet Administration (sic) Agreement dated March 17,
1998, between WorldPass Communications Corporation ("WPPC") and the Company
granting to the Company the exclusive right to provide Internet services to
WPCC's present and future Internet customers in Monroe, Miami-Dade, Broward and
Palm Beach County, Florida, and the right of first refusal to provide Internet
services to customers of WPCC in other areas upon the terms and conditions set
forth therein.
4. Employment Agreements as follows:
a. Employment Agreement dated March 20, 1998, between Mr. Camilo
Pereira and the Company providing for the employment of Mr. Pereira as Chief
Executive Officer for a period of five (5) years from March 20, 1998, through
March 19, 2003, at a base salary of $125,000 per annum.
2
<PAGE>
b. Employment Agreement dated June 1, 1998, between Mr. George
Elia and the Company providing for the employment of Mr. Elia as Vice President
of Business Development and Investor Relation (sic) for a period of five (5)
years from June 1, 1998, through May 31, 2003, at a base salary of $48,000 per
annum.
c. Employment Agreement dated June 1, 1998, between Mr. Anthony N. Dean
and the Company providing for the employment of Mr. Dean as Vice President of
Network Administration for a period of five (5) years from June 1, 1998, through
May 31, 2003, at a base salary of $30,000 per annum.
5. Lease Agreements, as follows:
a. Business Lease Agreement dated September 2, 1997, (the "Lease"),
between E. Square Partners and P.A.C.T. and Associates, Inc. (now the Company),
providing for the rental of Space 208, 2740 East Oakland Park Boulevard, Ft.
Lauderdale, Florida 33306, for a term of five (5) years from September 15, 1997,
through September 14, 2002, for total rental $98,849.76 during each of the five
years during the term of the Lease at a rate of $583, $612.15, $642.77, $674.91
and $708.66 per month, respectively.
b. Business Lease Agreement dated December 23, 1997, between E. Square
Partners and P.A.C.T. and Associates, Inc. (now the Company), providing for the
rental of Space 206, 2740 East Oakland Park Boulevard, Ft. Lauderdale, Florida
33306, on a month-to-month basis commencing December 1, 1997, at a rate of $600
per month.
6. Company Owned Residential Installation and Monitoring Agreement
dated May 15, 1998, between Security Link from Ameritech and the Company
providing for security system installation and monitoring services at 2740 East
Oakland Park Boulevard, Suites 206 and 208.
7. Such other tangible assets of Seller as are mutually agreeable to
the parties.
These assets (hereinafter, collectively, referred to as the "Assets") shall be
delivered to the Buyer on the Closing Date.
B. Other than as stated herein, all other properties and assets of the
Seller shall be retained by the Seller and shall not be sold, assigned or
transferred to the Buyer. Such properties and assets shall be held by the Seller
and be available for distribution to the Seller's shareholders, and may be used
by the Seller to satisfy its obligations and liabilities to the extent thereof.
3
<PAGE>
ARTICLE III
RELATIONSHIP OF THE PARTIES
---------------------------
Notwithstanding anything to the contrary contained in this Agreement,
it is understood and agreed that the Buyer is only purchasing the Assets for
purposes of conducting the Buyer's business activities and is not continuing or
assuming the Internet system and network management services business of the
Seller or assuming any liability or liabilities of the Seller arising from or in
connection with the Seller's business, nor commencing a merger or other
consolidation with the Seller. This Agreement is one of purchase and sale of
the Assets only, and does not and shall not be deemed to create a partnership,
joint venture or other agency relationship between the parties, or result in a
merger, de facto merger or any other type of combination of the Seller with or
into the Buyer.
ARTICLE IV
PURCHASE PRICE
--------------
The total purchase price for the Assets shall be 2,000,000
newly-issued, restricted shares of common stock, no par value per share
(hereinafter referred to as the "Common Stock"), of the Buyer deliverable by the
Buyer to the Seller on the Closing Date. The Seller and the Buyer agree that
this Agreement is indivisible and may not be fractionalized even though separate
considerations may be stated for the Assets. The Seller and the Buyer agree that
they will prepare a schedule allocating the purchase price among the Assets
transferred; which schedule shall become Exhibit B attached to and incorporated
in this Agreement by this reference.
ARTICLE V
TAXES AND ASSESSMENTS
---------------------
The Seller shall be responsible for and pay real and personal property
taxes and assessments in connection with the Assets for the period prior to the
Closing Date. The Buyer shall be responsible for and pay all real and personal
property taxes and assessments in connection with the Assets for the period on
and after the Closing Date.
ARTICLE VI
NO ASSUMPTION OF LIABILITIES
----------------------------
The Buyer shall assume no debts, liabilities or obligations of the
Seller arising with respect to periods prior to or subsequent to the Closing
Date. Anything herein to the contrary notwithstanding, the Seller hereby agrees
to retain and discharge, and to indemnify and hold the Buyer harmless from and
against, any and all debts, liabilities and obligations of the Seller, whenever
arising.
4
<PAGE>
ARTICLE VII
THE SELLER'S REPRESENTATIONS
----------------------------
The Seller represents, warrants, covenants and agrees that:
A. The Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida and is duly qualified to
transact business as a corporation in the State of Florida. The Seller has all
requisite corporate power and authority to own and operate its properties and to
carry on its business as now and where being conducted.
B. The execution and delivery of this Agreement by the Seller has been
duly and validly authorized and approved by all necessary action of the Seller.
The Seller has full corporate power and authority and the legal right to enter
into this Agreement and to consummate the transactions contemplated herein.
This Agreement is a valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms.
C. On the Closing Date, the Seller shall have full legal power, right
and authority to sell and convey to the Buyer legal and beneficial title to the
Assets and the Seller's sale to the Buyer shall transfer good, marketable and
indefeasible title thereto, free and clear of all security interests, liens,
pledges, charges and encumbrances except for liens for taxes and other
governmental charges not yet due and payable. At the Closing Date, the Assets,
as applicable, shall be in good working order and repair in all material
respects.
D. The Seller has all licenses, permits, operating authorizations and
other agreements and approvals from governmental authorities necessary to own
and operate the Seller's business lawfully and in the manner in which it is now
operated by the Seller. The Seller has not received notice of any violation of
or default under, and is in substantial compliance in all material respects
with, each such license, permit, operating authorization or approval from
governmental authorities.
E. The Seller's business has been operated in substantial compliance
with all applicable local, state and Federal laws.
F. The execution, delivery and performance of this Agreement by the
Seller will not violate any provisions of law and will not, with or without the
giving of notice or the passage of time, conflict with or result in any breach
of any of the terms or conditions of, or constitute a default under, any
mortgage, agreement or other instrument to which the Seller is a party or by
which the Seller or the Assets are bound. The execution, delivery and
performance of this Agreement will not result in the creation of any security
interest, lien, pledge, charge, or encumbrance upon the Assets or the Seller.
G. There is no outstanding judgment against the Seller and there is no
litigation, arbitration, proceeding or investigation pending, or, to the
Seller's knowledge, threatened against the Seller relating to or affecting the
Assets, the Seller or the transactions contemplated by this Agreement, or which
questions the validity of any action taken or to be taken pursuant to or in
connection with the provisions of this Agreement. The Seller warrants and
represents that there is no litigation matter or arbitration claim or demand for
money damages which exists or may
5
<PAGE>
exist as of the Closing Date. There are no proceedings pending to which the
Seller is a party or, to the Seller's knowledge, are threatened, nor any demands
by any governmental agency or other party, to terminate, modify or materially
and adversely change the terms and conditions of the Seller's rights with
respect to the Assets.
H. The Seller is not a party to any collective bargaining agreement,
pension, profit sharing, retirement, deferred compensation or bonus or stock
purchase plan relating to the Seller's employees for which the Buyer shall have
any obligation or liability. There are no disputes or controversies pending or,
to the Seller's knowledge, threatened with or by any employees of the Seller
which would materially and adversely affect any of the Assets. The Seller does
not have in effect or have any obligation to establish or contribute to, any
plan, fund or program covered by the Employee Retirement Income Security Act of
1974, as amended (hereinafter referred to as "ERISA"), for which the Buyer shall
have any obligation or liability.
I. The Seller has paid all taxes, assessments, governmental charges and
penalties due and payable by it, and there are no suits, actions, claims,
investigations, inquiries or proceedings pending or, to the Seller's knowledge,
threatened against the Seller in respect of any taxes, assessments, governmental
charges or penalties.
J. The Buyer has good and marketable title to all of its properties and
assets, real and personal, except as since sold or otherwise disposed of in the
ordinary course of business, and the Buyer's properties and assets are subject
to no mortgage, pledge, lien or encumbrance with respect to which no default
exists as of the date hereof and as of the Closing. The Seller will have no
continuing business after this transaction, and shall make adequate provision
for payment of any liabilities of the Seller arising prior to or after the
Closing date.
K. No representation or warranty by the Seller, or any statement or
certificate furnished by the Seller to the Buyer pursuant hereto or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained therein not misleading.
The Seller acknowledges that the Buyer is relying upon the above
representations, warranties and agreements in entering into this Agreement and
proceeding to Closing.
Article VIII
THE BUYER'S REPRESENTATIONS
---------------------------
The Buyer hereby represents, warrants, covenants and agrees that:
A. The Buyer is a corporation organized, validly existing and in good
standing under the laws of the State of Colorado and is duly qualified to
transact business as a corporation in the State of Colorado. The Buyer is
qualified to transact business as a foreign entity in all states in which the
nature of its business or the character or ownership of its properties make such
licensing, registration or qualification necessary.
6
<PAGE>
B. The execution and delivery of this Agreement by the Buyer has been
duly and validly authorized and approved by all necessary action of the Buyer.
The Buyer has full corporate power and authority and the legal right to enter
into this Agreement and to consummate the transactions contemplated hereby. This
Agreement is a valid and binding obligation of the Buyer, enforceable against
the Buyer in accordance with its terms.
C. The Buyer has all licenses, permits, operating authorizations and
other agreements and approvals from governmental authorities necessary to own
and operate the Buyer's business lawfully and in the manner in which it is now
operated by the Buyer. The Buyer has not received notice of any violation of or
default under, and is in substantial compliance in all material respects with,
each such license, permit, operating authorization or approval from governmental
authorities.
D. The Buyer's business has been operated in substantial compliance
with all applicable local, state and Federal laws.
E. The execution, delivery and performance of this Agreement by the
Buyer will not violate any provisions of law and will not, with or without the
giving of notice or the passage of time, conflict with or result in any breach
of any of the terms or conditions of, or constitute a default under, any
mortgage, agreement or other instrument to which the Buyer is a party or by
which the Buyer is bound.
F. There is no outstanding judgment against the Buyer and there is no
litigation, arbitration, proceeding or investigation pending, or, to the Buyer's
knowledge, threatened against the Buyer or relating to or affecting the Buyer's
business operations or affairs, the Buyer or the transactions contemplated by
this Agreement, or which questions the validity of any action taken or to be
taken pursuant to or in connection with the provisions of this Agreement. The
Buyer warrants and represents that there is no litigation matter or arbitration
claim or demand for money damages which exists or may exist as of the date of
the Closing.
G. The Buyer is not in default under any employment agreement,
collective bargaining agreement, pension, profit sharing, retirement, deferred
compensation or bonus or stock purchase plan relating to the Buyer's employees.
The Buyer does not have in effect or have any obligation to establish or
contribute to, any plan, fund or program covered by ERISA, for which the Buyer
shall have any obligation or liability. There are no disputes or controversies
pending or, to the Buyer's knowledge, threatened with or by any employees of the
Buyer which would materially and adversely affect the Buyer's business.
H. The Buyer has paid all taxes, assessments, governmental charges and
penalties due and payable by it, and there are no suits, actions, claims,
investigations, inquiries or proceedings pending or, to the Buyer's knowledge,
threatened against the Buyer in respect of any taxes, assessments, governmental
charges or penalties.
I. No representation or warranty of the Buyer, or any statement or
certificate furnished by the Buyer to the Seller hereunder or in connection with
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained therein not misleading.
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ARTICLE IX
THE SELLER'S AND THE BUYER'S AFFIRMATIVE COVENANTS
--------------------------------------------------
A. The Seller covenants and agrees that from and after the execution
and delivery of this Agreement to and including the Closing Date:
1. The Seller shall give the Buyer and its representatives access
during normal business hours to the properties comprising the Assets and to the
relevant books and records of the Seller concerning the Assets, and furnish the
Buyer with such relevant information concerning the Assets as the Buyer may
reasonably request. The Buyer agrees not to disturb the normal operations of the
Seller and further agrees that any and all information received from the Seller
shall be treated as confidential.
2. The Seller shall conduct its business only in the ordinary course
and shall use its reasonable efforts to preserve intact its assets, properties
and business, including, but not limited to, maintaining in effect the casualty
and liability insurance on the Assets heretofore in force, and in complying with
applicable Federal, state and local laws, rules and regulations and pertinent
provisions of all contracts, licenses and other agreements to which it is a
party or is otherwise bound. The Seller shall make adequate provision for
payment of its liabilities arising prior to or after the Closing Date for which
liabilities the Buyer shall have no responsibility or liability.
3. The Assets shall not be sold, transferred, conveyed or otherwise
disposed of without the prior written consent of the Buyer.
B. The Seller shall provide to the Buyer its files of correspondence,
lists, records and reports concerning customers and prospective customers of the
Seller, and all dealings with Federal, state and local regulatory agencies in
connection with the business of the Seller.
C. Each party hereto will keep confidential any financial or other
confidential information obtained from the other party in connection with the
transaction contemplated by this Agreement except for such disclosure as may be
necessary in the consummation hereof, including any necessary disclosure by the
Buyer to its investors or lenders. In the event the Agreement is terminated and
purchase and sale contemplated hereby abandoned, each party will return to the
other party all documents, work papers and other written material obtained by it
in connection with this transaction.
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ARTICLE X
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS TO CLOSE
--------------------------------------------------------
The obligations of the Buyer under this Agreement with respect to the
purchase and sale of the Assets shall be subject to the fulfillment on or prior
to the Closing Date of each of the following conditions:
A. All of the representations and warranties by the Seller contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing Date and shall survive the Closing Date for a period of six (6)
months. The Seller shall have complied with and performed in all material
respects all of the agreements, covenants and conditions required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date. The Buyer shall have been furnished with a certificate of the President or
any Vice President of the Seller, dated the Closing Date, certifying to the
fulfillment of the foregoing conditions.
B. The Seller shall have delivered a copy, certified by the Secretary
of the Seller, of the resolution(s) adopted by the Board of Directors and the
shareholders of the Seller and authorizing the execution, delivery and
performance of this Agreement on behalf of the Seller and the consummation of
the transactions contemplated hereby.
C. There shall not have been instituted by any creditor of the Seller
or other third party any suit or proceedings to restrain or invalidate this
transaction or seeking damages from or to impose obligations upon the Buyer
which, in the Buyer's judgment, reasonably exercised, would involve expense or
lapse of time that would be materially adverse to the Buyer's interest.
D. There shall not have been suffered (after the date hereof) any
casualty or loss, whether or not covered by insurance, which materially and
adversely affects the Assets; provided that if the Buyer elects to waive such
condition to its obligations under this Agreement, the provisions of Article XV
hereof shall be applicable to the insurance proceeds and other rights against
third parties, if any, resulting from such casualty or loss.
ARTICLE XI
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATION TO CLOSE
--------------------------------------------------------
The obligations of the Seller under this Agreement with respect to the
purchase and sale of the Assets shall be subject to the fulfillment on or prior
to the Closing Date of each of the following conditions:
A. All of the representations and warranties by the Buyer contained in
this Agreement shall be true and correct at and as of the Closing Date and shall
survive the Closing Date for a period of six (6) months. The Buyer shall have
complied with and performed all of the agreements, covenants and conditions
required by this Agreement to be performed and complied with by it on or prior
to the Closing Date. The Seller shall have been furnished with a certificate of
the President or any Vice President of the Buyer, dated the Closing Date,
certifying to the fulfillment of the foregoing conditions.
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B. The Buyer shall have delivered a copy, certified by the Secretary of
the Seller, of the resolution adopted by the Board of Directors of the Buyer and
authorizing the execution, delivery and performance of this Agreement on behalf
of the Buyer and the consummation of the transactions contemplated hereby.
C. The Buyer shall have delivered the purchase price in accordance with
Article IV hereof.
D. There shall not have occurred any material adverse change in the
operations, assets, liabilities, business, results of operation, condition
(financial or otherwise) or prospects of the Buyer, or any event or circumstance
which materially and adversely affects or may affect the operation, assets,
liabilities, business, results of operations, condition (financial or otherwise)
or prospects of the Buyer.
ARTICLE XII
CLOSING
-------
The closing hereunder (hereinafter referred to as the "Closing") shall
be held in the offices of the Seller, 2740 East Oakland Park Boulevard, Suites
#206/208, Fort Lauderdale, Florida 33306, on June 26, 1998 (hereinafter referred
to as the "Closing Date"), or on such other date and at such other place as the
parties hereto shall mutually agree. At the Closing, all deeds, bills of sale,
certificates of title, assignments and other instruments and documents referred
to or contemplated by this Agreement shall be exchanged by the parties hereto.
A. At the Closing, the Buyer shall receive from the Seller the
following:
1. A Bill of Sale and assignments or certificates of title for the
Assets as described in Article II, section A;
2. Resolution of the Board of Directors of the Buyer as described in
Article X, section B, hereof;
3. The Certificate of the Seller's President certifying to the matters
set forth in Article X, section A, hereof; and
4. The Subscription Agreement/Investment Letter in the form attached
hereto as Exhibit C and incorporated herein by this reference.
B. At the Closing, the Seller shall receive from the Buyer the
following:
1. Stock certificate of the Buyer in the name of the Seller as provided
in Article IV;
2. Resolution of the Board of Directors and the shareholders of the
Seller as described in Article XI, section B, hereof; and
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3. The Certificate of the Buyer's President certifying to the matters
set forth in Article XI, section A, hereof.
C. The Seller and the Buyer shall provide the other with such other
documents as, in the reasonable judgment of either of them or their respective
counsels, may be material to the Closing of the transactions contemplated by
this Agreement.
ARTICLE XIII
TERMINATION RIGHTS
------------------
This Agreement may be terminated by either the Buyer or the Seller, if
the terminating party is not then in breach of any material provision of this
Agreement, upon written notice to the other party, upon the occurrence of any of
the following:
A. If, on the Closing Date, any of the conditions precedent to the
obligations of the parties set forth in this Agreement have not been materially
satisfied by the responsible party or waived in writing by the other party for
whose benefit the condition is imposed.
B. If the Closing does not occur on or before July 31, 1998.
(i) Upon termination, if neither party hereto is in breach of any material
provision of this Agreement, the parties hereto shall have no further liability
to each other, (ii) if the Seller shall be in breach of any material provision
of this Agreement, the Buyer shall be entitled to such rights and remedies
provided in this Agreement or in any agreement executed in connection with this
Agreement or at law or in equity, or (iii) if the Buyer shall be in breach of
any material provision of this Agreement, the Seller shall be entitled to such
rights and remedies provided in this Agreement or in any agreement executed in
connection with this Agreement or at law or in equity.
ARTICLE XIV
BROKERAGE
---------
Each party hereto represents and warrants to the other party that it has
not incurred any obligations or liabilities, contingent or otherwise, for
brokerage or finder's fees or agent's commissions or other like payment in
connection with this Agreement or the transactions contemplated hereby for
which any party will have any liability. Each party hereto agrees to indemnify
and hold the other party hereto harmless against and in respect of any breach
by it of the provisions of this Article XIV.
ARTICLE XV
CASUALTY LOSSES
---------------
In addition to any other remedy the Buyer may have hereunder, in the event
that there shall have been suffered between the date hereof and the Closing
Date any casualty or loss
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relating to Assets which does not materially and adversely affect the business
of the Seller, then at the Closing all claims to insurance proceeds or other
rights of the Seller against third parties arising from such casualty or loss
shall (to the extent assignable) be separately assigned by the Seller to the
Buyer, for its own account and benefit, in the name of the Seller.
ARTICLE XVI
INDEMNITY
---------
A. Notwithstanding the Closing, the Seller agrees to indemnify and to
hold the Buyer harmless from and against and in respect of any losses incurred
by the Buyer and from:
1. All actual or purported liabilities and obligations of the Seller,
and all claims and demands made in respect thereof whether or not known or
asserted at or prior to the Closing Date relating to, or arising from,
ownership, operation or control of the Assets at or prior to Closing, the
conduct of the business of the Seller or any other state of facts which existed
at or prior to the Closing Date;
2. Any damage or deficiency resulting from any misrepresentations,
breach of warranty or non-fulfillment of any agreement or covenant on the part
of the Seller under this Agreement, or from any misrepresentation in or omission
from any exhibit or other instrument furnished or to be furnished to the Buyer
hereunder; and
3. Any claims made by creditors or customers of the Seller relating to
the ownership or operation of the Seller's business not expressly assumed
hereunder.
B. Notwithstanding the indemnities provided in Article XVI, section A,
the Buyer shall be responsible for and pay all costs and expenses incurred by
the Buyer attendant to efforts to dismiss or remove it from any action,
claim or controversy prior to any trial or hearing on the matter, whether by
motion to dismiss, motion for summary judgment or other similar motion, on the
basis that the Buyer is not a successor in liability to the claims against or
debts of the Seller. The Seller's indemnity as provided in Article XVI, section
A, shall be for any costs or expenses beyond such motion to remove the Buyer
from such action, and for the amount of any judgment or award rendered against
the Buyer. Such indemnity shall be paid directly by the Seller.
C. In the event that the Buyer does not succeed in being dismissed from
an action as provided in Article XVI, section B, the Buyer shall appoint a two
person litigation committee to oversee the conduct of any hearing or trial on
the matter. Such committee shall consist of two members of the Buyer's Board of
Directors. Decisions concerning any such action, including settlement of the
claim or controversy, shall be made by the litigation committee. If no decision
can be reached, the members will agree to designate a third party to make such
decision.
D. Notwithstanding the Closing, the Buyer agrees to indemnify and to
hold the Seller harmless from and against and in respect of any losses incurred
by the Seller from:
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1. Any and all damages, costs, claims and expenses arising by reason of
the Buyer's failure to perform and discharge all of the liabilities and
obligations of the Seller expressly assumed by the Buyer under Article VI of
this Agreement; and
2. Any damage or deficiency resulting from any misrepresentation,
breach of warranty or nonfulfillment of any agreement or covenant on the part of
the Buyer under this Agreement, or from misrepresentaiton in or omission from
any exhibit or other instrument furnished or to be furnished to the Seller
hereunder.
ARTICLE XVII
NON-COMPETITION
---------------
For a period of three (3) years from the Closing Date, the Seller hereby
agrees not to engage in the business of providing Internet system and network
management solutions, including server hosting, Internet connectivity,
collaborative management and Internet technology services, and any other
business in which it is engaged on the date of this Agreement.
ARTICLE XVIII
MISCELLANEOUS
-------------
A. From time to time after the Closing Date, the Seller shall, if
requested by the Buyer, make, execute and deliver to the Buyer such additional
assignments, bills of sale, deeds and other instruments of transfer, as may be
necessary or proper to transfer to the Buyer all of the Seller's right, title
and interest in and to the Assets covered by this Agreement.
B. All notices and other communications required or permitted to be
given hereunder shall be in writing and shall be deemed to have been duly given
if delivered or mailed, registered or certified mail, return receipt requested,
postage prepaid, to the following addresses:
1. If to the Buyer, to:
AP Sales, Inc. a/k/a Quest Corp.
4096 West Union Avenue
Denver, Colorado 80236
Attn: Mr. Andrew N. Peterie, Sr., President
With a copy to:
Cudd & Associates
Attorneys at Law
1120 Lincoln Street, Suite #1310
Denver, Colorado 80203
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2. If to the Seller:
PACT Communications Group, Inc.
2740 East Oakland Park Boulevard, Suites #206/208
Fort Lauderdale, Florida 33306
Notices delivered personally shall be effective upon delivery. Notices
transmitted by facsimile shall be effective when received. Notices delivered
by registered or certified mail shall be effective on the date set forth on
the receipt of registered or certified mail, or 72 hours after mailing,
whichever is earlier.
C. All agreements made and entered into in connection with this
transaction shall be binding upon and inure to the benefit of the parties
hereto, their successors and assigns.
D. The Seller and the Buyer shall each bear its own expenses and
costs, including the fees of any attorney retained by it, incurred in connection
with the preparation of this Agreement and the consummation of the
transactions hereby.
E. Any sales, use, transfer or documentary taxes imposed in connection
with the sale and delivery of the Assets and rights acquired by the Buyer under
this Agreement shall be paid by the Buyer.
F. From and after the Closing, the Buyer shall have the right and
authority, at its expense, to collect for its account all items to which it is
entitled as provided in this Agreement and to endorse with the name of the
Seller any checks or drafts received on account of any such items.
G. This Agreement and the exhibits attached hereto contain the entire
agreement among the parties and supersede all prior agreements, understandings
and writings among the parties with respect to the subject matter hereof and
thereof. Each party hereto acknowledges that no representations, inducements,
promises or agreements, verbal or otherwise, have been made by any party, or
anyone acting with authority on behalf of any party, which are not embodied
herein or in an exhibit hereto, and that no other agreement, statement or
promise may be relied upon or shall be valid or binding. Neither this Agreement
nor any term hereof may be changed, waived, discharged or terminated verbally.
This Agreement may be amended or any term hereof may be changed, waived,
discharged or terminated by an agreement in writing signed by all parties
hereto.
H. This Agreement may be executed in one or more counterparts, each of
which when so executed shall be an original, but all of which together shall
constitute one agreement.
I. If any provision of this Agreement or the application thereof to any
person or circumstance shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such provision to other
persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law.
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<PAGE>
J. This Agreement shall be construed and enforceable in accordance
with, and be governed by, the internal laws of the State of Colorado without
regard to the principles of conflict of law.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
BUYER: SELLER:
AP SALES, INC. PACT COMMUNICATION GROUP, INC.
By:/s/Andrew N. Peterie By:/s/ Camilo Pereira
- ----------------------- ---------------------
Andrew N. Peterie, Sr. President Camilo Pereira, President
15
QUEST NET CORP.
1999 EQUITY INCENTIVE PLAN
ARTICLE 1: PURPOSE
1.1 GENERAL. The purpose of the Quest Net Corp. 1999 Equity Incentive
Plan (the "Plan") is to promote the interests of Quest Net Corp. (the
"Company"), by enabling the Company to motivate, attract, and retain the
services of persons upon whose judgment, efforts, and contributions the success
of the Company's business depends. The plan is further intended to align the
personal interests of such persons with the interests of stockholders of the
Company through equity participation in the Company's growth and success.
Capitalized terms not otherwise defined in the text are defined in Article 14.
ARTICLE 2: EFFECTIVE DATE; TERM.
2.1 EFFECTIVE DATE. The Plan shall become effective at the date and
time of its approval by the stockholders of the Company (the "Effective Date").
The Plan shall be submitted to the stockholders of the Company for their
approval at the 1999 Annual Meeting of the Company.
2.2 TERM. This Plan shall terminate on the tenth (10th) anniversary of
the Effective Date, subject to Article 12.
ARTICLE 3: SHARES SUBJECT TO THE PLAN.
3.1 NUMBER OF SHARES. The maximum number of shares of Stock reserved
and available for delivery pursuant to Stock Rights or which may be used to
provide a basis of measurement or valuation of a Stock Right shall be equal to
the sum of (a) 15,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock, the Series Rights and preferences of which are to be determined
by the Company's Board of Directors, plus (b) any shares of Stock available for
future Stock Rights under the Predecessor Plan as of the Effective Date, plus
(c) the additional shares of Stock described below in this Article 3. No
additional grants shall be made under the Predecessor Plan after the Effective
Date. The limitations of this Article 3 shall be subject to adjustment as
provided in Section 11.1.
3.2 LAPSED STOCK RIGHTS. To the extent that a Stock Right under the
Plan or the Predecessor Plan is forfeited, terminates, expires, or lapses for
any reason, any shares of Stock subject to the Stock Right will again be
available for the grant of a Stock Right under the Plan. To the extent any
shares of Stock covered by an Stock Right are not delivered to a Participant or
beneficiary because the Stock Right is forfeited, terminates, expires or lapses
for any reason, or the shares of Stock are not delivered because the Stock Right
is settled in cash, such shares shall not be deemed to have been delivered for
purposes of determining the maximum number of shares of Stock available for
delivery under the Plan.
3.3 PAYMENTS IN STOCK. Any shares of Stock tendered (by delivery or
attestation) to the Company in connection with payment for Stock purchased
pursuant to the Plan or any Predecessor Plan or payment of withholding taxes
with respect to any Stock Right shall be added back to the aggregate number of
shares reserved and available for Stock Rights under the Plan and only the
number of shares of Stock issued net of the number of shares tendered shall be
deemed delivered for purposes of determining the maximum number of shares of
Stock available for delivery under the Plan.
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3.4 LIMITATIONS. Subject to adjustment as provided in Section 11.1, the
following additional limitations apply under the Plan:
(a) The maximum number of shares of Stock that may be delivered
pursuant to Stock Rights of Incentive Stock Options, Non-Qualified
Stock Options or other Stock Rights shall be 15,000,000 shares.
(b) In no event shall the aggregate fair market value (determined at
the time an Incentive Stock Option is granted) of Common Stock for
which Incentive Stock Option's granted to any employee are exercisable
for the first time by such employee during any calendar year (under all
stock option plans of the Company and any Related Corporation) exceed
$100,000.
(c) The maximum payment that can be made for Stock Rights granted to
any one individual pursuant to Section 8 (Stock-Reference Stock Rights)
shall be $500,000 for any single or combined performance goal
established for any annual performance. If an Stock Right granted under
Section 8 is, at the time of grant, denominated in shares, the value of
the shares of Stock for determining this maximum individual payment
amount will be the Fair Market Value of the shares of Stock on the
first day of the applicable performance period.
3.5 STOCK DISTRIBUTED. Any Stock distributed pursuant to a Stock Right
may consist, in whole or in part, of authorized and unissued Stock, treasury
Stock, or Stock purchased on the open market.
ARTICLE 4: ELIGIBILITY.
4.1 GENERAL. Stock Rights may be granted only to an individual who is
an officer, director or employee (including employees who also are directors or
officers), consultants, independent contractors, or advisers of the Company or a
Subsidiary, and to other individuals the Company or a Subsidiary proposes to
engage in one of the foregoing capacities, as determined by the Committee.
2
<PAGE>
ARTICLE 5: ADMINISTRATION.
5.1 ADMINISTRATORS. The Plan will be administered by the Company's
Board of Directors (the "Committee"). The Board may, in its discretion, delegate
its powers with respect to the Plan to an employee benefit plan committee or any
other committee. A majority of the members of any such Committee shall
constitute a quorum, and all determinations of the Committee shall be made by
the majority of its members present at a meeting. Any determination of the
Committee under the Plan may be made without notice or meeting of the Committee
by a writing signed by all of the Committee members.
5.2 AUTHORITY OF THE COMMITTEE. Subject to ratification of the grant or
authorization of each Stock Right by the Committee (but only if so required by
applicable state law), and subject to the terms of the Plan, the Committee shall
have the exclusive power, authority, and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Stock Rights to be granted to each
Participant;
(c) Determine the number of Stock Rights to be granted and the number
of shares of Stock subject to a Stock Right;
(d) Prescribe the form of each Stock Right Agreement, which need not be
identical for each Participant;
(e) Determine the terms and conditions of any Stock Right granted under
the Plan, including but not limited to, the exercise price, grant
price, or purchase price, any restrictions or limitations on the Stock
Right, any schedule for lapse of forfeiture restrictions or
restrictions on the exercisability of an Stock Right and accelerations
or waivers thereof, any performance criteria, and any modification or
amendment of any Stock Right previously granted, based in each case on
such considerations as the Committee in its sole discretion determines;
(f) Determine whether, to what extent, and under what circumstances an
Stock Right may be settled in, or the exercise price of an Stock Right
may be paid in, cash, Stock, other Stock Rights, or other property, or
an Stock Right may be canceled, forfeited, or surrendered;
(g) Decide all other matters that must be determined in connection with
a Stock Right;
(h) Establish, adopt, or revise any rules or regulations, as it may
deem necessary or advisable to administer the Plan;
(i) Interpret the Plan, any Stock Right, and any Stock Right Agreement
in its discretion; and
(j) Make all other decisions and determinations that may be required
under the Plan or as the Committee deems necessary or advisable to
administer the Plan.
5.3 LIABILITY. No members of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any stock
right granted under it. No member of the Committee shall be liable for any act
or omission of any other member of the Committee or for any act or omission on
his own part, including but not limited to the exercise of any power and
discretion given to him under the Plan, except those resulting from his own
gross negligence or willful misconduct.
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<PAGE>
5.4 GRANTS TO THE COMMITTEE. Stock Rights may be granted to members of
the Committee, whether such grants are in their capacity as directors, officers
or consultants, but no discretionary Stock Rights shall be granted to any person
who is, at the time of the proposed grant, a member of the Committee unless such
grant has been approved by a majority vote of the disinterested members of the
Committee. All grants of Stock Rights to members of the Committee shall in all
other respects be made in accordance with the provisions of this Plan applicable
to other eligible persons. Members of the Committee who are either (i) eligible
for Stock Rights pursuant to the Plan or (ii) have been granted Stock Rights may
vote on any matters affecting the administration of the Plan or the grant of any
Stock Rights pursuant to the Plan, except that no such member shall act upon the
granting to himself of discretionary Stock Rights but any such member may be
counted in determining the existence of a quorum at any meeting of the Committee
during which action is taken with respect to the granting to him of Stock
Rights.
5.5 DECISIONS BINDING. All decisions, interpretations, and
determinations by the Committee with respect to the Plan, any Stock Right, and
any Stock Right Agreement are final, binding, and conclusive on all parties.
ARTICLE 6: STOCK OPTIONS.
6.1 GENERAL. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock under an
Option shall be determined by the Committee, provided that such
exercise price shall not be less than seventy-five percent (75%) of the
Fair Market Value as of the date of grant in the case of a
Non-Qualified Stock Option and one hundred percent (100%) of such Fair
Market Value in the case of an Incentive Stock Option. In the case of
an Incentive Stock Option to be granted to an employee owning stock
which represents more than 10 percent (10%) of the total combined
voting power of all classes of stock of the Company or any Related
Corporation, the price per share specified in the agreement relating to
such Incentive Stock Option shall not be less than 110 percent (110%)
of the fair market value per share of Common Stock on the date of grant
and such Incentive Stock Option shall not be exercisable after the
expiration of 5 years from the date of grant.
(b) PAYMENT. Payment for Stock issued upon exercise of an Option shall
be made in accordance with Article 9 of the Plan.
(c) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part;
provided, that no Option may be exercisable prior to six months
following the date of the grant of such Option. The Committee also
shall determine the expiration date of each Option and the performance
or other conditions, if any, that must be satisfied before all or part
of an Option may be exercised. The Committee may provide in any Stock
Right Agreement with respect to an Option for expiration prior to its
expiration date, or for accelerated exercisability, in the event of the
Participant's death, disability, retirement, termination of service, or
other events.
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(d) EVIDENCE OF OPTION. All Options shall be evidenced by a written
Agreement between the Company and the Participant. The Agreement shall
include such provisions as may be specified by the Committee. The
Agreement shall specify whether the Option is an Incentive Stock Option
or a Non-Qualified Option.
6.2 INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options
granted under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock shall be set
by the Committee, provided that the exercise price for any Incentive
Stock Option may not be less than the Fair Market Value as of the date
of the grant.
(b) EXERCISE. In no event may any Incentive Stock Option be exercisable
for more than ten years from the date of its grant.
(c) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value
(determined as of the time a Stock Right is granted) of all shares of
Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed
$100,000.00. Any Options granted that exceed this threshold shall be
automatically deemed Non-Qualified Options.
(d) TEN PERCENT OWNERS. An Incentive Stock Option may be granted to a
Ten Percent Owner, provided that at the time such option is granted the
exercise price per share of Stock shall not be less than 110% of the
Fair Market Value and such option by its terms is not exercisable after
the expiration of five (5) years from the date of its grant.
(e) EXPIRATION OF INCENTIVE STOCK OPTIONS. No award of an Incentive
Stock Option may be made pursuant to this Plan after the expiration of
ten (10) years from the Effective Date.
(f) RIGHT TO EXERCISE. During a Participant's lifetime, an Incentive
Stock Option may be exercised only by the Participant.
(g) EMPLOYEES ONLY. Only common law employees of the Company or a
Subsidiary are eligible to receive Incentive Stock Options.
ARTICLE 7: RESTRICTED STOCK AWARDS.
7.1 RESTRICTED STOCK AWARDS. The Committee is authorized to make Stock
Awards of Restricted Stock to Participants either in the form of a grant of
Stock or an offer to sell Stock to a Participant, in such amounts and subject to
such terms, conditions and restrictions as may be selected by the Committee. All
Awards of Restricted Stock shall be evidenced by an Agreement. A Stock Award
Agreement may specify whether, and to what extent, holders of Restricted Stock
Awards shall have voting, dividend, and other rights of holders of Stock.
7.2 ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions, including without
limitation "vesting" or forfeiture restrictions, as the Committee may impose.
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, or otherwise, as the Committee
determines at the time of the grant of the Stock Right or thereafter.
5
<PAGE>
7.3 FORFEITURE. Except as otherwise determined by the Committee at the
time of the grant of the Stock Right or thereafter, upon termination of
employment during the applicable restriction period, Restricted Stock that is at
that time subject to restrictions shall be forfeited and reacquired by the
Company; provided, however, that the Committee may provide in any Stock Right
Agreement that restrictions or forfeiture conditions relating to Restricted
Stock will be waived in whole or in part in specified circumstances, and the
Committee may in other cases waive in whole or in part restrictions or
forfeiture conditions relating to Restricted Stock.
7.4 PAYMENT AND CERTIFICATES FOR RESTRICTED STOCK. If a Restricted
Stock Right provides for the purchase of Stock by a Participant, payment shall
be made pursuant to Article 9 of the Plan. Restricted Stock granted under the
Plan may be evidenced in such manner, as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock, and
the Company shall retain physical possession of the certificate until such time
as all applicable restrictions lapse.
7.5 RESTRICTIONS ON RESTRICTED STOCK RIGHTS. Each Restricted Stock
Right shall be subject to such conditions, restrictions and contingencies, as
the Committee shall determine. These may include continuous service and/or the
achievement of performance goals. The performance goals that may be used by the
Committee for such Stock Rights may be based on one or more business criteria
that apply to the individual participant, a business unit of the Company, a
Subsidiary or the Company as a whole, and/or performance as compared with that
of other publicly traded companies. Such criteria may include, but are not
limited to, stock price, market share, sales, earnings, earnings per share,
return on equity, or costs. The Committee may designate a single performance
goal criterion, or multiple performance goal criteria.
ARTICLE 8: STOCK REFERENCE STOCK AWARDS.
8.1 GRANT OF STOCK-REFERENCE AWARDS. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other
Stock Rights that are payable in, valued in whole or in part by reference to, or
otherwise, based on or related to shares of Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including without limitation shares
of Stock awarded purely as a "bonus" and not subject to any restrictions or
conditions, other rights convertible or exchangeable into shares of Stock, and
Stock Rights valued by reference to book value of shares of Stock or the value
of securities of or the performance of specified divisions or Subsidiaries of
the Company.
8.2 RESTRICTIONS ON STOCK-REFERENCE AWARDS. Each Stock-Reference Award
shall be subject to such conditions, restrictions and contingencies, as the
Committee shall determine. These may include continuous service and/or the
achievement of performance goals. The performance goals that may be used by the
Committee for such Stock Rights may be based on one or more business criteria
that apply to the individual participant, a business unit of the Company, a
Subsidiary, or the Company as a whole, and/or performance as compared with that
of other publicly traded companies. Such criteria may include, but are not
limited to, stock price, market share, sales, earnings, earnings per share,
return on equity, or costs. The Committee may designate a single performance
goal criterion, or multiple performance goal criteria.
6
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ARTICLE 9: PAYMENT FOR STOCK PURCHASES;
WITHHOLDING TAXES; RELOAD OPTIONS.
9.1 PAYMENT. Payment for Stock purchased pursuant to the Plan may be
made in cash (by check) or, where expressly approved for the Participant by the
Committee in a Stock Right Agreement (or otherwise in writing where permitted by
law):
(a) By cancellation of indebtedness of the Company to the Participant;
(b) By surrender of (or attestation to the ownership of) Stock, valued
at Fair Market Value on the date new Stock is purchased under the Plan;
provided, however, that such surrender or attestation shall not be
permitted if such action would cause the Company to recognize
compensation expense (or additional compensation expense) with respect
to the Stock Right for financial reporting purposes;
(c) By tender of a full recourse promissory note having such terms as
may be approved by the Committee, secured by the Stock purchased, and
bearing interest at a rate sufficient to avoid imputation of income
under Sections 482 and 1274 of the Code; provided, however, that
Participants who are not employees of the Company shall not be entitled
to purchase Stock with a promissory note unless the note is adequately
secured by collateral other than the Stock; provided, further, that in
the case of newly issued shares of Stock, the portion of the Purchase
Price equal to the par value of the Stock, if any, must be paid in cash
or other legal consideration;
(d) By waiver of compensation due or accrued to Participant for
services rendered;
(e) By tender of property acceptable to the Committee;
(f) With respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock then exists:
(1) Through a "same day sale" commitment from Participant and
a broker-dealer that is a member of the National Association
of Securities Dealers (a "NASD" Dealer") whereby Participant
irrevocably elects to exercise the Option and to sell a
portion of the Stock so purchased to pay for the exercise
price and any applicable withholding taxes, and whereby the
NASD Dealer irrevocably commits upon receipt of such Stock to
forward the exercise price and any such withholding taxes
directly to the Company;
(2) Through a "margin" commitment from Participant and a NASD
Dealer whereby Participant irrevocably elects to exercise the
Option and to pledge the Stock so purchased to the NASD Dealer
in a margin account as security for a loan from the NASD
Dealer in the amount of the exercise price and any applicable
withholding taxes, and whereby the NASD Dealer irrevocably
commits upon receipt of such Stock to forward the exercise
price and any such withholding taxes directly to the Company;
or
(3) Through any other "cashless exercise" procedure approved
by the Committee; or
(g) By any combination of the foregoing.
7
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9.2 LOAN GUARANTEES. The Committee may help the Participant pay for
Shares purchased under the Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.
9.3 TAX WITHHOLDING. The Company or any Subsidiary shall have the
authority and the right to deduct or withhold, or require a Participant to remit
to the Company, an amount sufficient to satisfy federal, state and local taxes
(including the Participant's FICA obligation) required by law to be withheld
with respect to any taxable event arising as a result of this Plan. Whenever,
under the Plan, payments in satisfaction of Stock Rights are to be made in cash,
such payment shall be net of an amount sufficient to satisfy federal, state, and
local withholding tax requirements. With respect to withholding required upon
any taxable event relating to the issuance of Stock under the Plan, Participants
may elect, subject to the Committee's approval and any rules or policies adopted
by the Committee from time to time, to satisfy the withholding requirement, in
whole or in part, by having the Company or any Subsidiary withhold shares of
Stock having a Fair Market Value on the date of withholding equal to the amount
to be withheld for tax purposes. The Committee may, at the time any Stock Right
is granted, require that any and all applicable tax withholding requirements be
satisfied by the withholding of shares of Stock as set forth above.
9.4 RELOAD OPTIONS. Stock Right Agreements may contain a provision
pursuant to which a Participant who pays all or a portion of the exercise price
of an Option or the tax required to be withheld pursuant to an exercise of an
Option by surrendering shares of Stock pursuant to Sections 9.1 or 9.3,
respectively, shall be automatically granted an Option for the purchase of Stock
equal to the number of shares surrendered (a "Reload Option"). The grant of the
Reload Option shall be effective on the date the Participant surrenders the
shares of Stock in respect of which the Reload Option is granted (the "Reload
Date"). The Reload Option shall have an exercise price equal to the Fair Market
Value of the Stock on the Reload Date, and shall have a term which is no longer,
and which shall lapse no later, than the original term of the underlying option.
If stock otherwise available under an Incentive Stock Option is withheld
pursuant to Section 9.3, any Reload Option granted in connection with the
withholding shall be treated as a new Incentive Stock Option, subject to the
rules set forth in Section 6.2.
8
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ARTICLE 10: ADDITIONAL PROVISIONS
APPLICABLE TO STOCK RIGHTS.
10.1 STAND-ALONE, TANDEM, AND SUBSTITUTE STOCK RIGHTS. Stock Rights
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution for, any
other Stock Right granted under the Plan. Stock Rights granted in addition to or
in tandem with other Stock Rights may be granted either at the same time as or
at a different time from the grant of such other Stock Rights.
10.2 EXCHANGE PROVISIONS. The Committee may at any time offer to
exchange or buy out any previously granted Stock Right for a payment in cash,
Stock, or another Stock Right, based on the terms and conditions the Committee
determines and communicates to the Participant at the time the offer is made.
10.3 TERM OF STOCK RIGHT. The term of each Stock Right shall be for the
period as determined by the Committee, provided that in no event shall the term
of any Incentive Stock Option or a Stock Appreciation Right granted in tandem
with the Incentive Stock Option exceed a period of ten years from the date of
its grant.
10.4 FORM OF PAYMENT FOR STOCK RIGHTS. Subject to the terms of the Plan
and any applicable law or Stock Right Agreement, payments or transfers to be
made by the Company or a Subsidiary on the grant or exercise of an Stock Right
may be made in such forms as the Committee determines at or after the time of
grant, including without limitation, cash, Stock, other Stock Rights, or other
property, or any combination, and may be made in a single payment or transfer,
in installments, or on a deferred basis, in each case determined in accordance
with rules adopted by, and at the discretion of, the Committee.
10.5 LIMITS ON TRANSFER. No right or interest of a Participant in any
Stock Right may be pledged, encumbered, or hypothecated to or in favor of any
party other than the Company or a Subsidiary, or shall be subject to any lien,
obligation, or liability of such Participant to any other party other than the
Company or a Subsidiary. Except as otherwise provided below, no Stock Right
shall be assignable or transferable by a Participant other than by will,
beneficiary designation or the laws of descent and distribution or, except in
the case of an Incentive Stock Option, pursuant to a qualified domestic
relations order as defined in Section 414(p)(1)(A) of the Code or Title I of the
Employee Retirement Income Security Act, or the rules there under. The Committee
may determine and specify in any Stock Right Agreement for an Stock Right other
than an Stock Right that includes an Incentive Stock Option, at the time of
granting an Stock Right or thereafter, that a Participant may assign or
otherwise transfer all or a portion of the rights represented by the Stock Right
to specified individuals or classes of individuals, or to a trust benefiting
such individuals or classes of individuals, or to a partnership or other entity
in which all partners or equity owners are such individuals, subject to such
restrictions, limitations, or conditions as the Committee deems to be
appropriate.
10.6 STOCK CERTIFICATES. All Stock certificates delivered under the
Plan are subject to any stop-transfer orders and other restrictions as the
Committee deems necessary or advisable to comply with federal or state
securities laws, rules, and regulations and the rules of any national securities
exchange or automated quotation system on which the Stock is listed, quoted, or
traded. The Committee may place legends on any Stock certificate to reference
restrictions applicable to the Stock.
9
<PAGE>
ARTICLE 11: CHANGES IN CAPITAL
STRUCTURE; CHANGE OF CONTROL.
11.1 GENERAL ADJUSTMENTS. In the event of a subdivision of the outstanding
Stock, a declaration of a dividend payable in Stock, a declaration of a dividend
payable in a form other than Stock in an amount that has a material effect on
the price of the Stock, a combination or consolidation of the outstanding Stock
(by classification or otherwise) into a lesser number of shares of Stock, a
recapitalization, a spin-off or a similar occurrence, the Committee shall make
such adjustments as it, in its sole discretion, deems appropriate in one or more
of (a) the number of shares of Stock available for future Stock Rights under
Article 3, (b) the limitations set forth in Article 3, (c) the number and kind
of shares of Stock covered by each outstanding Stock Right or (d) the exercise
price under each outstanding Option or other Stock Right in the nature of rights
that may be exercised. Except as provided in this Article 11, a Participant
shall have no rights by reason of any issue by the Company of stock of any class
or securities convertible into stock of any class, any subdivision or
consolidation of shares of stock of any class, the payment of any stock dividend
or any other increase or decrease in the number of shares of stock of any class.
11.2 DISSOLUTION OR LIQUIDATION. To the extent not previously
exercised, Stock Rights shall terminate immediately prior to the dissolution or
liquidation of the Company.
11.3 REORGANIZATIONS. In the event that the Company is a party to a
merger, consolidation, or other reorganization, outstanding Stock Rights shall
be subject to the agreement of merger, consolidation, or reorganization. The
Committee shall cause such agreement to provide, (a) for the continuation of
outstanding Stock Rights by the Company (if the Company is a surviving
corporation), (b) for their assumption by the surviving corporation or its
parent or subsidiary, (c) for the substitution by the surviving corporation or
its parent or subsidiary of its own Stock Rights for such Stock Rights, (d) for
accelerated vesting, accelerated expiration and/or lapse of restrictions, or (e)
for settlement in cash or cash equivalents.
11.4 EFFECT OF CHANGE IN CONTROL. The Committee may determine and
specify in any Stock Right Agreement, at the time of granting an Stock Right or
thereafter, that any or all outstanding Options and other Stock Rights in the
nature of rights that may be exercised shall become fully exercisable and any or
all restrictions on other Stock Rights shall lapse, upon the effectiveness of a
Change of Control, subject to the following limitations:
(a) In the case of an Incentive Stock Option, the acceleration of
exercisability shall not occur without the Participant's written consent.
(b) If the Company and the other party to the transaction constituting
a Change in Control agree that such transaction is to be treated as a
"pooling of interests" for financial reporting purposes, and if such
transaction in fact is so treated, then the acceleration of
exercisability shall not occur to the extent that the surviving
entity's independent public accountants determine in good faith that
such acceleration would preclude the use of "pooling of interests"
accounting.
10
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ARTICLE 12: AMENDMENT, MODIFICATION,
AND TERMINATION.
12.1 AMENDMENT, MODIFICATION, AND TERMINATION. With the approval of the
Committee, at any time and from time to time, the Committee may terminate,
amend, or modify the Plan. An amendment or modification of the Plan shall be
subject to the approval of the Company's stockholders only to the extent
required by applicable laws, regulations and rules.
12.2 STOCK RIGHTS PREVIOUSLY GRANTED. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Stock
Right previously granted under the Plan, without the written consent of the
Participant.
ARTICLE 13: GENERAL PROVISIONS.
13.1 NO RIGHTS TO STOCK RIGHTS. No Participant or employee shall have
any claim to be granted any Stock Right under the Plan, and neither the Company
nor the Committee is obligated to treat Participants and employees uniformly.
13.2 NO STOCKHOLDERS RIGHTS. No Stock Right gives the Participant any
of the rights of a stockholder of the Company unless and until shares of Stock
are in fact issued to such person in connection with such Stock Right.
13.3 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or any Stock Right
Agreement shall interfere with or limit in any way the "at will" nature of any
Participant's employment or other relationship with the Company or any
Subsidiary, nor confer upon any Participant any right to continue in the
employment or any other relationship of the Company or any Subsidiary, and the
Company and each Subsidiary reserve the right to terminate any Participant's
employment or other relationship at any time.
13.4 UNFUNDED STATUS OF STOCK RIGHTS. The Plan is intended to be an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Stock Right, nothing
contained in the Plan or any Stock Right Agreement shall give the Participant
any rights that are greater than those of a general creditor of the Company or
any Subsidiary.
13.5 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare, or other benefit plan of the
Company or any Subsidiary.
13.6 EXPENSES. The expenses of administering the Plan shall be borne by
the Company and its Subsidiaries.
13.7 TITLES AND HEADINGS. The titles and headings of the Articles and
Sections in the Plan are for convenience of reference only, and in the event of
any conflict, the text of the Plan, rather than such titles or headings, shall
control.
13.8 FRACTIONAL SHARES. No fractional shares of stock shall be issued
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether rounding up will eliminate such
fractional share.
13.9 SECURITIES LAW COMPLIANCE. With respect to any person who is, on
the relevant date, obligated to file reports under Section 16 of the Exchange
Act, transactions under this Plan are intended to comply with all applicable
conditions of Section 16 or its successors under the Exchange Act. To the extent
any provision of the Plan or any Stock Right Agreement or any action by the
Committee fails to so comply, it shall be void to the extent required by law and
voidable as deemed advisable by the Committee.
11
<PAGE>
13.10 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company
to make payment of Stock Rights in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Company shall be under no obligation to
register under the Securities Act any of the shares of Stock paid under the
Plan. The Company may restrict the issuance or transfer of such shares in such
manner as it deems advisable to ensure the satisfaction of all legal
requirements relating to their registration, qualification or listing or any
exemption there from.
13.11 GOVERNING LAW. The Plan and all Stock Right Agreements shall be
construed in accordance with and governed by the laws of the State of Florida.
13.12 NON-EXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan nor
the submission of the Plan to the stockholders of the Company for approval shall
be construed as creating any limitations upon the right and authority of the
Committee to adopt such other incentive compensation arrangements (which
arrangements may be applicable either generally to a class or classes of
individuals or specifically to a particular individual or individuals) as the
Committee in its discretion determines desirable, including, without limitation,
the granting of stock options or other rights otherwise than under the Plan.
ARTICLE 14: DEFINITIONS.
14.1 Definitions. The following words and phrases shall have the
following meanings for purposes of this Plan:
(a) "Stock Right" means any Option, Restricted Stock Right, or
Stock-Reference Stock Right, or any other right or interest relating to Stock,
cash or property, granted to a Participant under the Plan.
(b) "Stock Right Agreement" means any written agreement, contract, or
other instrument or document evidencing a Stock Right.
(c) "Board" means the Board of Directors of the Company.
(d) "Change of Control" means and includes each of the following:
(1) Any transaction or series of transactions, whereby any
person (as that term is used in Section 13 and 14(d)(2) of the Exchange
Act), is or becomes the beneficial owner (as that term is used in
Section 13(d) of the Exchange Act) directly or indirectly, of
securities of the Company representing 20% or more of the combined
voting power of the Company's then outstanding securities; provided,
that for purposes of this paragraph, the term "person" shall exclude
(i) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or of a Subsidiary and (ii) a corporation
owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of the common
stock of the Company.
(2) Any merger, consolidation, or liquidation of the Company
in which the Company is not the continuing or surviving corporation or
pursuant to which Stock would be converted into cash, securities, or
other property, other than (i) a merger or consolidation with a wholly
owned Subsidiary, (ii) a reincorporation of the Company in a different
jurisdiction, or (iii) other transaction in which there is no
substantial change in the stockholders of the Company, where in the
case of (i), (ii) or (iii) all then outstanding Stock Rights are
assumed by the successor corporation, which assumption shall be binding
on all Participants;
12
<PAGE>
(3) Any merger or consolidation of the Company with or into
another entity or any other corporate reorganization, if more than 50%
of the combined voting power of the continuing or surviving entity's
securities outstanding immediately after such merger, consolidation or
other reorganization is owned by persons who were not stockholders of
the Company immediately prior to such merger, consolidation or other
reorganization.
(4) The sale, transfer, or other disposition of all or
substantially all of the assets of the Company.
(5) A change in the composition of the Board, as a result of
which fewer than 50% of the incumbent directors are directors who
either (i) had been directors of the Company on the date 24 months
prior to the date of the event that may constitute a Change in Control
(the "original directors") or (ii) were elected, or nominated for
election, to the Board with the affirmative votes of at least a
majority of the aggregate of the original directors who were still in
office at the time of the election or nomination and the directors
whose election or nomination was previously so approved.
A transaction shall not constitute a Change of Control if its sole
purpose is to change the state of incorporation of the Company or to create a
holding company that will be owned in substantially the same proportions by the
persons who held the Company's securities immediately before such transaction.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Committee" means the committee of the Board described in Article
5.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Fair Market Value" means with respect to Stock or any other
property, the fair market value of such Stock or other property determined by
such methods or procedures as may be established from time to time by the
Committee. Unless otherwise determined by the Committee, the Fair Market Value
of Stock as of any date shall be the closing price for the Stock as reported on
the NASDAQ National Market (or on any national securities exchange on which the
Stock is then listed) for that date or, if no closing price is so reported for
that date, the closing price on the next preceding date for which a closing
price was reported.
(i) "Incentive Stock Option" means an Option that is intended to meet
the requirements of Section 422 of the Code or any successor provision thereto.
(j) "Non-Qualified Stock Option" means an Option that is not intended
to be an Incentive Stock Option.
13
<PAGE>
(k) "Option" means a right granted to a Participant under Article 6 of
the Plan to purchase Stock at a specified price during specified time periods.
An Option may be either an Incentive Stock Option or a Non-Qualified Stock
Option.
(l) "Participant" means a person who, as an officer, director,
employee, director, consultant, independent contractor, or adviser of the
Company or any Subsidiary, has been granted a Stock Right under the Plan.
(m) "Predecessor Plan" means the 1995 Incentive Stock Option Plan of
the Company.
(n) "Plan" means the Quest Net Corp. 1999 Equity Incentive Plan, as
amended from time to time.
(o) "Restricted Stock Stock Right" means Stock granted to a Participant
or offered for sale to a Participant under Article 7.
(p) "Securities Act" means the Securities Act of 1933, as amended.
(q) "Stock" means the common stock of the Company and such other
securities of the Company that may be substituted for Stock pursuant to Article
11.
(r) "Stock-Reference Stock Right" means a right, granted to a
Participant under Article 8.
(s) "Subsidiary" means any corporation of which a majority of the
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Company.
(t) "Ten Percent Owner" means any individual who, at the date of grant
of an Incentive Stock Option, owns stock possessing more than ten percent of the
total combined voting power of all classes of Stock of the Company or a
Subsidiary. For purposes of determining such percentage, the following rules
shall apply:
(1) The individual with respect to whom such percentage is being
determined shall be considered as owning the Stock owned, directly or
indirectly, by or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants; and
(2) Stock owned, directly or indirectly, by or for a corporation,
partnership, estate, or trust, shall be considered as being owned
proportionately by or for its stockholders, partners, or beneficiaries.
14
[Letterhead of Registrant]
November 9, 1999
Quest Net Corp.
2999 NE 191st Street, PH-8 ,
Aventura, Florida 33180
Re: Amendment No. 2 to 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 Quest, I have examined the
original, certified, conformed, or other copies of Quest's Certificate of
Incorporation, Bylaws and corporate minutes provided to me by Quest. 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 Quest, I have necessarily assumed the
correctness and completeness of the statements made or included therein by
Quest, 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
Q.guaranteed Service
Service Provided Through LCI International Telecom Corp., a Subsidiary of Qwest
Communications International, Inc.
Monthly Commitment and Term Agreement - Competitive Promotion
Select Term and Monthly Usage Commitment
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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"Confidential Portion Deleted" "Confidential Portion Deleted" "Confidential Portion Deleted" "Confidential Portion Deleted"
[ ] [ ] [ ] [ ]
"Confidential Portion Deleted" "Confidential Portion Deleted" "Confidential Portion Deleted" "Confidential Portion Deleted"
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LCI OFFICE USE ONLY
Month to 800010 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Month Term SGP5%
810011- 810021- 810051- 810101- 810202- 810402- 810702- 811202- 812003- 813503- 815003- 817503- 819993-
1 Year Term SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5%
820011- 820021- 820051- 820101- 820202- 820402- 820702- 821202- 822003- 823503- 825003- 827503- 829993-
2 Year Term [X] SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5%
830011- 830021- 830051- 830101- 830202- 830402- 830702- 831202- 832003- 833503- 835003- 837503- 839993-
3 Year Term SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5% SGP5%
</TABLE>
Definitions: "Agreement" refers to this Q.guaranteed Service Monthly Commitment
and Term Agreement. "Customer" refers to the name of the entity executing this
Agreement, which name is set forth below. "LCI" refers to LCI International
Telecom Corp., a subsidiary of Qwest Communications International, Inc. "Term"
shall refer to the term of this Agreement as designated above. "MRC" shall refer
to Monthly Recurring Charge. "Excluded Charges" shall be defined as taxes and
tax-related surcharges, international data services charges, MRCs (exclusive of
internet access services MRCs,, domestic LCI frame relay service and
permanent virtual circuit MRCs, private line interexchange carrier MRCs and
central office connection MRCCs) and non-recurring charges. "Effective Date"
shall mean the date upon which this Agreement is executed by both parties.
Tariff Considerations: LCI will provide to Customer, and Customer will receive
from LCI (1) interstate and international telecommunications services(s)
provided pursuant to LCI Tariffs FCC No. 1 and 2 (and any other applicable
interstate and international tariff of LCI and/or its affiliates) and (2)
intrastate telecommunications services provided pursuant to LCI's applicable
state tariffs (all LCI tariffs referenced herein are collectively referred to as
the "Tariff"). This Agreement is subject to and incorporates by reference the
terms of the Tariff. LCI may modify the Tariff from time to time in accordance
with law, which modifications may affect service(s) furnished to Customer.
Monthly Commitment: Customer hereby agrees to the minimum monthly usage
commitment designated above ("Monthly Commitment"). During any month of the Term
that Customer's total usage of Q.guaranteed Service falls below the Monthly
Commitment, Customer shall pay for each such month the actual amount billed for
Q.guaranteed Service plus the difference between that amount and the Monthly
Commitment. To determine whether Customer satisfied the Monthly Commitment, LCI
will count Customer's total monthly Q.guaranteed Service usage charges (based on
the applicable Tariff rates associated with the designated and Monthly
Commitment) less Excluded Charges ("Eligible Usage Charges").
The Guarantee: In consideration of Customer's commitment to use Q.guaranteed
Service for the specified Term and at the Monthly Commitment level, LCI agrees
to provide Q.guaranteed Service domestic switched and dedicated long distance
services for the duration of this Agreement at the Tariff rates in effect on the
Effective Date. This guarantee does not apply to rates for international
services.
Regulatory Activity: Notwithstanding any statement to the contrary contained in
this Agreement or the Tariff, in the event that any regulatory legislative
body or court of competent jurisdiction promulgates regulations or modifies
existing ones including, without limitation, regulations regarding
compensation, access charges and/or universal service ("Regulatory Activity"),
LCI reserves the right, at any time and without notice, to: (i) pass through
Customer all, or a portion of, any charges or surcharges directly or indirectly
related to such Regulatory Activity; and/or (ii) modify the rates, including any
guarantees, and/or other terms and conditions contained in this Agreement
and/or the tariff to reflect the impact of such Regulatory Activity.
Termination: Either Customer or LCI may terminate this Agreement at the end of
the initial Term by providing written notice at least thirty (30) days prior to
the conclusion of such Term. Customer's notice of termination must be sent to:
LCI International Telecom Corp., a Qwest Communications Company, Attention:
Account Resolution Center, RA# 20275, 4650 Lakehurst Court, Dublin, OH 43017. If
written notification is not submitted to LCI at least thirty (30) days prior to
expiration of this Agreement and LCI has not given notice of termination to
Customer, this Agreement shall automatically renew at the same Monthly
Commitment level and Term and at the Tariff rates in effect at the time of such
renewal. LCI is providing service pursuant to the Tariff and if Customer
terminates early, Customer will be subject to the early termination charges
stated in such Tariff.
Competitive Promotion:
(a) In consideration of Customer's commitment to use Q.guaranteed Service
for the specified Term and at the Monthly Commitment level, LCI agrees
to provide Q.guaranteed Service to Customer at the Tariff rates in
effect on the Effective Date less a discount equal to five percent (5%)
of Customer Eligible Usage Charges, which discount shall be applied to
Customer's interstate usage.
(b) Customer represents that it has received from a competitor of LCI an
offer comparable to the offer set forth in this Agreement.
Miscellaneous:
(a) Customer may not assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of LCI.
(b) This Agreement (including the Tariff) constitutes the entire agreement
between the parties and supersedes any prior or contemporaneous
proposals, discussions, or agreements, whether verbal or written,
concerning Q.guaranteed Service. All amendments to this Agreement must
be in writing and signed by both parties.
(c) In order to receive dedicated internet access service, Customer must
sign an addendum to this Agreement.
(d) Customer authorizes LCI and its agents to (i) use billing and usage
information related to Customer's account to evaluate whether Customer
would benefit from other telecommunication services offered by LCI; and
(ii) market such other telecommunications services to Customer.
AGREED TO AND ACCEPTED:
LCI INTERNATIONAL TELECOM CORP., A subsidiary of Qwest Communications
International, Inc._____________________
<TABLE>
<CAPTION>
<S> <C>
Print Customer Name
By: ________________________7-1_____________ By: _______________07/06/99________________
Authorized Signature Date Authorized Signature Date
___Allen Ruiz_______________________________ ________Camilio Pereira____________________
Print Name Print Name
____________________________________________ ____________C.E.O__________________________
Print Title Print Title
</TABLE>
<PAGE>
ride the light
Q w e s t
QWEST INTERNET SOLUTIONS, INC.
Dedicated Internet Access Service Agreement
1. General. This Agreement is made by and between Qwest Internet Solutions,
Inc., a Delaware corporation with an address at 555 Seventeenth Street, Denver,
CO 80202 ("Qwest") and Customer ("Customer") as identified below. This Agreement
shall be effective on the date that it is executed by Qwest following Customer's
execution ("Effective Date"). This Agreement sets forth the terms and conditions
pursuant to which Qwest shall provide to Customer the Qwest Dedicated Internet
Access Service ("Service") described in Addendum A-2 hereto, which Addendum is
incorporated by reference herein.
2. Rates and Charges; Payment. Customer agrees to pay all applicable rates and
charges set forth on Addendum A-1 hereto, which Addendum is incorporated by
reference herein. In addition to such rates and charges, Customer shall be
responsible for all sales and use taxes, as well as any duties or levies,
arising in connection with the Service, including without limitation, any and
all fees and taxes which may be imposed by any Internet registration authority,
in connection with the registration and maintenance of Customer's domain name(s)
and/or Internet address(es) if any. Billing for the recurring component of the
Service shall be monthly in advance. Payment for the non-recurring component of
the Service, including initial set-up and installation fees, shall be payable
upon execution of Addendum A-1. Charges shall be due upon Customer's receipt of
invoice and payable within thirty (30) days of such date. Any amount not paid
within such period shall bear interest at the lesser of (i) the rate of one and
one-half percent (1 1/2%) per month, or (ii) the highest rate permitted by
applicable law. If Customer reasonably and good faith disputes any portion of an
invoice, Customer shall timely pay the full invoiced amount and provide Qwest,
within thirty (30) days of payment, a written statement adequately supporting
Customer's position regarding the dispute. Qwest shall determine in its good
faith business judgment whether such invoiced items were erroneous, and shall
issue a credit to Customer if it so determines. Qwest reserves the right to
change or modify the rates and charges for the Service, or eliminate or modify
certain components of the Service, upon not less than forty-five (45) days
advance written notice to Customer. In the event of such a modification or
elimination with respect to the Service, Customer may terminate this Agreement,
without penalty, upon not less than thirty (30) days advance written notice to
Qwest. Customer's execution of this Agreement signifies Customer's acceptance of
Qwest's initial and continuing credit review and approval. Qwest reserves the
right to withhold implementation of Service pending completion of Qwest's credit
review and Qwest may condition initiation of Service on its receipt of a deposit
or such other means to establish reasonable assurance of payment.
3. Term and Termination
(a) This Agreement shall be effective upon the Effective Date and continue until
the expiration (or termination) of Addendum A-1 as issued pursuant hereto.
Unless otherwise set forth in Addendum A-1, the term with respect to such
Addendum A-1 (its "Term") shall commence on the date upon which, with respect to
the Service ordered, the Service is made available for use by Customer, and
continue for a period of twelve (12) months. Addendum A-1 may be terminated by
either party at the end of its Term by giving written notice at least sixty (60)
days prior thereto, but in the absence of such notice, such Addendum A-1 shall
automatically renew under the same terms and conditions for a term equal to that
of its original Term (such renewal term shall also be referred to herein as the
"Term"). In the event Customer terminates the Agreement prior to the conclusion
of the Term, Customer shall pay to Qwest all charges for Service provided
through the effective date of such cancellation plus a cancellation charge
determined as follows: (i) if the Term for the cancelled Service is one (1) year
or less, then the cancellation charge shall be an amount equal to the balance of
the monthly Service charges (then in effect at the time of cancellation) for
such cancelled Service that would otherwise have become due for the unexpired
balance of the Term; (ii) if the Term for the cancelled Service is longer than
one (1) year and such cancellation becomes effective prior to the completion of
the first year of the Term, the cancellation charge shall be an amount equal to
the balance of the monthly Service charges (then in effect at the time of
cancellation) for such cancelled year of the term, plus fifty percent (50%) of
the the remainder of the Term beyond the first year; and (iii) if the Term for
the cancelled Service is longer than one (1) year and such cancellation becomes
effective after completion of the first year of the Term, the cancellation
charge shall be an amount equal to fifty percent (50%) of the balance of the
monthly Service charges (then in effect at the time of cancellation) for such
cancelled Service that otherwise would have become due and payable for the
unexpired portion of the Term. In addition, if Customer was granted a discount
or waiver with respect to any non-recurring charges based on the duration of
Customer's Term commitment (an "NRC Discount"), then Customer shall also pay an
amount equal to the NRC Discount. It is agreed that Qwest's damages if Service
is cancelled prior to the completion of the Term shall be difficult or
impossible to ascertain, thus the amounts set forth herein are intended to
establish liquidated damages in the event of cancellation and are not intended
as a penalty.
(b) Qwest may terminate this Agreement and/or cease or suspend the provision of
the Service upon default of Customer. Default includes: (i) the failure to pay
any amount when due hereunder (after five (5) days prior notice of such failure
to pay); (ii) the filing of a petition in bankruptcy by or against Customer; and
(iii) any material default of this Agreement including but not limited to
violation of the "AUP" (as hereinafter defined) or conduct that Qwest, in its
sole discretion, believes may subject Qwest to civil or criminal litigation,
charges and/or damages. If Qwest has suspended the Service pursuant to this
Section 3(b), Qwest shall require a reconnection fee in order to resume Service.
Termination shall not relieve Customer of its obligation to pay all fees for
Service accrued and owing up to and including the date of termination or
otherwise payable pursuant to Section 3(a) above, nor shall it preclude Qwest
from pursuing any other remedies available to it, at law or in equity.
(c) In the event a law or regulatory action prohibits, substantially impairs or
makes impracticable the provision of Service under this Agreement, as determined
by Qwest, Qwest may, at its option and without liability, terminate this
Agreement or modify the Service or the terms and conditions of this Agreement in
order to conform to such action ("Regulatory Modification"); provided, however,
that Qwest shall provide thirty (30) days written notice prior to Customer of
any such Regulatory Modification, unless Qwest determines, in its good faith
business judgment, that it is necessary to reduce the foregoing notice period.
Use by Customer of the Service after implementation of a Regulatory Modification
shall constitute acceptance by Customer of such changes.
4. Rights and Obligations of Customer. Customer represents that (a) it has full
right and authority to enter into this Agreement; (b) it will not use the
Service in any manner which is in violation of any law or governmental
regulation, or Qwest's Acceptable Use Policy ("AUP") as amended from time to
time by Qwest, which AUP is posted on Qwest's web site at (www.qwest.com) and
which is incorporated by reference hrein; (c) the "Customer Data" (as
hereinafter defined) will not violate or infringe the rights of others,
including, without limitation, any patent, copyright, trademark, trade dress,
trade secret, privacy, publicity, or other personal or proprietary right; (d)
the Customer Data will not include indecent or obscene material or constitute a
defamation or libel of Qwest or any third party and will not result in the
obligation of Qwest to make payment of any third party licensing fees; and (e)
it will comply with all relevant export and encryption laws and regulations of
the United States. For purposes of this Section 4, "Customer Data" shall mean
the text, data, images, sounds, photographs, illustrations, graphics, programs,
coda and other materials transmitted through the Service hereunder.
5. Equipment or Software Not Provided By Qwest. Customer shall be solely
responsible for the installation, operation, maintenance, use and compatibility
of equipment or software not provided by Qwest and Qwest shall have no
responsibility or liability in connection therewith. In the event that equipment
or software not provided by Qwest impairs Customer's use of any Service: (a)
Customer shall nonetheless be liable for payment for all Service provided by
Qwest; and (b) any service specifications or service levels (and corresponding
service credits) generally applicable to the Service shall not apply. Customer
shall cooperate with Qwest in setting the initial configuration for its
equipment's interface with the Service and comply with Qwest's instructions in
connection therewith.
6. Rights and Obligations of Qwest; Disclaimer of Warranties (a) Qwest, at its
sole discretion, may secure domain names and assign Internet address space
(subject to reasonable availability) for the benefit of Customer during the
Term, and Qwest will route those addresses on Qwest's network; it being
understood and agreed that neither Customer nor any of its "Users" (as defined
in the shall have the right to these addresses. Customer understands
andon Customer's behalf and that Qwest shall retain
ownership of all such IP addresses, and upon termination of the Agreement,
Customer's access to and utilization of such IP addresses shall terminate.
(b) Customer agrees that it is solely responsible for assessing its own computer
and transmission network needs and the results to be obtained therefrom and
Qwest exercises no control whatsoever over the merchandise, information and
services offered or accessible on the Internet. Qwest shall use commercially
reasonable efforts to (i) monitor its network and its interconnection to other
networks and (ii) maintain its network, including interconnections, in an
operational state (except during scheduled
Page 1 of 2
(c) 1999 Qwest Internet Solutions, Inc.
CONFIDENTIAL
DIA AGREEMENT REV 061099
<PAGE>
maintenance) in order to provide Service in accordance with any applicable
service level agreement ("SLA"). CUSTOMER ASSUMES TOTAL RESPONSIBILITY FOR
CUSTOMER'S USE AND USERS' USE OF THE SERVICE, SOFTWARE OR EQUIPMENT PROVIDED BY
QWEST, IF ANY, AND THE INTERNET CUSTOMER UNDERSTANDS AND AGREES FURTHER THAT THE
INTERNET (1) CONTAINS MATERIALS SOME OF WHICH ARE SEXUALLY EXPLICIT OR MAY BE
OFFENSIVE AND (2) IS ACCESSIBLE BY PERSONS WHO MAY ATTEMPT TO BREACH THE
SECURITY OF QWEST'S AND/OR CUSTOMER'S NETWORK(S). QWEST HAS NO CONTROL OVER AND
EXPRESSLY DISCLAIMS ANY LIABILITY OR RESPONSIBILITY WHATSOEVER FOR SUCH
MATERIALS OR ACTIONS AND CUSTOMER AND CUSTOMER'S USERS ACCESS THE SERVICE AT
CUSTOMER'S OWN RISK. EXCEPT AS SPECIFICALLY SET FORTH HEREINOR IN THE ADDENDUM,
THE SERVICE AND RELATED SOFTWARE AND/OR EQUIPMENT PROVIDED BY QUEST, IF ANY, ARE
PROVIDED ON AN "AS IS" AND "AS AVAILABLE" BASIS WITHOUT WARRANTIES OF ANY KIND
EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF TITLE,
NONINFRINGEMENT OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. NO ADVICE OR INFORMATION GIVEN BY QWEST, ITS AFFILIATES OR
ITS CONTRACTORS OR THEIR RESPECTIVE EMPLOYEES SHALL CREATE A WARRANTY. Some
states do not allow the limitation of implied warranty, and therefore certain
provisions may not apply to customers located in those states.
7. Limitation of Liability. TO THE MAXIMUM EXTENT PERMITTED BY LAW, IN NO EVENT
SHALL QWEST, ITS AFFILIATES OR AGENTS BE LIABLE FOR ANY DIRECT, INDIRECT,
INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OR LOST OR IMPUTED
PROFITS OR ROYALTIES, LOST DATA OR COST OF PROCUREMENT OF SUBSTITUTE GOODS OR
SERVICES ARISING FROM OR RELATED TO THE SERVICE OR THIS AGREEMENT WHETHER FOR,
AMONG OTHER THINGS, BREACH OF WARRANTY OR ANY OBLIGATION ARISING THEREFROM, AND
WHETHER LIABILITY IS ASSERTED IN, AMONG OTHER THINGS, CONTRACT OR TORT
(INCLUDING BUT NOT LIMITED TO NEGLIGENCE AND STRICT PRODUCT LIABILITY) WHETHER
OR NOT QWEST HAS BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE.
QWEST'S LIABILITY HEREUNDER SHALL IN NO EVENT EXCEED AN AMOUNT EQUAL TO THE
AVERAGE MONTHLY RECURRING CHARGE PAID BY CUSTOMER FOR THE SERVICE, SUCH AVERAGE
MONTHLY CHARGE TO BE CALCULATED BASED UPON THE PERIOD COMMENCING ON THE
EFFECTIVE DATE AND CONCLUDING ON THE DATE A CLAIM IS MADE. CUSTOMER HEREBY
WAIVES ANY CLAIM THAT THESE EXCLUSIONS DEPRIVE IT OF AN ADEQUATE REMEDY OR CAUSE
THIS AGREEMENT TO FAIL OF ITS ESSENTIAL PURPOSE. Except as specifically set
forth in the SLA, the foregoing sets forth Customer's exclusive remedy for
breach of this Agreement by Qwest. Some states do not allow the exclusion of
incidental or consequential damages, and therefore certain provisions hereof may
not apply to customers located in those states. The provisions of this Section 7
allocate the risks between Qwest and Customer and Qwest's pricing reflects the
allocation of risk and limitation of liability specified herein.
8. Indemnity. Customer agrees to defend, indemnify and hold Qwest and its
affiliates harmless from any and all liabilities, costs and expenses, including
reasonable attorneys' fees, related to or arising from: (a) any breach of this
Agreement by Customer or Users; (b) the use of the Service or the Internet or
the placement or transmission of any information, software or other materials on
the Internet by Customer or Users, including but not limited to any Customer
Data; (c) acts or omissions of Customer, Customer's agents or contractors in
connection with, among other things, the installation, maintenance, presence,
use or removal of equipment or software not provided by Qwest connected to or to
be connected to the Service; and (d) claims for infringement of any third party
proprietary right, including copyright, patent, trade secret and trademark
rights, arising from the use of any services, equipment and software not
provided by Qwest.
9. Non-Solicitation of Employees. Customer shall not, during the Term of this
Agreement and for a period of one (1) year thereafter, directly or indirectly
solicit, employ, offer to employ, nor engage as a consultant, any employee of
Qwest with whom Customer had contact pursuant to this Agreement.
10. Non-Disclosure. Except with respect to information in the public domain or
which is legally required to be disclosed, Customer shall not disclose any of
the terms and conditions of this Agreement to any third party during the Term
and for a period of twelve (12) months thereafter.
11. Assignment. Customer shall not assign this Agreement or, unless set forth in
Addendum A-1, the right to use the Service, without the prior written
consent of Qwest.
12. Miscellaneous.
(a) Any dispute relating to this Agreement shall be submitted for binding
arbitration under the Commercial Arbitration Rules of the American
Arbitration Association and judgment on any award entered therein may be
entered in any court of competent jurisdiction. The venue for any such
arbitration shall be Denver, Colorado.
(b) In the event that any portion of this Agreement is held to be
unenforceable, the unenforceable portion shall be construed as nearly as
possible to reflect the original intent of the parties and the remainder of
the provisions shall remain in full force and effect.
(c) Qwest's failure to insist upon strict performance of any provision of this
Agreement shall not be construed as a waiver of any of its rights
hereunder.
(d) The terms and conditions of this Agreement, including all Addenda, shall
prevail notwithstanding any different or additional terms and conditions of
any purchase order or other form for purchase or payment submitted by
Customer to Qwest.
(e) All terms and provisions of this Agreement which should by their nature
survive the termination of this Agreement shall so survive, including but
not limited to sections 3, 4, 6, 7, 8, 9, 10 and 12.
(f) Qwest is acting as an independent contractor and shall have exclusive
control of the manner and means of performing its obligations.
(g) Qwest will not be responsible for performance of its obligations hereunder
where delayed or hindered by war, riots, embargoes, strikes or acts of its
vendors, suppliers, accidents, acts of God, or any other event beyond its
control.
(h) All notices shall be sent by registered or certified mail or by overnight
commercial delivery to the address set forth in this Agreement by each
party. Notices to Qwest shall be sent to the attention of its General
Counsel.
(i) This Agreement shall be governed by the laws of the State of New York. Any
cause of action Customer may have with respect to the Service must be
commenced within one (1) year after the claim or cause of action arises or
such claim or cause of action is. In any proceeding to enforce the
terms of this Agreement, the party prevailing shall be entitled to recover
all of its expenses, including, without limitation, reasonable attorney's
fees.
(j) This Agreement may be executed in separate counterparts including facsimile
copies, each of which shall be deemed an original, and all of which shall
be deemed one and the same instrument and legally binding upon the parties.
(k) This Agreement, including the AUP (as such AUP may be amended from time to
time). Addendum A-1 and Addendum A-2 constitutes the entire agreement
between Customer and Qwest with respect to the Service. This Agreement may
only be amended in a written agreement executed by authorized
representatives of both parties hereto.
CUSTOMER
QWEST NET CORP.____________________
Print Customer Name
____________________________07/6//99____
Signature of Authorized Representative Date
Camilo Pereira, CEO_____________________
Name and Title of Authorized Representative
Customer Address:
2999 NE 191 ST #1008____________________
AVENTURA , FL. 33180_________________
QWEST INTERNET SOLUTIONS, INC.
_____________________________7-6-99______
Signature of Authorized Representative Date
DAVID HOROWITZ ACCT EXECUTIVE______________
Name and Title of Authorized Representative
Page 2 of 2
(c) 1999 Qwest Internet Solutions, Inc.
CONFIDENTIAL
DIA AGREEMENT REV 061099
<PAGE>
Addendum A-1
Qwest Communications Corporation
Dedicated Internet Access Service Pricing
for
QUESTNET CORPORATION
July 1, 1999
DEDICATED INTERNET ACCESS PRICING FOR ONE (1) DS-3 CIRCUIT
1. Customer agrees to pay, for the a full DS-3 dedicated internet access
circuit provided pursuant to this Agreement, a monthly recurring charge
("MRC") for Port access a MRC for access interconnection for each DS-3
circuit that is installed on Qwest's IP Network as set forth in the
table below.
<TABLE>
<CAPTION>
Dedicated Port Access Monthly Local access Loop
Internet Access Recurring Charge MRC from NPA/NXX
DS-3 circuit ties (MRC) 305/935
In Megabits per
Second (MBPS)
<S> <C> <C> <C>
45 MBPS "Confidential Portion Deleted" "Confidential Portion Deleted"
</TABLE>
2. No other discounts or credits shall apply.
3. Any other circuits purchased by Customer (other than a full DS-3
circuit provided herein) shall be priced separately. This Agreement
shall be amended to include any additional circuits.
4. Qwest will waive all non-recurring port and access interconnection
installation charges ("NRCs") if the full DS-3 circuit remains
installed and used by Customer for the duration of the Initial Term. In
the event Customer disconnects the full DS-3 circuit prior to the
completion of the Initial Term, in addition to early termination
charges set forth in Section 3 of the Agreement and usage charges
accrued to the date of termination, Customer agrees to pay to Qwest,
within thirty (30) days of the effective date of termination, all
previously waived non-recurring installation charges (NRCs) associated
with such full DS-3 circuit. The total non-recurring installation
charges for the single full DS-3 circuit provided pursuant to this
Agreement is five thousand three hundred fifty dollars "Confidential
Portion Deleted".
5. The initial term of this Agreement shall be for a period of twenty-four
(24) months ("Initial Term"). The Initial Term of this Agreement shall
commence on the "Acceptance Date" (as hereinafter defined) of the first
circuit delivered to Customer pursuant to this Agreement and shall
conclude twenty-four (24) months from the Acceptance Date of the last
circuit delivered by Qwest to Customer pursuant to this Agreement. As
used herein, "Acceptance Date" is the date in which Customer accepts
delivery of the DS-3 circuit. If Customer fails to provide written
notice to Qwest that such circuit is in material non-compliance with
the industry standard applicable to such Services within five (5) days
after notification by Qwest that such circuit is available to Customer
for use and/or testing, Customer shall be deemed to have accepted such
circuit as of the date of delivery by Qwest. Qwest shall begin billing
Customer as of the Acceptance Date.
Page 1 of 2
<PAGE>
Addendum A-1
6. Qwest agrees to install the full DS-3 Dedicated Internet Access Circuit
within sixty (60) days of both parties' signature of this Agreement. If
the circuit is not installed within this time frame, Customer may
terminate the Agreement without liability for early termination
charges.
7. Any other services ordered by Customer and provided by Qwest (other
than the circuit provided pursuant to this Agreement) shall not be
governed by the terms of this Addendum A-1.
_________________________07/06/99
Questnet Corp. Date
_________________________________7-6-99___
Qwest Communications Corporation Date
----------------------------------------------
Reginald Phillips/Contract Administrator Date
Page 2of 2
<PAGE>
Addendum A-1
Qwest Communications Corporation
Dedicated Internet Access Service Pricing
for
QUESTNET CORPORATION
July 1, 1999
DEDICATED INTERNET ACCESS PRICING FOR ONE (1) DS-3 CIRCUIT
1. Customer agrees to pay, for the a full DS-3 dedicated internet access
circuit provided pursuant to this Agreement, a monthly recurring charge
("MRC") for Port access a MRC for access interconnection for each DS-3
circuit that is installed on Qwest's IP Network as set forth in the table
below.
<TABLE>
<CAPTION>
Dedicated Port Access Monthly Local access Loop
Internet Access Recurring Charge MRC from NPA/NXX
DS-3 circuit ties (MRC) 305/935
In Megabits per
Second (MBPS)
<S> <C> <C> <C>
45 MBPS "Confidential Portion Deleted" "Confidential Portion Deleted"
</TABLE>
2. No other discounts or credits shall apply.
3. Any other circuits purchased by Customer (other than a full DS-3 circuit
provided herein) shall be priced separately. This Agreement shall be
amended to include any additional circuits.
4. Qwest will waive all non-recurring port and access interconnection
installation charges ("NRCs") if the full DS-3 circuit remains installed
and used by Customer for the duration of the Initial Term. In the event
Customer disconnects the full DS-3 circuit prior to the completion of the
Initial Term, in addition to early termination charges set forth in Section
3 of the Agreement and usage charges accrued to the date of termination,
Customer agrees to pay to Qwest, within thirty (30) days of the effective
date of termination, all previously waived non-recurring installation
charges (NRCs) associated with such full DS-3 circuit. The total
non-recurring installation charges for the single full DS-3 circuit
provided pursuant to this Agreement is five thousand three hundred fifty
dollars ("Confidential Portion Deleted").
5. The initial term of this Agreement shall be for a period of twenty-four
(24) months ("Initial Term"). The Initial Term of this Agreement shall
commence on the "Acceptance Date" (as hereinafter defined) of the first
circuit delivered to Customer pursuant to this Agreement and shall conclude
twenty-four (24) months from the Acceptance Date of the last circuit
delivered by Qwest to Customer pursuant to this Agreement. As used herein,
"Acceptance Date" is the date in which Customer accepts delivery of the
DS-3 circuit. If Customer fails to provide written notice to Qwest that
such circuit is in material non-compliance with the industry standard
applicable to such Services within five (5) days after notification by
Qwest that such circuit is available to Customer for use and/or testing,
Customer shall be deemed to have accepted such circuit as of the date of
delivery by Qwest. Qwest shall begin billing Customer as of the Acceptance
Date.
Page 1 of 2
<PAGE>
Addendum A-1
6. Qwest agrees to install the full DS-3 Dedicated Internet Access Circuit
within sixty (60) days of both parties' signature of this Agreement. If the
circuit is not installed within this time frame, Customer may terminate the
Agreement without liability for early termination charges.
7. Any other services ordered by Customer and provided by Qwest (other than
the circuit provided pursuant to this Agreement) shall not be governed by
the terms of this Addendum A-1.
_________________________07/06/99
Questnet Corp. Date
_________________________________7-6-99___
Qwest Communications Corporation Date
---------------------------------------------
Reginald Phillips/Contract Administrator Date
Page 2of 2
<PAGE>
Qwest Communications
Dedicated Internet Access Service Level Agreement Definition
Effective November 1st, 1998
End-to-End Network availability
For domestic Qwest Internet products and services provided under a signed
agreement, Qwest is committed to maintain a network availability of 100%.
Calculation
The calculation for end-to-end network availability for a given month is as
follows:
(24 Hours x # of Days in Month x Number of Sites) - Network Outage
Time = Network
(24 Hours x Days in Month x Number of Sites) Availability
Components Included
The performance of the following components of the products and services shall
be included in the determination of Network Availability.
All components of the Qwest IP Network (e.g. POPs, Routers, Circuits)
Qwest-provided local access facilities used to access the Qwest IP
Network (e.g. Local Loop)
Components Excluded
The following shall be excluded from any network outage time when calculating
the Network Availability:
The failure of any components beyond the premise of the Qwest
demarcation (e.g. CPE)
Scheduled network downtime during Qwest's maintenance window
The failure of any components which cannot be corrected due to
inaccessibility or causes beyond the reasonable control of Qwest
Any customer ordered local telephone circuits
Network Availability Measurement and Remedies
Network outage time in the Network Availability calculation is measured based on
the total outage time of all affected sites, subject to the included and
excluded components set forth herein. An outage condition shall exist when a
site is unable to transmit data when recorded in the trouble ticket system.
Outage time is measured from the time the trouble ticket is opened to the time
the site is again able to transmit and receive data.
Upon verification that the actual Network Availability is below the Committed
Network Availability, Qwest shall evaluate the network and take corrective
action to remedy the problem. If the Actual Network Availability falls below the
Committed Network Availability, Qwest shall provide a service credit equal to
100 percent (100%) of one day's charge for all ports for each cumulative hour of
service disruption.
Network Delay Service Level Agreement
For the Qwest IP service provided under a signed agreement, Qwest is committed
to maintain an average roundtrip POP-to-POP (e.g. IP Backbone) on-network delay
(Committed Network Delay) of 75 milliseconds.
Calculation
The calculation for average roundtrip network delay (Average Network Delay) for
a given month is as follows based on the procedure criteria defined below:
(SIGMA) (Roundtrip Delay for POP-POP trunks) = Average Network Delay
Total Number of POP-POP trunks
<PAGE>
Components Included
The performance of the following components of the Products and Services shall
be included in the determination of Average Network Delay:
All components of the Qwest IP Network
Components Excluded
The following components shall be excluded in the determination of Average
Network Delay:
Equipment beyond Qwest's network demarcation
International connections, peering interfaces to other ISPs and/or
Qwest Internet gateways to other carrier products.
Average Network Delay Measurement and Remedies
Average Network Delay will be measured by a Qwest test in accordance with the
following criteria:
Software and hardware components capable of measuring application
traffic and responses shall be placed at each site (e.g. POP) to be
measured for roundtrip delay.
Measurements shall be performed on an ongoing basis to adequately
determine a consistent average performance level for the calculation,
and posted to the Qwest Website.
Upon verification by Qwest that the actual Average Network Delay is below the
Committed Network Delay, Qwest shall take corrective action to remedy the
problem. If the Average Network Delay falls below the committed Network Delay
within the calendar month, Qwest shall provide a service credit equal to 10%
percent of the total monthly IP commitment with validated outages.
Reporting Service Level Agreement
For the Qwest IP services provided under a signed agreement, Qwest is committed
to maintain a reporting guarantee of 10 minutes or less after Qwest's
determination that the customer's service is unavailable.
Definition & Process
The calculation for Qwest's reporting guarantee is as follows based on the
procedure defined below:
Qwest will performs SNMP traps from customer's routers on an ongoing
basis. If Qwest determines that the customer's service is unavailable
(i.e. router isn't able to transmit and/or receive data), Qwest will
contact customer within 10 minutes, via an agreed upon Method (i.e.
pager, email, phone).
Customer Requirements
Customer must provide a valid pager number (alpha text, or numerical)
or fax number
Customer can opt to provide VALID email address of customer contact
(Qwest will send out notification to the contact within 10 minutes of determined
outage)
Customer must provide access to the routers SNMP variables
Customer is solely responsible for providing accurate contact
information for customer's designated point of contact.
Components Included
The performance of the following components of the Qwest IP network shall be
included in the determination of Reporting Guarantee:
<PAGE>
All components of the Qwest IP Network
Components Excluded
The following components shall be excluded in the determination of the Reporting
Guarantee:
Equipment beyond Qwest's network demarcation
International connections, peering interfaces to other ISPs and/or
Qwest Internet gateways to other carrier products.
Upon verification by Qwest that the actual Reporting Guarantee was below the
Committed Reporting Guarantee, Qwest shall provide a service credit equal to
100% percent of the daily charge for all ports with validated infringements for
the applicable day. The customer may obtain no more than one credit per day,
irrespective of how often in that day Qwest failed to meet the guarantee.
SLA Enforcement
1. Who does the customer call if they experience a problem?
The Network Operations Center via email or telephone.
2. What evidence is needed to apply for a service credit?
The time stamp on the return email from the Network Operations Center
stating when the problem was detected and when it was corrected.
3. How does the customer get credited?
The Network Operations Center will notify billing upon request by the
customer, or the customer can email their trouble ticket notification direct
to billing.
**Service level agreements for new customers begin to take effect on the first
day of the second month after initial installation of service.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Qwest DEDICATED SERVICE REQUEST FORM
Page 1 of ______
Revised: 3/19/99
Customer acknowledges and agrees that Qwest Communications Corporation ("Qwest") is providing interstate and international
telecommunications service(s) pursuant to Qwest Tariffs FCC Nos 2 and 3, and any other applicable state and international tariff of
Qwest and its affiliates and intrastate telecommunications services provided pursuant to Qwest's state tariffs governing
such services (all Qwest tariffs referenced hrein are collectively referred to as "the Tariff") This Agreement is subject to, and
incorporates by reference, the terms of the Tariff. Qwest may modify the Tariff from time to time in accordance with law. In the
event of any inconsistency between this Form and the Tariff, the Tariff shall govern.
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ORDER DETAIL: ORDER TYPE: PRODUCT: CONTRACT: PROMO DETAIL:
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Sales Rep ID:___________ [X] New [X] Q.guaranteed [ ] 1 Year [ ]_____________________
Rep Name:___Ruiz________ [ ] Add [ ] Q.integrity D [X] 2 Year [X]_____________________
Distributor:____________ [ ] Supplement [ ] Q.integrity E [ ] 3 Year [ ]_____________________
Revenue:________________ [ ] Cancel [ ] Simply Guaranteed Contract #________ [ ] ____________________
Account #:______________ [ ] Physical Change [ ] Other____________ [ ] BCR#__________ Commit $_______20K______
Invoice Group:__________ [ ] Admin/Billing Change INTERNAL USE ONLY
Discount Group:_________ [ ] Product Conversion Alt Price Code_____________ Promo Codes___________________
Product Acct. ID:_______ [ ] Partial Disconnect Related CORE # ____________ ______________ ______________
Customer Desired Date:__ [ ] Total Disconnect Order #s __________________ ______________ ______________
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CUSTOMER BILLING LOCATION: TYPE OF SERVICE: OPTIONS:
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Customer Name:_________________________________ [ ] T1 Access______________ [ ] Enhanced 8XX*
Address:_______________________________________ [ ] W/Voice [ ] W/8XX [ ] 8XX Tailored Call Coverage*
City:__________________________ST:_____Zip_____ [ ] Point to Point T1__________ [ ] Invoice Options*
Contact:_______________________ Phone:_________ [ ] Digital Data_______________ [ ] Alternate Call Detail Media*
[ ] Analog Data________________ [ ] Product Account Billing*
In accordance with Sections 69.3 and 69.115 of the FCC's [ ] Voice______________________ [ ] PAC [ ]8XX W/PAC
rules, Customer represents that the off network [ ] Frame______________________ [ ] NV [ ] V [ ] Custom*
interconnection capabilities are: [ ] ATM________________________ # Digits_____ Index #_______
Surcharge Exempt: [ ] Yes [X] No [X] DIA____DS-3________________ [ ] Credit Card Billing*
State Tax Exempt [ ] Yes* [X] No * Attach [ ] Other______________________ * Attach appropriate form
Fed. Tax Exempt [ ] Yes* [X] No Certificate
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SERVICE LOCATION END A SERVICE LOCATION END B
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Customer Name:________________________________________ Customer Name:___________________________________________________________
Address: _____________________________________________ Address:_________________________________________________________________
City: _____________________ ST:____ Zip_____________ City:____________________________ ST:_____ Zip_________________________
Contact:______________________________________________ Contact:_________________________________________________________________
Site Phone:________________ Fax:_____________________ Site Phone:______________ Fax:__________________________________________
Building:__________________ Floor:___Room:___________ Building:________________ Floor:_______ Room:___________________________
Access From ____:___to____:____ Time Zone:___________ Access From____:___to____:_____ Time Zone:_______________________________
Who is ordering Local Loop? [X] Qwest [ ] Cust Who is ordering Local Loop? [ ] Qwest [ ] Cust
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RECURRING CHARGES: (Attach Q.pricer) NON-RECURRING/INSTALL CHARGES:
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Local Loop #1 IXC Local Loop #2 Other# Total MRC Local Loop #1 IXC Local Loop #2 Other Total NRC
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*Explain Please use Supplemental Service Agreement to list additional information.
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Installation: The estimated due date is established according to the most current information available provided by the
appropriate Local Exchange Carrier (LEC). Qwest shall not be liable or responsible for any installation delay. Qwest will attempt to
notify the customer as soon as possible with the reason for any delay and the revised estimated installation date.
Vendor Coordination Function: (A savings will be recognized if the customer elects to coordinate circuit installation with
the hardware vendor)
[ ] Customer will Coordinate [ ] Qwest will coordinate
Customer acknowledges and agrees that he is responsible for disconnecting service and circuits with its existing carrier(s) and
Qwest shall not be liable for any failure to disconnect service.
Expedite order: [ ] Yes (Additional charge will apply) [ ] No
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Pricing: The charges set forth herein are valid for thirty (30) days from the date of quote. The local loop pricing set
forth above represents a pass through of the charges set forth in the applicable local exchange carrier access tariff (s).
In accordance with Part 36 of the FCC's rules, the percentage of interstate traffic carried over the above ordered local loops will
be:
[ ] Greater than 10% [ ] 10% or less
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Service Interruption: In case of service interruption, Qwest's liability is governed by the terms of the Qwest Tariff.
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This Dedicated Service Request form is not valid and you will not receive service until a valid service agreement is signed by
customer.
Authorized By: Accepted By:
X_________________________________07/6/99______ X_____________________________________7-6-99____________________________________
Customer Signature Date Sales Representative Date
Name:_____________CAMILO PEREIRA_______________ ______________________________________7-6-99____________________________________
(print or type) Sales Manager
Title: ___________________C.E.O._______________ ________________________________________________________________________________
Authorized Representative at Headquarters/Sales Office
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Qwest DEDICATED SERVICE REQUEST FORM
Revised 3/19/99
Page 2 of______________
Customer Name: ________________________ Account #: _______________
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EQUIPMENT
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END A Mfg/Type Provided by PBX Key END B Mfg/Type Provided by PBX Key
Phone System [ ] [ ] Phone System [ ] [ ]
CSU/DSU CUST CSU/DSU
Channel Bank Channel Bank
Drop & Insert Drop & Insert
Modem Modem
Inside Wiring Req'd: [X]Yes [ ]No Jack: [X]New [ ]Existing Inside Wiring Req'd: [ ]Yes [ ] No Jack: [ ] New [ ]Existing
[ ]RJ11C [ ] RJ21X [ ] RJ48C [ ] RJ48S [ ] Other DS 3 Terminal [ ] RJ11C [ ] RJ21X [ ] RJ48C [ ] RJ48S [ ]Other___________
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Vendor:____________CUST_____________________________ Vendor:
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Contact: KEVIN LOCKERBY Phone: 305 935 1080 Contact: Phone:
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TECHNICAL INFORMATION FOR T1 WITH VOICE
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Direction (DALs) [ ] In [ ] Out [ ] 2 Way Line Coding [ ] AMI [ ] B8ZS
(See Channel Assignment Below) Framing [ ] SF [ ] ESF
Outpulse Type [ ] DP [ ] DTMF [ ] MF Wire [ ] 2 [ ] 4
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8XX Service Required: [ ] No [ ] Yes [ ] New (Reserve 8XX and attach 8XX Service Options form)
[ ] Port (Attach 8XX Service Options form and 8XX LOA)
[ ] Existing [ ] Change from Switched to Dedicated (Attach
Service Options form)
[ ] Change in AOS or other Options (Attach Service
Options form)
[ ] Change in Trunk Group Assignment (Enter in
Remarks)
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Centrex: [ ] Yes [ ] No Main Billing Number___________ CLLI Name:________________________________________________
LEC Contact:_________________________________________________________ Phone: ___________________________________________________
New Access Code Desired: [ ] Yes - New Code_______________________ [ ] No - Existing Code___________________________________
Address Signals: [ ] DTMF [ ] Rotary [ ] Both Automatic Route Selection/Lease Cost Routing: [ ]Yes [ ]No
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T1 CHANNEL ASSIGNMENT
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Trunk Group 1 Trunk Group 2 Trunk Group 3 Trunk Group 4
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Trunk Type [ ] In [ ] Out [ ] 2 Way [ ] In [ ] Out [ ] 2 Way [ ] In [ ] Out [ ] 2 Way [ ] In [ ] Out [ ] 2 Way
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Channels Assigned
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Circuit ID
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Trunk Group ID
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Signaling [ ] L [ ] G [ ] E & M [ ] L [ ] G [ ] E & M [ ] L [ ] G [ ]E & M [ ]L [ ] G [ ] E & M
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Hunting [ ] Most Idle [ ] Least Idle [ ] Most Idle [ ] Least Idle [ ] Most Idle [ ] Least Idle [ ] Most Idle [ ] Least Idle
[ ] Ascend [ ] Descend [ ] Ascend [ ] Descend [ ] Ascend [ ] Descend [ ] Ascend [ ] Descend
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PAC Code Digits
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TECHNICAL INFORMATION FOR DIGITAL DATA / POINT TO POINT T1
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Data Speed: [ ] 19.2 [ ] 56K [ ] 64K [ ] 1.544M [ ] Other____ Error Correction (56kbs only): [ ] Yes [ ] No
Framing: [ ] ESF [ ] SF Line Coding: [ ] D4/AMI [ ] B8ZS
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TECHNICAL INFORMATION FOR ANALOG DATA
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Data Rate: [ ] 9.6 [ ] 14.4 [ ] 19.2 Wire: [ ] 2 [ ] 4
Line Conditioning: [ ] C [ ] D [ ] None [ ] Other
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TECHNICAL INFORMATION FOR VOICE (OPX, FX, ARD)
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Wire: [ ] 2 [ ] 4 Signaling: [ ] E & M [ ] Loop [ ] Ground
Effective Wiring: [ ] Yes [ ] No Outpulse Type: [ ] DP [ ] DTMF [ ] MF
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DIA DS-3 DIRECT REMARKS:
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TO MIA DPO ALL CPE IS USED, PROVIDED AND MAINTAINED
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Qwest DEDICATED INTERNET ACCESS xDSL ORDER FORM
Revised: 6/16/99
Page 1 of 4
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ORDER INFORMATION
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Sales Rep ID:
Customer ID: Sales Rep Email Address:
CORE Order #: Sales Rep Phone Number:
Order Date: Sales Support Rep Name:
Company Name: Sales Manager Name:
TC:
RVP:
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SERVICE DELIVERY INFORMATION
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BILLING ADDRESS (if different from Service Address)
Address:____________________________________________________________________________________________________________________________
Address:____________________________________________________________________________________________________________________________
City:_______________________________________________________________________________________________________________________________
State:______________________________________________________________________________________________________________________________
Zip Code:___________________________________________________________________________________________________________________________
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SERVICE ADDRESS
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Name:_______________________________________________________________________________________________________________________________
Address:____________________________________________________________________________________________________________________________
Email address:______________________________________________________________________________________________________________________
City:_______________________________________________ State:______________________________________________ Zip Code:_________________
NPA XXX (where circuit will be installed):_________________________________________________________________________________________
DSL Provider: [ ] C [ ]R [ ] Other:
Order Type: [X] New [ ] Add [ ] Change [ ] Disconnect
Installation Date: 60 Days Preferred install time: [ ]AM [ ]PM
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CONTACT INFORMATION
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Primary Contact(s): Telephone #: 305 935 1080 Email:
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Site Contact(s): KEVIN LOCKERBY Telephone #: Email:
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Technical Contact(s): KEVIN LOCKERBY Telephone #: Email:
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Billing Contact(s): CAMILLO PERIERA Telephone # Email:
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CIRCUIT/PRICING INFORMATION
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I. Packaging [ ] Promotion 1 [ ] Promotion 2
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Term of Contract: [ ]1 yr [X]2 yr [ ] 3 yr [ ] 4 yr [ ] Other Circuit Termination Type: [ ] ISP [ ] Corp LAN
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II. PRICING
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C R Reserved for Future
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Bandwidth $ MRC Prod.Code Bandwidth $MRC Prod. Code
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128K/128K
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144K/144K 144K/144K
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192K/192K 192K/192K
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384K/384K 384K/384K
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512K/512K
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768K/768K 768K/768K
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1M/1M 1M/1M
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1.5M 384K 1.2M/1M
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2-3M/1M
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3M/1M
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384K/128K 5M/1M
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768K/384K 7.1M/1M
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MRC :"Confidential Portion Deleted" DS-3 NRC: $
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Version: CMD06001
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Qwest(R) DEDICATED INTERNET ACCESS - xDSL ORDER FORM
Page 2 of 4
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INSTALLATION INFORMATION
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Inside Wire Authorized: /X/ Yes / / No If no, continue to next section
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Dwelling: /X/ Office Building / / Apartment / / Town Home / / Condo / / Single Family
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Is the end-user building a multi-story structure: /X/ Yes / / No
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Is it a multi-unit building?: /X/ Yes / / No
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Ownership: / / Own /X/ Lease / / Rent
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If lease/rent, Property Mgr name and Phone #:
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Is proof of insurance required to work on this property: / / Yes /X/ No
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If yes, provide fax number where proof of insurance should be faxed:
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Inside wiring special treatment: /X/ None / / Wiring must be done by building manager / / Wiring must be done by union workers
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Location of NID:
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Is there more than one phone closet at the end-user locations? / / Yes /X/ No
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Is the distance from the MPOE or NID to the router installation location more than 50 feet?: /X/ Yes / / No
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Will the inside wiring need to be installed a above ceiling tiles?: / / Yes /X/ No
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Is there available inside wiring to the router location?: /X/ Yes / / No
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Telephone lines: / / Underground / / Aerial
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CUSTOMER PREMISE EQUIPMENT
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CPE: /X/ Customer provided/Customer configured / / Customer provided/DSL Supplier configured / / DSL Supplier Provided
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No. of existing voice and Fax lines:
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No. of existing ISDN lines: ISDN Line C requested ADSL loc: / / Yes / / No
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Primary Operating System: / / Windows 95 / / Windows 3.X / / Windows NT / / Windows NT 3.5X / / Windows NT 4.X
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/ / Mac / / UNIX / / Other
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Location of computer:
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Location of NID (telephone box): / / Basement / / Outside Premise / / Inside Premise / / Inaccessible
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END USER IP ADDRESSING
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/ / New or / / Existing Customer IP Addresses: (List Addresses) ISP:
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IS the Customer an ISP? / / Yes / / No / / Static / / Dynamic
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New IP Address Required? / / Yes / / No Number of New IP Addresses#:
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NOTE: Only complete remainder of form for corporate end users.
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CORPORATE IP ADDRESSING
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What size IP address block should be assigned to customer: / / /30 / / /29 / / /28 / / /27 / / /26 / / /25 / / /24
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Does the customer have an existing IP address block that is being used for this service? / / Yes / / No
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Existing Customer IP Addresses: (List Addresses)
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Is the Customer an ISP? / / Yes / / No Use / / Own domain email / / Qwest email
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New IP Address Required? / / Yes / / No Number of New IP Addresses*:
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* If the Customer is an ISP, one (1) Class C will be provided without justification. If the Customer is not an ISP and requesting
more than 32 hosts (/27), complete the following:
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List all networks and subnets used by your organization, including those from other providers. Please include host counts for
your Customer's subnets if you are an ISP.
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Subnet Number Subnet Mask Hosts Today Hosts in 3 Months Usage
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</TABLE>
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<TABLE>
<S> <C>
Qwest(R) DEDICATED INTERNET ACCESS - xDSL ORDER FORM
Page 3 of 4
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CORPORATE DOMAIN NAME SERVICE
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Domain Name Service: / / Qwest Provided / / Customer - List OS & version number of BIND:
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Primary DNS Required: / / Yes / / No Secondary DNS Required: / / Yes / / No
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* New Domain Required: / / Yes / / No
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New Domain Name (1st Choice):
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New Domain Name (2nd Choice):
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New Domain Name (3rd Choice):
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* Please complete the following information if a NEW domain is requested:
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Administrative Contact:
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NIC Handle (if known): Name (Last, First):
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Phone Number: Fax Number: Email:
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Technical Contact:
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NIC Handle (if known) Name (Last, First):
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Phone Number: Fax Number: Email:
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Billing Contact:
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NIC Handle (if known) Name (Last, First):
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Phone Number: Fax Number: Email:
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Primary Name Server:
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Primary Server Hostname:
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Primary Server Netaddress:
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Secondary Name Server:
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Secondary Name Hostname:
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Secondary Server Netaddress:
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CORPORATE NETWORK CONFIGURATION
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Type of Networking: / / Bridging /X/ IP Routing / / IP Routing with NAT
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Preferred Customer PVC (optional):
- --------------------------------------------------------------------------------------------------------------------------------
If using IP routing, Please enter network information below.
You Must provide network information unless you provide a configured CPE prior to the installation date.
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Customer Router IP:
- ----------------------------------------------------------------------------------------------
Client Router IP:
- ---------------------------------------------------------------------------------------------- WAN Side
Subnet Mask: Configuration
- ----------------------------------------------------------------------------------------------
Routing Protocol: / / RIP-1 / / RIP-2 / / Static
- ----------------------------------------------------------------------------------------------
Broadcast IP:
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CORPORATE NETWORK CONFIGURATION (CONT)
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Client Router IP:
- ---------------------------------------------------------------------------------------------- LAN Side
Subnet Mask: Configuration
- ----------------------------------------------------------------------------------------------
Routing Protocol: / / RIP-1 / / RIP-2 / / Static
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Use DHCP: / / No / / Yes
- ---------------------------------------------------------------------------------------------- DHCP
DHCP Server IP:
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</TABLE>
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<TABLE>
<S> <C>
Qwest(R) DEDICATED INTERNET ACCESS - xDSL ORDER FORM
Page 4 of 4
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BOP4 Feed Type: / / No Routes / / Partial Routes* / / Full Routes *Qwest routes and Qwest Customer routes
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Does the Customer have any BGP Customers? / / Yes / / No If yes, list their ASes:
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Provide a list of all routes that will be announced to Qwest:
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Additional Notes:
--------
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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CORPORATE ROUTING
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BGP Required: [X] Yes [ ] No List Autonomous System #'s:
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Single-homed: [ ] Yes [ ] No
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Multi-homing Required: [X] Yes ([X] BGP [ ] Static) For BGP, list Autonomous System #'s:
[ ] No
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List all connections (DS1, DS3, etc.) to each ISP
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Connection Type: ISP:
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Connection Type: ISP:
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Version: CMD06001"
</TABLE>
<PAGE>
QUESTNET PRICES
Part I Equipment
<TABLE>
<CAPTION>
6 GHz WDSL* WDSL* ATM
Backbone Hub Remote Network
# City Equipment Equipment Equipment Equipment
<S> <C> <C> <C> <C>
1 Miami "Confidential Portion Deleted" "Confidential Portion Deleted"
2 Ft. Lauderdale "Confidential Portion Deleted" "Confidential Portion Deleted"
3 Boca raton "Confidential Portion Deleted" "Confidential Portion Deleted"
4 West Palm "Confidential Portion Deleted" "Confidential Portion Deleted"
"Confidential Portion Deleted" "Confidential Portion Deleted"
</TABLE>
Part II Installation
<TABLE>
<CAPTION>
6 GHz WDSL ATM
Backbone Hub Network
# City Equipment Equipment Equipment
<S> <C> <C> <C> <C>
1 Miami "Confidential Portion Deleted" "Confidential Portion Deleted"
2 Ft. Lauderdale "Confidential Portion Deleted" "Confidential Portion Deleted"
3 Boca raton "Confidential Portion Deleted" "Confidential Portion Deleted"
4 West Palm "Confidential Portion Deleted" "Confidential Portion Deleted"
"Confidential Portion Deleted" "Confidential Portion Deleted"
Part III Site Surveys, Frequency Coordination & FCC licensing "Confidential Portion Deleted"
Part IV System Engineering "Confidential Portion Deleted"
Part V TSM 2500 Backbone Network Management System "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
*(Prices Reflect a minimum commitment of 1000 Remotes)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Aventura Xtra Storage
2690 N.E. 191 Street
North Miami Beach, FL 33180
Unit #1124
2 multiplexers 1.6M "Confidential Portion Deleted"
20-30 shelve
computer and software "Confidential Portion Deleted"
various misc. items
internet camera 3000 Total "Confidential Portion Deleted"
Suite Unit
20 computer and 20 ralks "Confidential Portion Deleted"
15 cobalts server
8 monitors
5 cisco routers "Confidential Portion Deleted" "Confidential Portion Deleted"
3 dail-up server
32 UPS "Confidential Portion Deleted" each "Confidential Portion Deleted"
1 stand alone air condition "Confidential Portion Deleted"
various misc. items
Total "Confidential Portion Deleted"
PH #8
9 computers "Confidential Portion Deleted" "Confidential Portion Deleted"
1 switch "Confidential Portion Deleted"
1' docstar "Confidential Portion Deleted"
Total "Confidential Portion Deleted"
Roof #6
6 antennas "Confidential Portion Deleted"
Equip. in Virginia "Confidential Portion Deleted"
Web Cafe
20 computers "Confidential Portion Deleted" each "Confidential Portion Deleted"
equipment. var. "Confidential Portion Deleted"
Total "Confidential Portion Deleted"
Grand Total "Confidential Portion Deleted"
Wireless equipment -- see attached "Confidential Portion Deleted"
</TABLE>
SMARTRing SM SERVICE
TRANSPORT PAYMENT PLAN
The undersigned customer (hereinafter "customer") requests BELLSOUTH
(hereinafter "Telephone Company") to provide SMARTRingSM Service as described
below.
1. SMARTRing Service is provided pursuant to and in accordance with the
BellSouth Companies Tariff F.C.C. NO. 1, including the Transport Payment Plan
(TPP) as it applies to SMARTRing Service.
2. The SMARTRing Service provided to the customer shall consist of the locations
and configuration described in Exhibit 1 and all rate elements which are
consequently added to such configuration.
3. The service capacity desired is (check one):
- OC1 capacity___ - OC3 capacity___
- OC3+ capacity_X__ - OC12 capacity___
- OC48 capacity___
- OC48+ capacity___
4. The TPP payment plan and service period for this service is:
- Payment plan A for ____ months
- Payment plan B for ____ months
- Payment plan C for _61__months
5. The earliest date on which this service can reasonably be made available to
the customer is _________________(to be completed by the Telephone Company).
There is no standard service interval for this service.
6. The service date requested by the customer is June 1st 1998.
7. The service period shall commence on the actual service date, i.e. the date
the service is actually made available to the customer.
8. The Application Date is the date the Telephone Company receives a signed
original of this Agreement and all correct information needed to start the
ordering process, which shall evidence the customer's firm commitment for the
service.
<PAGE>
9. Rates and charges applicable to this Agreement are those in effect in
accordance with the tariff on the:
(check one)
____Application Date (if the service date requested by the customer is
earlier than or the same as the date in paragraph 5 above).
____Actual service date (if the service date requested by the customer
is later than the date in paragraph 5 above).
10. The foregoing service is provided in accordance with the Telephone Company's
lawfully filed tariffs, including any changes therein as may be made from time
to time, except that the applicable rates and charges for the service described
herein shall not be subject to any Telephone Company-initiated rate changes.
BY: /s/ illegible_____________________ TITLE: PRESIDENT & CEO__________
SUBSCRIBER: P.A.C.T. COMMUNICATION GROUP, INC._________________________
ADDRESS: 2740 E Oakland Park Blvd______________________________________
Suite 286/8
Ft. Lauderdale, FL 33306
BELLSOUTH
BY: __________________________________
TITLE: __Assistant Vice President - Sales
ACCEPTED: _______________________________
<PAGE>
SMARTRing SM SERVICE
TRANSPORT PAYMENT PLAN
The undersigned customer P.A.C.T. and Associates, Inc. (hereinafter "customer")
requests BELLSOUTH (hereinafter "Telephone Company") to provide
SMARTRing SM Service as described below.
1. SMARTRing Service is provided pursuant to and in accordance with the
BellSouth Companies Tariff F.C.C. NO 1, including the Transport Payment Plan
(TPP) as it applies to SMARTRing Service.
2. The SMARTRing Service provided to the customer shall consist of the locations
and configuration described in Exhibit 1 and all rate elements which are
consequently added to such configuration.
3. The service capacity desired is (check one):
- OC1 capacity ____ - OC3 capacity _X_
-
- OC3+capacity ____ - OC12 capacity ____
- OC48 capacity ____
- OC48+ capacity____
4. The TPP payment plan and service period for this service is:
- Payment plan A for ____ months
- Payment plan B for ____ months
- Payment plan C for ____ months
5. The earliest date on which this service can reasonably be made available to
the customer is 90 days from receipt of signed contract. There is no standard
service interval for this service.
6. The service date requested by the customer is ______________.
7. The service period shall commence on the actual service date, i.e. the date
the service is actually made available to the customer.
8. The Application Date is the date the Telephone Company receives a signed
original of this Agreement and all correct information needed to start the
ordering process, which shall evidence the customer's firm commitment for the
service.
<PAGE>
9. Rates and charges applicable to this Agreement are those in effect in
accordance with the tariff on the:
(check one)
__X__ Application Date (if the service date requested by the
customer is earlier than or the same as the date in paragraph 5 above).
_____ Actual service date (if the service date requested by
the customer is later than the date in paragraph 5 above).
10. The foregoing service is provided in accordance with the Telephone Company's
lawfully filed tariffs, including any changes therein as may be made from time
to time, except that the applicable rates and charges for the service described
herein shall not be subject to any Telephone Company-initiated rate changes.
BY: /s/ illegible______________ TITLE: PRESIDENT______________
SUBSCRIBER: P.A.C.T. and Associates, Inc._____________________
ADDRESS: 2740 East Oakland Park Boulevard, Suite 206 & 08,
Ft. Lauderdale, FL____
BELLSOUTH
BY: /s/ illegible_____________________
TITLE: ____AVP________________________
ACCEPTED: 2/26/98____________________
<PAGE>
P.A.C.T. & Associates
OC-3 SMARTRing
P.A.C.T. & Associates
Plantation
Central Office
SMARTRing Service
If system does not automatically self-heal
around the point of failure within one (1)
second, your account will be credited all
monthly charges for the service provided.
Coral Ridge
Central Office
Cypress
Central Office
Customer Node
Central Office Node
Pass Thru Central Office
<PAGE>
CONTRACT SERVICE ARRANGEMENT
AGREEMENT Case Number SE98-0365-01
This Contract Service Arrangement Agreement ("Agreement") is by and between
BellSouth Telecommunications, Inc., a Georgia corporation, d/b/a Bell South,
("Company") and Pact and Associates ("Customer or Subscriber"), and is entered
into pursuant to Tariff Section A5 of the General Subscriber Services Tariff.
This agreement is based upon the following terms and conditions as well as any
Attachment(s) affixed and the appropriate lawfully filed and approved tariffs
which are by this reference incorporated herein.
1. Subscriber requests and Company agrees, subject to the terms and
conditions herein, to provide the service described in the Attachment(s) at the
monthly and nonrecurring rates, charges, and conditions as described in the
Attachment(s) ("Service"). The rates, charges, and conditions described in the
Attachment(s) are binding upon Company and Subscriber for the duration of this
Agreement. For the purposes of the effectiveness of the terms and conditions
contained herein, this Agreement shall become effective upon execution by both
parties. For purposes of the determination of any service period stated herein,
said service period shall commence the date upon which installation of the
service is completed.
2. Subscriber agrees to subscribe to and Company agrees to provide any
additional tariffed services required for the installation of the Service.
Subscriber agrees to be responsible for all rates, charges, and conditions for
such tariffed services.
3. This agreement is subject to and controlled by the provisions of
Company's or any of its affiliated companies' lawfully filed and approved
tariffs, including but not limited to Section A2 of the General Subscriber
Services Tariff and No. 2 of the Federal Communications Commission Tariff and
shall include all changes to said tariffs as may be made from time to time. All
appropriate tariff rates and charges shall be included in the provision of this
service. The tariff shall supersede any conflicting provisions of this
Agreement, with the exception of the rates and charges herein, in the event any
part of this Agreement conflicts with terms and conditions of Company's or any
of its affiliated companies' lawfully filed and approved tariffs.
4. This Agreement may be subject to the appropriate regulatory approval
prior to commencement of installation. Should such regulatory approval be
denied, after a proper request by Company, this Agreement shall be null, void,
and of no effect.
5. If Subscriber cancels this Agreement prior to the completed
installation of the Service, but after the execution of this Agreement by
Subscriber and Company, Subscriber shall pay all reasonable costs incurred in
the implementation of this Agreement prior to receipt of written notice of
cancellation by Company. Notwithstanding the foregoing, such reasonable costs
shall not exceed all costs which would apply if the work in the implementation
of this Agreement had been completed by Company.
6. The rates, charges, and conditions described in the Attachment(s)
may be based upon information supplied to Company by the Subscriber, including
but not limited to forecasts of growth. If so, Subscriber agrees to be bound by
the information provided to Company. Should Subscriber fail to meet its
forecasted level of service requirements at any time during the term of this
Agreement, Subscriber shall pay all reasonable costs associated with its failure
to meet its projected service requirements.
7. (a) If Subscriber cancels this Agreement at any time prior to the
expiration of the service period set forth in this Agreement, Subscriber shall
be responsible for all termination charges. Unless otherwise specified by
tariff, termination charges are defined as all reasonable charges due or
remaining as a result of the minimum service period agreed to by Company and
Subscriber and set forth in the Attachment(s).
<PAGE>
CONTRACT SERVICE ARRANGEMENT
AGREEMENT Case Number SE98-0365-01
7. (b) Subscriber further acknowledges that it has options for its
telecommunication services from providers other than BellSouth and that it has
chosen BellSouth to provide the services in this Agreement. Accordingly,
Subscriber agrees that in the event it transfers its services to an alternative
local service provider, such transfer shall be deemed a termination of this
Agreement and BellSouth shall bill Subscriber all appropriate termination
charges applicable to a termination of the Agreement.
8. This Agreement shall be construed in accordance with the laws of the
State of Florida.
9. Except as otherwise provided in this Agreement, notices required to
be given pursuant to this Agreement shall be effective when received, and shall
be sufficient if given in writing, hand delivered, or United States mail,
postage prepaid, addressed to the appropriate party at the address set forth
below. Either party hereto may change the name and address to whom all notices
or other documents required under this Agreement must be sent at any time by
giving written notice to the other party.
Company
-------------
BellSouth Telecommunications, Inc.
Assistant Vice President
1800 CENTURY BLVD., SUITE 400
ATLANTA, GA 30345
Subscriber
---------------
Pact and Associates, Inc.
2740 East Oakland Park Blvd, Suite 206 & 208
Ft. Lauderdale, FL 33306
10. Subscriber may not assign its rights or obligations under this
Agreement without the express written consent of Company and only pursuant to
the conditions contained in the appropriate tariff.
11. In the event that one or more of the provisions contained in this
Agreement or incorporated within by reference shall be invalid, illegal, or
unenforceable in any respect under any applicable statute, regulatory
requirement or rule of law, then such provisions shall be considered inoperative
to the extent of such invalidity, illegality, or unenforceability and the
remainder of this Agreement shall continue in full force and effect.
<PAGE>
CONTRACT SERVICE ARRANGEMENT
AGREEMENT Case Number SE980365-01
Option 1 of 1
RATES AND CHARGES
<TABLE>
<CAPTION>
Rate Element Non-Recurring Monthly Rate USOC
------------ ------------- ------------ ----
<S> <C> <C> <C> <C>
1. BellSouthR Primary Rate ISDN service "Confidential Portion Deleted" 1LD1E
Access Line, each
2. BellSouthR Primary Rate ISDN service, "Confidential Portion Deleted" 1LN1B
Interoffice Channel, each channel, per mile
or fraction thereof
3. BellSouthR Primary Rate ISDN service "Confidential Portion Deleted" PR7BD
4. Contract Preparation Charge "Confidential Portion Deleted" WGGVF
</TABLE>
NOTES:
All applicable rates and regulations for BellSouthR Primary Rate ISDN
service as set forth in the General Subscriber Services Tariff are in
addition to the rates and regulations contained in this Contract
Service Arrangement.
Apply five End User CommonLine Charges for each Primary Rate Interface.
These rates and charges include the rate elements that have been
specifically discounted. Other rate elements that are used in the
provision of the service may not have been listed but can be found in
the appropriate BellSouth tariff.
(R) Registered Service Mark of BellSouth Corporation
END OF ARRANGEMENT AGREEMENT OPTION 1
<PAGE>
CONTRACT SERVICE ARRANGEMENT
AGREEMENT
SALES NOTES Case Number SE98-0365-01
- --------------------------------------------------------------------------------
Option 1
Discounts are computed using: one PRI Access Line, one Interface, 23 B-Channels
and five End User Common Line charges. Discounts provided by this Contract
Service Arrangement supercede volume discounts provided from the GSST.
For PRI-Inward Data Option, the Class of Service is PR7ZX.
Unless otherwise indicated, the rates and charges herein are not valid for
locations in Independent Company territory. This model is not valid for a
BellSouth Company Enhanced Service Provider, such as BellSouth.net.
For sold cases, once the signed contract has been forwarded to the Headquarters
Staff, the following intervals should be expected to gain regulatory approval to
process this case:
AL - 20 days for CSAs
MS - 20 days for CSAs
TN - 40 days for CSAs
SC - 9 business days for CSAs and SSAs
States not identified above should gain regulatory approval in 1 business day.
Page 1
<PAGE>
AGREEMENT
The undersigned Subscriber, P.A.C.T. & Associates, Inc. requests BellSouth
Telecommunications, Inc. ("Company") provide BellsouthR Primary Rate ISDN "PRI"
at the FTLDFLCYC central office and/or Subscriber's location(s) at 2740 East
Oakland Park Boulevard, Suite 206 & 208, Ft. Lauderdale, Florida.
1. The Company will furnish, maintain and provide maintenance of channel
services for PRI in accordance with the Company's lawfully filed
tariffs. The tariffs provide the basis for this Agreement with the
Subscriber. The Agreement period shall begin the day PRI service is
installed.
2. The Subscriber agrees to pay Company for the provision of PRI
("Service"). The Service shall be offered for variable rate periods of
24 to 72 months. This monthly rate will continue for the elected
service period and will not be subject to Company initiated change
during such period.
3. Recognition of previous service will be given to the Subscriber who
renews an existing contract arrangement, for the same or larger
system(s) and all associated rate elements at the same location(s),
provided that the length of the new contract arrangement is a minimum
24 month service period or equals/exceeds the remaining service period
of the original contract arrangement, whichever is greater.
4. Recognition of previous service will be given to the month-to-month
Subscriber with a service date of January 1, 1994 or later who converts
to a contract arrangement, provided the minimum service period has been
met. For the Subscriber whose service date is January 1, 1994 or
earlier, recognition will be given for the previous service back to
January 1, 1994. For the Subscriber whose service date is later than
January 1, 1994, recognition for the previous service will be given
back to the actual service date.
<PAGE>
5. The service period for this Agreement shall be 60 months. This
Agreement period includes 0 months for recognition of previous service.
The rates and charges, per month, for items under this Agreement are:
- --------------------------------------------------------------------------------
QUANTITY RECURRING NON-RECURRING
- --------------------------------------------------------------------------------
PRI INTERFACE 8 "Confidential Portion Deleted"
- --------------------------------------------------------------------------------
PRI ACCESS LINE 8 "Confidential Portion Deleted"
- --------------------------------------------------------------------------------
INTEROFFICE
CHANNEL
- --------------------------------------------------------------------------------
PRI B CHANNELS 190 "Confidential Portion Deleted"
- --------------------------------------------------------------------------------
TELEPHONE NUMBERS 1 "Confidential Portion Deleted"
- --------------------------------------------------------------------------------
ICE-MAX ONE CALL
PER TELEPHONE
NUMBER
- --------------------------------------------------------------------------------
ICE- MORE THAN ONE
SIMULTANEOUS CALL
PER TELEPHONE
NUMBER
- --------------------------------------------------------------------------------
ICE- ADDITIONAL
PATHS
- --------------------------------------------------------------------------------
Digital Data Only NEXT
ROUTE INDEX-VOICE
- --------------------------------------------------------------------------------
Digital Data Only NEXT
ROUTE INDEX-
VOICE/DATA
- --------------------------------------------------------------------------------
<PAGE>
6. In the event that any item of Service is terminated prior to the
expiration of the service period, the Subscriber shall pay a
termination liability charge as specified in the tariff.
7. At the expiration of the service period, the Subscriber may continue
the Service according to renewal options provided under the tariff. If
the Subscriber does not elect an additional service period, or does not
request discontinuance of service, then the above Service will be
continued at the monthly rate currently in effect for month-to-month
rates. Service periods may also be renewed prior to expiration in
accordance with regulations and rates in effect.
8. Suspension of service is not permitted for PRI service.
9. The Subscriber agrees to pay any added costs incurred by the Company
due to a Subscriber initiated change in the location of the PRI service
prior to the time it is placed in service.
10. Subject to the current provisions of applicable tariffs, the Subscriber
may arrange to have existing Service under this Agreement moved within
the same premises. Subscriber agrees to pay a non-recurring charge
based upon the estimated cost of such arrangement without interruption
or change in monthly rates.
11. Service may be transferred to another Subscriber at the same location
upon prior written concurrence of the Company. The new Subscriber to
whom the Service is transferred will be subject to all tariff
provisions and equipment configurations currently in effect for the
present Subscriber.
This Agreement is effective when executed by the Subscriber and accepted by the
Company, and is subject to and controlled by the provisions of the Company's
lawfully filed tariffs, including any changes therein as may be made from time
to time.
ADDRESS: 2740 East Oakland Park Boulevard, Suite 206 & 208______________________
_________Ft. Lauderdale, Florida 33306_________________________________________
SUBSCRIBER: _____P.A.C.T. & Associates, Inc.___________________________________
BY: /s/ illegible_____________________________ TITLE: _______PRES._____________
BELLSOUTH TELECOMMUNICATIONS, INC.
ACCEPTED: __________FEB. 26________________, 1998_______________________________
BY: /s/ illegible____________________________ TITLE: ___AVP_____________________
<PAGE>
Attachment 1
AGREEMENT FOR ALTERNATE
NETWORK SERVICE ARRANGEMENT
This Agreement is entered into between P.A.C.T. & Associates "Customer" and
BellSouth "Company" for an ISDN Alternate Network Serving Arrangement (ANSA) for
ISDN Individual Line service or Primary Rate ISDN Service. WHEREAS, Customer at
2740 E. Oakland Park Boulevard, Ft. Lauderdale, FL has requested an ISDN ANSA;
WHEREAS, Company agrees to provide an ISDN ANSA pursuant to its lawfully filed
tariffs. NOW, THEREFORE, in consideration of the foregoing the parties agree to
the following:
A. Company agrees to provide ISDN serving arrangements for Customer if
Customer's Local Serving Office is not equipped with ISDN capability.
B. Customer recognizes and agrees that BellSouth shall provide the Customer ISDN
ANSA subject to the following conditions:
1. In order to obtain ISDN, Company may be required to serve Customer from
an office other than the customer's normal local service office.
2. At the discretion of Company, Customer may be required to change its
original telephone number.
3. Upon the conversion of the Customer's original local service office to
ISDN, Customer's ISDN service will be provided from its original local
serving office.
4. Upon the conversion of the customer's original local serving office to
ISDN, Customer may be required at the discretion of the Company to change
its telephone number to a number provided from the original local serving
office.
5. Customer further recognizes and agrees that in the event the customer
receives ISDN service from its original local serving office, Customer is
responsible from any CPE modifications that are required to provide the
service in the new office.
C. 1. Customer further recognizes and agrees that applicable tariff rates shall
apply to its service arrangement; however, Customer shall not incur any
additional charge for Foreign Central Office (FCO) capability.
2. Customer further recognizes and agrees that upon conversion of the local
serving office to ISDN capability, if the customer does not desire to
receive service from its original local serving office, applicable FCO
charges will apply.
3. Additional features requested by the Customer shall be provided at rates
that are published in BellSouth tariffs or as stated in a Special Assembly
Agreement.
4. Usage sensitive billing, both originating and terminating, will be billed
as if calls originate or terminate in the ISDN service node.
D. Customer further agrees to the following terms and conditions:
1. Customer will be responsible for all CPE related costs and associated
with the ANSA agreement.
2. Customer assumes the responsibility of ensuring the compatibility of
Customer Premise Equipment (CPE) with the BellSouth ISDN interface.
3. BellSouth's standard installation and repair interval will apply to
serving arrangement.
E. Customer recognizes that the aforementioned services are provided pursuant
to BellSouth's lawfully filed tariffs and if there is a conflict between
this Agreement and BellSouth's lawfully filed tariffs, the tariffs have
govern.
P.A.C.T. & Associates BellSouth Telecommunications, Inc.
__Camilo Pereira_______________ Donna Edson__________________
Print Name Print Name
------------------------------- -----------------------------
Signature Signature
Title: ___PRES._______________ Title: Business Development Manager
Date: ___02 - 25 - 98__________ Date: _______________________
<PAGE>
FCC OC-3 SMARTRING PRICING
2/19/98
RING-LEVEL ITEMS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION QTY USOC NR Mo. to Mo. 12-36 37-60 61-96
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------
Nodes
- ---------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OC-3 Customer Nodes (List Below): 1 SHNC3 "Confidential Portion Deleted"
- ------------------------------------------------------------------------------------------------------------------------------------
2740 E. Oakland Park Blvd.
- ---------------------------------
- ---------------------------------
- ---------------------------------
- ---------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OC-3 Central Office Nodes (List Below): 2 SHNH3 "Confidential Portion Deleted"
- ------------------------------------------------------------------------------------------------------------------------------------
coral ridge
cypress
- ---------------------------------
- ---------------------------------
- ---------------------------------
- ---------------------------------
Mileage Related Charges
- ---------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Local Channel - Per 1/4 Air Mile 4 1HVXX "Confidential Portion Deleted"
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Alternate C.O. Channel - Per 1/4 Air Mile
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Interoffice Channel - Fixed 2 1HXFX "Confidential Portion Deleted"
- ------------------------------------------------------------------------------------------------------------------------------------
Interoffice Channel - Per 1/4 Air Mile 49 1HXFX "Confidential Portion Deleted"
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Intermodal Channel - Same Wire Center - Per 1/4 Mile
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Intermodal Channel - Contiguous SWC's - Per 1/4 Mile
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CIRCUIT-LEVEL ITEMS
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION QTY USOC NR Mo. to Mo. 12-36 37-60 61-96
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------
Customer Channel Interfaces
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Per DS-1 16 SHNBB "Confidential Portion Deleted"
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Per DS-3
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Per STS-1
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------
C.O. Channel Interfaces
- ---------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Per DS-1 15 SHNCB "Confidential Portion Deleted"
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Per DS-3
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Per STS-1
- ------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------
NR Mo. to Mo. 12-36 37-60 61-96
- ---------------------------------- ------------------------------------------------------
GRAND TOTALS "Confidential Portion Deleted"
- ---------------------------------- ------------------------------------------------------
</TABLE>
OC 3 Page 1
BellSouth Corporation Confidential
<PAGE>
AGREEMENT
The undersigned Subscriber, P.A.C.T. & Associates, Inc. requests BellSouth
Telecommunications, Inc. ("Company") provide BellsouthR Primary Rate ISDN "PRI"
at the FTLDFLCYC central office and/or Subscriber's location(s) at 2740 East
Oakland Park Boulevard, Suite 206 & 208, Ft. Lauderdale, Florida.
1. The Company will furnish, maintain and provide maintenance of channel
services for PRI in accordance with the Company's lawfully filed tariffs.
The tariffs provide the basis for this Agreement with the Subscriber. The
Agreement period shall begin the day PRI service is installed.
2. The Subscriber agrees to pay Company for the provision of PRI ("Service").
The Service shall be offered for variable rate periods of 24 to 72 months.
This monthly rate will continue for the elected service period and will not
be subject to Company initiated change during such period.
3. Recognition of previous service will be given to the Subscriber who renews
an existing contract arrangement, for the same or larger system(s) and all
associated rate elements at the same location(s), provided that the length
of the new contract arrangement is a minimum 24 month service period or
equals/exceeds the remaining service period of the original contract
arrangement, whichever is greater.
4. Recognition of previous service will be given to the month-to-month
Subscriber with a service date of January 1, 1994 or later who converts to
a contract arrangement, provided the minimum service period has been met.
For the Subscriber whose service date is January 1, 1994 or earlier,
recognition will be given for the previous service back to January 1, 1994.
For the Subscriber whose service date is later than January 1, 1994,
recognition for the previous service will be given back to the actual
service date.
<PAGE>
5. The service period for this Agreement shall be 60 months. This Agreement
period includes 0 months for recognition of previous service. The rates and
charges, per month, for items under this Agreement are:
- --------------------------------------------------------------------------------
QUANTITY RECURRING NON-RECURRING
- --------------------------------------------------------------------------------
PRI INTERFACE 4 "Confidential Portion Deleted"
- --------------------------------------------------------------------------------
PRI ACCESS LINE 4 "Confidential Portion Deleted"
- --------------------------------------------------------------------------------
INTEROFFICE 4 "Confidential Portion Deleted"
CHANNEL
- --------------------------------------------------------------------------------
PRI B CHANNELS 94 "Confidential Portion Deleted"
- --------------------------------------------------------------------------------
TELEPHONE NUMBERS 1 "Confidential Portion Deleted"
- --------------------------------------------------------------------------------
ICE-MAX ONE CALL
PER TELEPHONE
NUMBER
- --------------------------------------------------------------------------------
ICE- MORE THAN ONE
SIMULTANEOUS CALL
PER TELEPHONE
NUMBER
- --------------------------------------------------------------------------------
ICE- ADDITIONAL
PATHS
- --------------------------------------------------------------------------------
Digital Data Only NEXT
ROUTE INDEX-VOICE
- --------------------------------------------------------------------------------
Digital Data Only NEXT
ROUTE INDEX-
VOICE/DATA
- --------------------------------------------------------------------------------
<PAGE>
6. In the event that any item of Service is terminated prior to the expiration
of the service period, the Subscriber shall pay a termination liability
charge as specified in the tariff.
7. At the expiration of the service period, the Subscriber may continue the
Service according to renewal options provided under the tariff. If the
Subscriber does not elect an additional service period, or does not request
discontinuance of service, then the above Service will be continued at the
monthly rate currently in effect for month-to-month rates. Service periods
may also be renewed prior to expiration in accordance with regulations and
rates in effect.
8. Suspension of service is not permitted for PRI service.
9. The Subscriber agrees to pay any added costs incurred by the Company due to
a Subscriber initiated change in the location of the PRI service prior to
the time it is placed in service.
10. Subject to the current provisions of applicable tariffs, the Subscriber may
arrange to have existing Service under this Agreement moved within the same
premises. Subscriber agrees to pay a non-recurring charge based upon the
estimated cost of such arrangement without interruption or change in
monthly rates.
11. Service may be transferred to another Subscriber at the same location upon
prior written concurrence of the Company. The new Subscriber to whom the
Service is transferred will be subject to all tariff provisions and
equipment configurations currently in effect for the present Subscriber.
This Agreement is effective when executed by the Subscriber and accepted by the
Company, and is subject to and controlled by the provisions of the Company's
lawfully filed tariffs, including any changes therein as may be made from time
to time.
ADDRESS: 2740 East Oakland Park Boulevard, Suite 206 & 208______________________
_________Ft. Lauderdale, Florida 33306_________________________________________
SUBSCRIBER: _____P.A.C.T. & Associates, Inc.___________________________________
BY: /s/ illegible_____________________________ TITLE: _______PRES._____________
BELLSOUTH TELECOMMUNICATIONS, INC.
ACCEPTED: __________FEB. 26________________, 1998_______________________________
BY: /s/ illegible____________________________ TITLE: ___AVP_____________________
<PAGE>
AGREEMENT
The undersigned Subscriber, P.A.C.T. & Associates, Inc. requests BellSouth
Telecommunications, Inc. ("Company") provide BellsouthR Primary Rate ISDN "PRI"
at the FTLDFLCYC central office and/or Subscriber's location(s) at 2740 East
Oakland Park Boulevard, Suite 206 & 208, Ft. Lauderdale, Florida.
1. The Company will furnish, maintain and provide maintenance of channel
services for PRI in accordance with the Company's lawfully filed tariffs.
The tariffs provide the basis for this Agreement with the Subscriber. The
Agreement period shall begin the day PRI service is installed.
2. The Subscriber agrees to pay Company for the provision of PRI ("Service").
The Service shall be offered for variable rate periods of 24 to 72 months.
This monthly rate will continue for the elected service period and will not
be subject to Company initiated change during such period.
3. Recognition of previous service will be given to the Subscriber who renews
an existing contract arrangement, for the same or larger system(s) and all
associated rate elements at the same location(s), provided that the length
of the new contract arrangement is a minimum 24 month service period or
equals/exceeds the remaining service period of the original contract
arrangement, whichever is greater.
4. Recognition of previous service will be given to the month-to-month
Subscriber with a service date of January 1, 1994 or later who converts to
a contract arrangement, provided the minimum service period has been met.
For the Subscriber whose service date is January 1, 1994 or earlier,
recognition will be given for the previous service back to January 1, 1994.
For the Subscriber whose service date is later than January 1, 1994,
recognition for the previous service will be given back to the actual
service date.
<PAGE>
5. The service period for this Agreement shall be 60 months. This Agreement
period includes 0 months for recognition of previous service. The rates and
charges, per month, for items under this Agreement are:
- --------------------------------------------------------------------------------
QUANTITY RECURRING NON-RECURRING
- --------------------------------------------------------------------------------
PRI INTERFACE 1 "Confidential Portion Deleted"
- --------------------------------------------------------------------------------
PRI ACCESS LINE 1 "Confidential Portion Deleted"
- --------------------------------------------------------------------------------
INTEROFFICE 1 "Confidential Portion Deleted"
CHANNEL
- --------------------------------------------------------------------------------
PRI B CHANNELS 23 "Confidential Portion Deleted"
- --------------------------------------------------------------------------------
TELEPHONE NUMBERS 1 "Confidential Portion Deleted"
- --------------------------------------------------------------------------------
ICE-MAX ONE CALL
PER TELEPHONE
NUMBER
- --------------------------------------------------------------------------------
ICE- MORE THAN ONE
SIMULTANEOUS CALL
PER TELEPHONE
NUMBER
- --------------------------------------------------------------------------------
ICE- ADDITIONAL
PATHS
- --------------------------------------------------------------------------------
Digital Data Only NEXT
ROUTE INDEX-VOICE
- --------------------------------------------------------------------------------
Digital Data Only NEXT
ROUTE INDEX-
VOICE/DATA
- --------------------------------------------------------------------------------
<PAGE>
6. In the event that any item of Service is terminated prior to the expiration
of the service period, the Subscriber shall pay a termination liability
charge as specified in the tariff.
7. At the expiration of the service period, the Subscriber may continue the
Service according to renewal options provided under the tariff. If the
Subscriber does not elect an additional service period, or does not request
discontinuance of service, then the above Service will be continued at the
monthly rate currently in effect for month-to-month rates. Service periods
may also be renewed prior to expiration in accordance with regulations and
rates in effect.
8. Suspension of service is not permitted for PRI service.
9. The Subscriber agrees to pay any added costs incurred by the Company due to
a Subscriber initiated change in the location of the PRI service prior to
the time it is placed in service.
10. Subject to the current provisions of applicable tariffs, the Subscriber may
arrange to have existing Service under this Agreement moved within the same
premises. Subscriber agrees to pay a non-recurring charge based upon the
estimated cost of such arrangement without interruption or change in
monthly rates.
11. Service may be transferred to another Subscriber at the same location upon
prior written concurrence of the Company. The new Subscriber to whom the
Service is transferred will be subject to all tariff provisions and
equipment configurations currently in effect for the present Subscriber.
This Agreement is effective when executed by the Subscriber and accepted by the
Company, and is subject to and controlled by the provisions of the Company's
lawfully filed tariffs, including any changes therein as may be made from time
to time.
ADDRESS: 2740 East Oakland Park Boulevard, Suite 206 & 208______________________
_________Ft. Lauderdale, Florida 33306_________________________________________
SUBSCRIBER: _____P.A.C.T. & Associates, Inc.___________________________________
BY: /s/ illegible_____________________________ TITLE: _______PRES._____________
BELLSOUTH TELECOMMUNICATIONS, INC.
ACCEPTED: __________FEB. 26________________, 1998_______________________________
BY: /s/ illegible____________________________ TITLE: ___AVP_____________________
<PAGE>
CHANNEL SERVICES PAYMENT PLAN AGREEMENT
The undersigned customer (hereinafter "customer") requests BellSouth
Telecommunications, Inc. (hereinafter "Telephone Company") to provide service as
described below.
1. Service is provided pursuant to and in accordance with the BellSouth
Companies Tariff No. 1, including the Channel Services Payment Plan
(CSPP).
2. The service type desired is (check one):
T1--hicap
Lowspeed DDAS 1
Highspeed DDAS 2
Voice Grade Service
Commercial Quality Video Service
3. The CSPP payment plan and service period for this service are:
Plan A for 36 months. Plan B for months. Plan C for months.
4. The earliest date on which this service can reasonably be made
available to the customer is 04-16-98 (to be completed by the Telephone
Company).
5. The service date requested by the customer is ____04-16-98___.
6. The service period shall commence on the actual service date, i.e., the
date the service is actually made available to the customer.
7. The application date is the date the Telephone Company receives a
signed original of this Agreement and all correct information needed to
start the ordering process, which shall evidence the customer's firm
commitment for the service.
8. Rates and charges applicable to this Agreement are those in effect in
accordance with the tariff on the:
Application Date (if the service date requested by
the customer is earlier than or the same as the date
in paragraph 5 above). Actual service date (if the
service date requested by the customer is later than
the date in paragraph 5 above).
Channel Services Payment Plan
<PAGE>
Page 2
9. The foregoing service is provided in accordance with the Telephone
Company's lawfully filed tariffs, including any changes therein as may
be made from time to time, except that the applicable rates and charges
for the service described herein shall not be subject to any Telephone
Company initiated rate changes.
BY: /s/ illegible TITLE: PRES.
SUBSCRIBER: P.A.C.T. & ASSOCIATES
ADDRESS: 2740 E. OAKLAND PARK BLVD., FT. LAUDERDALE, FL
BELLSOUTH Telecommunications, Inc.
BY:
TITLE:
DATE ACCEPTED:
e.spire
communications to the point
e.spire PLATINUM ISDN
for ISP'S
Thank you for doing business with e.spireTM Communications, Inc. We are
committed to providing you with the highest quality of telecommunications
services. If, at any time, you have questions or problems, or are not completely
satisfied, please let us know. Our goal is to do our best for you.
ACCEPTANCE By signing below, you acknowledge your review and acceptance of the
terms and conditions contained in this Agreement. This Agreement can only be
modified in a written document executed by both parties. Any attempts to make
modifications to these terms and conditions are void, and will not be
enforceable.
We provide the Services specified in the Attachments under the terms of our
applicable state and federal tariffs (Tariffs). Our entire agreement consists of
this Agreement and its Attachments, and the applicable Tariffs, and supersedes
any prior or contemporaneous proposals, discussions or agreements, written or
oral, concerning e.spire services.
With the exception of any special pricing and term commitments contained herein,
in the event of any conflict between the terms of this Agreement and its
Attachments, and the terms of our Tariffs, the terms of our Tariffs control.
ACCEPTED BY:
Company QUEST NET CORP.
Customer Name Camilo Pereira
Title CEO & Chairman
/s/ illegible
- ---------------------------------
Customer Signature
03-25-99
- ----------------------------------
Date
This e.spire PLATINUM ISDN AGREEMENT (Agreement) covers local access, local
toll, long distance and toll free services (Services) as specified in the
Attachments to this Agreement. This agreement is for Internet Service Provider
("ISP") customers. Outbound traffic is prohibited.
ADDITIONAL SERVICES e.spire PLATINUM ISDN also includes special Tariff Rates for
optional custom calling features, and ancillary services (Additional Services).
The monthly rates for the Additional Services will be as published in the
applicable e.spire Tariff, regardless of the Term of this Agreement. These rates
are subject to change at any time. If you select the Additional Services at some
time other than when you initially order the Services you will be charged a one
time fee for the Additional Services.
TERM COMMITMENT You agree to a three year term plan (Term). Based on this Term,
you will receive the e.spire Tariff rates as specified in the Attachments. This
Agreement will automatically renew for an additional Term of equal length with
the initial Term unless e.spire receives advance written notice from you at
least thirty (30) days prior to the end of the initial Term of your desire not
to renew the Agreement.
TERM RATES The Term rates for the Services are as specified in the applicable
Tariff. The Tariff rates are subject to change. Throughout the Term of this
Agreement, you will receive a term discount based upon the length of your Term
Commitment. The term discount is detailed in the Attachment(s) and varies
according to specific markets.
EARLY TERMINATION PENALTY If you decide to terminate the Services prior to the
end of the Term, you will be subject to early termination charges equal to
twenty percent (20%) of the number of months remaining in the Term multiplied by
the monthly rate for the Services. You shall be obligated to pay such charges
within thirty (30) days of termination. If we provide the Services via a
third-party, you will be charged all costs we incur for such early termination
with our service provider.
SATISFACTION GUARANTEE If for any reason you are dissatisfied with the Services,
you may cancel this Agreement within the first ninety (90) days after Services
are made available to you without paying an early termination penalty.
PAYMENT You will be billed at the beginning of each month. Your first bill will
include all non-recurring charges, charges for the first full month of Service,
and the pro-rated amount for Services provided during the month of installation.
You agree to pay all charges within thirty (30) days of the date of our invoice
to you ("Due Date"). You shall pay us interest on overdue payments at the rate
of one and a half percent (1.5%) or the maximum rate allowable by law. If you do
not pay all undisputed amounts by the Due Date we reserve the right to
disconnect Services. You will have up to ninety (90) days (commencing five (5)
days after remittance of the bill) to initiate a dispute over charges or to
receive credits, if applicable. If your check is returned by your bank, you will
be billed a twenty-five dollar ("Confidential Portion Deleted") return check
fee. We reserve the right to bill you retroactively for any Services for which
we previously had not billed.
You also agree to pay all applicable taxes resulting from any transaction under
this Agreement. This does not include taxes based on our net income.
LETTERS OF AUTHORIZATION In cases in which you and e.spire agree to have e.spire
act as your authorized agent for ordering and coordinating local and long
distance access circuits for services outside of this Agreement, you will
execute a Letter of Authorization.
<PAGE>
PLATINUM ISDN
Attachment A
<TABLE>
<CAPTION>
Term 1 Year 2 Year 3 Year
- ---- ------ ------ ------
<S> <C> <C>
Monthly "Confidential Portion Deleted"
Non-Recurring "Confidential Portion Deleted" "Confidential Portion Deleted" waived
</TABLE>
PRODUCT COMPONENTS
* ISDN PRI Access Facility
Hunting (at no additional cost)
Long Distance Fixed Term Discounts
1 Year 2 Year 3Year
------ ------ -----
19.29% 24.24% 29.39%
Toll Free Service Fixed Term Discounts
1 Year 2 Year 3 Year
------ ------ ------
12% 15% 20%
e.spire PLATINUM ISDN
11/98
<PAGE>
CREDIT Your execution of this Agreement signifies your acceptance of our initial
and continuing credit approval procedures and policies. We reserve the right to
withhold initiation or full implementation of the Services until we are
satisfied with our initial credit review and approval. We may require a security
deposit before Services are provided.
If there is a material adverse change in your creditworthiness we may: (1)
interrupt Service; (2) deny requests for additional Services or (3) require a
deposit.
TRANSFER AND ASSIGNMENT You may not sell, assign or transfer any of your rights
or obligations under this Agreement without our prior written consent. We
reserve the right to transfer Services we provide to you via a third-party
network to e.spire -based facilities at any time during the term of this
Agreement.
FORCE MAJEURE We are not responsible for performing our obligations when they
are delayed or hindered by war, riots, embargoes, strikes, or any Acts of God.
SALE AND INSTALLATION AGREEMENT
This Agreement made this ____day of June 1999, by and between Quest Net Corp.,
2999 NE 191st Street, Penthouse 8, Aventura, Florida 33180, a Florida
corporation ("Quest") Quest Wireless, Inc. 2999 NE 191st Street, Penthouse 8,
Aventura, Florida 33180, a Florida corporation ("Quest Wireless") and Wireless
Inc., 19 Davis Drive, Belmount California 94002, a California Corporation
("Wireless").
W I T N E S E T H:
RECITALS
WHEREAS, Quest Wireless wishes to purchase and Wireless wishes to sell
the equipment and services as set forth in the Purchase Order and schedules
attached hereto as Exhibit A and incorporated herein (the "Purchase Order");
WHEREAS, Quest Wireless is the wholly owned subsidiary of Quest;
WHEREAS, Quest, as Quest Wireless' parent corporation, wishes to
guarantee the payment obligations of Quest Wireless to Wireless pursuant to the
terms of this Agreement.
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. Quest Wireless agrees to purchase and Wireless by its
acceptance of this Agreement agrees to sell, on the following terms and
conditions, the equipment (the "Equipment"), and services set forth and more
fully described in the Purchase Order (the "Project").
2. TERMS AND PAYMENT. The terms and payment for the Project are fully set forth
in the Purchase Order.
3. TITLE. Title to the equipment shall pass to Quest Wireless upon completion of
the installation of the Equipment by Wireless.
4. SECURITY INTEREST. Wireless reserves a purchase money security interest in
the Equipment in the amount of its purchase price. These interests will be
satisfied by payment in full of the purchase price.
5. RISK OF LOSS. During the period the Equipment is in transit or in the
possession of Wireless, up to and including the date of installation Wireless
and its insurers, if any, relieve Quest Wireless of responsibility for all risks
of loss or damage to the Equipment. After the date of installation, the risk of
loss or damage shall be on Quest Wireless.
1
<PAGE>
6. DELIVERY AND INSTALLATION. Delivery and installation of the Equipment will be
made in accordance with the delivery and installation schedule set forth in the
Purchase Order, subject to the following conditions beyond Wireless' control.
Wireless shall not be liable for any failure to deliver or install if such
failure has been occasioned by fire, embargo, strike, failure to secure
materials from a usual source of supply, or any circumstance beyond Wireless'
control which shall prevent Wireless from making deliveries or installations in
the normal course of its business. Wireless shall not, however, be relieved from
making delivery and installation when the causes interfering with deliveries and
installations shall have been removed.
7. WARRANTY.
(a) Equipment purchased pursuant to this Agreement will be in new
condition with original manufacturer's warranties. The Equipment will meet
published performance specifications, including but not limited to range,
signal, strength, and performance under weather conditions.
(b) For one year commencing on the date of installation Wireless
warrants that the Equipment to be free from defects in material and workmanship.
Wireless' obligation is limited to furnishing on an exchange basis replacements
for Equipment, which has been promptly reported by Quest Wireless as having been
defective and are so found by Wireless upon inspection. All replacement
Equipment will be new or equivalent to new in performance when installed. All
replaced Equipment will become the property of Wireless on an exchange basis.
(c) The above warranties will not apply to repair of damage caused by:
accident, transportation, neglect or misuse; alterations installation or any
other modification or maintenance related activities, whenever any of the above
are performed by other than Wireless representatives.
8. SOFTWARE AND HARDWARE UPGRADES. Wireless will provide, for a period of five
years, software upgrades at no cost for the WaveNet IP 2458. Hardware upgrades
will be provided at the most favorable customer pricing available at that time.
In the event that Wireless "manufacture discontinues" WaveNet 2458 or no longer
provides customer service, or product support such, Quest shall be granted
licenses to continue support and deployment. In this event the reasonable cost
of transferring licenses and supporting documentation will be borne by Quest.
9. GUARANTEE OF PAYMENT. Quest Net Corp., by execution of this Agreement, agrees
to guaranty all payments required to be made by Quest Wireless pursuant to this
Agreement and the Purchase Order. Quest agrees that, if the Quest Wireless
should at any time make a general assignment, or if a petition in bankruptcy or
any insolvency or reorganization proceedings shall be filed or commenced by,
against or in respect of Quest Wireless any and all of Quest's obligations
shall, at Wireless' option, become due and payable without notice.
10. RELATIONSHIP OF PARTIES. Except as set forth herein, Wireless shall have no
right or authority to create any obligation on the part of Quest or Quest
Wireless or bind Quest or Quest Wireless to any agreement.
11. SOLICITATION OF COMPETITORS. During the term of this Agreement and for a
2
<PAGE>
period of one year thereafter, Wireless, directly or indirectly, will not seek
to sell to any competitor of Quest Wireless, equipment or services the same as
or similar to the Equipment and services provided to Quest Wireless pursuant to
this Agreement, for installation within a 30 mile radius from the installations
contemplated by this Agreement.
12. 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 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, facsimile delivery or by mailing.
13. 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 Miami 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.
14. 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.
15. 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.
16. SECTION AND PARAGRAPH HEADINGS. The section and paragraph headings in the
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
17. 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.
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.
3
<PAGE>
19. 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.
20. FURTHER ASSURANCES. The Parties hereto agree to execute and deliver from
time to time at the other Party's request, without further consideration, such
additional documents and to take such other action necessary to consummate the
transactions contemplated herein.
21. ASSIGNMENT. This Agreement may not be assigned by either party without the
other party's prior written consent, which shall not be unreasonably withheld.
22. TIME IS OF THE ESSENCE. The Parties hereto acknowledge and agree that time
is of the essence in the performance of any obligations contained herein.
23. CONTINGENCIES. The Agreement shall be subject to the contingencies contained
in the Purchase Order.
24. ENTIRE AGREEMENT. This Agreement and the Exhibits hereto, constitute 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 first set forth above.
In the presence of:
Quest Wireless, Inc.
_______________________
_______________________ BY:_____________________________________
Camilo Pereira, President
Quest Net Corp.
_______________________
_______________________ BY:_____________________________________
Camilo Periera, President
Wireless, Inc.
_______________________ BY:_____________________________________
William E. Gibson, Chief Executive
Officer & President
_______________________
4
<PAGE>
WIRELESS, INC.(LOGO)
QUEST NET AND WIRELESS INC.
EXECUTIVE SUMMARY
Our Proposal recognizes the need for a cost effective, total system solution
which provides leading-edge products, timely delivery and installation, high
reliability and performance.
Our document includes a backbone of the 6 GHz OC3 radios, protected 1X1. These
radios will provide an OC 3 from South Miami to West Palm Beach. We have set
engineering criteria of 99.999% reliability. All transmission products used in
the backbone are FCC approved and can be licensed under 6 GHz frequencies. Our
OC3 design is upgrade able to multiple OC 3's, giving Quest Net a path to the
future, expandable to cover all of Florida.
We have also used an ATM switch platform at each city to connect to the Ethernet
Wavenet IP centrals and to N2 links to supply extra sites for additional
Distribution.
Each target city has optioned a 4 sector Wavenet IP Central build, (upgrade able
to 12 sectors per city). N2 Radios shall be used to connect the backbone site to
other central sites, each supporting a four central cluster. The Wavenet IP is a
point to multipoint Access router, which is used as the final wireless mile
solution to access your customers and bring them on to the network. Initially
each city shall be able to offer approximately 250 customers, High-Speed sub T1
service, as well as the option to add point to point N2 links for dedicated high
capacity connectivity.
These Four elements, wireless OC3 the backbone, ATM switches, N2 links and the
Wavenet IP point multipoint wireless final mile solution provides Quest Net the
basis of a build out for the South Miami to West Palm Beach system.
Wireless Inc. proposes to engineer, furnish, and install the system in the
target cities that Quest Net has desired, in an expedient fashion partnering in
Quest Net's pursuit of success.
Wireless Inc. is pleased to be a part of this effort and is committed to its
success. Our submission of the basic design is contained within. We plan to meet
with you on Friday June 4th to finalize our agreement and begin the process.
In summary Wireless Inc is offering the most technologically advanced products
proven global experience and commitment for success to Quest Net. I look forward
to our June 4th meeting.
Sincerely,
Shahin Sadri.
<PAGE>
QUESTNET SITES
I. 6 GHz OC3 Backbone Radio Sites
<TABLE>
<CAPTION>
Backbone
Centerlines Tower Site ATM
# Site Name Latitude Longitude ASL Main Div Ht City State Type WDSL Switch
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 QuestNet 25 57.134 80 08.6 -30 North Miami FL End 4 Sector Yes
2 NW 23rd Ave 26 08.6 80 10.3 280 -30 265 Ft. Lauderdale FL B-to-B 4 Sector Yes
3 501 E. Camino Real 26 20.4 80 04.69 305 -30 300 Boca Raton FL B-to-B 4 Sector Yes
4 Trump Plaza 26 42.5 80 03.06 378 -30 368 West Palm Beach FL End 4 Sector Yes
</TABLE>
II. N2X & Additional WDSL POP Sites
<TABLE>
<CAPTION>
Backbone
Centerlines Tower Site ATM
# Site Name Latitude Longitude ASL Main Div Ht City State Type WDSL Switch
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2nd Miami TBD TBD TBD TBD NA TBD Miami FL NA 4 Sector No
2 3rd Miami TBD TBD TBD TBD NA TBD Miami FL NA 4 Sector No
3 2nd Ft. Lauderdale TBD TBD TBD TBD NA TBD Ft. Lauderdale FL NA 4 Sector No
4 3rd Ft. Lauderdale TBD TBD TBD TBD NA TBD Ft. Lauderdale FL NA 4 Sector No
5 2nd Boca TBD TBD TBD TBD NA TBD Boca Raton area FL NA 4 Sector No
6 3rd Boca TBD TBD TBD TBD NA TBD Boca Raton Area FL NA 4 Sector No
7 2nd West Palm TBD TBD TBD TBD NA TBD West Palm area FL NA 4 Sector No
8 3rd West Palm TBD TBD TBD TBD NA TBD West Palm area FL NA 4 Sector No
</TABLE>
<PAGE>
QUSTNET PATHS
I. 6 GHz OC3 Radios
<TABLE>
<CAPTION>
Frequency (MHz)
# From To Distance (M) Product Go Return Channel
<S> <C> <C> <C> <C> <C> <C>
1 QuestNet FT Lauderdale 13.33 MDR-43U6s-D 6 GHz 6 GHz 30 MHz
2 FT Lauderdale Boca Raton 14.82 MDR-43U6s-D 6 GHz 6 GHz 30 MHz
3 Boca Raton West Palm Beach 25.7 MDR-43U6s-D 6 GHz 6 GHz 30 MHz
53.85
</TABLE>
II. N2X Spur Routes
<TABLE>
<CAPTION>
Frequency (MHz)
# From To Distance (M) Product Go Return Channel
<S> <C> <C> <C> <C> <C> <C>
1 QuestNet 2nd Miami Site TBD N2X NII NII 16 MHz
2 QuestNet 3rd Miami Site TBD N2X NII NII 16 MHz
3 Ft Lauderdale 2nd Ft. L Site TBD N2X NII NII 16 MHz
4 Ft Lauderdale 3rd Ft. L Site TBD N2X NII NII 16 MHz
5 Boca Raton 2nd Boca Site TBD N2X NII NII 16 MHz
6 Boca Raton 3rd Boca Site TBD N2X NII NII 16 MHz
7 West Palm Beach 2nd W Palm Site TBD N2X NII NII 16 MHz
8 West Palm Beach 3rd W Palm Site TBD N2X NII NII 16 MHz
</TABLE>
<PAGE>
QUESTNET PRICES
Part I Equipment
<TABLE>
<CAPTION>
6 GHz WDSL* WDSL* ATM
Backbone Hub Remote Network
# City Equipment Equipment Equipment Equipment
<S> <C> <C> <C> <C> <C>
1 Miami "Confidential Portion Deleted"
2 Ft. Lauderdale "Confidential Portion Deleted"
3 Boca raton "Confidential Portion Deleted"
4 West Palm "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
Part II Installation
<TABLE>
<CAPTION>
6 GHz WDSL ATM
Backbone Hub Network
# City Equipment Equipment Equipment
<S> <C> <C> <C> <C>
1 Miami "Confidential Portion Deleted"
2 Ft. Lauderdale "Confidential Portion Deleted"
3 Boca raton "Confidential Portion Deleted"
4 West Palm "Confidential Portion Deleted"
"Confidential Portion Deleted" "Confidential Portion Deleted"
Part III Site Surveys, Frequency Coordination & FCC licensing "Confidential Portion Deleted"
Part IV System Engineering "Confidential Portion Deleted"
Part V TSM 2500 Backbone Network Management System "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
*(Prices Reflect a minimum commitment of 1000 Remotes)
<PAGE>
I. Microwave Backbone Equipment
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 1 6 GHz, 1+1, MHSE Alcatel MDR-43U6e-D "Confidential Portion Deleted"
2 4 24" Flex Waveguide Cablewave 400014 "Confidential Portion Deleted"
3 1 6 GHz 8' Dish Main Cablewave 304253 "Confidential Portion Deleted"
4 1 8' Conical Radome Cablewave 310772-001 "Confidential Portion Deleted"
5 0 6 GHz 6' Dish Diversity Cablewave 304252 "Confidential Portion Deleted"
6 0 6' Conical Radome Cablewave 310771-001 "Confidential Portion Deleted"
7 1 Adjustable Sway Bar Cablewave 311211 "Confidential Portion Deleted"
7 300 Main Elliptical WG Cablewave 810265-002 "Confidential Portion Deleted"
8 0 Diversity Elliptical WG Cablewave 819265-002 "Confidential Portion Deleted"
9 2 Waveguide Connector Cablewave 399269-101 "Confidential Portion Deleted"
10 1 Hoisting Grip/GEP-65 Cablewave 910311 "Confidential Portion Deleted"
11 6 Universal Grounding Kit Cablewave 921182-003 "Confidential Portion Deleted"
12 11 Waveguide Hanger Kit Cablewave 920981-003 "Confidential Portion Deleted"
13 22 Angle Member Kit Cablewave 915255 "Confidential Portion Deleted"
14 1 4" Wall Roof Feed Thru Cablewave 920831 "Confidential Portion Deleted"
15 1 4" Cushion Entry Boot Cablewave 915663 "Confidential Portion Deleted"
16 1 WR-137 Press Window Cablewave 400108 "Confidential Portion Deleted"
17 1 Air Press Dist Kit, 4 Port Cablewave 920204 "Confidential Portion Deleted"
18 1 Threaded Rod Kit Cablewave 915666 "Confidential Portion Deleted"
19 3 Hanger Hardware Kit Cablewave WBG "Confidential Portion Deleted"
20 1 Automatic Dehydrator Cablewave 920635 "Confidential Portion Deleted"
21 1 Power Supply Shelf PCP PS-19H "Confidential Portion Deleted"
22 2 Switchmode Rectfier PCP MOD4812P "Confidential Portion Deleted"
23 1 Minl Load Center PCP MDM48-40-1 "Confidential Portion Deleted"
24 1 19" Battery Tray PCP 0000910447AB "Confidential Portion Deleted"
25 1 Power Battery PCP 4-PRC1235 "Confidential Portion Deleted"
26 1 PS Mounting Rail PCP "Confidential Portion Deleted"
27 1 PS Mounted & Tested PCP "Confidential Portion Deleted"
28 1 Tower Structure for 6' Dish & Install TBD "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
II. Wirelese DSL Six Sector Hub Equipment (Par City)
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 12 WaveNet 2458 IP Central Router Wireless TA109200 "Confidential Portion Deleted"
2 12 Data Power Cables (100 Meter) Wireless AC100003
3 24 6' coax cable W/N-Type connectors Wireless AC100008
4 12 2.4/5.8 GHz Central 60 deg Panel Radiowaves TBD "Confidential Portion Deleted"
5 12 Combined Lightning Arrestors Wireless AC100024 "Confidential Portion Deleted"
6 12 +/-48 VDC Voltage Limiter Wireless AC100007 NC
7 2 N2X NII Distribution Hop w/Ant Wireless TBD "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
III. Wireless DSL Remote Equipment (Per City)
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 250 WaveNet 2458 IP Remote Router Wireless TA109205 "Confidential Portion Deleted"
2 250 Data Power Cables (25 Meter) Wireless AC100001 "Confidential Portion Deleted"
3 500 6' coax cable w/N-Type connectors Wireless AC100008 "Confidential Portion Deleted"
4 250 Ant, 2.4/5.8, 14/22 dbi 1' dish Radiowaves AC100020 "Confidential Portion Deleted"
5 250 115 VAC 60Hz Transformer Wireless AC100004 "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
IV. ATM Local Access Networking Equipment
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 0 Omni 5WX Chasis Xylan Omni-5WX-48V "Confidential Portion Deleted"
2 0 Management Processor Module Xylan MPM-1GW-32MB "Confidential Portion Deleted"
3 0 -48 VDC Redundant Power Supply Xylan OMNI-PS6 -DC260P "Confidential Portion Deleted"
4 0 Frame Cell Switching Module Xylan FCSM-IW-4C-CSM-3.4 "Confidential Portion Deleted"
5 0 Universal Cell Switching Module Xylan CSM-UW "Confidential Portion Deleted"
6 0 2 Port OC3 NNI Port Xylan CSM-AB-155FM-2 "Confidential Portion Deleted"
7 0 High Density Ethernet Module (12) Xylan ESM-100C-12W-2C "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
<PAGE>
Back-to-Back Site Prices
I. Microwave Backbone Equipment
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 2 6 GHz, 1+1 Space Div Alcatel MDR-43U6e-D "Confidential Portion Deleted"
2 8 24" Flex Waveguide Cablewave 400014 "Confidential Portion Deleted"
3 2 6 GHz 8' Dish Main Cablewave 304253 "Confidential Portion Deleted"
4 2 8' Conical Radome Cablewave 310772-001 "Confidential Portion Deleted"
5 1 6 GHz 6' Dish Diversity Cablewave 304252 "Confidential Portion Deleted"
6 1 6' Conical Radome Cablewave 310771-001 "Confidential Portion Deleted"
7 3 Adjustable Sway Bar Cablewave 311211 "Confidential Portion Deleted"
7 600 Main Elliptical WG Cablewave 810265-002 "Confidential Portion Deleted"
8 540 Diversity Elliptical WG Cablewave 810265-002 "Confidential Portion Deleted"
9 8 Waveguide Connector Cablewave 399269-101 "Confidential Portion Deleted"
10 4 Hoisting Grip/GEP-65 Cablewave 910311 "Confidential Portion Deleted"
11 12 Universal Grounding Kit Cablewave 921182-003 "Confidential Portion Deleted"
12 22 Waveguide Hanger Kit Cablewave 920981-003 "Confidential Portion Deleted"
13 44 Angle Member Kit Cablewave 915255 "Confidential Portion Deleted"
14 4 4" Wall Roof Feed Thru Cablewave 920831 "Confidential Portion Deleted"
15 4 4" Cushion Entry Boot Cablewave 915663 "Confidential Portion Deleted"
16 4 WR-137 Press Window Cablewave 400108 "Confidential Portion Deleted"
17 2 Air Press Dist Kit, 4 Port Cablewave 920204 "Confidential Portion Deleted"
18 2 Threaded Rod Kit Cablewave 915666 "Confidential Portion Deleted"
19 3 Hanger Hardware Kit Cablewave WBG "Confidential Portion Deleted"
20 2 Automatic Dehydrator Cablewave 920635 "Confidential Portion Deleted"
21 2 Power Supply Shelf PCP PS-19H "Confidential Portion Deleted"
22 4 Switchmode Rectifier PCP MOD4812P "Confidential Portion Deleted"
23 2 Mini Load Center PCP MDM48-40-1 "Confidential Portion Deleted"
24 2 19" Battery Tray PCP 0000910447AB "Confidential Portion Deleted"
25 2 Power Battery PCP 4-PRC1235 "Confidential Portion Deleted"
26 2 PS Mounting Rail PCP "Confidential Portion Deleted"
27 2 PS Mounted & Tested PCP "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
II. Wireless DSL Six Sector Hub Equipment (Per City)
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 12 WaveNet 2458 IP Central Router Wireless TA109200 "Confidential Portion Deleted"
2 12 Data Power Cables (100 Meter) Wireless AC100003
3 24 6' coax cable w/N-Type connectors Wireless AC100008
4 12 2.4/5.8 GHz Central 60 deg Panel Radiowaves TBD "Confidential Portion Deleted"
5 12 Combined Lightning Arrestors Wireless AC100024 "Confidential Portion Deleted"
6 12 ->/- 48 VDC Voltage Limiter Wireless AC100007 NC
7 2 N2X NII Distribution Hop w/Ant Wireless TBD "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
III. Wireless DSL Remote Equipment (Per City)
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 250 WaveNet 2458 IP Remote Router Wireless TA109205 "Confidential Portion Deleted"
2 250 Data Power Cables (25 Meter) Wireless AC100001 "Confidential Portion Deleted"
3 500 6' coax cable w/N-Type connectors Wireless AC100008 "Confidential Portion Deleted"
4 250 Ant. 2.4/5.8, 14/22 dbi 1' dish Radiowaves AC100020 "Confidential Portion Deleted"
5 250 115 VAC 60Hz Transformer Wireless AC100004 "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
IV. ATM Local Access Networking Equipment
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 1 Omni 5WX Chasis Xylan Omni-5WX-48V "Confidential Portion Deleted"
2 1 Management Processor Module Xylan MPM-1GW-32MB "Confidential Portion Deleted"
3 1 -48 VDC Redundant Power Supply Xylan OMNI-PS5-DC250P "Confidential Portion Deleted"
4 1 Frame Cell Switching Module Xylan CSM-IW-4C-CSM-3 "Confidential Portion Deleted"
5 1 Universal Cell Switching Module Xylan CSM-UW "Confidential Portion Deleted"
6 1 2 Port OC3 NNI Port Xylan CSM-AB-155FM-2 "Confidential Portion Deleted"
7 1 High Density Ethernet Module (12) Xylan ESM-100C-12W-2C "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
Repeater Site Pricing
I. Microwave Backbone Equipment
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 2 6 GHz, 1+1, Space Div Alcatel MDR-43U6e-D "Confidential Portion Deleted"
2 8 24" Flex Waveguide Cablewave 400014 "Confidential Portion Deleted"
3 2 6 GHz 8' Dish Main Cablewave 304253 "Confidential Portion Deleted"
4 2 8' Conical Radome Cablewave 310772-001 "Confidential Portion Deleted"
5 2 6 GHz 6' Dish Diversity Cablewave 304252 "Confidential Portion Deleted"
6 2 6' Conical Radome Cablewave 310771-001 "Confidential Portion Deleted"
7 4 Adjustable Sway Bar Cablewave 311211 "Confidential Portion Deleted"
7 600 Main Elliptical WG Cablewave 810265-002 "Confidential Portion Deleted"
8 540 Diversity Elliptical WG Cablewave 810265-002 "Confidential Portion Deleted"
9 8 Waveguide Connector Cablewave 399269-101 "Confidential Portion Deleted"
10 4 Hoisting Grip/GEP-65 Cablewave 910311 "Confidential Portion Deleted"
11 12 Universal Grounding Kit Cablewave 921182-003 "Confidential Portion Deleted"
12 22 Waveguide Hanger Kit Cablewave 920981-003 "Confidential Portion Deleted"
13 44 Angle Member Kit Cablewave 915255 "Confidential Portion Deleted"
14 4 4" Wall Roof Feed Thru Cablewave 920831 "Confidential Portion Deleted"
15 4 4" Cushion Entry Boot Cablewave 915663 "Confidential Portion Deleted"
16 4 WR-137 Press Window Cablewave 400108 "Confidential Portion Deleted"
17 2 Air Press Dist Kit, 4 Port Cablewave 920204 "Confidential Portion Deleted"
18 2 Threaded Rod Kit Cablewave 915666 "Confidential Portion Deleted"
19 3 Hanger Hardware Kit Cablewave WBG "Confidential Portion Deleted"
20 2 Automatic Dehydrator Cablewave 920635 "Confidential Portion Deleted"
21 2 Power Supply Shelf PCP PS-19H "Confidential Portion Deleted"
22 4 Switchmode Rectfier PCP MOD4812P "Confidential Portion Deleted"
23 2 Mini Load Center PCP MDM48-40-1 "Confidential Portion Deleted"
24 2 19" Battery Tray PCP 0000910447AB "Confidential Portion Deleted"
25 2 Power Battery PCP 4-PRC1235 "Confidential Portion Deleted"
26 2 PS Mounting Rail PCP "Confidential Portion Deleted"
27 2 PS Mounted & Tested PCP "Confidential Portion Deleted"
</TABLE>
II. Wireless DSL Six Sector Hub Equipment (Per City)
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 12 WaveNet 25S8 IP Central Router Wireless TA109200 "Confidential Portion Deleted"
2 12 Data Power Cables (100 Meter) Wireless AC100003
3 24 6' coax cable w/N-Type connectors Wireless AC100008
4 12 2.4/5.8 GHz Central 60 deg Panel Radiowaves TBD "Confidential Portion Deleted"
5 12 Combined Lightning Arrestors Wireless AC100024 "Confidential Portion Deleted"
6 12 +/- 48 VDC Voltage Limiter Wireless AC100007 NC
7 2 N2X NII Distribution Hop w/Ant Wireless TBD "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
IV. Wireless DSL Remote Equipment (Per City)
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 250 WaveNet 2458 IP Remote Router Wireless TA109205 "Confidential Portion Deleted"
2 250 Data Power Cables (25 Meter) Wireless AC100001 "Confidential Portion Deleted"
3 500 6' coax cable w/N-Type connectors Wireless AC100008 "Confidential Portion Deleted"
4 250 Ant, 2.4/5.8, 14/22 dbi 1' dish Radiowaves AC100020 "Confidential Portion Deleted"
5 250 115 VAC 60Hz Transformer Wireless AC100004 "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
III. ATM Local Access Networking Equipment
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 1 Omni 5WX Chasis Xylan Omni-5WX-48V "Confidential Portion Deleted"
2 1 Management Processor Module Xylan MPM-1GW-32MB "Confidential Portion Deleted"
3 1 -48 VDC Redundant Power Supply Xylan OMNI-PS5-DC250P "Confidential Portion Deleted"
4 1 Frame Cell Switching Module Xylan FCSM-IW-4C-CSM-3.4 "Confidential Portion Deleted"
5 1 Universal Cell Switching Module Xylan CSM-UW "Confidential Portion Deleted"
6 1 2 Port OC3 NNI Port Xylan CSM-AB-155FM-2 "Confidential Portion Deleted"
7 1 High Density Ethernet Module (12) Xylan ESM-100C-12W-2C "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
<PAGE>
END POINT PRICING
I. Microwave Backbone Equipment
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 1 6 GHz, 1+1 Space Div Alcatel MDR-43U6s-D "Confidential Portion Deleted"
2 4 24" Flex Waveguide Cablewave 400014 "Confidential Portion Deleted"
3 1 6 GHz 8' Dish Main Cablewave 304253 "Confidential Portion Deleted"
4 1 8' Conical Radome Cablewave 310772-001 "Confidential Portion Deleted"
5 1 6 GHz 6' Dish Diversity Cablewave 304252 "Confidential Portion Deleted"
6 1 6' Conical Radome Cablewave 310771-001 "Confidential Portion Deleted"
7 2 Adjustable Sway Bar Cablewave 311211 "Confidential Portion Deleted"
7 300 Main Elliptical WG Cablewave 610265-002 "Confidential Portion Deleted"
8 275 Diversity Elliptical WG Cablewave 810265-002 "Confidential Portion Deleted"
9 4 Waveguide Connector Cablewave 399269-101 "Confidential Portion Deleted"
10 2 Hoisting Grip/GEP-65 Cablewave 910311 "Confidential Portion Deleted"
11 6 Universal Grounding Kit Cablewave 921182-003 "Confidential Portion Deleted"
12 11 Waveguide Hanger Kit Cablewave 920981-003 "Confidential Portion Deleted"
13 22 Angle Member Kit Cablewave 915255 "Confidential Portion Deleted"
14 2 4" Wall Roof Feed Thru Cablewave 920831 "Confidential Portion Deleted"
15 2 4" Cushion Entry Boot Cablewave 915663 "Confidential Portion Deleted"
16 2 WR-137 Press Window Cablewave 400108 "Confidential Portion Deleted"
17 1 Air Press Dist Kit, 4 Port Cablewave 920204 "Confidential Portion Deleted"
18 1 Threaded Rod Kit Cablewave 915666 "Confidential Portion Deleted"
19 3 Hanger Hardware Kit Cablewave WBG "Confidential Portion Deleted"
20 1 Automatic Dehydrator Cablewave 920635 "Confidential Portion Deleted"
21 1 Power Supply Shelf PCP PS-19H "Confidential Portion Deleted"
22 2 Switchmode Rectfier PCP MOD4812P "Confidential Portion Deleted"
23 1 Mini Load Center PCP MDM48-40-1 "Confidential Portion Deleted"
24 1 19" Battery Tray PCP 0000910447AB "Confidential Portion Deleted"
25 1 Power Battery PCP 4-PRC1235 "Confidential Portion Deleted"
26 1 PS Mounting Rail PCP "Confidential Portion Deleted"
27 1 PS Mounted & Tested PCP "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
II. Wireless DSL Six Sector Hub Equipment (Per City)
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 12 WaveNet 2458 IP Central Router Wireless TA109200 "Confidential Portion Deleted"
2 12 Data Power Cables (100 Meter) Wireless AC100003
3 24 6' coax cable w/N-Type connectors Wireless AC100008
4 12 2.4/5.8 GHz Central 60 deg Panel Radiowaves TBD "Confidential Portion Deleted"
5 12 Combined Lightning Arrestors Wireless AC100024 "Confidential Portion Deleted"
6 12 +/- 48 VDC Voltage Limiter Wireless AC100007 NC
7 2 N2X NII Distribution Hop w/Ant Wireless TBD "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
III. Wireless DSL Remote Equipment (Per City)
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 250 WaveNet 2458 IP Remote Router Wireless TA109205 "Confidential Portion Deleted"
2 250 Data Power Cables (25 Meter) Wireless AC100001 "Confidential Portion Deleted"
3 500 6' coax cable w/N-Type connectors Wireless AC100008 "Confidential Portion Deleted"
4 250 Ant. 2.4/5.8, 14/22 dbi 1' dish Radiowaves AC100020 "Confidential Portion Deleted"
5 250 115 VAC 60Hz Transformer Wireless AC100004 "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
IV. ATM Local Access Networking Equipment
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 1 Omni 5WX Chasis Xylan Omni-5WX-48V "Confidential Portion Deleted"
2 1 Management Processor Module Xylan MPM-1GW-32MB "Confidential Portion Deleted"
3 1 -48 VDC Redundant Power Supply Xylan OMNI-PS5-DC250P "Confidential Portion Deleted"
4 1 Frame Cell Switching Module Xylan FCSM-IW-4C-CSM-3.4 "Confidential Portion Deleted"
5 1 Universal Cell Switching Module Xylan CSM-UW "Confidential Portion Deleted"
6 1 2 Port OC3 NNI Port Xylan CSM-AB-155FM-2 "Confidential Portion Deleted"
7 1 High Density Ethernet Module (12) Xylan ESM-100C-12W-2C "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
<PAGE>
Quest Net Project Expectations and Assumptions
Backbone
1. 6 GHz frequencies can be obtained & coordinated.
2. Tower locations and Antenna space can be acquired.
3. Radio Equipment can be co-located in existing equipment room at tower
site.
4. Line of sight can be obtained.
5. 99.999% Reliability can be engineered.
6. Antenna citing can be granted.
7. Tower location, suitability and installation only.
8. NOC/Network Monitoring- Quest Net.
Central Hubs
1. Tower locations and/or rooftops can be acquired.
2. Antenna citing can be granted.
3. Equipment can be co-located at these sites without the need to
erect/construct/purchase shelters or building.
4. Back haul to backbone can be easily established.
5. Central location, identity and installation only.
6. NOC/Network monitoring. Quest Net.
Remotes
1. Quest Net installed and Monitored.
<PAGE>
Scope Of Work
-------------
Quest Net Project Responsibilities
----------------------------------
<TABLE>
<CAPTION>
Backbone
- -----------------------------------------------------------------------------------------------------------
Description Quest Wireless
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Plan Backbone-Design Phase
- -----------------------------------------------------------------------------------------------------------
Obtain Frequencies X
- -----------------------------------------------------------------------------------------------------------
Tower space X
- -----------------------------------------------------------------------------------------------------------
Lease X
- -----------------------------------------------------------------------------------------------------------
Facilities X
- -----------------------------------------------------------------------------------------------------------
Link Engineering X
- -----------------------------------------------------------------------------------------------------------
Install & Test Radios X
- -----------------------------------------------------------------------------------------------------------
Antennas X
- -----------------------------------------------------------------------------------------------------------
Wave Guides X
- -----------------------------------------------------------------------------------------------------------
Commissioning/Acceptance X X
- -----------------------------------------------------------------------------------------------------------
Central Hubs
- -----------------------------------------------------------------------------------------------------------
Plan Central Layouts/City
- -----------------------------------------------------------------------------------------------------------
Design System X
- -----------------------------------------------------------------------------------------------------------
Identify Sites/Towers/Rooftops X
- -----------------------------------------------------------------------------------------------------------
Obtain Path work/design/LOS X
- -----------------------------------------------------------------------------------------------------------
Tower space X
- -----------------------------------------------------------------------------------------------------------
Lease X
- -----------------------------------------------------------------------------------------------------------
Facilities X
- -----------------------------------------------------------------------------------------------------------
Install & Test Radios X
- -----------------------------------------------------------------------------------------------------------
Antennas X
- -----------------------------------------------------------------------------------------------------------
Load Routers X
- -----------------------------------------------------------------------------------------------------------
Commissioning/Acceptance X X
- -----------------------------------------------------------------------------------------------------------
Remotes
- -----------------------------------------------------------------------------------------------------------
Plan Remote Layout per Central
- -----------------------------------------------------------------------------------------------------------
Design System X
- -----------------------------------------------------------------------------------------------------------
Identify Sites/Towers/Rooftops X
- -----------------------------------------------------------------------------------------------------------
Antenna Siting/LOS X
- -----------------------------------------------------------------------------------------------------------
Install & Test Radios X
- -----------------------------------------------------------------------------------------------------------
Antennas X
- -----------------------------------------------------------------------------------------------------------
Load Routes X
- -----------------------------------------------------------------------------------------------------------
Commissioning/Acceptance X
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Training
<S> <C>
- ------------------------------------------------------------------------------------
Wavenet IP Design Training X
- ------------------------------------------------------------------------------------
Wavenet IP Remote Installation training X
- ------------------------------------------------------------------------------------
Trouble Shooting Training X
- ------------------------------------------------------------------------------------
6 GHz NMS/SNMP Training X
- ------------------------------------------------------------------------------------
</TABLE>
* Events, Shipments and Milestones begin:
ARO:
Submission of Acceptable Purchase Order
Acceptable Financial Terms
Agreed to Scope of work.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Financial Milestones Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99 Jan-00 Feb-00 Mar-00 Apr-00 May-00
Proposed Schedule
- -----------------
Planning & Design Month
- ----------------- -----
Site Survey 1 40K
Path Engineering 1
Frequency Search 1
FCC Lic./Application 1
Facilities/Lease 1
Backbone 6 GHz OC3/ATM
- ----------------------
Production 3 750K
Shipment 3
Installation/Test 4
Commisioning 4
Central Hubs & N2 Spurs
- -----------------------
Production
Miami 1 40K
FT. Lauderdale 4 200K
Boca Raton 4
West Palm 4
Shipment
Installation/Test 3
Commission 3
Remotes
- -------
Miami 1 to 12 45K 150K 0 0 0
Production
Shipment
Installtion/Test
Commision
Ft Lauderdale 3 to 12 54K 54K 54K 54K 54K 54K 54K 54K
Production
Shipment
Installtion/Test
Commision
Boca Raton 3 to 12 54K 54K 54K 54K 54K 54K 54K 54K
Production
Shipment
Installtion/Test
Commision
West Palm 3 to 12
Production 54K 54K 54K 54K 54K 54K 54K 54K
Shipment
Installtion/Test
Commision
Training
- --------
IP System design Training
IP System Installation and Commissioning 0
Trouble shooting
6 GHz NMS/Training
Total "Confidential Portion Deleted"
</TABLE>
<PAGE>
PURCHASE ORDER
Description:
The project includes a backbone of 6 GHz radios, which will provide OC3 Backbone
from Miami to West Palm Beach, with high speed Service from Homestead to
Jupiter, Florida. All transmission products used in the backbone will be FCC
approved and licensed under the 6 GHz frequencies. The OC3 will be designed to
be upgradeable to multiple OC3's to accommodate future expansion. Each platform
will also consist of an ATM switch to connect to the Ethernet WaveNet IP
centrals and to N2 links in order to supply extra sites for additional
distribution.
Each target city will consist of a 4 sector WaveNet IP Central build
(upgradeable to 12 sectors per city). N2 radios will be used to connect the
backbone site to other central sites, each supporting a four-central cluster.
The WaveNet IP is a point to multipoint access router, which will be used as the
final wireless mile solution to access customers and bring them on the network.
Initially, each city will be able to accommodate approximately 250 customers,
High-speed sub T1 service, as well as the option to add point to point N2 links
for dedicated high capacity connectivity.
Preliminary Scope of Work
Attachment A describes the preliminary scope of work that outlines the
responsibilities of both parties. A final scope of work will be provided at the
conclusion of the site survey.
Schedules
Attachment A also includes both project and financial milestones. In summary,
the scope of this project, which governs this purchase order, is one year. The
total costs are "Confidential Portion Deleted" to be payable under the schedule
outlined in Attachment A and summarized below. Included in the equipment covered
in Attachment A are 1000 WaveNet IP 2458 remotes which will be purchased in
accordance with the agreed rollout plan below:
Month 1 "Confidential Portion Deleted" (includes 30 remotes)
Month 2 "Confidential Portion Deleted" (includes 100 remotes)
Month 3 "Confidential Portion Deleted"
Month 4 "Confidential Portion Deleted"
Months 5 - 12 "Confidential Portion Deleted" (for remaining 870 remotes)
Terms for the project are as follows: 1) all services are due upon completion of
services. 2) All Wireless Inc. equipment will carry net 30. 3) All 3rd party
equipment will be determined. Quest Net will use its best efforts to obtain
equipment leasing.
<PAGE>
Contingencies
This purchase order will be contingent upon the following:
1. The Execution of a detailed contract, within seven working days, which
incorporates this purchase order and exhibits in their entirety hereto.
2. The bandwidth to be verified by an independent party to match published
specifications provided by the manufacturer for the WaveNet IP 2458.
This applies to the central routers. Central bandwidth is scaleable and
is dependent upon system design. Wireless Inc. for this purpose will
submit a test plan.
3. All products to meet published performance specifications such as
range, signal strength, performance under weather conditions, etc.
4. Wireless Inc. will provide, for a period of five years, software
upgrades at no cost for the WaveNet IP 2458. Hardware upgrades will be
provided at most favorable customer pricing at that time.
5. In the event that Wireless Inc. "manufacture discontinues" WaveNet 2458
or no longer provides customer service, or product support such as in
an acquisition, Quest Net will be granted licenses to continue support
and deployment. In this event, the cost of transferring licenses and
supporting documentation will be borne by Quest Net Corp.
6. Wireless Inc. extends to Quest Net Corp. the right of first refusal for
the purchase of the following StarPort city Networks: Las Vegas,
(installed and ready for service) Seattle, San Jose, Sacramento, and
Colorado Springs (projected and in engineering phase), for a period of
30 Days. Wireless to present, within three days, a proposal for the Las
Vegas network, providing detail information of coverage, equipment,
location and pricing. Quest Net to respond within five Business days
upon receipt of this information.
PURCHASE ORDER #:
DATE: 05-4-99
/s/ illegible /s/ illegible
- -------------------------------- ---------------------------
Quest Wireless Inc. Wireless Inc.
A wholly owned subsidiary of President/Chief Executive
Quest Net Corp.
<PAGE>
ATTACHMENT #1
June 2nd, 1999
Mr. Camilo Pereira
Chairman & Chief Executive Officer
Quest Net Corp
2999 N.E. 191st Street, Penthouse 8
Aventura, FL 33180
Dear Mr. Pereira,
Wireless, Inc. would like to thank Quest Net for the opportunity to partner with
the company in an exciting network expansion project in Florida.
The enclosed planning documents cover systems design, network elements, project
implementaton, and pre/post project activities in Florida.
Wireless, Inc. has substantial experience in network build-outs across the
global market. This experience, together with the value Wireless offers in its
distribution products, form the integral elements of the proposed partnership
with Quest Net.
If you have any questions, please do not hesitate to contact either Shahin Sadri
at our New York office (716 889-7950), or Len Gee at our Chicago office (847
842-8885). Both Shahin and Len are fully focussed on your project and are ready
to assist with any clarification you may require.
Thank you once again for this opportunity. I look forward to meeting with you
early in June and to a mutually rewarding relationship.
Very truly yours,
/s/ William E. Gibson
- ---------------------
William E. Gibson
Chief Executive Officer & President
Wireless, Inc.
cover
<PAGE>
ATTACHMENT #2
WIRELESS, INC.(LOGO)
QUEST NET AND WIRELESS INC.
EXECUTIVE SUMMARY
Our Proposal recognizes the need for a cost effective, total system solution
which provides leading-edge products, timely delivery and installation, high
reliability and performance.
Our document includes a backbone of the 6 GHz OC3 radios, protected 1X1. These
radios will provide an OC 3 from South Miami to West Palm Beach. We have set
engineering criteria of 99.999% reliability. All transmission products used in
the backbone are FCC approved and can be licensed under 6 GHz frequencies. Our
OC3 design is upgrade able to multiple OC 3's, giving Quest Net a path to the
future, expandable to cover all of Florida.
We have also used an ATM switch platform at each city to connect to the Ethernet
Wavenet IP centrals and to N2 links to supply extra sites for additional
Distribution.
Each target city has optioned a 4 sector Wavenet IP Central build, (upgrade able
to 12 sectors per city). N2 Radios shall be used to connect the backbone site to
other central sites, each supporting a four central cluster. The Wavenet IP is a
point to multipoint Access router, which is used as the final wireless mile
solution to access your customers and bring them on to the network. Initially
each city shall be able to offer approximately 250 customers, High-Speed sub T1
service, as well as the option to add point to point N2 links for dedicated high
capacity connectivity.
These Four elements, wireless OC3 the backbone, ATM switches, N2 links and the
Wavenet IP point multipoint wireless final mile solution provides Quest Net the
basis of a build out for the South Miami to West Palm Beach system.
Wireless Inc. proposes to engineer, furnish, and install the system in the
target cities that Quest Net has desired, in an expedient fashion partnering in
Quest Net's pursuit of success.
Wireless Inc. is pleased to be a part of this effort and is committed to its
success. Our submission of the basic design is contained within. We plan to meet
with you on Friday June 4th to finalize our agreement and begin the process.
In summary Wireless Inc is offering the most technologically advanced products
proven global experience and commitment for success to Quest Net. I look forward
to our June 4th meeting.
Sincerely,
Shahin Sadri.
<PAGE>
QUESTNET SITES
I. 6 GHz OC3 Backbone Radio Sites
<TABLE>
<CAPTION>
Backbone
Centerlines Tower Site ATM
# Site Name Latitude Longitude ASL Main Div Ht City State Type WDSL Switch
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 QuestNet 25 57.134 80 08.6 -30 North Miami FL End 4 Sector Yes
2 NW 23rd Ave 26 08.6 80 10.3 280 -30 265 Ft. Lauderdale FL B-to-B 4 Sector Yes
3 501 E. Camino Real 26 20.4 80 04.69 305 -30 300 Boca Raton FL B-to-B 4 Sector Yes
4 Trump Plaza 26 42.5 80 03.06 378 -30 368 West Palm Beach FL End 4 Sector Yes
</TABLE>
II. N2X & Additional WDSL POP Sites
<TABLE>
<CAPTION>
Backbone
Centerlines Tower Site ATM
# Site Name Latitude Longitude ASL Main Div Ht City State Type WDSL Switch
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2nd Miami TBD TBD TBD TBD NA TBD Miami FL NA 4 Sector No
2 3rd Miami TBD TBD TBD TBD NA TBD Miami FL NA 4 Sector No
3 2nd Ft. Lauderdale TBD TBD TBD TBD NA TBD Ft. Lauderdale FL NA 4 Sector No
4 3rd Ft. Lauderdale TBD TBD TBD TBD NA TBD Ft. Lauderdale FL NA 4 Sector No
5 2nd Boca TBD TBD TBD TBD NA TBD Boca Raton area FL NA 4 Sector No
6 3rd Boca TBD TBD TBD TBD NA TBD Boca Raton Area FL NA 4 Sector No
7 2nd West Palm TBD TBD TBD TBD NA TBD West Palm area FL NA 4 Sector No
8 3rd West Palm TBD TBD TBD TBD NA TBD West Palm area FL NA 4 Sector No
</TABLE>
<PAGE>
QUSTNET PATHS
I. 6 GHz OC3 Radios
<TABLE>
<CAPTION>
Frequency (MHz)
# From To Distance (M) Product Go Return Channel
<S> <C> <C> <C> <C> <C> <C>
1 QuestNet FT Lauderdale 13.33 MDR-43U6s-D 6 GHz 6 GHz 30 MHz
2 FT Lauderdale Boca Raton 14.82 MDR-43U6s-D 6 GHz 6 GHz 30 MHz
3 Boca Raton West Palm Beach 25.7 MDR-43U6s-D 6 GHz 6 GHz 30 MHz
53.85
</TABLE>
II. N2X Spur Routes
<TABLE>
<CAPTION>
Frequency (MHz)
# From To Distance (M) Product Go Return Channel
<S> <C> <C> <C> <C> <C> <C>
1 QuestNet 2nd Miami Site TBD N2X NII NII 16 MHz
2 QuestNet 3rd Miami Site TBD N2X NII NII 16 MHz
3 Ft Lauderdale 2nd Ft. L Site TBD N2X NII NII 16 MHz
4 Ft Lauderdale 3rd Ft. L Site TBD N2X NII NII 16 MHz
5 Boca Raton 2nd Boca Site TBD N2X NII NII 16 MHz
6 Boca Raton 3rd Boca Site TBD N2X NII NII 16 MHz
7 West Palm Beach 2nd W Palm Site TBD N2X NII NII 16 MHz
8 West Palm Beach 3rd W Palm Site TBD N2X NII NII 16 MHz
</TABLE>
<PAGE>
QUESTNET PRICES
Part I Equipment
<TABLE>
<CAPTION>
6 GHz WDSL* WDSL* ATM
Backbone Hub Remote Network
# City Equipment Equipment Equipment Equipment
<S> <C> <C> <C> <C> <C>
1 Miami "Confidential Portion Deleted" "Confidential Portion Deleted"
2 Ft. Lauderdale "Confidential Portion Deleted" "Confidential Portion Deleted"
3 Boca raton "Confidential Portion Deleted" "Confidential Portion Deleted"
4 West Palm "Confidential Portion Deleted" "Confidential Portion Deleted"
"Confidential Portion Deleted" "Confidential Portion Deleted"
</TABLE>
Part II Installation
<TABLE>
<CAPTION>
6 GHz WDSL ATM
Backbone Hub Network
# City Equipment Equipment Equipment
<S> <C> <C> <C> <C>
1 Miami "Confidential Portion Deleted" "Confidential Portion Deleted"
2 Ft. Lauderdale "Confidential Portion Deleted" "Confidential Portion Deleted"
3 Boca raton "Confidential Portion Deleted" "Confidential Portion Deleted"
4 West Palm "Confidential Portion Deleted" "Confidential Portion Deleted"
"Confidential Portion Deleted" "Confidential Portion Deleted"
"Confidential Portion Deleted"
Part III Site Surveys, Frequency Coordination & FCC licensing "Confidential Portion Deleted"
Part IV System Engineering "Confidential Portion Deleted"
Part V TSM 2500 Backbone Network Management System "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
*(Prices Reflect a minimum commitment of 1000 Remotes)
<PAGE>
I. Microwave Backbone Equipment
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 1 6 GHz, 1+1, MHSB Alcatel MDR-43U6e-D "Confidential Portion Deleted"
2 4 24" Flex Waveguide Cablewave 400014 "Confidential Portion Deleted"
3 1 6 GHz 8' Dish Main Cablewave 304253 "Confidential Portion Deleted"
4 1 8' Conical Radome Cablewave 310772-001 "Confidential Portion Deleted"
5 0 6 GHz 6' Dish Diversity Cablewave 304252 "Confidential Portion Deleted"
6 0 6' Conical Radome Cablewave 310771-001 "Confidential Portion Deleted"
7 1 Adjustable Sway Bar Cablewave 311211 "Confidential Portion Deleted"
7 300 Main Elliptical WG Cablewave 810265-002 "Confidential Portion Deleted"
8 0 Diversity Elliptical WG Cablewave 810265-002 "Confidential Portion Deleted"
9 2 Waveguide Connector Cablewave 399269-101 "Confidential Portion Deleted"
10 1 Hoisting Grip/GEP-65 Cablewave 910311 "Confidential Portion Deleted"
11 6 Universal Grounding Kit Cablewave 921182-003 "Confidential Portion Deleted"
12 11 Waveguide Hanger Kit Cablewave 920981-003 "Confidential Portion Deleted"
13 22 Angle Member Kit Cablewave 915255 "Confidential Portion Deleted"
14 1 4" Wall Roof Feed Thru Cablewave 920831 "Confidential Portion Deleted"
15 1 4" Cushion Entry Boot Cablewave 915663 "Confidential Portion Deleted"
16 1 WR-137 Press Window Cablewave 400108 "Confidential Portion Deleted"
17 1 Air Press Dist Kit, 4 Port Cablewave 920204 "Confidential Portion Deleted"
18 1 Threaded Rod Kit Cablewave 915666 "Confidential Portion Deleted"
19 3 Hanger Hardware Kit Cablewave WBG "Confidential Portion Deleted"
20 1 Automatic Dehydrator Cablewave 920635 "Confidential Portion Deleted"
21 1 Power Supply Shelf PCP PS-19H "Confidential Portion Deleted"
22 2 Switchmode Rectfier PCP MOD4812P "Confidential Portion Deleted"
23 1 Mini Load Center PCP MDM48-40-1 "Confidential Portion Deleted"
24 1 19" Battery Tray PCP 0000910447AB "Confidential Portion Deleted"
25 1 Power Battery PCP 4-PRC1235 "Confidential Portion Deleted"
26 1 PS Mounting Rail PCP "Confidential Portion Deleted"
27 1 PS Mounted & Tested PCP "Confidential Portion Deleted"
28 1 Tower Structure for 8' Dish & Install TBD "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
II. Wireless DSL Six Sector Hub Equipment (Per City)
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 12 WaveNet 2458 IP Central Router Wireless TA109200 "Confidential Portion Deleted"
2 12 Data Power Cables (100 Meter) Wireless AC100003
3 24 6' coax cable w/N-Type connectors Wireless AC100008
4 12 2.4/5.8 GHz Central 60 deg Panel Radiowaves TBD "Confidential Portion Deleted"
5 12 Combined Lightning Arrestors Wireless AC100024 "Confidential Portion Deleted"
6 12 +/- 48 VDC Voltage Limiter Wireless AC100007 NC
7 2 N2X NII Distribution Hop w/Ant Wireless TBD "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
III. Wireless DSL Remote Equipment (Per City)
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 250 WaveNet 2458 IP Remote Router Wireless TA109205 "Confidential Portion Deleted"
2 250 Data Power Cables (25 Meter) Wireless AC100001 "Confidential Portion Deleted"
3 500 6' coax cable w/N-Type connectors Wireless AC100008 "Confidential Portion Deleted"
4 250 Ant, 2.4/5.8, 14/22 dbi 1' dish Radiowaves AC100020 "Confidential Portion Deleted"
5 250 115 VAC 60Hz Transformer Wireless AC100004 "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
IV. ATM Local Access Networking Equipment
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 0 Omni 5WX Chasis Xylan Omni-5WX-48V "Confidential Portion Deleted"
2 0 Management Processor Module Xylan MPM-1GW-32MB "Confidential Portion Deleted"
3 0 -48 VDC Redundant Power Supply Xylan OMNI-PS5-DC250P "Confidential Portion Deleted"
4 0 Frame Cell Switching Module Xylan FCSM-IW-4C-CSM-3.4 "Confidential Portion Deleted"
5 0 Universal Cell Switching Module Xylan CSM-UW "Confidential Portion Deleted"
6 0 2 Port OC3 NNI Port Xylan CSM-AB-155FM-2 "Confidential Portion Deleted"
7 0 High Density Ethernet Module (12) Xylan ESM-100C-12W-2C "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
<PAGE>
Back-to-Back Site Prices
I. Microwave Backbone Equipment
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 2 6 GHz, 1+1 Space Div Alcatel MDR-43U6e-D "Confidential Portion Deleted"
2 8 24" Flex Waveguide Cablewave 400014 "Confidential Portion Deleted"
3 2 6 GHz 8' Dish Main Cablewave 304253 "Confidential Portion Deleted"
4 2 8' Conical Radome Cablewave 310772-001 "Confidential Portion Deleted"
5 1 6 GHz 6' Dish Diversity Cablewave 304252 "Confidential Portion Deleted"
6 1 6' Conical Radome Cablewave 310771-001 "Confidential Portion Deleted"
7 3 Adjustable Sway Bar Cablewave 311211 "Confidential Portion Deleted"
7 600 Main Elliptical WG Cablewave 810265-002 "Confidential Portion Deleted"
8 540 Diversity Elliptical WG Cablewave 810265-002 "Confidential Portion Deleted"
9 8 Waveguide Connector Cablewave 399269-101 "Confidential Portion Deleted"
10 4 Hoisting Grip/GEP-65 Cablewave 910311 "Confidential Portion Deleted"
11 12 Universal Grounding Kit Cablewave 921182-003 "Confidential Portion Deleted"
12 22 Waveguide Hanger Kit Cablewave 920981-003 "Confidential Portion Deleted"
13 44 Angle Member Kit Cablewave 915255 "Confidential Portion Deleted"
14 4 4" Wall Roof Feed Thru Cablewave 920831 "Confidential Portion Deleted"
15 4 4" Cushion Entry Boot Cablewave 915663 "Confidential Portion Deleted"
16 4 WR-137 Press Window Cablewave 400108 "Confidential Portion Deleted"
17 2 Air Press Dist Kit, 4 Port Cablewave 920204 "Confidential Portion Deleted"
18 2 Threaded Rod Kit Cablewave 915666 "Confidential Portion Deleted"
19 3 Hanger Hardware Kit Cablewave WBG "Confidential Portion Deleted"
20 2 Automatic Dehydrator Cablewave 920635 "Confidential Portion Deleted"
21 2 Power Supply Shelf PCP PS-19H "Confidential Portion Deleted"
22 4 Switchmode Rectfier PCP MOD4812P "Confidential Portion Deleted"
23 2 Mini Load Center PCP MDM48-40-1 "Confidential Portion Deleted"
24 2 19" Battery Tray PCP 0000910447AB "Confidential Portion Deleted"
25 2 Power Battery PCP 4-PRC1235 "Confidential Portion Deleted"
26 2 PS Mounting Rail PCP "Confidential Portion Deleted"
27 2 PS Mounted & Tested PCP "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
II. Wireless DSL Six Sector Hub Equipment (Per City)
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 12 WaveNet 2458 IP Central Router Wireless TA109200 "Confidential Portion Deleted"
2 12 Data Power Cables (100 Meter) Wireless AC100003
3 24 6' coax cable w/N-Type connectors Wireless AC100008
4 12 2.4/5.8 GHz Central 60 deg Panel Radiowaves TBD "Confidential Portion Deleted"
5 12 Combined Lightning Arrestors Wireless AC100024 "Confidential Portion Deleted"
6 12 +/- 48 VDC Voltage Limiter Wireless AC100007 NC
7 2 N2X NII Distribution Hop w/Ant Wireless TBD "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
III. Wireless DSL Remote Equipment (Per City)
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 250 WaveNet 2458 IP Remote Router Wireless TA109205 "Confidential Portion Deleted"
2 250 Data Power Cables (25 Meter) Wireless AC100001 "Confidential Portion Deleted"
3 500 6' coax cable w/N-Type connectors Wireless AC100008 "Confidential Portion Deleted"
4 250 Ant. 2.4/5.8, 14/22 dbi 1' dish Radiowaves AC100020 "Confidential Portion Deleted"
5 250 115 VAC 60Hz Transformer Wireless AC100004 "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
IV. ATM Local Access Networking Equipment
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 1 Omni 5WX Chasis Xylan Omni-5WX-48V "Confidential Portion Deleted"
2 1 Management Processor Module Xylan MPM-1GW-32MB "Confidential Portion Deleted"
3 1 -48 VDC Redundant Power Supply Xylan OMNI-PS5-DC250P "Confidential Portion Deleted"
4 1 Frame Cell Switching Module Xylan CSM-IW-4C-CSM-3,4 "Confidential Portion Deleted"
5 1 Universal Cell Switching Module Xylan CSM-UW "Confidential Portion Deleted"
6 1 2 Port OC3 NNI Port Xylan CSM-AB-155FM-2 "Confidential Portion Deleted"
7 1 High Density Ethernet Module (12) Xylan ESM-100C-12W-2C "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
<PAGE>
Repeater Site Pricing
I. Microwave Backbone Equipment
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 2 6 GHz, 1+1, Space Div Alcatel MDR-43U6e-D "Confidential Portion Deleted"
2 8 24" Flex Waveguide Cablewave 400014 "Confidential Portion Deleted"
3 2 6 GHz 8' Dish Main Cablewave 304253 "Confidential Portion Deleted"
4 2 8' Conical Radome Cablewave 310772-001 "Confidential Portion Deleted"
5 2 6 GHz 6' Dish Diversity Cablewave 304252 "Confidential Portion Deleted"
6 2 6' Conical Radome Cablewave 310771-001 "Confidential Portion Deleted"
7 4 Adjustable Sway Bar Cablewave 311211 "Confidential Portion Deleted"
7 600 Main Elliptical WG Cablewave 810265-002 "Confidential Portion Deleted"
8 540 Diversity Elliptical WG Cablewave 810265-002 "Confidential Portion Deleted"
9 8 Waveguide Connector Cablewave 399269-101 "Confidential Portion Deleted"
10 4 Hoisting Grip/GEP-65 Cablewave 910311 "Confidential Portion Deleted"
11 12 Universal Grounding Kit Cablewave 921182-003 "Confidential Portion Deleted"
12 22 Waveguide Hanger Kit Cablewave 920981-003 "Confidential Portion Deleted"
13 44 Angle Member Kit Cablewave 915255 "Confidential Portion Deleted"
14 4 4" Wall Roof Feed Thru Cablewave 920831 "Confidential Portion Deleted"
15 4 4" Cushion Entry Boot Cablewave 915663 "Confidential Portion Deleted"
16 4 WR-137 Press Window Cablewave 400108 "Confidential Portion Deleted"
17 2 Air Press Dist Kit, 4 Port Cablewave 920204 "Confidential Portion Deleted"
18 2 Threaded Rod Kit Cablewave 915666 "Confidential Portion Deleted"
19 3 Hanger Hardware Kit Cablewave WBG "Confidential Portion Deleted"
20 2 Automatic Dehydrator Cablewave 920635 "Confidential Portion Deleted"
21 2 Power Supply Shelf PCP PS-19H "Confidential Portion Deleted"
22 4 Switchmode Rectfier PCP MOD4812P "Confidential Portion Deleted"
23 2 Mini Load Center PCP MDM48-40-1 "Confidential Portion Deleted"
24 2 19" Battery Tray PCP 0000910447AB "Confidential Portion Deleted"
25 2 Power Battery PCP 4-PRC1235 "Confidential Portion Deleted"
26 2 PS Mounting Rail PCP "Confidential Portion Deleted"
27 2 PS Mounted & Tested PCP "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
II. Wirelese DSL Six Sector Hub Equipment (Per City)
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 12 WaveNet 2458 IP Central Router Wireless TA109200 "Confidential Portion Deleted"
2 12 Data Power Cables (100 Meter) Wireless AC100003
3 24 6' coax cable w/N-Type connectors Wireless AC100008
4 12 2.4/5.8 GHz Central 60 deg Panel Radiowaves TBD "Confidential Portion Deleted"
5 12 Combined Lightning Arrestors Wireless AC100024 "Confidential Portion Deleted"
6 12 +/-48 VDC Voltage Limiter Wireless AC100007 NC
7 2 N2X NII Distribution Hop w/Ant Wireless TBD "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
IV. Wireless DSL Remote Equipment (Per City)
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 250 WaveNet 2458 IP Remote Router Wireless TA109205 "Confidential Portion Deleted"
2 250 Data Power Cables (25 Meter) Wireless AC100001 "Confidential Portion Deleted"
3 500 6' coax cable w/N-Type connectors Wireless AC100008 "Confidential Portion Deleted"
4 250 Ant, 2.4/5.8, 14/22 dbi 1' dish Radiowaves AC100020 "Confidential Portion Deleted"
5 250 115 VAC 60Hz Transformer Wireless AC100004 "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
III. ATM Local Access Networking Equipment
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 1 Omni 5WX Chasis Xylan Omni-5WX-48V "Confidential Portion Deleted"
2 1 Management Processor Module Xylan MPM-1GW-32MB "Confidential Portion Deleted"
3 1 -48 VDC Redundant Power Supply Xylan OMNI-PS5-DC250P "Confidential Portion Deleted"
4 1 Frame Cell Switching Module Xylan FCSM-IW-4C-CSM-3.4 "Confidential Portion Deleted"
5 1 Universal Cell Switching Module Xylan CSM-UW "Confidential Portion Deleted"
6 1 2 Port OC3 NNI Port Xylan CSM-AB-155FM-2 "Confidential Portion Deleted"
7 1 High Density Ethernet Module (12) Xylan ESM-100C-12W-2C "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
<PAGE>
END POINT PRICING
I. Microwave Backbone Equipment
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 1 6 GHz, 1+1, Space Div Alcatel MDR-43U6e-D "Confidential Portion Deleted"
2 4 24" Flex Waveguide Cablewave 400014 "Confidential Portion Deleted"
3 1 6 GHz 8' Dish Main Cablewave 304253 "Confidential Portion Deleted"
4 1 8' Conical Radome Cablewave 310772-001 "Confidential Portion Deleted"
5 1 6 GHz 6' Dish Diversity Cablewave 304252 "Confidential Portion Deleted"
6 1 6' Conical Radome Cablewave 310771-001 "Confidential Portion Deleted"
7 2 Adjustable Sway Bar Cablewave 311211 "Confidential Portion Deleted"
7 300 Main Elliptical WG Cablewave 810265-002 "Confidential Portion Deleted"
8 275 Diversity Elliptical WG Cablewave 810265-002 "Confidential Portion Deleted"
9 4 Waveguide Connector Cablewave 399269-101 "Confidential Portion Deleted"
10 2 Hoisting Grip/GEP-65 Cablewave 910311 "Confidential Portion Deleted"
11 6 Universal Grounding Kit Cablewave 921182-003 "Confidential Portion Deleted"
12 11 Waveguide Hanger Kit Cablewave 920981-003 "Confidential Portion Deleted"
13 22 Angle Member Kit Cablewave 915255 "Confidential Portion Deleted"
14 2 4" Wall Roof Feed Thru Cablewave 920831 "Confidential Portion Deleted"
15 2 4" Cushion Entry Boot Cablewave 915663 "Confidential Portion Deleted"
16 2 WR-137 Press Window Cablewave 400108 "Confidential Portion Deleted"
17 1 Air Press Dist Kit, 4 Port Cablewave 920204 "Confidential Portion Deleted"
18 1 Threaded Rod Kit Cablewave 915666 "Confidential Portion Deleted"
19 3 Hanger Hardware Kit Cablewave WBG "Confidential Portion Deleted"
20 1 Automatic Dehydrator Cablewave 920635 "Confidential Portion Deleted"
21 1 Power Supply Shelf PCP PS-19H "Confidential Portion Deleted"
22 2 Switchmode Rectfier PCP MOD4812P "Confidential Portion Deleted"
23 1 Mini Load Center PCP MDM48-40-1 "Confidential Portion Deleted"
24 1 19" Battery Tray PCP 0000910447AB "Confidential Portion Deleted"
25 1 Power Battery PCP 4-PRC1235 "Confidential Portion Deleted"
26 1 PS Mounting Rail PCP "Confidential Portion Deleted"
27 1 PS Mounted & Tested PCP "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
II. Wirelese DSL Six Sector Hub Equipment (Per City)
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 12 WaveNet 2458 IP Central Router Wireless TA109200 "Confidential Portion Deleted"
2 12 Data Power Cables (100 Meter) Wireless AC100003
3 24 6' coax cable W/N-Type connectors Wireless AC100008
4 12 2.4/5.8 GHz Central 60 deg Panel Radiowaves TBD "Confidential Portion Deleted"
5 12 Combined Lightning Arrestors Wireless AC100024 "Confidential Portion Deleted"
6 12 +/-48 VDC Voltage Limiter Wireless AC100007 NC
7 2 N2X NII Distribution Hop w/Ant Wireless TBD "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
III. Wireless DSL Remote Equipment (Per City)
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 250 WaveNet 2458 IP Remote Router Wireless TA109205 "Confidential Portion Deleted"
2 250 Data Power Cables (25 Meter) Wireless AC100001 "Confidential Portion Deleted"
3 500 6' coax cable w/N-Type connectors Wireless AC100008 "Confidential Portion Deleted"
4 250 Ant, 2.4/5.8, 14/22 dbi 1' dish Radiowaves AC100020 "Confidential Portion Deleted"
5 250 115 VAC 60Hz Transformer Wireless AC100004 "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
IV. ATM Local Access Networking Equipment
<TABLE>
<CAPTION>
Price Total
Item # QTY Description MFG Part# Unit Price
<S> <C> <C> <C> <C> <C> <C>
1 1 Omni 5WX Chasis Xylan Omni-5WX-48V "Confidential Portion Deleted"
2 1 Management Processor Module Xylan MPM-1GW-32MB "Confidential Portion Deleted"
3 1 -48 VDC Redundant Power Supply Xylan OMNI-PS5-DC250P "Confidential Portion Deleted"
4 1 Frame Cell Switching Module Xylan FCSM-IW-4C-CSM-3.4 "Confidential Portion Deleted"
5 1 Universal Cell Switching Module Xylan CSM-UW "Confidential Portion Deleted"
6 1 2 Port OC3 NNI Port Xylan CSM-AB-155FM-2 "Confidential Portion Deleted"
7 1 High Density Ethernet Module (12) Xylan ESM-100C-12W-2C "Confidential Portion Deleted"
"Confidential Portion Deleted"
</TABLE>
<PAGE>
ATTACHMENT #3
Quest Net Project Expectations and Assumptions
Backbone
1. 6 GHz frequencies can be obtained & coordinated.
2. Tower locations and Antenna space can be acquired.
3. Radio Equipment can be co-located in existing equipment room at tower
site.
4. Line of sight can be obtained.
5. 99.999% Reliability can be engineered.
6. Antenna citing can be granted.
7. Tower location, suitability and installation only.
8. NOC/Network Monitoring- Quest Net.
Central Hubs
1. Tower locations and/or rooftops can be acquired.
2. Antenna citing can be granted.
3. Equipment can be co-located at these sites without the need to
erect/construct/purchase shelters or building.
4. Back haul to backbone can be easily established.
5. Central location, identity and installation only.
6. NOC/Network monitoring. Quest Net.
Remotes
1. Quest Net installed and Monitored.
<PAGE>
Attachment #4
Scope Of Work
-------------
Quest Net Project Responsibilities
----------------------------------
<TABLE>
<CAPTION>
Backbone
- -----------------------------------------------------------------------------------------------------------
Description Quest Wireless
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Plan Backbone-Design Phase
- -----------------------------------------------------------------------------------------------------------
Obtain Frequencies X
- -----------------------------------------------------------------------------------------------------------
Tower space X
- -----------------------------------------------------------------------------------------------------------
Lease X
- -----------------------------------------------------------------------------------------------------------
Facilities X
- -----------------------------------------------------------------------------------------------------------
Link Engineering X
- -----------------------------------------------------------------------------------------------------------
Install & Test Radios X
- -----------------------------------------------------------------------------------------------------------
Antennas X
- -----------------------------------------------------------------------------------------------------------
Wave Guides X
- -----------------------------------------------------------------------------------------------------------
Commissioning/Acceptance X X
- -----------------------------------------------------------------------------------------------------------
Central Hubs
- -----------------------------------------------------------------------------------------------------------
Plan Central Layouts/City
- -----------------------------------------------------------------------------------------------------------
Design System X
- -----------------------------------------------------------------------------------------------------------
Identify Sites/Towers/Rooftops X
- -----------------------------------------------------------------------------------------------------------
Obtain Path work/design/LOS X
- -----------------------------------------------------------------------------------------------------------
Tower space X
- -----------------------------------------------------------------------------------------------------------
Lease X
- -----------------------------------------------------------------------------------------------------------
Facilities X
- -----------------------------------------------------------------------------------------------------------
Install & Test Radios X
- -----------------------------------------------------------------------------------------------------------
Antennas X
- -----------------------------------------------------------------------------------------------------------
Load Routers X
- -----------------------------------------------------------------------------------------------------------
Commissioning/Acceptance X X
- -----------------------------------------------------------------------------------------------------------
Remotes
- -----------------------------------------------------------------------------------------------------------
Plan Remote Layout per Central
- -----------------------------------------------------------------------------------------------------------
Design System X
- -----------------------------------------------------------------------------------------------------------
Identify Sites/Towers/Rooftops X
- -----------------------------------------------------------------------------------------------------------
Antenna Siting/LOS X
- -----------------------------------------------------------------------------------------------------------
Install & Test Radios X
- -----------------------------------------------------------------------------------------------------------
Antennas X
- -----------------------------------------------------------------------------------------------------------
Load Routes X
- -----------------------------------------------------------------------------------------------------------
Commissioning/Acceptance X
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Training
<S> <C>
- ------------------------------------------------------------------------------------
Wavenet IP Design Training X
- ------------------------------------------------------------------------------------
Wavenet IP Remote Installation training X
- ------------------------------------------------------------------------------------
Trouble Shooting Training X
- ------------------------------------------------------------------------------------
6 GHz NMS/SNMP Training X
- ------------------------------------------------------------------------------------
</TABLE>
* Events, Shipments and Milestones begin:
ARO:
Submission of Acceptable Purchase Order
Acceptable Financial Terms
Agreed to Scope of work.
<PAGE>
ATTACHMENT #5
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Financial Milestones Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99 Jan-00 Feb-00 Mar-00 Apr-00 May-00
Proposed Schedule
- -----------------
Planning & Design Month
- -----------------
Site Survey 1 40K
Path Engineering 1
Frequency Search 1
FCC Lic./Application 1
Facilities/Lease 1
Backbone 6 GHz OC3/ATM
- ----------------------
Production 3 750K
Shipment 3
Installation/Test 4
Commisioning 4
Central Hubs & N2 Spurs
- -----------------------
Production
Miami 1 40K
FT. Lauderdale 4 200K
Boca Raton 4
West Palm 4
Shipment
Installation/Test 3
Commission 3
Remotes
- -------
Miami 1 to 12 45K 150K 0 0 0
Production
Shipment
Installtion/Test
Commision
Ft Lauderdale 3 to 12 54K 54K 54K 54K 54K 54K 54K 54K
Production
Shipment
Installtion/Test
Commision
Boca Raton 3 to 12 54K 54K 54K 54K 54K 54K 54K 54K
Production
Shipment
Installtion/Test
Commision
West Palm 3 to 12
Production 54K 54K 54K 54K 54K 54K 54K 54K
Shipment
Installtion/Test
Commision
Training
- --------
IP System design Training
IP System Installation and Commissioning 0
Trouble shooting
6 GHz NMS/Training
Total "Confidential Portion Deleted"
</TABLE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT dated October 11, 1999, between Quest Net
Corp. (the "Company"), and Rebecca J. Del Medico (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
President/Chief Operating Officer of the Company, with duties and
responsibilities that are customary for such executives subject to the
direction of the Company's Chairman/Chief Executive Officer. The
Executive will also perform services for such subsidiaries as may be
necessary. The Executive will use her best efforts to performs her
duties and discharge her responsibilities pursuant to this Agreement
competently, carefully and faithfully.
(b) DEVOTION OF TIME. The Executive will devote all of her
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 Company; provided, that the Executive
shall be permitted to devote a limited amount of her time, without
compensation, to charitable or similar organizations.
1
<PAGE>
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 $110,000 during the Term, subject to annual cost of living
increases based upon changes in the Consumer Price Index published by
the Bureau of Labor Statistics (or similar successor index) for the
region in which the Executive resides, but in no event shall the cost
of living increase be less than 7% per annum. 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 her annual salary in equal installments
no less frequently than twice a month.
(b) BONUS. For the services to be rendered by the Executive
under this Agreement, the Company's Board of Directors, on a yearly
basis, shall determine a bonus to be paid to Employee, based upon a
percentage of the adjusted consolidated net earnings of the Company for
each calendar year of Executive's employment, such sum to be computed
as follows:
(i) The adjusted consolidated net earnings of the Company
shall be determined in accordance with accepted accounting
practice by the independent accounting firm employed by the
Company as its auditors, within 90 days after the end of each
fiscal year.
(ii) This computation of net earnings and of the Executive's
percentage compensation, made in the manner here provided,
shall be final and binding upon the Company and the Executive,
and the Company shall pay such compensation to the Executive
within 120 days after the end of the fiscal year in question.
The Bonus may be paid in cash, stock, or options, by mutual
agreement of the Executive and the Company.
2
<PAGE>
(iii) For purposes of computing the executive's percentage
compensation, the adjusted consolidated net earnings of the
company shall be determined after full allowance for, and
deduction of the following: (a) all federal, state and
municipal taxes; (b) depreciation for the period based on the
amount of depreciation set forth in the annual report of the
company to its shareholders for the fiscal year which includes
such period.
(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 her 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 five weeks of vacation without loss of
compensation or other benefits to which she 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) INCENTIVE EQUITY AWARDS. The Executive shall receive an
incentive stock award of 150,000 shares of the Company's common stock
and options to purchase up to 600,000 shares of the Company's common
stock, the terms and conditions of which are more fully set forth in
that certain Stock Option Agreement dated as of October 11, 1999.
(d) MISCELLANEOUS BENEFITS. The Company shall also provide
Executive with the following: (a) a $500 per month automobile
allowance, (b) a $500 expense allowance and (c) telephone card,
cellular phone, and major credit card.
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 the remainder of the term of this Agreement
or for a period of 6 months following such termination,
whichever is less, the Company will continue to pay the
Executive her annual salary pursuant to Section 3(a) and her
Bonus pursuant to Section 3(b), 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.
3
<PAGE>
(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 30 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, 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 her duties hereunder, has been found in a
civil action by the Company, 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 her 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 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 her legal representative, as the case may be: (i) her
annual salary at such time pursuant to Section 3(a) through the date of
such termination of employment; and (ii) the Executive's share of the
Bonus as set forth in Section 3(b) of this Agreement. ;
(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 30%
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)-(iii) of Section 5(a). for
the remainder of the term of this Agreement or for a period of 12
months following such termination, whichever is greater, and 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.
(e) VOLUNTARY TERMINATION. The Executive, on 30 days prior
written notice to the Company, may terminate her 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 she must devote
a substantial amount of her time and energies to her family or other
personal matter and not to her business activities so as to preclude
her fulfilling her obligations under this Agreement. Upon any such
termination, the Company will pay the Executive (i) her annual salary
at such time pursuant to Section 3(a) through the date of such
termination of employment; and (ii) any bonus which would have been
payable through the date of termination pursuant to Section 3(b).
(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.
6. NON-COMPETITION AGREEMENT.
(a) COMPETITION WITH THE COMPANY. Until termination of her
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,
4
<PAGE>
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. Provided however
that nothing contained herein shall prevent Executive from practicing
law and representing clients engaged in a line of business the same or
similar to the Company.
(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) SOLICITATION OF EMPLOYEES. During the periods in which the
provisions of Section 6(a) shall be in effect, the Executive, will not
directly or indirectly, solicit employees of the Company for employment
by any person, enterprise, business, company, partnership, joint
venture or other entity. For the purposes of this Agreement, the term
"Employee " means any person, firm, corporation, partnership,
association or other entity which the Company, or any of its
affiliates, employed during the 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 an Employee.
(d) NO PAYMENT. The Executive acknowledges and agrees that no
separate or additional payment will be required to be made to her in
consideration of her undertakings in this Section 6.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
The Executive acknowledges that during her employment she 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 affiliates is a special, valuable and unique
asset. All records, files, materials and confidential information
obtained by the Executive in the course of her 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 her
performance of her duties under this Agreement, for any reason use for
her own benefit or the benefit of any person or entity with which she
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.
5
<PAGE>
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 her 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
assigns of the Company, provided that such successor or assign shall acquire all
or substantially all of the assets and business 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:
6
<PAGE>
To the Company: Quest Net Corp.
2999 N.E. 191 Street, Ph8
Aventura, Florida 33180
To the Executive: Rebecca J. Del Medico
14 Tara Lakes Drive East
Boynton Beach, Florida 33436
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 Miami, 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 AGREEMENT. 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.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date and year first above written.
Quest Net, Corp.
s/Rebecca J. Del Medico, Executive By: /s/ Camilo Pereira, Chairman
7
[LETTERHEAD OF AUDITORS]
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 heading "Selected Financial
Data" and "Experts" in such Prospectus.
/S/ CORDOVANO AND HARVEY, P.C.
Cordovano and Harvey, P.C.
Denver Colorado
November 9, 1999
