AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 18, 2000
REGISTRATION STATEMENT NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
---------------
YUPI INTERNET INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
FLORIDA 7375 65-0796526
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
YUPI INTERNET INC.
830 LINCOLN ROAD, SECOND FLOOR
MIAMI BEACH, FLORIDA 33139
(305) 604-0366
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
OSCAR L. COEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
YUPI INTERNET INC.
830 LINCOLN ROAD, SECOND FLOOR
MIAMI BEACH, FLORIDA 33139
(305) 604-0366
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
COPIES TO:
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<S> <C>
STEPHEN A. HURWITZ, ESQ. NANCY A. SPANGLER, ESQ.
WILLIAM B. SIMMONS, ESQ. PIPER MARBURY RUDNICK & WOLFE LLP
TESTA, HURWITZ & THIBEAULT, LLP COMMERCE EXECUTIVE PARK III, SUITE 610
125 HIGH STREET 1850 CENTENNIAL PARK DRIVE
BOSTON, MASSACHUSETTS 02110 RESTON, VIRGINIA 20191
(617) 248-7000 (703) 391-7100
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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 EACH CLASS PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.0001 par value....... $ 172,500,000.00 $ 45,540.00
=====================================================================================
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JANUARY 18, 2000
Shares
[YUPI LOGO]
Common Stock
------------
All of the shares of common stock are being offered by Yupi. Prior to this
offering, there has been no public market for our common stock. The initial
public offering price is expected to be between $ and $ per share.
We have granted the underwriters a 30-day option to purchase a maximum of
additional shares of common stock to cover over-allotments of shares.
Application has been made to list our common stock on the Nasdaq National
Market under the symbol "YUPI."
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 5.
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<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS
PUBLIC COMMISSIONS TO YUPI
------------- --------------- -------------
<S> <C> <C> <C>
Per Share ......... $ $ $
Total ............. $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about ,
2000.
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.
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
BANC OF AMERICA SECURITIES LLC
SG COWEN
The date of this prospectus is , 2000
<PAGE>
[INSIDE COVER PICTURE]
<PAGE>
------------
TABLE OF CONTENTS
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<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUMMARY .................... 1
RISK FACTORS .......................... 5
SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS ................. 17
USE OF PROCEEDS ....................... 18
DIVIDEND POLICY ....................... 18
CAPITALIZATION ........................ 19
DILUTION .............................. 20
SELECTED HISTORICAL FINANCIAL DATA..... 21
UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL DATA ..................... 23
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS .......... 28
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
BUSINESS .............................. 33
MANAGEMENT ............................ 45
CERTAIN TRANSACTIONS .................. 50
PRINCIPAL SHAREHOLDERS ................ 51
DESCRIPTION OF CAPITAL STOCK .......... 53
SHARES ELIGIBLE FOR FUTURE SALE ....... 57
UNDERWRITING .......................... 59
NOTICE TO CANADIAN RESIDENTS .......... 61
LEGAL MATTERS ......................... 62
EXPERTS ............................... 62
ADDITIONAL INFORMATION ................ 62
INDEX TO FINANCIAL STATEMENTS ......... F-1
</TABLE>
------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
------------
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING
AS AN UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------
i
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU
SHOULD CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. YOU SHOULD READ THE
ENTIRE PROSPECTUS CAREFULLY. UNLESS OTHERWISE SPECIFIED, ALL INFORMATION IN
THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION
AND REFLECTS THE FILING OF AN AMENDED AND RESTATED ARTICLES OF INCORPORATION
AND THE MANDATORY CONVERSION OF ALL OUTSTANDING SHARES OF PREFERRED STOCK INTO
AN AGGREGATE OF 19,558,460 SHARES OF COMMON STOCK UPON THE CLOSING OF THIS
OFFERING.
YUPI INTERNET INC.
We are a leading online Spanish language destination, delivering rich
content, useful services and an easy and intuitive navigational experience to a
wide and diverse community of Spanish speakers around the world. We attract
users through grass roots, traditional media and online marketing efforts, and
we provide them with aggregated entertainment, news and other content through
relationships with media companies, including our strategic investors, Sony,
News Corp. and Comcast. We also provide our users with relevant search results
exclusively in Spanish through our proprietary search engine.
We work with our advertisers and marketers to design, execute and evaluate
online advertising and promotional campaigns that segment and target our users.
As of January 7, 2000, we had over 3.3 million registered users. According to
I/PRO, in December 1999, our sites generated approximately 115 million page
views and we recorded approximately 8.3 million visits to our sites, with an
average duration of approximately 14 minutes per visit.
Our target market of Spanish-speaking Internet users represents one of the
fastest growing groups of Internet users today. IDC estimates that the number
of Spanish-speaking Internet users outside the United States will increase from
approximately 8.3 million in 1999 to 20.6 million in 2002. Forrester Research
estimates that by the end of 2000, there will be approximately 3.6 million U.S.
Hispanic Internet users. Jupiter Communications estimates that the percentage
of Latin Americans outside of Brazil using the Internet will increase from
approximately 1.0% in 1999 to 4.7% in 2003, representing a compound annual
growth rate of approximately 50%, compared to an estimated rate of
approximately 12% in the United States for the same period. As Internet usage
in Latin America increases, we believe that Spanish-speaking Internet users
will become a more diverse group. According to Nazca S & S, the percentage of
Internet users from the highest socio-economic level in the eight largest Latin
American countries declined from 41% in 1997 to 30% in 1999 and the percentage
of female Internet users increased from 24% to 38% during the same period.
We believe Yupi provides an effective medium for advertisers and marketers
to reach this increasingly diverse audience. We attract users through grass
roots, traditional media and online marketing efforts and strengthen their
loyalty and increase usage by providing them with:
/bullet/ aggregated quality content from leading media companies and
publications, such as BMG Entertainment, Cinemark, COMPUTER WORLD,
News Corp., PC WORLD, Sony, Universal Music Group, THE WALL STREET
JOURNAL OF THE AMERICAS, Warner Bros. Studios and WRIGHT INVESTOR
SERVICES;
/bullet/ relevant search and intuitive navigational services, through our
proprietary search engine and a database of Spanish language sites
that has been manually reviewed and categorized by our
Spanish-speaking employees, as well as through AltaVista's
proprietary Spanish language database; and
/bullet/ our simple and efficient presentation of content that allows users
to quickly navigate through our sites.
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Our large and diverse online user base enables us to conduct targeted
marketing analyses for advertisers and marketers. We provide advertisers and
marketers with a wide range of media consulting services, including campaign
planning and creative development. In addition, we provide them with access to
real-time feedback on user traffic, click-through rates, demographics, online
surveys and other information that allows them to reach their target markets
more easily and cost effectively.
Our objective is to be the most valuable medium for advertisers and
marketers to reach the Spanish-speaking online community. To achieve this goal,
we intend to:
/bullet/ attract new users and broaden our audience by continuing our
marketing efforts, cross-promotional activities and acquiring
existing Internet sites;
/bullet/ continue to strengthen audience loyalty and increase frequency of
use by leveraging branded content from Sony, News Corp. and over
100 other content providers, pursuing additional strategic
alliances, enhancing the functionality of our core services and
introducing user loyalty and affinity programs;
/bullet/ create value for advertisers and marketers by continuing to offer
consulting services, such as strategic planning, collection and
aggregation of user demographic information, online research and
analysis of advertising data; and
/bullet/ expand electronic commerce opportunities.
We were incorporated in Florida on October 20, 1997. Our principal
executive offices are located at 830 Lincoln Road, Second Floor, Miami Beach,
Florida 33139, and our telephone number is (305) 604-0366.
Yupi/trademark/, Yupi.com/trademark/, CiudadFutura.com/trademark/,
Bogota.com/trademark/, Claqueta.com/trademark/, MiYupi.com/trademark/,
LaCosa.com/trademark/, MiCasa.Yupi.com/trademark/, Metabusca.com/trademark/ and
the Yupi logo are our trademarks. Other trademarks or service marks appearing in
this prospectus are the property of their respective holders.
2
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THE OFFERING
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Common stock offered ........................... shares
Common stock to be outstanding
after this offering ........................... shares
Use of proceeds ................................ For general corporate purposes, including
working capital. See "Use of Proceeds."
Proposed Nasdaq National Market symbol ......... YUPI
</TABLE>
- ----------------
The number of shares of common stock to be outstanding after this offering
is based on our shares outstanding at December 31, 1999. This information
excludes 10,000,000 shares of common stock reserved for issuance under our
Stock Incentive Plan, of which 9,289,514 shares are issuable upon exercise of
stock options outstanding as of December 31, 1999.
3
<PAGE>
SUMMARY FINANCIAL DATA
The statement of operations data for the period from October 20, 1997
(date of incorporation) through December 31, 1997 and the year ended December
31, 1998 are derived from the audited consolidated financial statements
appearing elsewhere in this prospectus. The statement of operations data for
the nine months ended September 30, 1998 and 1999 and the balance sheet data as
of September 30, 1999 are derived from the unaudited consolidated financial
statements appearing elsewhere in this prospectus. The unaudited consolidated
financial statements have been prepared on the same basis as the audited
consolidated financial statements and, in the opinion of our management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the information set forth in the financial
statements. The historical results are not necessarily indicative of the
operating results to be expected in the future. For more information, see
"Unaudited Pro Forma Consolidated Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements and notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
OCTOBER 20, 1997
(DATE OF NINE MONTHS ENDED
INCORPORATION) TO YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, ---------------------------------
1997 1998 1998 1999
------------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues .......................................... $ 2,095 $ 77,147 $ 46,856 $ 166,914
Operating expenses ................................ 23,572 1,948,499 83,217 14,130,009
----------- ------------ ----------- -------------
Loss from operations .............................. (21,477) (1,871,352) (36,361) (13,963,095)
Net loss available to common shareholders ......... $ (21,477) $ (1,873,091) $ (37,682) $ (18,599,305)
=========== ============ =========== =============
Basic and diluted net loss per
common share .................................... $ (0.00) $ (0.16) $ (0.00) $ (1.14)
Weighted average number of shares used in
computing basic and diluted net loss per
common share .................................... 10,625,000 11,903,777 11,193,153 16,246,918
Pro forma basic and diluted net loss per
common share(1) ................................. $ (0.37) $ (1.17)
Pro forma weighted average number of shares
used in computing basic and diluted net loss
per common share(1) ............................. 12,165,542 16,474,038
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
--------------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
--------------- -------------- ---------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ...................... $ 3,684,211 $ 64,326,911 $
Working capital (deficit) ...................... (7,646,735) 56,040,239
Total assets ................................... 17,342,202 99,431,127
Mandatorily redeemable preferred stock ......... 13,160,468 -- --
Convertible preferred stock .................... -- 110,793,667 --
Total shareholders' equity (deficit) ........... (12,640,820) 90,652,847
</TABLE>
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(1) The pro forma summary statement of operations data reflects the acquisition
of CiudadFutura.com in February 1999 and Bogota.com in August 1999 as if
the acquisitions were completed on January 1, 1998. These acquisitions
were accounted for using the purchase method of accounting.
(2) The pro forma summary balance sheet data reflects the issuance of 2,955,016
shares of Class B Convertible Preferred Stock in October 1999 and
5,858,698 shares of Class C Convertible Preferred Stock in November 1999
and the elimination of the redemption feature of the Class A Convertible
Preferred Stock.
(3) The pro forma as adjusted summary balance sheet data reflects the
conversion of all outstanding shares of preferred stock into 19,558,460
shares of common stock upon the closing of this offering and the sale of
shares of common stock in this offering at an assumed initial
offering price of $ per share, after deducting the estimated
underwriting discounts and commissions and estimated offering expenses.
4
<PAGE>
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY
CONSIDER THE RISKS DESCRIBED BELOW BEFORE YOU DECIDE TO BUY OUR COMMON STOCK.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION
OR RESULTS OF OPERATIONS WOULD LIKELY SUFFER. IN THIS CASE, THE TRADING PRICE
OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR
INVESTMENT.
WE ARE AN EARLY STAGE COMPANY WITH AN UNPROVEN BUSINESS PLAN WHICH MAKES OUR
BUSINESS DIFFICULT TO EVALUATE
We were incorporated in October 1997. Accordingly, we have a limited
operating history for you to evaluate our business. You must consider the
risks, expenses and uncertainties that an early stage company faces,
particularly in the new and rapidly evolving Internet market.
These risks include our ability to:
/bullet/ increase awareness of Yupi.com and our other sites and attract new
users to our network;
/bullet/ continue to build user loyalty;
/bullet/ expand the content and services on our network;
/bullet/ generate increased advertising revenue;
/bullet/ generate increased electronic commerce revenue;
/bullet/ maintain our current, and develop new, strategic relationships
with media and technology companies;
/bullet/ expand distribution of our services through relationships with
Internet service providers, or ISPs, and by increasing the number
of links to our sites;
/bullet/ respond effectively to competitive pressures; and
/bullet/ continue to develop and upgrade our technology systems and
infrastructure.
If we are unsuccessful in addressing these risks, our business, financial
condition and results of operations will be materially and adversely affected.
WE HAVE NEVER BEEN PROFITABLE AND EXPECT OUR LOSSES TO CONTINUE
We have never been profitable. As of September 30, 1999, we had an
accumulated deficit of approximately $20.5 million. We expect to continue to
incur significant losses for the foreseeable future. Although our revenues have
grown in recent quarters, our expenses have grown even faster, and we expect to
increase spending significantly. Accordingly, we will need to generate
significantly higher revenues to achieve profitability. We may not be able to
do so.
WE HAVE ENGAGED IN A SUBSTANTIAL AMOUNT OF BARTER ACTIVITY WHICH MAKES AN
EVALUATION OF OUR HISTORICAL FINANCIAL RESULTS DIFFICULT
We have historically engaged in a substantial amount of barter activity.
Barter activity consists of arrangements in which we exchange advertising space
on our network predominately for advertising space in print media, on
television and radio stations, or for placement of our promotions in areas of
high commercial traffic, rather than for cash payment. Under current accounting
rules and our revenue recognition policy, these barter transactions may not be
reported as revenue unless we are
5
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able to reliably measure the cash value of these transactions. For the value of
a barter transaction to be reliably measurable, we must conduct a sufficient
number of cash-only transactions that are similar to that barter transaction in
terms of the scope, size and prominence of the advertising services being sold.
Through September 30, 1999, we have not reported any barter transactions as
revenue. If in future periods we are able to meet the standard that allows us
to report barter transactions as revenue, we may recognize substantially
increased revenue compared to prior periods. Comparison of revenues for any
future period with revenues from prior periods may not necessarily be
indicative of results in subsequent periods. In addition, because barter
transactions do not generate cash, we may be unable to fund our operations if
we are unable to increase our cash revenue.
OUR FUTURE FINANCIAL RESULTS MAY BE ADVERSELY AFFECTED IF ACCOUNTING POLICIES
REGARDING BARTER REVENUE CHANGE
We expect to receive a significant portion of our revenues from barter
transactions for the foreseeable future. Current accounting policies allow us
to record barter transactions as revenue if we can reliably measure the value
of the barter transactions. This accounting practice has recently come under
increased scrutiny by the Securities and Exchange Commission and the Emerging
Issues Task Force of the Financial Accounting Standards Board. If the current
accounting policy on barter transactions changes, we may be unable to report
barter transactions as revenue. This could cause the trading price of our
common stock to decline.
OUR OPERATING RESULTS MAY FLUCTUATE DUE TO SEASONAL FACTORS
Use of our services is seasonal. This seasonality may cause fluctuations
in our revenues and operating results. User traffic on our sites has been
significantly lower during the first calendar quarter of each year because:
/bullet/ that period includes the summer months in much of Latin America;
/bullet/ many users in our target market take extended vacations during
these months; and
/bullet/ schools and universities in our target market are generally closed
during this time.
We believe these seasonal trends will continue to affect our results of
operations.
YOU SHOULD NOT RELY ON OUR QUARTERLY OPERATING RESULTS AS AN INDICATION OF OUR
FUTURE RESULTS BECAUSE THEY ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS
Our future revenues and results of operations may fluctuate significantly
due to a combination of factors, including:
/bullet/ our ability to attract and retain users;
/bullet/ the start-up nature of our business, which means we have not begun
to achieve consistency in revenue and expense growth;
/bullet/ our acquisition and internal growth strategy, which means that we
expect to frequently add new activities to our business, leading
to increased expenses;
/bullet/ promotional activities by us or our competitors, which could cause
heavier Internet usage in some quarters compared to others;
/bullet/ currency fluctuations that affect reported revenues and expenses
from our Latin American and Spanish operations;
/bullet/ seasonal variations in advertising from quarter to quarter, which
would lead to fluctuating advertising revenues; and
6
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/bullet/ heavier retail purchasing activity in some quarters compared to
others, which would contribute to fluctuating electronic commerce
revenues.
Accordingly, you should not rely on quarter-to-quarter comparisons of our
results of operations as an indication of our future performance. In future
periods our results of operations may be below the expectations of public
market analysts and investors. This failure to meet expectations could cause
the trading price of our common stock to decline.
IF THE INTERNET IS NOT WIDELY ACCEPTED AS A MEDIUM FOR ADVERTISING AND COMMERCE
IN OUR MARKETS, PARTICULARLY IN LATIN AMERICA, OUR BUSINESS WILL SUFFER
We expect to receive a substantial amount of our revenue for the
foreseeable future from Internet advertising, and to a lesser extent, from
facilitating electronic commerce transactions. If the Internet is not accepted
as a medium for advertising and commerce in our markets, especially in Latin
America, our business will suffer. The Internet advertising and electronic
commerce markets are new and rapidly evolving in Spanish-speaking communities,
particularly in Latin America. As a result, we cannot gauge their effectiveness
or the long-term market acceptance of online advertising and electronic
commerce.
Many of our current or potential advertisers and electronic commerce
merchants have limited experience using the Internet for advertising and
electronic commerce and historically have not devoted a significant portion of
their budgets to Internet-based activities. Advertisers and marketers have
invested substantial resources in other methods of conducting business, and
companies may choose not to advertise or sell their products or services on our
sites if they do not perceive our audience demographic to be desirable or
advertising on our sites to be effective.
THE ACCEPTANCE OF THE INTERNET AS A MEDIUM FOR ADVERTISING DEPENDS ON THE
DEVELOPMENT OF STANDARDS TO MEASURE ADVERTISING EFFECTIVENESS
No standards have been widely accepted for measuring the effectiveness of
Internet advertising. In particular, few Internet traffic measurement companies
currently offer their services in many of our target markets, including Latin
America. Standards may not develop sufficiently to support the Internet as an
effective advertising medium. If these standards do not develop, advertisers
may choose not to advertise on the Internet in general or, specifically, on our
sites. This decision would have a material adverse effect on our business,
financial condition and results of operations.
IF INTERNET USE BY SPANISH-SPEAKING USERS DOES NOT GROW, OUR BUSINESS WILL
SUFFER
The Internet market in Latin America and in other Spanish-speaking markets
is in an early stage of development. Our future success depends on continued
growth of Internet usage in these markets, which may be inhibited for various
reasons, including:
/bullet/ cost of Internet access;
/bullet/ concerns about security, reliability, and privacy;
/bullet/ difficulty of use; and
/bullet/ quality of service.
Our business, financial condition and results of operations will be materially
and adversely affected if Internet usage in these markets does not continue to
grow or grows more slowly than we anticipate.
UNDERDEVELOPED TELECOMMUNICATIONS INFRASTRUCTURE MAY LIMIT THE GROWTH OF THE
INTERNET IN LATIN AMERICA AND ADVERSELY AFFECT OUR BUSINESS
Access to the Internet requires a relatively advanced telecommunications
infrastructure. The telecommunications infrastructure in many parts of Latin
America is not as well-developed as that in
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the United States or Western Europe. The quality and continued development of
this infrastructure in Latin America will have a substantial impact on our
ability to deliver our services and on the market acceptance of the Internet in
Latin America in general. If the Latin American telecommunications
infrastructure does not improve, the Internet will not gain broad acceptance.
If access to the Internet in Latin America does not continue to grow or grows
more slowly than we anticipate, our business, financial condition and results
of operations will be materially and adversely affected.
UNDERDEVELOPED DISTRIBUTION INFRASTRUCTURE MAY LIMIT THE GROWTH OF ELECTRONIC
COMMERCE IN LATIN AMERICA AND ADVERSELY AFFECT OUR BUSINESS
Execution of electronic commerce transactions requires a relatively
advanced distribution infrastructure. Currently, this distribution
infrastructure, which includes roads, airports, ports and warehouse facilities,
in many parts of Latin America is not as well-developed as in the United States
or Western Europe. If further improvements to the distribution infrastructure
in Latin America are not made, the volume of electronic commerce transactions
there may not increase or may increase more slowly than we anticipate. If
electronic commerce opportunities in Latin America do not grow or grow more
slowly than anticipated, our business, financial condition and results of
operations will be materially and adversely affected.
LACK OF CREDIT CARD OWNERSHIP MAY LIMIT THE GROWTH OF ELECTRONIC COMMERCE IN
LATIN AMERICA AND ADVERSELY AFFECT OUR BUSINESS
Unlike consumers in the United States and Western Europe, most Latin
Americans do not own credit cards. Credit cards are often required to conduct
electronic commerce transactions. If credit card ownership by Latin Americans
using the Internet does not increase, or another payment infrastructure is not
adopted, the growth of electronic commerce in Latin America may be limited. If
electronic commerce opportunities in Latin America do not grow, or grow more
slowly than anticipated, our business, financial condition and results of
operations will be materially and adversely affected.
SOCIAL AND POLITICAL CONDITIONS IN LATIN AMERICA MAY CAUSE VOLATILITY IN OUR
OPERATIONS AND ADVERSELY AFFECT OUR BUSINESS
A substantial portion of our revenue is, and will continue to be,
dependent upon economic activity in Latin America. Social and political
conditions in Latin America are volatile and may cause our operations to
fluctuate. This volatility could make it difficult for us to achieve our
desired growth in revenues and earnings. Historically, volatility in Latin
America has been caused by:
/bullet/ significant governmental influence over many aspects of local
economies;
/bullet/ political instability;
/bullet/ unexpected changes in regulatory requirements;
/bullet/ social unrest;
/bullet/ slow or negative economic growth;
/bullet/ imposition of trade barriers; and
/bullet/ wage and price controls.
We have no control over these matters. Resulting volatility may decrease
Internet availability, create uncertainty regarding our operating climate and
adversely affect our advertising revenue, all of which may adversely impact our
business.
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CURRENCY FLUCTUATIONS AND GENERAL ECONOMIC CONDITIONS IN LATIN AMERICA MAY
ADVERSELY AFFECT OUR BUSINESS
The currencies of many countries in Latin America have experienced
substantial depreciation and volatility. Currency fluctuations, as well as high
interest rates, inflation and high unemployment, have materially and adversely
affected the economies of these countries. Poor general economic conditions in
Latin American countries may cause a decrease in our user base and cause our
advertisers to reduce their spending, which could adversely impact our business
and cause our revenue to decline unexpectedly.
In addition, if we generate an increased amount of revenue in currencies
other than the U.S. dollar, currency losses could occur as a result of currency
depreciation.
WE MAY NOT BE ABLE TO DEVELOP OUR BRANDS AND ATTRACT USERS TO OUR SITES
Developing our Yupi.com brand and the brands of our other sites is
critical to expanding our user base and revenues. We believe the importance of
brand recognition will increase as the number of Spanish language Internet
sites grows. To attract and retain Internet users, advertisers and marketers,
we intend to substantially increase our expenditures to strengthen brand
loyalty. Our success in promoting and enhancing our brands will also depend on
our success in providing high quality content, features and functionality. If
we fail to promote our brands successfully or if users, advertisers or
marketers do not perceive our services to be of high quality, the value of our
brands could be diminished. This result could have a material and adverse
effect on our business, financial condition and results of operations.
IF WE FAIL TO ESTABLISH AND MAINTAIN STRATEGIC RELATIONSHIPS WITH CONTENT
PROVIDERS, ELECTRONIC COMMERCE MERCHANTS AND TECHNOLOGY PROVIDERS, WE MAY NOT
BE ABLE TO ATTRACT AND RETAIN USERS OR ADVERTISERS
We have focused on establishing relationships with leading content
providers, electronic commerce merchants, and technology and infrastructure
providers. Our business depends heavily on these relationships. Because most of
our agreements with these third parties are not exclusive, our competitors may
seek to work with these same parties and adversely impact our relationships. We
might not be able to maintain these relationships or replace them on
financially attractive terms. If these same third parties do not adequately
perform their obligations, or if they reduce their activities with us, compete
with us, or provide their services to competitors, we may have more difficulty
attracting and retaining users and advertisers. This result could cause our
business, financial condition and results of operations to be materially and
adversely affected. Also, while we intend to actively seek additional strategic
relationships in the future, our efforts may prove unsuccessful.
WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY AGAINST OUR COMPETITORS
Many companies provide Internet sites and online destinations targeting
Spanish-speaking people. Competition for users, advertisers and marketers is
intense and is expected to increase significantly in the future because there
are no substantial barriers to entry in our market. Companies may be successful
in competing against us if they are able to offer more compelling content or
services, promote their brand more effectively or bundle their content and
services with related products or services that we cannot offer. Increased
competition could result in:
/bullet/ lower advertising rates;
/bullet/ price reductions and lower profit margins;
/bullet/ reduced traffic; and
/bullet/ loss of market share.
9
<PAGE>
WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE OUR EXPANDING OPERATIONS
We have recently experienced a period of rapid growth which has placed
significant strain on our managerial, operational and financial resources. To
accommodate this growth, we must implement new or upgraded operating and
financial systems, procedures and controls throughout many different locations.
We may not succeed with these efforts. Our failure to efficiently expand and
integrate these areas could cause our expenses to grow, revenues to decline or
grow more slowly than expected and could otherwise have a material adverse
effect on our business, financial condition and results of operations.
OUR BUSINESS AND GROWTH WILL SUFFER IF WE ARE UNABLE TO HIRE AND RETAIN KEY
PERSONNEL THAT ARE IN HIGH DEMAND
We depend on the services of senior management and key technical
personnel. In particular, our success depends on the continued efforts of our
President and Chief Executive Officer, Oscar Coen, and Chief Technical Officer,
Carlos Cardona. The loss of the services of these executive officers or any of
our key management, sales or technical personnel could have a material adverse
effect on our business, financial condition and results of operations. In
addition, our success is largely dependent on our ability to hire highly
qualified managerial, sales and technical personnel. These individuals are in
high demand, and we may not be able to attract the staff we need. The
difficulties and costs of personnel growth are compounded by our international
operations.
WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE OUR ACQUIRED BUSINESSES
Our operations have grown in part due to our acquisition of local
Internet-based businesses including our:
/bullet/ February 1999 acquisition of CiudadFutura.com in Spain;
/bullet/ August 1999 acquisition of Bogota.com in Colombia;
/bullet/ October 1999 acquisition of Claqueta.com in Spain; and
/bullet/ November 1999 acquisition of LaCosa.com in Argentina.
We are now involved in integrating the operations, personnel and services
of these businesses. We also expect to acquire or form relationships with other
Internet companies in Latin America, Spain and the United States, and will
therefore need to integrate their operations, personnel and services with ours.
If we are unable to integrate all of these businesses, the quality of our sites
may suffer and our users may be less likely to use our sites. This failure
could have a material adverse effect on our business, financial condition and
results of operations.
WE MAY NOT BE ABLE TO IDENTIFY OR FINANCE ACQUISITIONS OR JOINT VENTURES IN THE
FUTURE, WHICH WOULD LIMIT OUR GROWTH PROSPECTS
In our business strategy, we continually review possible acquisitions,
joint ventures and strategic alliances that we expect to complement our
existing business, increase our user traffic, enhance our content offerings or
increase our advertising and electronic commerce revenues. We do not know if we
will succeed in identifying future joint ventures, acquisitions or alliances or
in financing these transactions. A failure to identify or finance these future
transactions may impair our growth.
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<PAGE>
OUR ACQUISITIONS AND JOINT VENTURES INVOLVE RISKS AND UNCERTAINTIES THAT MAY
HARM OUR BUSINESS OR CAUSE US NOT TO PERFORM AS EXPECTED
Our acquisitions and joint ventures could result in numerous risks and
uncertainties, including:
/bullet/ the need to raise additional funds through public or private
financings, which may result in dilution to existing shareholders
and substantially increase our debt;
/bullet/ difficulties in assimilating the operations, personnel,
technologies, services and products of acquired companies;
/bullet/ conflicts of interest with joint venture partners;
/bullet/ the risks of entering geographic or business markets in which we
have limited or no prior experience;
/bullet/ the diversion of management's attention from our other business
concerns;
/bullet/ the risk that an acquired business will not perform as expected or
that it will have unforeseen liabilities; and
/bullet/ loss of key personnel of acquired organizations.
OUR ADVERTISING PRICING MODEL, BASED ON THE NUMBER OF TIMES AN ADVERTISEMENT IS
DELIVERED TO USERS, MAY NOT BE SUCCESSFUL
Different pricing models are used to sell advertising on the Internet, and
models we adopt may not prove to be the most profitable. Advertising based on
impressions, or the number of times an advertisement is delivered to users,
currently comprises substantially all of our revenues. When minimum guaranteed
impression levels are not met, we defer recognition of the corresponding
revenues until guaranteed levels are achieved. If they are not achieved, we may
be required to provide additional impressions after the contract term, which
would reduce our advertising inventory. This requirement could have a material
adverse effect on our business, financial condition and results of operations.
In addition, it is difficult to predict which pricing model, if any, will
emerge as the industry standard. This uncertainty makes it difficult to project
our future advertising rates and revenues. Our advertising revenues could be
adversely affected if we are unable to adapt to new forms of Internet
advertising or if we do not adopt the most profitable pricing model or
advertising form.
IF WE DO NOT INCREASE OUR ADVERTISING SALES STAFF, OUR BUSINESS WILL NOT GROW
AS EXPECTED
We depend on our advertising sales personnel to maintain and increase
advertising sales. Our business, financial condition and results of operations
could be materially and adversely affected if our advertising sales department
is not effective. As of December 31, 1999, our advertising sales department
consisted of nine employees. Although we expect our advertising sales
department to grow, we cannot be sure that new sales personnel will become
productive on a timely basis.
UNEXPECTED NETWORK INTERRUPTIONS CAUSED BY SYSTEM FAILURES MAY RESULT IN
REDUCED USER TRAFFIC, REDUCED REVENUE AND HARM TO OUR REPUTATION
In the past, we have experienced:
/bullet/ system disruptions;
/bullet/ inaccessibility of our network;
11
<PAGE>
/bullet/ long response times;
/bullet/ impaired quality; and
/bullet/ loss of important reporting data.
Although we are in the process of improving our sites to reduce the frequency
of these events, we may not be successful. If we experience delays and
interruptions, user traffic may decrease and our brand could be adversely
affected. Because our revenues depend on the number of individuals who use our
sites, our business may suffer if improvement efforts are unsuccessful. We
maintain our central production servers at the New Jersey data center of Exodus
Communications. A failure by Exodus to protect its systems against damage from
power loss, telecommunications failure, break-ins, fire, natural disasters or
other events could have a material adverse effect on our business, financial
condition and results of operations.
CONCERNS ABOUT SECURITY OF ELECTRONIC COMMERCE TRANSACTIONS AND
MISAPPROPRIATION OF CONFIDENTIAL INFORMATION FROM OUR SITES MAY REDUCE THE USE
OF OUR SITES AND IMPEDE OUR GROWTH
A significant barrier to electronic commerce and confidential
communications over the Internet has been the need for security. Internet usage
could decline if any well-publicized security failure occurs. Unauthorized
persons could attempt to penetrate our network security. If successful, they
could misappropriate confidential information concerning our users or cause
interruptions in our services. We may incur significant costs to protect
against the threat of security breaches or to alleviate problems caused by
these breaches. Security breaches could have a material adverse effect on our
business, financial condition and results of operations.
COMPUTER VIRUSES MAY CAUSE OUR SYSTEMS TO INCUR DELAYS OR INTERRUPTIONS AND MAY
ADVERSELY AFFECT OUR BUSINESS
Computer viruses may cause delays in our systems or other service
interruptions. In addition, the inadvertent transmission of computer viruses
could expose us to material losses or litigation and material liability.
Moreover, if a computer virus affecting our system is highly publicized, our
reputation could be greatly damaged and our user traffic could decline.
WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATIONS AND LEGAL
UNCERTAINTIES AFFECTING THE INTERNET WHICH COULD ADVERSELY AFFECT OUR BUSINESS
Until now, governmental regulations have not materially restricted use of
the Internet in our markets. However, the legal and regulatory environment
pertaining to the Internet is uncertain and may change. Uncertainty and new
regulations could increase our costs of doing business and prevent us from
delivering our services over the Internet. The growth of the Internet may also
be significantly slowed. These circumstances could delay growth in demand for
our sites and limit the growth of our revenues. In addition to new laws and
regulations, existing laws may be applied to the Internet. New and existing
laws may cover issues, including:
/bullet/ sales and other taxes;
/bullet/ user privacy;
/bullet/ pricing controls;
/bullet/ characteristics and quality of products and services;
/bullet/ consumer protection;
/bullet/ cross-border commerce;
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<PAGE>
/bullet/ libel and defamation;
/bullet/ copyright, trademark and patent infringement;
/bullet/ pornography;
/bullet/ antitrust and competition; and
/bullet/ other claims based on the nature and content of Internet
materials.
WE MAY BECOME SUBJECT TO CLAIMS REGARDING FOREIGN LAWS AND REGULATIONS WHICH
MAY BE COSTLY, TIME CONSUMING AND DISTRACTING
Because we have employees, property and business operations in the United
States, Spain and throughout Latin America, we are subject to the laws and the
court systems of many jurisdictions. We may face claims based on foreign
jurisdictions for violations of their laws. These laws may be changed or new
laws may be enacted in the future. International litigation is often expensive,
time consuming and distracting. Accordingly, any of these matters could have a
material adverse effect on our business, financial condition and results of
operations.
UNAUTHORIZED USE OF OUR INTELLECTUAL PROPERTY BY THIRD PARTIES MAY ADVERSELY
AFFECT OUR BUSINESS
We regard our copyrights, service marks, trade names, trademarks, trade
secrets and other intellectual property as critical to our success.
Unauthorized use of our intellectual property by third parties may adversely
affect our business and our reputation. We rely on trademark and copyright law,
trade secret protection and confidentiality and license agreements with our
employees, customers, suppliers and others to protect our intellectual property
rights. Despite these precautions, it may be possible for third parties to
obtain and use our intellectual property without authorization. Furthermore,
the validity, enforceability and scope of protection of intellectual property
in Internet-related industries is uncertain and still evolving. The laws of
some foreign countries are uncertain or do not protect intellectual property
rights to the same extent as do the laws of the United States.
DEFENDING AGAINST INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS COULD BE TIME
CONSUMING AND EXPENSIVE AND, IF WE ARE NOT SUCCESSFUL, COULD SUBJECT US TO
SIGNIFICANT DAMAGES AND DISRUPT OUR BUSINESS
We cannot be certain that we do not or will not infringe valid patents,
copyrights or other intellectual property rights of third parties. We may be
subject to legal proceedings and claims from time to time relating to the
intellectual property of others in the ordinary course of our business. We may
incur substantial expenses in defending against these third party infringement
claims, regardless of their merit. Successful infringement claims against us
may result in substantial monetary liability or may materially disrupt the
conduct of our business.
WE MAY BE SUBJECT TO CLAIMS BASED ON THE CONTENT WE PROVIDE ON OUR SITES WHICH
MAY EXPOSE US TO LIABILITY AND ADVERSELY AFFECT OUR BUSINESS
The laws in the United States, Spain and in Latin American countries
relating to the liability of companies providing online services, like ours,
for activities of their visitors, are currently unsettled. Claims have been
made against online service providers and networks in the past for defamation,
negligence, copyright or trademark infringement, obscenity, personal injury or
other reasons based on the nature and content of information posted online by
their visitors. We could be subject to similar claims and incur significant
costs in their defense. In addition, we could be exposed to liability for the
selection of listings that may be accessible through our sites or through
content and materials that users may post in classifieds, message boards, chat
rooms or other interactive services. If any information provided through our
services contains errors, third parties could make claims against us
13
<PAGE>
for losses incurred in reliance on the information. We offer Internet-based
email services, which expose us to potential liabilities or claims resulting
from:
/bullet/ unsolicited email;
/bullet/ lost or misdirected messages;
/bullet/ illegal or fraudulent use of email; or
/bullet/ interruptions or delays in email service.
Investigating and defending these claims is expensive, even if they do not
result in liability and the expenses we incur may materially and adversely
affect our business, financial condition and results of operations.
WE MAY BE SUBJECT TO CLAIMS BASED ON PRODUCTS SOLD ON OUR SITES WHICH MAY
EXPOSE US TO LIABILITY AND ADVERSELY AFFECT OUR BUSINESS
We offer third party products and services on our sites under arrangements
where we receive a portion of the revenues generated from these transactions.
These arrangements may expose us to additional claims including product
liability or personal injury from these products and services, even when the
products or services are not ours. These claims may require us to incur
significant expenses in their defense or satisfaction. While some of our
agreements with these parties may provide that we will be indemnified against
these liabilities, such indemnification may not be adequate. Although we carry
general liability insurance, our insurance may not cover all potential claims
to which we are exposed or may not be adequate to indemnify us for all
liability that may be imposed. Liabilities not covered by our insurance could
have a material adverse effect on our business, financial condition and results
of operations or could result in criminal penalties. In addition, the increased
attention focused on liability issues as a result of these lawsuits and
legislative proposals could adversely impact the overall growth of Internet
use.
OUR ABILITY TO COLLECT PERSONAL DATA ON OUR USERS MAY BE RESTRICTED AND MAY
LIMIT OUR ABILITY TO GENERATE ADVERTISING AND ELECTRONIC COMMERCE REVENUE
We must comply with applicable data protection laws, including a European
Union directive that limits our ability to collect and use information relating
to our users. Spain has adopted legislation implementing the standards of this
directive. Increased public awareness of privacy issues and changes to
legislation could limit our ability to use personal information about our users
to attract advertisers and marketers, which could adversely affect our
business, financial condition and results of operations.
WE MAY NEED ADDITIONAL FINANCING WHICH COULD BE DIFFICULT TO OBTAIN
We expect the net proceeds from this offering, together with our current
cash and cash equivalents, will be sufficient to meet our requirements for at
least the next 12 months. After that, we expect that we will need to raise
additional funds. The actual amount and timing of our future capital
requirements may differ from our estimates depending on many factors,
including:
/bullet/ our ability to generate cash from operations;
/bullet/ technological developments;
/bullet/ competitive developments;
/bullet/ new business activities, including new market developments or new
opportunities in our industry; and
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<PAGE>
/bullet/ the occurrence of additional acquisitions.
Our ability to obtain additional financing will be subject to a number of
factors, including our operating performance, market conditions and investor
sentiment. We cannot be certain that we will be able to obtain additional
financing on favorable terms, if at all. Further, if we issue additional equity
securities, shareholders may experience additional dilution and the new equity
securities may have rights, preferences or privileges senior to those of
existing holders of common stock. If we cannot raise funds on acceptable terms,
if and when needed, we may be unable to further develop or enhance our sites,
take advantage of future opportunities, grow our business or respond to
competitive pressures or unanticipated requirements, which could seriously harm
our business.
OUR STOCK PRICE MAY BE VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL LOSSES FOR
INVESTORS PURCHASING SHARES IN THIS OFFERING
Prior to this offering, you could not publicly buy or sell our common
stock. An active public market for our common stock may not develop or be
sustained after this offering. We will negotiate and determine the initial
public offering price with the representatives of the underwriters. You may be
unable to sell your shares of common stock at or above the initial public
offering price, which may result in substantial losses to you. The market price
of our common stock may fluctuate significantly in response to the following
factors, some of which are beyond our control:
/bullet/ variations in our quarterly operating results;
/bullet/ changes in securities analysts' estimates of our financial
performance;
/bullet/ changes in market valuations of similar companies;
/bullet/ announcements by us or our competitors of new or enhanced products
or of significant contracts, acquisitions or strategic
relationships;
/bullet/ additions or departures of key personnel; and
/bullet/ future sales of our common stock or other securities.
OUR STOCK PRICE COULD BE ADVERSELY AFFECTED BY SHARES OF OUR COMMON STOCK
BECOMING AVAILABLE FOR SALE
Sales of a substantial number of shares of our common stock in the public
market after this offering could depress the market price of our common stock
and could impair our ability to raise capital through the sale of additional
equity securities. For a more detailed description, see "Shares Eligible for
Future Sale."
PURCHASERS IN THIS OFFERING WILL INCUR IMMEDIATE, SUBSTANTIAL DILUTION
The initial public offering price of our common stock is substantially
higher than the book value per share of our outstanding common stock. As a
result, investors purchasing common stock in this offering will incur immediate
and substantial dilution. In the past, we issued options to acquire common
stock at prices significantly below the initial public offering price. If these
outstanding options are exercised, there will be further dilution to investors
in this offering.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND FLORIDA LAW COULD PREVENT
OR DELAY A CHANGE IN CONTROL OF YUPI
Provisions of our articles of incorporation and bylaws, as well as
provisions of Florida law, could make it more difficult for a third party to
acquire us, even if doing so would be beneficial to our
15
<PAGE>
shareholders. For more information, see "Description of Capital
Stock--Anti-Takeover Effects of Provisions of the Florida Business Corporation
Act and Our Charter."
INSIDERS WHO WILL CONTINUE TO HAVE SUBSTANTIAL CONTROL OVER US AFTER THIS
OFFERING MAY HAVE INTERESTS DIFFERING FROM THOSE OF OTHER SHAREHOLDERS AND
COULD DELAY OR PREVENT A CHANGE IN CORPORATE CONTROL
Upon completion of this offering, our executive officers, directors and
principal shareholders will beneficially own, in the aggregate, approximately
% of our outstanding common stock. As a result, these shareholders will be
able to exercise control over all matters requiring shareholder approval,
including the election of directors and approval of significant corporate
transactions, including mergers, consolidations and sale of substantially all
of our assets. This could have the effect of delaying or preventing a change of
control of Yupi.
WE HAVE BROAD DISCRETION TO USE THE PROCEEDS FROM THIS OFFERING, AND THE
FAILURE OF MANAGEMENT TO APPLY THESE FUNDS EFFECTIVELY COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS
We plan to use the proceeds from this offering for general corporate
purposes. Therefore, we will have broad discretion as to how we spend the
proceeds, and shareholders may not agree with how we use the proceeds. We may
not be successful in investing the proceeds from this offering in our
operations or external investments in ways that will yield favorable returns.
See "Use of Proceeds."
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<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and elsewhere in this prospectus constitute
forward-looking statements. These statements relate to future events or our
future financial performance, and are identified by terminology such as "may,"
"will," "should," "expects," "scheduled," "plans," "intends," "anticipates,"
"believes," "estimates," "potential," or "continue" or the negative of such
terms or other comparable terminology. These statements are only predictions.
Actual events or results may differ materially. In evaluating these statements,
you should specifically consider various factors, including the risks outlined
under "Risk Factors." These factors may cause our actual results to differ
materially from any forward-looking statement.
Although we believe the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of these
statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform these statements to
actual results.
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<PAGE>
USE OF PROCEEDS
Our net proceeds from the issuance and sale of shares of common
stock in this offering are estimated to be approximately $ , at an assumed
initial public offering price of $ per share, after deducting underwriting
discounts and commissions and estimated offering expenses. If the underwriters'
over-allotment option is exercised in full, we estimate that we will receive an
additional $ . We intend to use the proceeds from this offering as
follows:
/bullet/ approximately $40.0 million to fund branding and advertising
activities;
/bullet/ approximately $4.0 million for payment of the promissory note
issued in connection with the acquisition of CiudadFutura.com; and
/bullet/ the balance for working capital and general corporate purposes.
However, changing business conditions and unforeseen circumstances could cause
the actual amounts used for these purposes to vary from these estimates.
A portion of the proceeds may also be used to acquire or invest in
complementary businesses or products or to obtain the right to use
complementary technologies. We have no specific understandings, commitments or
agreements with respect to any such acquisition or investment.
Pending such uses, the proceeds of this offering will be invested in
short-term, interest-bearing, investment-grade securities, certificates of
deposit or direct or guaranteed obligations of the United States.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock and
do not anticipate paying cash dividends in the foreseeable future. We currently
intend to retain future earnings, if any, to fund the expansion and growth of
our business. Payment of future dividends, if any, will be at the discretion of
our Board of Directors after taking into account various factors, including our
financial condition, operating results, current and anticipated cash needs and
plans for expansion.
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<PAGE>
CAPITALIZATION
The following table shows our capitalization as of September 30, 1999:
/bullet/ on an actual basis;
/bullet/ on a pro forma basis giving effect to the issuance of 2,955,016
shares of Class B Convertible Preferred Stock in October 1999 and
5,858,698 shares of Class C Convertible Preferred Stock in
November 1999, and the elimination of the redemption feature of
the Class A Convertible Preferred Stock; and
/bullet/ on a pro forma as adjusted basis to reflect:
-- the conversion of our preferred stock into an aggregate of
19,558,460 shares of common stock upon the closing of this
offering; and
-- the sale by us of shares of common stock in this
offering at an assumed initial public offering price of $
per share after deducting underwriting discounts and
commissions and estimated offering expenses.
This information should be read in conjunction with our consolidated
financial statements and notes thereto appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
------------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------------- --------------- ---------------
<S> <C> <C> <C>
Mandatorily redeemable preferred stock:
Class A Convertible Preferred Stock, $0.01 par value; 428,762 shares
authorized, issued and outstanding, actual; 428,762 shares authorized and
no shares issued or outstanding, pro forma; no shares authorized, issued or
outstanding, pro forma as adjusted ........................................ $ 13,160,468 $ -- $ --
Shareholders' equity (deficit):
Preferred Stock, $0.01 par value; 9,571,238 shares authorized and no shares
issued and outstanding, actual; 647,009 shares authorized and no shares
issued or outstanding, pro forma; shares authorized and no
shares issued or outstanding, pro forma as adjusted. ...................... -- -- --
Class A Convertible Preferred Stock, $0.01 par value, 428,762 shares
authorized, no shares issued and outstanding, actual; 428,762 shares
authorized, issued and outstanding, pro forma; no shares authorized, issued
or outstanding, pro forma as adjusted ..................................... -- 13,160,468 --
Class B Convertible Preferred Stock, $0.01 par value; no shares authorized,
issued or outstanding, actual; 4,924,229 shares authorized and 2,955,016
shares issued and outstanding, pro forma; no shares authorized, issued or
outstanding, pro forma as adjusted ........................................ -- 34,007,799 --
Class C Convertible Preferred Stock, $0.01 par value; no shares authorized,
issued or outstanding, actual; 6,000,000 shares authorized and 5,858,698
shares issued and outstanding, pro forma; no shares authorized, issued or
outstanding, pro forma as adjusted ........................................ -- 63,625,400 --
Common Stock, $0.0001 par value, 40,000,000 shares authorized and
16,148,340 shares issued and outstanding, actual; 60,000,000 shares
authorized and 16,148,340 shares issued and outstanding, pro forma;
shares authorized and shares issued and
outstanding, pro forma as adjusted ........................................ 16,149 16,149
Additional paid-in capital .................................................. 10,589,505 10,589,505
Deferred stock-based compensation ........................................... (2,753,444) (2,753,444) (2,753,444)
Accumulated other comprehensive income ...................................... 11,043 11,043 11,043
Accumulated deficit ......................................................... (20,504,073) (28,004,073) (28,004,073)
------------- ------------- -------------
Total shareholders' equity (deficit) ..................................... (12,640,820) 90,652,847
------------- -------------
Total capitalization ..................................................... $ 519,648 $ 90,652,847 $
============= ============= =============
</TABLE>
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DILUTION
Our pro forma net tangible book value at September 30, 1999 was $57.0
million, or $1.60 per share of common stock. Pro forma net tangible book value
per share represents the amount of total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding after
giving effect to the issuance of the Class B Convertible Preferred Stock in
October 1999 and Class C Convertible Preferred Stock in November 1999 and the
conversion of all shares of preferred stock into common stock upon the closing
of this offering. After giving effect to the sale of shares of common
stock offered by this prospectus at an assumed initial public offering price of
$ per share and after deducting underwriting discounts and commissions and
estimated offering expenses, our pro forma net tangible book value as of
September 30, 1999 would have been approximately $ , or $ per share.
This represents an immediate increase in pro forma net tangible book value of
$ per share to existing shareholders and an immediate dilution of $
per share to new investors purchasing shares of common stock in this offering.
The following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share .................................. $
Pro forma net tangible book value per share at September 30, 1999 ................ $ 1.60
Increase attributable to this offering .........................................
------
Pro forma net tangible book value per share after this offering ..................
-------
Net tangible book value dilution per share to new investors in this offering ..... $
=======
</TABLE>
The following table summarizes, at September 30, 1999, on the pro forma
basis described above, the total number of shares purchased, the consideration
paid to us and the average price per share paid by the existing shareholders
and by new investors purchasing shares of common stock in this offering at an
assumed initial public offering price of $ per share before deducting the
underwriting discounts and commissions and estimated offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------ -------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ --------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Existing shareholders ......... 35,706,800 % $82,912,646 % $ 2.32
New investors .................
---------- --- ----------- ---
Totals ..................... 100% $ 100%
========== === =========== ===
</TABLE>
The foregoing table and calculation exclude, as of December 31, 1999:
/bullet/ 9,289,514 shares of common stock issuable upon exercise of outstanding
stock options, at a weighted average exercise price of $1.66 per
share; and
/bullet/ 710,486 shares of common stock available for issuance under our Stock
Incentive Plan.
If the underwriters' over-allotment is exercised in full, the number of
shares held by new investors will increase to , or % of the total
number of shares of common stock outstanding after this offering.
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<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The statement of operations data for the period from October 20, 1997
(date of incorporation) through December 31, 1997 and the year ended December
31, 1998 and the balance sheet data as of December 31, 1997 and 1998 are
derived from the audited consolidated financial statements included elsewhere
in this prospectus. The statement of operations data for the nine months ended
September 30, 1998 and 1999 and the balance sheet data as of September 30, 1999
are derived from our unaudited consolidated financial statements appearing
elsewhere in this prospectus. The unaudited consolidated financial statements
have been prepared on the same basis as the audited consolidated financial
statements and, in the opinion of our management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the information set forth in the financial statements. The
historical results are not necessarily indicative of the operating results to
be expected in the future. For more information, see "Unaudited Pro Forma
Consolidated Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our consolidated financial
statements and notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
OCTOBER 20, 1997
(DATE OF NINE MONTHS ENDED
INCORPORATION) TO YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, ---------------------------------
1997 1998 1998 1999
------------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ....................................... $ 2,095 $ 77,147 $ 46,856 $ 166,914
Operating expenses:
Product and technology development ............ 6,053 36,164 10,739 2,322,488
Sales and marketing ........................... 300 14,221 6,613 7,796,671
General and administrative .................... 16,477 145,330 62,069 2,469,932
Depreciation and amortization ................. 742 2,197 2,807 1,324,361
Stock-based compensation ...................... -- 1,750,587 989 216,557
----------- ------------ ----------- -------------
Total operating expenses .................... 23,572 1,948,499 83,217 14,130,009
----------- ------------ ----------- -------------
Loss from operations ........................... (21,477) (1,871,352) (36,361) (13,963,095)
Other income (expense):
Interest income ............................... -- -- -- 43,800
Interest expense .............................. -- (1,739) (1,321) (698,676)
Other ......................................... -- -- -- 1,868
----------- ------------ ----------- -------------
-- (1,739) (1,321) (653,008)
----------- ------------ ----------- -------------
Loss before income taxes ....................... (21,477) (1,873,091) (37,682) (14,616,103)
Income taxes ................................... -- -- -- --
----------- ------------ ----------- -------------
Net loss ....................................... (21,477) (1,873,091) (37,682) (14,616,013)
Deemed dividend on convertible
preferred stock .............................. -- -- -- (3,983,202)
----------- ------------ ----------- -------------
Net loss available to
common shareholders .......................... $ (21,477) $ (1,873,091) $ (37,682) $ (18,599,305)
=========== ============ =========== =============
Basic and diluted net loss per
common share ................................. $ (0.00) $ (0.16) $ (0.00) $ (1.14)
Weighted average number of shares used
in computing basic and diluted net loss
per common share ............................. 10,625,000 11,903,777 11,193,153 16,246,918
Pro forma basic and diluted net loss per
common share(1) .............................. $ (0.37) $ (1.17)
Pro forma weighted average number of
shares used in computing basic and
diluted net loss per common share(1) ......... 12,165,542 16,474,038
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, 1999
-------------------------- --------------------------------------------------
PRO FORMA
1997 1998 ACTUAL PRO FORMA(2) AS ADJUSTED(3)
------------ ----------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents .................... $ 11,213 $106,425 $ 3,684,211 $64,326,911 $
Working capital (deficit) .................... (24,297) 10,337 (7,646,735) 56,040,239
Total assets ................................. 14,458 211,174 17,342,202 99,431,127
Mandatorily redeemable
preferred stock ............................. -- -- 13,160,468 -- --
Convertible preferred stock .................. -- -- -- 110,793,667 --
Total shareholders' equity (deficit) ......... (21,052) 73,115 (12,640,820) 90,652,847
</TABLE>
- ----------------
(1) The pro forma selected statement of operations data reflects the
acquisition of CiudadFutura.com and Bogota.com as if the acquisitions were
completed on January 1, 1998. These acquisitions were accounted for using
the purchase method of accounting.
(2) The pro forma balance sheet data reflects the issuance of 2,955,016 shares
of Class B Convertible Preferred Stock in October 1999 and 5,858,698
shares of Class C Convertible Preferred Stock in November 1999 and the
elimination of the redemption feature of the Class A Convertible Preferred
Stock.
(3) The pro forma as adjusted balance sheet data as of September 30, 1999,
reflects the conversion of all outstanding preferred stock into 19,558,460
shares of common stock upon the closing of this offering and the sale of
shares of common stock in this offering at an assumed initial public
offering price of $ per share, after deducting underwriting discounts
and commissions and estimated offering expenses.
22
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following sets forth unaudited pro forma consolidated financial data
for Yupi as of September 30, 1999 and for the year ended December 31, 1998 and
the nine month period ended September 30, 1999 giving effect to:
/bullet/ the acquisitions by Yupi of the operations of Planificacion y
Estrategia en Internet, S.L. and Illimited, S.L., or
CiudadFutura.com, in February 1999 for $10.1 million and the
operations of Proveedora de Servicios para Red Bogota.com Ltda.,
or Bogota.com, in August 1999 for $2.0 million and 261,765 shares
of our common stock valued at approximately $1.0 million;
/bullet/ the sale of 2,955,016 shares of Class B Convertible Preferred
Stock in October 1999 for $5.0 million in cash and approximately
$29.3 million in services. Certain of the services were deemed
delivered upon the closing of the sale.
/bullet/ the sale of 5,858,698 shares of Class C Convertible Preferred
Stock in November 1999 for $67.4 million; and
/bullet/ the elimination of the redemption feature of the Class A
Convertible Preferred Stock.
The acquisitions of CiudadFutura.com and Bogota.com have been accounted
for using the purchase method of accounting. The aggregate purchase price for
CiudadFutura.com and Bogota.com of approximately $13.1 million, including
transaction costs, was substantially allocated to property rights of trade
names and Internet domain names.
The pro forma statement of operations information assumes that the
acquisitions of CiudadFutura.com and Bogota.com had been completed as of
January 1, 1998. The pro forma balance sheet information assumes that the sales
of Class B Convertible Preferred Stock and Class C Convertible Preferred Stock
had been completed as of September 30, 1999. The pro forma financial
information does not purport to present our financial condition or results of
operations had these transactions occurred on these dates and is not
necessarily indicative of our results of operations for future periods.
The historical financial information of Yupi has been derived from the
financial statements included elsewhere in this prospectus. The historical
statement of operations data of CiudadFutura.com and Bogota.com for the year
ended December 31, 1998 has been derived from audited financial statements
included elsewhere in this prospectus. The statement of operations data for the
nine months ended September 30, 1999 includes financial data for
CiudadFutura.com and Bogota.com for the period from January 1, 1999 to their
respective dates of acquisition. The pro forma adjustments relating to the
acquisitions of these entities are based upon available information and
assumptions that we consider reasonable under the circumstances. Final
adjustments could differ from these adjustments.
23
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL CIUDADFUTURA.COM BOGOTA.COM ADJUSTMENTS PRO FORMA
----------------- ------------------ -------------- ------------------ -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues ........................ $ 77,147 $ 73,537 $ 104,869 $ -- $ 255,553
Operating expenses:
Product and technology
development .................. 36,164 1,864 -- -- 38,028
Sales and marketing ............ 14,221 2,364 37,410 -- 53,995
General and administrative ..... 145,330 82,178 150,131 -- 377,639
Depreciation and
amortization ................. 2,197 7,543 1,834 2,584,889(a) 2,596,463
Stock-based compensation ....... 1,750,587 -- -- -- 1,750,587
------------- --------------- ---------- ------------ -------------
Total operating
expenses .................. 1,948,499 93,949 189,375 2,584,889 4,816,712
------------- --------------- ---------- ------------ -------------
Loss from operations ............ (1,871,352) (20,412) (84,506) (2,584,889) (4,561,159)
------------- --------------- ---------- ------------ -------------
Other income (expense):
Interest income ................ -- 49,043 172 -- 49,215
Interest expense ............... (1,739) (29) (848) -- (2,616)
Other .......................... -- 20 375 -- 395
------------- --------------- ---------- ------------ -------------
(1,739) 49,034 (301) -- 46,994
------------- --------------- ---------- ------------ -------------
Net income (loss) before
income taxes ................... (1,873,091) 28,622 (84,807) (2,584,889) (4,514,165)
Income taxes .................... -- 4,434 -- -- 4,434
------------- --------------- ---------- ------------ -------------
Net income (loss) ............... $ (1,873,091) $ 24,188 $ (84,807) $ (2,584,889) $ (4,518,599)
============= =============== ========== ============ =============
Basic and diluted net loss per
common share ................... $ (0.16) $ (0.37)
Number of shares used in
computing basic and diluted
net loss per common share ...... 11,903,777 261,765 12,165,542
</TABLE>
24
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL CIUDADFUTURA.COM BOGOTA.COM ADJUSTMENTS PRO FORMA
---------------- -------------------- --------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Revenues .......................... $ 166,914 $ 12,256 $ 124,000 $ -- $ 303,170
Operating expenses:
Product and technology
development .................... 2,322,488 311 24,000 -- 2,346,799
Sales and marketing .............. 7,796,671 394 24,000 -- 7,821,065
General and administrative ....... 2,469,932 13,696 91,000 -- 2,574,628
Depreciation and
amortization ................... 1,324,361 1,257 14,000 721,938(a) 2,061,556
Stock-based compensation ......... 216,557 -- -- -- 216,557
------------- ------------- ----------- ---------- --------------
Total operating
expenses .................... 14,130,009 15,658 153,000 721,938 15,020,605
------------- ------------- ----------- ---------- --------------
Loss from operations .............. (13,963,095) (3,402) (29,000) (721,938) (14,717,435)
------------- ------------- ----------- ---------- --------------
Other income (expense):
Interest income .................. 43,800 8,174 -- -- 51,974
Interest expense ................. (698,676) (5) -- -- (698,681)
Other ............................ 1,868 (3) (10,000) -- (8,135)
------------- ---------------- ----------- ---------- --------------
(653,008) 8,166 (10,000) -- (654,842)
------------- --------------- ----------- ---------- --------------
Net income (loss) before
income taxes .................... (14,616,103) 4,764 (39,000) (721,938) (15,372,277)
Income taxes ...................... -- 739 -- -- 739
------------- --------------- ----------- ---------- --------------
Net income (loss) ................. (14,616,103) 4,025 (39,000) (721,938) (15,373,016)
Deemed dividend on
convertible preferred stock ..... (3,983,202) -- -- -- (3,983,202)
------------- --------------- ----------- ---------- --------------
Net income (loss) available to
common shareholders ............. $ (18,599,305) $ 4,025 $ (39,000) $ (721,938) $ (19,356,218)
============= =============== =========== ========== ==============
Basic and diluted net loss per
common share .................... $ (1.14) $ (1.17)
Number of shares used in
computing basic and diluted
net loss per common share ....... 16,246,918 227,120 16,474,038
</TABLE>
25
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
---------------- ------------------------- ---------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................... $ 3,684,211 $ 60,642,700(b)(c) $ 64,326,911
Accounts receivable ......................... 184,171 -- 184,171
Prepaid expenses ............................ 20,292 -- 20,292
Notes receivable from employees ............. 170,000 -- 170,000
Other current assets ........................ 117,145 -- 117,145
------------- ------------- -------------
Total current assets ...................... 4,175,819 60,642,700 64,818,519
Property and equipment, net .................. 855,511 -- 855,511
Intangible assets, net ....................... 11,847,481 -- 11,847,481
Deferred marketing costs ..................... -- 21,800,000 (c) 21,800,000
Other assets ................................. 463,391 (353,775)(b)(c) 109,616
------------- ------------- -------------
Total assets .............................. $ 17,342,202 $ 82,088,925 $ 99,431,127
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Short term borrowings ....................... $ 3,022,742 $ (3,000,000)(b) $ 22,742
Amounts due to sellers of
acquired companies ........................ 4,997,850 -- 4,997,850
Accounts payable and accrued expenses ....... 3,796,960 (44,274)(b) 3,752,686
Due to principal shareholders ............... 5,002 -- 5,002
------------- ------------- -------------
Total current liabilities ................. 11,822,554 (3,044,274) 8,778,280
------------- ------------- -------------
Deposit on preferred stock issuance .......... 5,000,000 (5,000,000)(c) --
------------- ------------- -------------
Mandatorily redeemable preferred stock ....... 13,160,468 (13,160,468)(b) --
------------- ------------- -------------
Shareholders' equity (deficit):
Class A convertible preferred stock ......... -- 13,160,468(b) 13,160,468
Class B convertible preferred stock ......... -- 34,007,799(c) 34,007,799
Class C convertible preferred stock ......... -- 63,625,400(b) 63,625,400
Common stock ................................ 16,149 -- 16,149
Additional paid-in capital .................. 10,589,505 -- 10,589,505
Deferred stock-based compensation ........... (2,753,444) -- (2,753,444)
Accumulated other comprehensive income ...... 11,043 -- 11,043
Accumulated deficit ......................... (20,504,073) (7,500,000)(c) (28,004,073)
------------- ------------- -------------
Total shareholders' equity (deficit) ...... (12,640,820) 103,293,667 90,652,847
------------- ------------- -------------
Total liabilities and shareholders' equity $ 17,342,202 $ 82,088,925 $ 99,431,127
============= ============= =============
</TABLE>
26
<PAGE>
ADJUSTMENTS:
The following are the pro forma adjustments made for purposes of the pro
forma consolidated financial information:
(a) Reflects the amortization over five years of intangible assets
acquired in connection with the acquisitions of CiudadFutura.com and
Bogota.com.
(b) Represents the net proceeds from the sale of 5,858,698 shares of Class
C Convertible Preferred Stock for (i) $64.4 million, net of
commissions of approximately $3.5 million and transaction costs of
approximately $217,000, of which approximately $62,000 had been
incurred as of September 30, 1999 and (ii) the discharge of $3.0
million of short-term borrowings and a $44,000 payment for accrued
interest. On November 5, 1999, we filed an amendment to our articles
of incorporation, which among other things, eliminated the mandatory
redemption feature of the Class A Convertible Preferred Stock. As a
result, since this date, all of our preferred stock is reflected
within shareholders' equity.
(c) Represents the net proceeds of the sale of 2,955,016 shares of Class B
Convertible Preferred Stock for $5.0 million in cash, which funds were
advanced prior to September 30, 1999, and approximately $29.3 million
in services. Certain of the services were deemed delivered upon the
closing of the sale. Transaction expenses amounted to approximately
$292,000.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH "SELECTED HISTORICAL
FINANCIAL DATA," "UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA" AND OUR
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS
PROSPECTUS. THIS DISCUSSION AND ANALYSIS CONTAINS FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We are a leading online Spanish-language destination, delivering content,
services and search and navigation capabilities to a wide and diverse community
of Spanish speakers around the world. We aggregate entertainment, news and
other content for our users, and our search engine provides users with search
results exclusively in Spanish. As of January 7, 2000, we had over 3.3 million
registered users. According to I/PRO, in December 1999, our sites generated
approximately 115 million page views and we recorded approximately 8.3 million
visits to our sites.
We were incorporated in October 1997. For the first eighteen months of
operations after our incorporation, we focused primarily on enhancing the
capabilities of our proprietary search engine, expanding our database of
Spanish language sites and entering into agreements with content providers for
purposes of developing our sites. In April 1999, we began to focus on
developing our sales organization and increasing the scale of our commercial
operations.
We derive our revenues principally through the sale of advertisements and
sponsorships on our sites. Advertisements are sold on a cost-per-thousand
impressions, or CPM, basis and sponsorships are sold at a fixed rate for a
given period of time. We record advertising revenues at the time advertisements
are displayed and we record sponsorship revenues ratably over the period of
sponsorship.
In addition to the sale of advertisements for cash, we also exchange
advertisements on our sites for promotions with our advertisers. These
arrangements are commonly referred to as barter transactions. We typically
enter into these arrangements because we receive opportunities to promote our
brands in both traditional and non-traditional media. Examples of these
arrangements have included promotions of our brands on store shelves where our
advertisers' products were sold as well as signage identifying Yupi as the
co-sponsor of a musical concert series. For financial reporting purposes, we
establish the value of barter transactions based on the CPM of cash-only
transactions of similar scope, size and prominence. For the period from
inception to September 30, 1999, we did not have sufficient revenue from
cash-only advertising sales to establish a basis of value for our barter
transactions. Accordingly, we did not record the revenue or the expense portion
of these transactions in our financial statements. We intend to enter into
barter arrangements with our advertisers and anticipate that we will begin to
record revenue and expense from these transactions beginning in the fourth
quarter of 1999.
We also derive revenues from electronic commerce transactions conducted on
our sites. Revenues from these activities have primarily been commission-based
and have been insignificant to date. We expect to derive a greater proportion
of our revenues from these activities in the future.
We aggregate content from numerous sources. This content is edited,
translated, formatted and reviewed for relevance by our staff. We display
content developed by third parties through agreements under which we agree to
share revenues, pay a flat fee, or provide co-branded presence on our sites.
In April 1999, we entered into a private placement of Class A Convertible
Preferred Stock which provided proceeds of approximately $13.0 million. We used
the proceeds from this transaction to
28
<PAGE>
complete two acquisitions, to begin hiring personnel in all areas, and to begin
a significant advertising and branding campaign. Additionally, we completed the
private placement of Class B Convertible Preferred Stock in October 1999 and
Class C Convertible Preferred Stock in November 1999, for a total purchase
price of approximately $101.7 million.
We completed the acquisitions of CiudadFutura.com in February 1999 and
Bogota.com in August 1999. The aggregate purchase price for these acquisitions
was approximately $13.1 million, primarily paid for in cash and debt. Although
these acquisitions involved established sites with significant user traffic,
these sites had minimal revenues associated with them prior to our acquisition.
The acquisitions were accounted for under the purchase method of accounting.
We have a limited operating history and have incurred losses in every
quarter of operations. Our accumulated deficit as of September 30, 1999 is
$20.5 million and we expect to continue to incur losses as we build brand
identity and support infrastructure to allow us to maintain our position as a
leader in the Spanish language Internet market.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, our statements
of operations. The information for the period from October 20, 1997 (date of
incorporation) through December 31, 1997 and the year ended December 31, 1998
is derived from our audited consolidated financial statements. The information
for the nine months ended September 30, 1998 and 1999 has been prepared on
substantially the same basis as the audited financial statements and includes
all adjustments, consisting only of normal recurring adjustments, that we
consider necessary for a fair presentation of the results of operations for the
periods presented.
<TABLE>
<CAPTION>
OCTOBER 20, 1997
(DATE OF NINE MONTHS ENDED
INCORPORATION) TO YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, -------------------------
1997 1998 1998 1999
------------------- ------------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues ............................... $ 2 $ 77 $ 47 $ 167
Operating expenses:
Product and technology
development ......................... 6 36 11 2,322
Sales and marketing ................... -- 14 6 7,797
General and administrative ............ 16 145 62 2,470
Depreciation and amortization ......... 1 2 3 1,324
Stock-based compensation .............. -- 1,751 1 217
----- ------- ---- ---------
Total operating expenses ............. 23 1,948 83 14,130
----- ------- ---- ---------
Loss from operations ................... (21) (1,871) (36) (13,963)
Other expense, net ..................... -- (2) (1) (653)
----- ---------- ------- ---------
Net loss ............................... $ (21) $(1,873) $(37) $ (14,616)
===== ========= ====== =========
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1998
REVENUES. Revenues for the nine months ended September 30, 1999 increased
by approximately $120,000 over the nine months ended September 30, 1998. This
increase was primarily the result of an increase in the number of advertisers
that displayed advertisements on our sites.
PRODUCT AND TECHNOLOGY DEVELOPMENT. Product and technology development
expenses consist primarily of payroll and benefits for employees dedicated to
the design and maintenance of our technology infrastructure as well as for
employees involved in the aggregation and editing of content
29
<PAGE>
for our sites. Product and technology development expenses also include fees
paid to content providers and connectivity costs for our network. Product and
technology development expenses for the nine months ended September 30, 1999
increased by approximately $2.3 million over the nine months ended September
30, 1998. The primary reason for this increase was the increase in headcount
from four as of September 30, 1998 to 66 as of September 30, 1999.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
advertising in all types of media, public relations, and payroll and benefits
for employees dedicated to marketing and sales efforts. Sales and marketing
expenses for the nine months ended September 30, 1999 increased by
approximately $7.8 million over the nine months ended September 30, 1998. The
primary reason for this increase was the launch of our domestic and
international branding campaign during the third quarter of 1999. Additionally,
our marketing department increased from zero employees as of September 30, 1998
to 19 employees as of September 30, 1999.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of
professional and legal fees, occupancy, travel, and payroll and benefits for
employees in the corporate, accounting, human resources and legal departments.
General and administrative expenses for the nine months ended September 30,
1999 increased by approximately $2.4 million over the nine months ended
September 30, 1998. The primary reason for this increase was the hiring of
personnel in all support departments. Our headcount increased from one as of
September 30, 1998 to 21 as of September 30, 1999. Additionally, our occupancy
costs increased as our headcount growth required that we move into larger
offices.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
consist primarily of amortization of trade names and Internet domain names
relating to our acquisitions. Depreciation and amortization expenses for the
nine months ended September 30, 1999 increased by approximately $1.3 million
over the nine months ended September 30, 1998 due to the acquisition of
CiudadFutura.com in February 1999 and Bogota.com in August 1999.
STOCK-BASED COMPENSATION. We recognize stock-based compensation expenses
if the estimated fair value of the underlying stock at the date that options
are granted exceeds their exercise price. This cost is recognized over the
vesting period of the options, which is generally four years. Additionally,
options and stock grants to non-employees in lieu of cash payments are recorded
as expense based on the estimated fair value of such instruments in the period
that the services are provided. Stock-based compensation expense for the nine
months ended September 30, 1999 increased by $216,000 over the nine months
ended September 30, 1998 due to additional options granted to new employees.
OTHER EXPENSE, NET. Other expense, net for the nine months ended September
30, 1999 increased by $652,000 over the nine months ended September 30, 1998.
Upon the private placement of Class A Convertible Preferred Stock in April
1999, we recognized an interest charge of approximately $689,000 representing
the estimated fair value of equity acquisition rights granted to a lender in
connection with a line of credit and the estimated fair value of certain
options granted by the Company's then principal shareholders to the lender.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO PERIOD FROM OCTOBER 20, 1997 (DATE OF
INCORPORATION) TO DECEMBER 31, 1997
We had one employee as of December 31, 1997. Because of the limited
operations for the partial year ended December 31, 1997, management has decided
to address only the most significant operating items in its comparison of the
two periods.
REVENUES. Revenues for the year ended December 31, 1998 increased by
approximately $75,000 over the partial year ended December 31, 1997, a period
of limited commercial operations, due to the start-up nature of our business.
30
<PAGE>
STOCK-BASED COMPENSATION. We recorded a charge for stock-based
compensation expense of approximately $1.8 million during the fourth quarter of
1998 in connection with the settlement of a dispute between our founders and an
individual who participated in our development prior to incorporation. In
connection with that settlement, the individual received an ownership interest
in Yupi in exchange for agreeing to end the dispute. The charge was recorded
based on the estimated fair value of the shares that the individual received.
LIQUIDITY AND CAPITAL RESOURCES
From incorporation, we have financed our operations through private sales
of our common stock and convertible preferred stock. Through September 30, 1999
we had raised approximately $13.4 million through such sales, almost all of
which was raised in the first half of 1999.
Net cash used in operating activities was approximately $19,000 for the
period from October 20, 1997 (date of incorporation) to December 31, 1997,
$120,000 for the year ended December 31, 1998 and $9.4 million for the nine
months ended September 30, 1999. This use of cash was primarily attributable to
our net losses in each of those periods. In 1998, the net loss was largely
offset by a non-cash stock-based compensation charge. For the nine months ended
September 30, 1999 the net loss was partially offset by non-cash expenses of
$1.3 million and an increase of $3.8 million in accounts payable and accrued
expenses.
Net cash used in investing activities was approximately $4,000 for the
period from October 20, 1997 (date of incorporation) to December 31, 1997,
$16,000 for the year ended December 31, 1998 and $8.1 million for the nine
months ended September 30, 1999. The use of cash for the nine months ended
September 30, 1999 was primarily attributable to the acquisitions of
CiudadFutura.com and Bogota.com, which represented $7.0 million of cash
payments as of September 30, 1999. In connection with the CiudadFutura.com
acquisition, we issued a $4.0 million promissory note with an annual interest
rate of 9% due March 2000.
Net cash provided by financing activities was approximately $34,000 for
the period from October 20, 1997 (date of incorporation) to December 31, 1997,
$231,000 for the year ended December 31, 1998 and $21.0 million for the nine
months ended September 30, 1999. In addition to the sale of Class A Convertible
Preferred Stock, which provided proceeds of approximately $13.0 million, we
obtained an advance of $5.0 million from an investor and issued notes for $3.0
million to another investor during the nine months ended September 30, 1999.
The advance and note were subsequently discharged in exchange for shares of
Class B Convertible Preferred Stock and Class C Convertible Preferred Stock.
As of September 30, 1999, we had approximately $3.7 million in cash and
cash equivalents. In order to fund our continued investments in branding,
technology and product development, we completed the private placements of
Class B Convertible Preferred Stock in October 1999 and Class C Convertible
Preferred Stock in November 1999. The gross proceeds from these offerings were
approximately $101.7 million, of which approximately $72.4 million was in cash
and $29.3 million was in services to be received over a three-year period.
We expect to continue to incur losses and to utilize cash in our
operations for the next several years. We believe that the net proceeds from
this offering, together with our current cash and cash equivalents, will be
sufficient to meet our anticipated requirements for at least the next 12
months. We expect that we will need to raise additional funds, including
through equity offerings, in the future in order to complete a successful
implementation of our strategy. The actual amount and terms of our future
capital requirements may differ from our estimates.
YEAR 2000 READINESS
The Year 2000 issue refers to the potential for system and processing
failures of date-related calculations, and is the result of computer-controlled
systems using two digits rather than four to
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define the applicable year. For example, computer programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, operate our sites, send invoices, or engage
in similar normal business activities.
To date, we have not experienced any material Year 2000 issues and have
been informed by our material suppliers and vendors that they have also not
experienced material Year 2000 issues. We have not spent a material amount on
Year 2000 compliance issues. Most of our expenses have related to the operating
costs associated with time spent by employees and consultants in the evaluation
process and Year 2000 compliance matters generally.
If we fail to identify and remedy any non-compliant internal or external
Year 2000 problems, or Year 2000 problems create a systemic failure beyond our
control, including a prolonged telecommunications or electrical failure or a
prolonged failure of third party software on which we rely, we could be
prevented from operating our business and permitting users access to our sites.
Such an occurrence would have a material adverse effect on our business.
MARKET RISK
To date, our results of operations have not been impacted materially by
inflation in the United States, Spain or in the countries that comprise Latin
America.
Although a substantial portion of our revenues are denominated in U.S.
dollars, a small percentage of our revenues are denominated in foreign
currencies. As a result, our revenues may be impacted by fluctuations in these
currencies and the value of these currencies relative to the U.S. dollar. In
addition, a portion of our monetary assets and liabilities and our accounts
payable and operating expenses are denominated in foreign currencies.
Therefore, we are exposed to foreign currency exchange risks. However, revenues
derived from foreign currencies historically have not comprised a material
portion of our revenues. As a result we have not tried to reduce our exposure
to exchange rate fluctuations by using hedging transactions. However, we may
choose to do so in the future. We may not be able to do this successfully.
Accordingly, we may experience economic loss and a negative impact on earnings
and equity as a result of foreign currency exchange rate fluctuations.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
Historically, we have not entered into derivative contracts to hedge existing
risks or for speculative purposes. Accordingly, we do not expect the adoption
of the new standard on January 1, 2001 to affect our financial statements.
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BUSINESS
YUPI
We are a leading online Spanish language destination, delivering rich
content, useful services and an easy and intuitive navigational experience to a
wide and diverse community of Spanish speakers around the world. Through
relationships with media companies, including our strategic investors, Sony,
News Corp. and Comcast, and over 100 other content providers, we aggregate
entertainment, news and other content for our users. We also provide our users
with relevant search results exclusively in Spanish through our proprietary
search engine.
We offer advertisers and marketers a valuable medium to reach a diverse
Spanish-speaking online audience, and help them design, execute and evaluate
online advertising and promotional campaigns that segment and target our users.
As of January 7, 2000, we had over 3.3 million registered users. According to
I/PRO, in December 1999, our sites generated approximately 115 million page
views and we recorded approximately 8.3 million visits to our sites, with an
average duration of approximately 14 minutes per visit.
INDUSTRY OVERVIEW
The Spanish-speaking world includes over 380 million people living in more
than 23 countries and in 1998, represented an aggregate gross domestic product
of approximately $1.9 trillion. Spanish speakers represent one of the fastest
growing groups of Internet users today. IDC estimates that the number of
Spanish-speaking Internet users outside the United States will increase from
approximately 8.3 million in 1999 to 20.6 million in 2002. In addition,
Forrester Research estimates that by the end of the year, there will be
approximately 3.6 million U.S. Hispanic Internet users. Jupiter Communications
estimates that the percentage of Latin Americans outside of Brazil using the
Internet will increase from approximately 1.0% in 1999 to 4.7% in 2003,
representing a compound annual growth rate of approximately 50%, compared to an
estimated rate of approximately 12% in the United States for the same period.
This growth is projected to occur despite Latin America's poor
telecommunications infrastructure and low bandwidth capacity. According to IDC,
in 1998 Latin Americans were 25% more likely than users in the United States to
access the Internet at speeds of 33.6 kilobits per second or lower.
As the telecommunication infrastructure in Spanish-speaking countries
improves, we believe that the Spanish-speaking online audience will become
increasingly diverse and that Internet usage will continue to spread across
genders and across wider age and income brackets. According to Nazca S & S, the
percentage of Internet users from the highest socio-economic level in the eight
largest Latin American countries declined from 41% in 1997 to 30% in 1999 and
the percentage of female Internet users increased from 24% to 38% during the
same period. As the Spanish-speaking Internet community diversifies, we believe
that advertisers will increase their online expenditures to reach targeted
audiences of consumers. In addition, we believe that online advertising
expenditures targeted at the Spanish-speaking community will increase as
advertisers become more aware of how to execute and evaluate online advertising
campaigns. Forrester Research estimates that online advertising revenues in the
Spanish-speaking world outside of the United States will increase from $34
million in 1999 to over $1.1 billion by 2004, which will represent 3.4% of
total advertising spending in the region.
IDC estimates that commerce spending over the World Wide Web among
Spanish-speaking users outside of the United States will increase from $890
million in 1999 to $11.1 billion in 2002, representing a compound annual growth
rate of 132.0%. We believe that much of this consumer spending will be in the
music and entertainment categories. According to Nazca S & S, Latin Americans
visit sites with music-related content more frequently than sites in any other
category. In addition, art, culture and film are among the top ten most
frequently visited categories of sites. According to IDC, Latin Americans who
use the Internet at home buy music-related products more than any other item
available online.
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THE YUPI SOLUTION
We aggregate rich and differentiated content and provide relevant
navigational services to a large online community of Spanish speakers around
the world. We employ grass roots, traditional media and online marketing
efforts to attract new users, and we offer advertisers and marketers a medium
for effectively targeting a wide and diverse audience.
BENEFITS TO USERS
AGGREGATE QUALITY CONTENT
By aggregating content from many different sources, we provide rich and
engaging content that encourages longer and more frequent visits to our sites.
In December 1999, we recorded approximately 8.3 million visits to our sites,
with an average duration of approximately 14 minutes per visit.
We aggregate branded Spanish language content through relationships with
well-known global entertainment and other content providers such as:
<TABLE>
<S> <C>
/bullet/ BMG Entertainment /bullet/ Sony
/bullet/ Cinemark /bullet/ Universal Music Group
/bullet/ COMPUTER WORLD /bullet/ THE WALL STREET JOURNAL OF THE AMERICAS
/bullet/ LATIN TRADE /bullet/ Warner Bros. Studios
/bullet/ News Corp. /bullet/ WRIGHT INVESTOR SERVICES
/bullet/ PC WORLD
</TABLE>
Our content and media relationships enable us to provide our users with a
broad selection of entertainment and news content, including preferred exposure
to artists, and access to music, television and movie information and products.
Recently, we posted on our sites exclusive interviews and promotions with Ricky
Martin, Antonio Banderas, Robin Williams, Harrison Ford, Edward James Olmos,
Winona Ryder, Enrique Iglesias, Jennifer Lopez and other popular entertainers.
In addition, our relationship with Sony provides us with limited periods of
exclusive access to Sony's content as well as digital downloads of online
premieres of new music to the Spanish-speaking world. We also provide special
coverage of events such as film festivals, the Pan American Games, the World
Cup and other sports and entertainment events of interest to our users.
PROVIDE RELEVANT SEARCH AND NAVIGATION CONVENIENCE
We have designed an easy-to-use search engine and a database of Spanish
language sites that have been manually selected and categorized by our
Spanish-speaking employees. We believe our database provides users with more
relevant search results than does a computer-generated database, because we
manually review these sites. In addition, we offer users access to AltaVista's
proprietary Spanish language database.
We have designed Yupi.com to allow users who access the Internet at slower
connection speeds to effectively navigate our site. In a survey conducted by
IDC, Latin Americans were 25% more likely than users in the United States to
access the Internet at speeds of 33.6 kilobits per second or lower. We deliver
a simple and efficient presentation of content because we believe our users
value the opportunity to quickly navigate through the Internet.
DEVELOP LOYAL COMMUNITY OF USERS
We encourage our users to join and actively participate in our online
communities. We host personal Web sites for our users and offer other services
including chats and forums to encourage development of interest-focused online
communities. One of our virtual communities,
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CiudadFutura.com, is a source of rich collaborative content in areas of local
and special interest. We promote and compensate approximately 200 selectively
chosen contributors who maintain and update specific content Web sites on
CiudadFutura.com.
BENEFITS TO ADVERTISERS AND MARKETERS
PROVIDE ACCESS TO A WIDE AUDIENCE. We provide advertisers and marketers
access to our diverse and fast-growing online audience. As of January 7, 2000,
we had over 3.3 million registered users. In December 1999, our sites generated
approximately 115 million page views and we recorded approximately 8.3 million
visits to our sites.
CONDUCT TARGETED MARKETING ANALYSES. Our large and diverse online user
base enables us to conduct targeted marketing analyses for advertisers and
marketers seeking to reach particular demographic segments of the
Spanish-speaking market. In addition, we target, track and analyze user data
and campaign effectiveness for our advertisers and marketers. We provide our
advertisers and marketers with access to real-time feedback on user traffic,
click-through rates, demographics, online surveys and other information that
allows them to reach their target markets more easily and cost effectively.
PROVIDE MEDIA CONSULTING SERVICES. We provide advertisers and marketers
with media consulting services ranging from campaign planning to creative
development. Our marketing professionals have extensive senior management
experience in Latin America obtained at leading advertising, media and consumer
products companies including Young & Rubicam, Grey Advertising, Sony, Viacom,
Procter & Gamble and Pillsbury. Our local presence allows us to maintain strong
relationships and to address the specific needs of local advertisers and
businesses. We currently have offices in Miami Beach, Los Angeles, Mexico City,
Buenos Aires, Bogota, Madrid and Barcelona, and expect to open additional
offices in major cities in Venezuela, Peru, Brazil, Ecuador, Puerto Rico, Chile
and the Dominican Republic during 2000.
BRANDING AND USER ACQUISITION
We attract users to our sites using a combination of grass roots,
traditional media and online marketing efforts. Our grass roots efforts have
included:
/bullet/ being the exclusive Internet advertiser in AVANZANDO, a
family-oriented Spanish language magazine published by Procter &
Gamble, that was distributed door-to-door during the second half of
1999 to over 4.5 million households in the United States and Puerto
Rico;
/bullet/ "Mes de Yupi" at Blockbuster Video, a month long promotion in
which customers received Yupi merchandise in over 172 Blockbuster
outlets throughout Mexico; and
/bullet/ sponsorship of events at social clubs and other entertainment
venues.
We have entered into agreements with local ISPs under which we create
co-branded portals for their subscribers. In addition, we license our branded
search engine to other Internet sites that target Spanish-speaking users. These
arrangements provide us with valuable branding opportunities as well as access
to additional Spanish speakers. In addition, our content relationships provide
us with co-branding opportunities on other Internet properties.
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OUR STRATEGY
Our objective is to be the most valuable medium for advertisers and
marketers to reach the Spanish-speaking online community. To achieve this goal,
we intend to:
ATTRACT NEW USERS AND BROADEN AUDIENCE PROFILE
We plan to further expand our audience and increase its diversity by:
/bullet/ continuing our grass roots marketing efforts and other innovative
techniques to attract a diverse group of Spanish speakers to our
sites;
/bullet/ aggressively increasing brand awareness by expanding our
traditional media and online marketing efforts;
/bullet/ emphasizing cross-promotional activities with other media and
consumer product companies;
/bullet/ increasing the number of links to our sites from other sites;
/bullet/ expanding our local presence by growing internally, acquiring
existing Internet sites and forming relationships with local
distribution and content providers; and
/bullet/ offering new and existing services to small businesses, small
offices and home offices in our target markets.
CONTINUE TO BUILD AUDIENCE LOYALTY AND INCREASE FREQUENCY OF USE
We intend to strengthen user loyalty and increase usage of our sites by:
/bullet/ leveraging branded content from our existing relationships with
Sony, News Corp. and other content providers to provide users with a
rich and informative experience;
/bullet/ pursuing strategic alliances and acquisitions to expand our
content and service offerings to meet the needs of the growing
Spanish-speaking Internet audience;
/bullet/ enhancing the functionality of our core services and expanding the
database of Spanish language sites used in our search engines;
/bullet/ introducing user loyalty and affinity programs; and
/bullet/ continuing to address telecommunications capacity constraints in
our target market through both technology and design enhancements.
CREATE VALUE FOR ADVERTISERS AND MARKETERS
We believe that the combination of our large and growing audience and our
integrated marketing solutions enhances the value of our sites to advertisers
and marketers. To increase the value of our sites, we will continue to:
/bullet/ provide access to a large, attractive Spanish-speaking audience
and deliver targeted advertising and direct marketing services;
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/bullet/ offer consultation services, including:
--strategic planning and campaign development;
--collection and aggregation of user demographic information
through promotions and personalization services for campaign
planning purposes;
--online research allowing advertisers and marketers to target
specific segments of our Spanish-speaking audience; and
--analysis of advertising data; and
/bullet/ expand electronic commerce opportunities, including:
--integration of electronic commerce opportunities for our users
into our content and community offerings;
--expansion of our electronic commerce environment, including
hosting and maintenance, to third party merchants to offer
products and services to our users; and
--creation of transaction opportunities for businesses interested
in engaging in commerce to and from Latin America.
CONTENT, COMMUNITY AND SERVICES
We offer the following content, community and services to our users:
CONTENT
ENTERTAINMENT. Through our relationships with leading media companies,
such as Sony, News Corp., Comcast and Universal Music Group, we provide our
users with rich, high quality entertainment content. This content includes
exclusive interviews with major motion picture stars and performers such as
Antonio Banderas, Harrison Ford, Chayanne, Robin Williams, Winona Ryder and
other popular celebrities. In addition, through Claqueta.com and
CiudadFutura.com, we provide coverage and reviews of Ibero-American movies.
Other entertainment content that can be found on our sites includes LAS ALAS
DEL AMOR, our online soap opera, interactive games, jokes and exclusive music
downloads.
BUSINESS. We offer a wide variety of business content to our users,
including access to THE WALL STREET JOURNAL OF THE AMERICAS, BANK RATE MONITOR,
Spanish language BUSINESS WIRE, AMERICA ECONOMIA, AMBITO FINANCIERO,
Patagon.com, LATIN TRADE, WRIGHT INVESTOR SERVICES and ZONA FINANCIERA. Through
these relationships we provide broad coverage of major domestic and
international markets. In addition, we provide financial calculators, stock and
bond quotes and specialized news coverage.
NEWS. We have developed a proprietary technology that categorizes and
indexes the news feeds we receive from Agencia EFE, Reuters and Notimex. This
technology allows our users to search our news offerings by keyword, country,
date or topic. In addition, our users can read Spanish versions of headlines
and news summaries from THE WASHINGTON POST, THE NEW YORK TIMES, LE MONDE, THE
LOS ANGELES TIMES, EL PAIS, FINANCIAL TIMES, LE PARISIEN, LE SOIR, O GLOBO,
CORRIERE DELLA SERA, THE MIAMI HERALD and DIARIO ABC. We also provide our users
headlines and news articles from several local newspapers in Latin America and
Spain.
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SPORTS. In addition to aggregating sports information from our content
providers, we provide special event coverage. In 1999, this coverage included
the Pan American Games, Formula 1 car racing, the Copa America soccer
championship, the World Series and the Tour de France. Through our relationship
with Fox Sports, a subsidiary of News Corp., we provide our users with
additional sports coverage.
TECHNOLOGY. We provide our users with access to articles, reports and
other information from technology publications including COMPUTER WORLD, PC
WORLD and International Data Group's newswire.
CHILDREN. We provide extensive content selected for children, including
cartoons, online kids' clubs, games, comics and movie information. We also
cover items of particular interest to children, such as Pokemon, Stuart Little
and Shakira.
SOCIETY/CULTURE. We provide a wide variety of content relating to
literature, art and religion. We also provide access to online fashion shows,
museums and sites of interest to women. Additional topics include news and
information regarding society, people and culture which we tailor to local
interests.
OTHER. We also provide content on other subjects, including education,
law, politics, health, tourism and weather.
COMMUNITY
CIUDADFUTURA.COM. An online community providing rich, collaborative
content created by over 200 contributors. This site includes content oriented
around community, entertainment and information. Our community-building
activities include chats, moderated chats, forums, virtual postcards, online
clubs, such as our popular club based on last names, personal matchmaking and
online games, including a popular chess site. We provide entertainment and
information in areas, such as love, music, astrology, tarot, horoscope, I
Ching, comics and content of particular interest to women, including beauty,
exercise and health.
MICASA.YUPI.COM. A personal Web site creation and hosting service that
assists users in creating their own Web sites through the use of templates and
a step-by-step wizard tool and also contains the manually-reviewed Web sites of
our users.
CHATS. Our users can instantly and easily communicate with each other. We
present live chats with well-known Spanish-speaking celebrities and experts on
specific topics.
FORUMS. Our online message boards have advanced features, including
country and keyword search capabilities, as well as features that enable users
to create their own personal forums.
SERVICES
SEARCH ENGINE. Yupi.com's proprietary search engine was among the first to
deliver results exclusively in Spanish. Our Spanish-speaking employees manually
select and categorize the sites in our Spanish language database. We believe
our database provides users with more relevant search results than does a
computer-generated database, because we manually review and categorize these
sites. We license our search engines, Yupi.com and Metabusca.com, to thousands
of other sites. Through our relationship with AltaVista, our users also have
access to AltaVista's extensive database of Web sites.
ELECTRONIC COMMERCE. We provide an international and regional electronic
commerce environment to our users. Our electronic commerce offering currently
includes:
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/bullet/ CONTEXTUALIZED ELECTRONIC COMMERCE--hyperlinks placed within
content areas throughout our sites allow our users to purchase
products relevant to the content of the page being viewed;
/bullet/ YUPI COMPRAS AND CIUDADFUTURA.COM COMPRAS--shopping channels that
facilitate the purchase of a wide variety of products;
/bullet/ YUPI HIPOTECAS--our users can obtain financing online for
properties located in the United States through our relationship
with Mortgage.com;
/bullet/ HOTEL RESERVATIONS--our users can make reservations at hotels
worldwide through our relationship with Hotel Reservation Network;
and
/bullet/ DOMAIN NAME REGISTRATION--our users can register domain names
online through our relationship with Network Solutions.
MI.YUPI.COM. A personalized version of Yupi.com that allows users to
select and design the look and feel as well as content of their personal
homepages based on their tastes and preferences. In addition, when users
personalize their homepages, we gain valuable user profiles that allow
advertisers and marketers to better reach their target audience.
LANGUAGE TRANSLATOR. We provide instant, Internet-based translation into
six languages for single words, sentences and entire Web sites.
CLASSIFIEDS. Our classifieds have an easy-to-use interface that includes
features such as search by country, region, category and other detailed keyword
and advanced search capabilities. In addition, our classifieds are easily
administered and can be accessed and updated directly by the person posting the
classified.
FREE EMAIL. Our licensed email services allow our users to send electronic
messages anywhere in the world, from an easy-to-understand Spanish language
platform.
VIRTUAL GREETING CARDS/POSTCARDS. Our proprietary virtual postcard service
allows users to design and send free electronic greeting cards over the
Internet.
MARKETING
Our marketing campaign is designed to attract and retain Spanish-speaking
users, advertisers and marketers. From October 1997 to July 1999, we focused
our limited resources on collecting quality Spanish language content and
improving the functionality of our various services. Our marketing efforts were
limited to banner exchanges with other Spanish language Internet sites.
In July 1999, we expanded our marketing campaign in an effort to promote
the Yupi.com brand to a broad spectrum of Spanish speakers. For example, we
conducted co-promotions with advertisers, including:
/bullet/ sponsorship of a Heineken U.S.A. tour of Latino musical artists
targeting U.S. Hispanics;
/bullet/ outdoor promotions in conjunction with the Hallmark Entertainment
film, ALICE IN WONDERLAND;
/bullet/ promotion hosted by Yupi.com with Sony, United Airlines and
Intercontinental Hotels for tickets to attend Ricky Martin's
concert tour; and
/bullet/ "Team of the Century" promotion in conjunction with Fox Sports
where our users voted for their favorite soccer players.
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In addition, we began television and outdoor advertising in Hispanic
markets in the United States, such as Los Angeles, New York and Miami and
expanded our media efforts to include online advertising, pan-regional cable
television, radio and print advertising in Latin America and Spain.
In 2000, we intend to increase our marketing efforts using the following:
/bullet/ banner advertising with links to our sites;
/bullet/ broadcast and cable television;
/bullet/ print media, including trade magazines, general circulation
newspapers and magazines and business journals;
/bullet/ billboard and other outdoor advertising; and
/bullet/ grass roots and local marketing efforts.
In addition to our pan-regional marketing efforts we intend to localize
our marketing efforts in specific key traffic countries, including the United
States, Puerto Rico, Mexico, Spain, Argentina, Colombia, Chile and Venezuela.
SALES
Our ability to attract a large and diverse audience of Spanish-speaking
Internet users gives advertisers and marketers the opportunity to focus their
efforts on highly attractive target markets. We believe that our growing sales
organization, with its consultative approach, and the diversity of our audience
will attract additional advertisers and marketers to our sites.
OUR SALES ORGANIZATION
Prior to August 1999, we used a media sales company to sell advertising on
our sites. Upon completion of our equity financing in November 1999, we began
to expand our sales organization. We educate advertisers and marketers about
the benefits of using our sites as an effective medium to reach the
Spanish-speaking community. By employing a consultative approach, we seek to
establish long term relationships with advertisers, advertising agencies and
marketers.
Our sales force has extensive experience in the media, advertising and
consumer products industries obtained at leading companies, including Young &
Rubicam, Grey Advertising, USA Networks, Viacom, Procter & Gamble, Pillsbury
and Knight Ridder. As a result, we are able to provide our advertisers with
assistance in developing effective Internet advertising campaigns that serve
their needs. As of December 31, 1999, we had an internal sales force of nine
professionals located in the United States, Spain, Mexico, Argentina and
Colombia. We plan to significantly increase our sales force as we expand our
business.
ADVERTISING SERVICES
We offer a variety of advertising opportunities to our clients, including:
/bullet/ banner advertising;
/bullet/ contextual links to merchandise and services;
/bullet/ online sweepstakes, contests and promotions;
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/bullet/ event sponsorships; and
/bullet/ channel sponsorships.
We enable advertisers to target their advertisements at the local,
regional and interest-specific level. By providing a broad array of channels of
interest, we offer advertisers expanded brand communications options.
Our sales organization assists advertisers in conducting market research,
analyzing the effectiveness of their advertising campaigns by gathering user
feedback and providing monitored, statistical information relating to user
traffic on our sites. We provide our advertisers and marketers with real-time
feedback on user traffic, click-through rates, demographics, online surveys and
other information. Advertisers seek cost effective ways to gather and track
information, obtain user feedback and continuously assess their market and
customers. We enable advertisers to quickly and accurately assess the
effectiveness of their advertising campaign.
OUR ADVERTISERS
In 1999, we had 55 advertisers and sponsors on our sites. Our advertisers
have included:
/bullet/ Banamex /bullet/ Nortel Networks
/bullet/ BellSouth /bullet/ Patagon.com
/bullet/ Dell Computers /bullet/ Pepsi USA
/bullet/ Fox /bullet/ Procter & Gamble
/bullet/ Hallmark Entertainment /bullet/ Siemens
/bullet/ Heineken USA /bullet/ USA Networks
We have derived substantially all of our revenues to date from the sale of
advertising and sponsorships on our sites.
TECHNOLOGY
We have a highly scalable, reliable systems architecture. We make our
sites available using Dell-based, Microsoft Windows NT servers, Sun
Microsystems servers and EMC disk arrays as our central production servers,
currently located at the facilities of Exodus Communications in New Jersey.
Exodus provides comprehensive facilities management services, including
monitoring of all production servers 24 hours a day, seven days a week. We have
implemented an environment in which each server can function separately. In
Argentina, Colombia, Mexico, Spain and the United States, we maintain data
centers for content and Internet development and staging.
Additional components of our server architecture enable us to administer
content, log traffic and serve advertisements. The connectivity layer of our
server architecture is operated with Cisco equipment. The Exodus server farm
facilities provide up to 200 megabits per second of bandwidth access over our
Internet connections. All of our facilities are protected by multiple power
supplies.
We use in-house and third party monitoring software for our servers,
processes and network connectivity. Reporting and tracking systems generate
daily traffic, demographic and advertising reports. All of our production
systems are copied to backup tapes each night and regularly stored in a storage
facility on Exodus's premises as well as in a storage facility in South
Florida.
Our sites must accommodate a high volume of traffic and deliver frequently
updated information. Components or features of our network have in the past
suffered outages or experienced slower response times because of equipment or
software down time. We are in the process of designing a mirrored co-location
site at another location to increase our availability and reliability, perform
load balancing of traffic and increase the serviceability of our sites.
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COMPETITION
Many companies provide content, connectivity services and electronic
commerce opportunities to Spanish-speaking Internet users located in Latin
America, the United States and Spain. As such, these companies compete with us
for user traffic, advertising relationships and revenues and strategic partners
and alliances. Although the market for online Spanish language content is
relatively new and evolving, we expect competition for users and revenues from
advertising and electronic commerce to increase significantly in the future
because there are no substantial barriers to entry in our target markets.
We compete against providers of Spanish language content, including ISPs,
portals, directories, content sites, Internet communities and Internet sites
maintained by governmental and/or educational institutions.
We face competition on a country-specific and pan-regional level. Our
primary competitors include, among others, StarMedia Network, Inc., Terra
Networks, S.A. and El Sitio, Inc. We also face competition from Internet
companies that provide products and services primarily in English, but that
also offer similar products and services in Spanish such as Yahoo!, America
Online, Lycos and Prodigy. These competitors may create or collect content that
is better than ours or achieves greater market acceptance. New competitors may
emerge and acquire significant market share. Some of our established
competitors and potential new competitors may have better brand recognition and
greater financial, technical and marketing resources than us.
Our ability to compete successfully depends on many factors, including:
/bullet/ the quality of the content provided by us and our competitors;
/bullet/ how easy our services are to use;
/bullet/ sales and marketing efforts;
/bullet/ the prices that we charge our advertisers and electronic commerce
merchants; and
/bullet/ performance of our technology.
We also compete with traditional forms of media, including newspapers,
magazines, radio and television for advertising revenue. If advertisers view
the Internet or our sites as an ineffective advertising medium, they may be
reluctant to allocate a portion of their advertising budget to advertising on
our sites and on the Internet.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We regard our copyrights, service marks, trademarks, trade secrets and
other intellectual property as critical to our success. We rely on trademark
and copyright law, trade secret protection and confidentiality and/or license
agreements with our employees, customers, suppliers and others to protect our
intellectual property rights. Despite our precautions, it may be possible for
third parties to obtain and use our intellectual property without
authorization. Furthermore, the validity, enforceability and scope of
protection of intellectual property in Internet-related industries are
uncertain and still evolving. The laws of some foreign countries are uncertain
or do not protect intellectual property rights to the same extent as do the
laws of the United States.
We are pursuing the registration of our trademarks and service marks in
the United States, Spain and in key countries of Latin America. We may not be
able to secure adequate protection for our trademarks in the United States and
other countries. Policing unauthorized use of our marks is also difficult and
expensive. In addition, it is possible that our competitors will adopt product
or service
42
<PAGE>
names similar to ours, thereby impeding our ability to build brand identity and
possibly leading to customer confusion. Our inability to protect our trademarks
and service marks would have a material adverse effect on our business,
financial condition and results of operations.
Many parties are actively developing chat, homepage, search and related
Internet technologies. We expect these developers to continue to take steps to
protect these technologies, including seeking patent protection. There may be
patents issued or pending that are held by others and that cover significant
parts of our technology, business methods or services. For example, we are
aware that a number of patents have been issued for electronic commerce,
Internet-based information indexing and retrieval and online direct marketing.
Disputes over rights to these technologies are likely to arise in the future.
We cannot be certain that our products do not or will not infringe valid
patents, copyrights or other intellectual property rights held by third
parties. We may be subject to legal proceedings and claims from time to time
relating to the intellectual property of others in the ordinary course of our
business. If we determine that licensing this intellectual property is
appropriate, we may not be able to obtain a license on reasonable terms or at
all. We may also incur substantial expenses in defending against third party
infringement claims, regardless of the merit of these claims. Successful
infringement claims against us may result in substantial monetary liability or
may prevent us from conducting all or part of our business.
We also intend to continue to license technology from third parties,
including our email, chat and ad-serving technology. The market is evolving and
we may need to license additional technologies to remain competitive. We may
not be able to license these technologies on commercially reasonable terms or
at all. In addition, we may fail to successfully integrate any licensed
technology into our services. Our inability to obtain any of these licenses
could delay product and service development until alternative technologies can
be identified, licensed and integrated.
GOVERNMENT REGULATION
There are currently few laws or regulations directly applicable to access
to or commerce on the Internet. However, due to the increasing use of the
Internet, various legislative and regulatory proposals are under consideration
by various governments and governmental agencies or bodies. Laws or regulations
may be adopted or applied with respect to the Internet relating to issues such
as the following:
/bullet/ sales and other taxes;
/bullet/ user privacy;
/bullet/ pricing controls;
/bullet/ characteristics and quality of services and products;
/bullet/ consumer protection;
/bullet/ cross-border electronic commerce;
/bullet/ libel and defamation;
/bullet/ pornography;
/bullet/ copyright, trademark and patent infringement; and
/bullet/ other claims based on the nature and content of Internet
materials.
The adoption or application of any of these laws or regulations may
negatively affect the growth in the use of the Internet, which could, in turn,
decrease the demand for our sites, increase our costs of doing business, or
otherwise have a material adverse effect on our business.
43
<PAGE>
EMPLOYEES
As of December 31, 1999, we had 192 employees, 113 of whom were based at
our headquarters in Miami Beach, Florida. None of our employees is subject to a
collective bargaining agreement. We believe that our relations with our
employees are good.
FACILITIES
We lease 7,000 square feet of space in three separate locations in Miami
Beach, Florida. Two of the leases are on a month-to-month basis and the third
lease expires in April 2000. We have entered into another lease agreement
covering 15,000 square feet in Miami Beach with a seven year lease term and
intend to occupy those premises beginning in February 2000. We also lease
office space in other cities including Los Angeles, Bogota, Buenos Aires,
Madrid and Mexico City with lease terms ranging from month-to-month up to three
years.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
44
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of Yupi and their ages and positions
as of January 12, 2000 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- ----- -------------------------------------------------------------
<S> <C> <C>
Oscar L. Coen ..................... 36 President, Chief Executive Officer and Director
Luis E. San Miguel ................ 40 Senior Vice President, Chief Financial Officer and Treasurer
Victor Gutierrez .................. 54 Senior Vice President, Chief Operating Officer
Marlena Delgado-Coen .............. 38 Executive Vice President, Managing Director
Carlos Cardona .................... 25 Senior Vice President, Chief Technology Officer and Director
Jackie O'Brien .................... 31 Senior Vice President, Marketing
Rudy Vila ......................... 41 Senior Vice President, Entertainment
Scott Tonneberger ................. 35 Vice President, International Operations
Damaris Valero .................... 33 Vice President, Global Sales
Ariel Bentata(1) .................. 30 Director
Juan Carlos Campuzano(2) .......... 39 Director
Camilo Cruz(1)(2) ................. 39 Director
Fred Ehrlich ...................... 38 Director
David R. Parker(1) ................ 56 Director
</TABLE>
- ----------------
(1) Member of the compensation committee
(2) Member of the audit committee
OSCAR L. COEN has been our President since May 1999, our Chief Executive
Officer since November 1998 and a director since February 1999. Prior to
joining Yupi, from July 1997 to February 1998, Mr. Coen was an investment
banker with Preferred Capital Markets, an institutional investment banking and
securities firm, where he specialized in early stage technology and
biotechnology companies. From March 1996 to July 1997, Mr. Coen worked at First
Meridian Corporation, where he specialized in business development and
financing in Latin America. From October 1993 to December 1995, Mr. Coen was a
Vice President of Development and Sales advising emerging markets portfolio
managers for A.B. Laffer, V.A. Canto & Associates, an economic consulting firm.
Mr. Coen earned his undergraduate degree in Economics at INTEC in the Dominican
Republic, as well as an M.B.A. in International Finance and an M.B.A. in Public
Accounting from St. John's University. Mr. Coen is married to Ms. Delgado-Coen.
LUIS E. SAN MIGUEL has been our Senior Vice President, Chief Financial
Officer and Treasurer since July 1999. Prior to joining Yupi, Mr. San Miguel
was Chief Financial Officer of AnswerThink Consulting Group from its inception
in April 1997. From July 1994 to April 1997, Mr. San Miguel was Vice President
of Finance for the Strategic Services Consulting division of KPMG Peat Marwick.
From April 1991 to July 1994, Mr. San Miguel held a number of corporate
financial positions including Director of Cash Management and Divisional
Controller at Burger King Corp. Mr. San Miguel began his career in the audit
department of Peat Marwick Mitchell in 1981. Mr. San Miguel holds a B.S. in
Accounting and Finance from Fordham University. He also is a Certified Public
Accountant in the State of Florida.
VICTOR GUTIERREZ has been our Senior Vice President and Chief Operating
Officer since May 1999. From 1991 to June 1998, Mr. Gutierrez worked in various
positions at Young & Rubicam Latin America, including Vice President, Business
Affairs Latin America, Worldwide Financial Director on the agency's global
Colgate-Palmolive account, and, most recently, as Vice Chairman, where he
managed more than 23 advertising agencies throughout the region. From 1987 to
1991, he owned fast food franchises and private retail outlets. From 1972 to
1987, Mr. Gutierrez served in various management capacities, including Chief
Financial Officer at J. Walter Thompson Advertising.
45
<PAGE>
MARLENA DELGADO-COEN has been our Executive Vice President and Managing
Director since January 1999. From April 1997 to January 1999, Ms. Delgado-Coen
was the co-owner of Delbrey, an advertising agency. From August 1996 to March
1997, Ms. Delgado-Coen was the General Manager of Young & Rubicam Advertising.
From November 1991 to December 1995, Ms. Delgado-Coen served as President of
FoVa/Grey Advertising, one of the largest Hispanic advertising agencies in the
United States. From October 1988 to November 1991, she served in various
capacities at Grey Advertising. From October 1986 to September 1988, Ms.
Delgado-Coen worked for Procter & Gamble in various sales and marketing
positions. Ms. Delgado-Coen holds a B.S. in Marketing from Barry University and
an M.B.A. from University of Miami in Florida. Ms. Delgado-Coen is married to
Mr. Coen.
CARLOS CARDONA founded Yupi and has been a Senior Vice President since
October 1997, our Chief Technology Officer since November 1998 and a director
since our incorporation. Prior to founding Yupi, Mr. Cardona worked for
Internet Solutions Inc., an Internet development company, where he was a Web
designer and programmer.
JACKIE O'BRIEN has been our Senior Vice President, Marketing since
November 1998. Prior to joining Yupi, Ms. O'Brien worked for eight years at
Young & Rubicam Advertising, where she held various positions, including most
recently, Vice President and Director of Business Development for Latin
America. Ms. O'Brien holds a B.S. in Marketing from Fordham University.
RUDY VILA has been our Senior Vice President, Entertainment since February
1999. Prior to joining Yupi, Mr. Vila was Vice President of Business
Development for PolyGram Records Latin America. From 1994 to 1996, Mr. Vila
held various positions at Columbia Pictures, including Vice President / Head of
International Marketing and as Regional Vice President at Latin America--
Columbia Tri-Star Pictures. Mr. Vila holds an M.B.A. from St. John's
University.
SCOTT TONNEBERGER has been our Vice President, International Operations
since December 1999. From May 1999 to November 1999, Mr. Tonneberger held the
position of Vice President, Strategic Services. Prior to joining Yupi, from
June 1998 to May 1999, Mr. Tonneberger was Vice President of Latin America for
Copernicus, a market strategy consulting firm. From January 1996 to June 1998
Mr. Tonneberger was involved in Client Services for The Market Segment Group a
marketing research firm specializing in market research for various ethnic
groups. From July 1994 to December 1995, he worked at Research International, a
market research company, as Director of Global Client Services. From June 1987
to June 1994, Mr. Tonneberger held various positions at FoVa/Grey Advertising,
including Account Director and Vice President of Strategic Services. Mr.
Tonneberger holds a Masters in International Studies from John Hopkins
University and an M.B.A. from Columbia University.
DAMARIS VALERO has been our Vice President, Global Sales since October
1999. Prior to joining Yupi, Ms. Valero was Vice President of Sales and
Business Development for Universal Television Networks Group in Latin America.
From 1993 to 1997, Ms. Valero held various positions at Music Television
Networks Latin America, including Senior Vice President of advertising and
affiliate sales. From 1989 to 1993 Ms. Valero was Director of International
Sales for Telemundo Group Inc. From 1986 to 1989 she worked for the Pillsbury
Company in various sales positions. Ms. Valero holds an M.B.A. from St.
Joseph's University.
ARIEL BENTATA has been a director since February 1999. Mr. Bentata served
as our Secretary from November 1998 to December 1999. Mr. Bentata is of-counsel
to the law firm of Bentata Hoet and Associates, concentrating on cross-border
transactions primarily in Latin America. Mr. Bentata is also a director of
Latin American Access, an Internet business and strategy consulting company for
Spanish and Portuguese language Internet markets. He was formerly Latin
American counsel for MTV Networks-Latin America from January 1997 to December
1998 and of-counsel to the Miami law firm of Steel Hector & Davis LLP from July
1993 to October 1996.
JUAN CARLOS CAMPUZANO has been a director since April 1999. Mr. Campuzano
is a director of the general partner of Interprise Technology Partners, L.P., a
shareholder of Yupi. From August 1992 to
46
<PAGE>
January 1999, Mr. Campuzano was a portfolio manager with INVESCO Capital
Management, Inc., where he also served as a Managing Director of the
International Group focusing on business development efforts in Latin America.
From August 1982 to July 1990, Mr. Campuzano was a general practice manager
with Coopers & Lybrand.
CAMILO CRUZ has been a director since our incorporation. Mr. Cruz served
as our President until October 1998. Mr. Cruz is a well known corporate and
motivational speaker in Latin America.
FRED EHRLICH has been a director since November 1999. Since July 1999, Mr.
Ehrlich has served as President of New Technology & Business Development of
Sony Music Entertainment Inc., an affiliate of Sony Corporation of America,
which is a shareholder of Yupi. From October 1994 to June 1999, Mr. Ehrlich
served as Vice President/General Manager of New Technology & Business
Development of Sony Music Entertainment Inc. From August 1991 to September
1994, Mr. Ehrlich served as Vice President and General Manager of Columbia
Records. From August 1988 to August 1991, Mr. Ehrlich served as Vice President
of Columbia Records.
DAVID R. PARKER has been a director since April 1999. Mr. Parker is the
Managing Principal of the general partner of Interprise Technology Partners,
L.P., a shareholder of Yupi. Mr. Parker recently served as Chairman of
ProSource, Inc. a food service distribution company. Prior to serving as
Chairman of ProSource, Inc., Mr. Parker worked at Ryder System, Inc., in
various executive positions, including President of the Vehicle Leasing and
Services Division, with responsibilities for all leasing, rental and logistics
operations. Mr. Parker currently serves on the board of directors of SunTrust
Miami, Tupperware Corporation and Applied Graphics Technologies, Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
Our compensation committee consists of Messrs. Bentata, Cruz and Parker.
It reviews and evaluates the salaries and incentive compensation of our
management and key employees and makes recommendations concerning these matters
to the Board of Directors. Our compensation committee also administers our
stock option plan.
Our audit committee consists of Messrs. Campuzano and Cruz. It reviews the
results and scope of audits and other services provided by our independent
public accountants and reviews our system of internal accounting and financial
controls.
DIRECTOR COMPENSATION
Directors who are our employees receive no additional compensation for
their services as directors. Directors who are not our employees do not receive
compensation for their services as directors, but are reimbursed for travel
expenses and other out-of-pocket costs incurred in connection with the
attendance at meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1999, the members of our compensation
committee were Messrs. Bentata, Cruz, Parker and Michael Shalom, a former
director. None of our executive officers has served as a director or member of
the compensation committee of any other entity whose executive officers served
as a director or member of our compensation committee.
47
<PAGE>
EXECUTIVE COMPENSATION
The following table shows the total compensation paid or accrued for the
year ended December 31, 1999 to our Chief Executive Officer and our three other
most highly compensated executive officers whose total compensation paid or
accrued for the year ended December 31, 1999 exceeded $100,000. These
individuals are collectively referred to below as the Named Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARD
--------------------- ----------------------
SECURITIES
NAME AND PRINCIPAL POSITION SALARY BONUS UNDERLYING OPTIONS(#)
- ----------------------------------------------------------- ----------- ------- ----------------------
<S> <C> <C> <C>
Oscar L. Coen
Chief Executive Officer, President and Director ......... $122,189 $-- 754,977
Marlena Delgado-Coen
Executive Vice President, Managing Director ............. 116,529 -- 475,925
Carlos Cardona
Senior Vice President, Chief Technology Officer
and Director ............................................ 113,540 -- 195,592
Jackie O'Brien
Senior Vice President, Marketing ........................ 111,934 -- 239,480
</TABLE>
OPTION GRANTS
The following table shows each grant of stock options during 1999 to each
of our Named Executive Officers. No stock appreciation rights were granted to
the Named Executive Officers in 1999.
The figures representing percentages of total options granted to employees
in the last fiscal year are based on options for a total of 5,371,653 shares
granted to our employees during 1999.
The potential realizable value is calculated based on the term of the
option at the time of grant. Stock appreciation of 5% and 10% is assumed
according to rules of the Securities and Exchange Commission and does not
represent our prediction of our stock price performance.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(3)
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------------------
NAME GRANTED IN FISCAL YEAR ($/SHARE) DATE 0% 5% 10%
- ------------------------------ ---------------- ---------------- ----------- ----------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Oscar L. Coen ................ 754,977(1) 14.2% 2.6400 5/13/09 $ -- $657,032 $2,226,816
Marlena Delgado-Coen ......... 75,925(2) 1.4 0.0001 1/1/02 50,862 58,881 67,700
354,786(1) 6.7 2.6400 5/13/09 -- 308,759 1,046,447
45,214(1) 0.8 8.0000 12/6/09 45,214 301,128 693,749
Carlos Cardona ............... 195,592(1) 3.7 2.6400 5/13/09 -- 170,217 576,902
Jackie O'Brien ............... 239,480(1) 4.5 2.6400 5/13/09 -- 208,412 706,350
</TABLE>
- ----------------
(1) 28% of these options will vest on the one year anniversary of the date of
grant and 2% per month thereafter until fully vested.
(2) These options are fully vested.
(3) Amounts represent hypothetical gains that could be achieved for the options
if exercised at the end of the option term. These amounts represent
assumed rates of appreciation in the value of our common stock from the
fair market value on the date of grant. Actual gains, if any, on stock
option exercise depend on the future performance of the common stock. The
amounts reflected in the table may not necessarily be achieved. The
initial public offering price is higher than the estimated fair market
value on the date of grant, and the potential realizable value of the
option grants would be significantly higher
48
<PAGE>
than the numbers shown in the table if future stock prices were projected to
the end of the option term by applying the same annual rates of stock price
appreciation to the initial public offering price.
YEAR-END OPTION VALUES
The following table shows information regarding exercisable and
unexercisable stock options held as of December 31, 1999 by each Named
Executive Officer. No options were exercised by these individuals during 1999.
There was no public trading market for our common stock as of December 31,
1999. The value of unexercised in-the-money options has been calculated by
determining the difference between the exercise price per share and an assumed
initial public offering price of $ per share, multiplied by the number of
shares underlying the options.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1999 AT DECEMBER 31, 1999
------------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Oscar L. Coen ................ 2,256,550 754,977 $ $
Marlena Delgado-Coen ......... 75,925 400,000
Carlos Cardona ............... 536,450 195,592
Jackie O'Brien ............... 64,075 239,480
</TABLE>
STOCK PLAN
Our Stock Incentive Plan was adopted by our Board of Directors and
approved by our shareholders in February 1999. The Stock Incentive Plan
provides for the grant of stock-based awards to employees, officers and
directors of, and consultants, distributors or other persons who render
valuable services to, Yupi and its subsidiaries, including incentive stock
options, non-qualified stock options and other equity-based awards. Incentive
stock options may be granted only to our employees. A total of 10,000,000
shares of common stock may be issued upon exercise of options or other awards
granted under the Stock Incentive Plan.
Our Stock Incentive Plan is administered by the Board of Directors and the
compensation committee. The Stock Incentive Plan provides that the Board of
Directors and the compensation committee each has the authority to select the
persons to whom awards are granted and determine the terms of each award,
including the number of shares of common stock to be granted. Subject to the
discretion of the Board of Directors and the compensation committee, payment of
the exercise price of an award may be made in cash, shares of common stock,
delivery of a promissory note representing the aggregate exercise price of the
award, or by any other method approved by the Board of Directors or the
compensation committee consistent with Section 422 of the Internal Revenue Code
and Rule 16b-3 under the Securities Exchange Act of 1934. Awards are not
assignable or transferable, except by will or the laws of descent and
distribution.
49
<PAGE>
CERTAIN TRANSACTIONS
On March 30, 1999, Yupi, IFX Corporation, an affiliate of IFX Online,
Inc., Oscar Coen, an executive officer and director of Yupi, Ariel Bentata, a
director of Yupi, Camilo Cruz, a director of Yupi, and Carlos Cardona, an
executive officer and director of Yupi, entered into an agreement under which
these four individuals granted IFX Corporation the right to purchase from them
an aggregate of 647,525 shares of our common stock at a price per share of
$0.9264. IFX Corporation can exercise this right at any time before March 30,
2001. Additionally, in connection with this agreement, we agreed to provide a
variety of services to IFX Corporation, including advertising banners with a
contract value of $200,000 and personalization home page services.
On April 23, 1999, we sold 45,620 shares of our Class A Convertible
Preferred Stock in a private financing to IFX Online, Inc. at $21.92 per share
and sold an aggregate of 223,500 shares of our Class A Convertible Preferred
Stock in a private financing to IFX Online, Inc. and Interprise Technology
Partners, L.P. at $31.32 per share. Between May 13, 1999 and August 2, 1999, we
sold an aggregate of 159,642 shares of our Class A Convertible Preferred Stock
in a series of private financings to Interprise Technology Partners, L.P. at
$31.32 per share.
On August 23, 1999, we borrowed $2.0 milllion from Interprise Technology
Partners, L.P. On September 9, 1999, we borrowed $1.0 million from Interprise
Technology Partners, L.P. Each loan was secured by certain assets of Yupi,
evidenced by a promissory note, and accrued interest at 8% per annum. On
November 5, 1999, these loans were discharged in exchange for 260,869 shares of
our Class C Convertible Preferred Stock and $44,274 for accrued but unpaid
interest on the promissory notes.
On October 27, 1999, we sold 2,955,016 shares of our Class B Convertible
Preferred Stock in a private financing to Sony Corporation of America at a
price of $11.60 per share for an aggregate purchase price of $34.3 million,
consisting of $5.0 million in cash and an agreement between Yupi and Sony
Corporation of America under which Sony agreed to provide services relating to
the marketing and promotion of our sites.
On November 5, 1999, we sold an aggregate of 5,858,698 shares of our Class
C Convertible Preferred Stock in a private financing at a price of $11.50 per
share to purchasers, including Interprise Technology Partners, L.P.
On November 24, 1999, Victor Gutierrez, an executive officer of Yupi,
borrowed $75,000 from Yupi. On October 27, 1999 and November 30, 1999, Rudy
Vila, an executive officer of Yupi, borrowed $20,000 and $70,000, respectively,
from Yupi. Each of these loans is unsecured, is evidenced by a promissory note
and bears interest at 8% per annum. Each of these loans is due one year from
the date made.
We have obtained legal services from a law firm of which Ariel Bentata, a
director of Yupi, is of-counsel. We paid this law firm, in part, by granting it
options to purchase an aggregate of 31,450 shares of our common stock at
$0.0025 per share for legal services rendered and related disbursements through
January 1999. For the year ended December 31, 1999, we paid this law firm
$136,111 for legal services rendered and related disbursements.
Pursuant to the terms of two sales and maintenance agreements between Yupi
and Netera, a company in which Interprise Technology Partners, L.P. has a
material interest, for the year ended December 31, 1999, we paid Netera
$649,187 for computer networking services.
We believe all transactions set forth above were made on terms no less
favorable to us than would have been obtained from unaffiliated third parties.
50
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table shows certain information regarding beneficial
ownership of our common stock as of December 31, 1999, and as adjusted to
reflect the sale of the shares of common stock offered by this prospectus by:
/bullet/ our Named Executive Officers;
/bullet/ each of our directors;
/bullet/ each person known by us to be the beneficial owner of more than 5%
of our common stock; and
/bullet/ all of our executive officers and directors as a group.
Unless otherwise noted below, the address of each person listed on the
table is c/o Yupi Internet Inc., 830 Lincoln Road, Second Floor, Miami Beach,
Florida 33139 and, to our knowledge, each person has sole voting and investment
power over all shares indicated, except when authority is shared by spouses
under applicable law and except as set forth in the footnotes to the table.
For purposes of calculating the percentage beneficially owned, the number
of shares deemed outstanding before the offering includes:
/bullet/ 16,187,681 shares of common stock outstanding as of December 31,
1999; and
/bullet/ 19,558,460 shares of common stock issuable upon conversion of the
preferred stock, which will be automatically converted upon the
closing of this offering.
For purposes of calculating the percentage beneficially owned, the number
of shares deemed outstanding after the offering includes:
/bullet/ all shares deemed to be outstanding before the offering; and
/bullet/ shares being sold in this offering, assuming no exercise of
the underwriters' over-allotment option.
In computing the number of shares beneficially owned by a person and the
percentage ownership by that person, shares of common stock issuable under
stock options exercisable within 60 days of December 31, 1999 are deemed
outstanding but are not deemed outstanding for computing the percentage
ownership of any other person.
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<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
NUMBER OF SHARES -----------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
- ---------------------------------------------- ------------------- ----------------- ---------------
<S> <C> <C> <C>
Oscar Coen(1) ................................ 2,576,186 6.7%
Carlos Cardona(2) ............................ 5,298,950 14.6
Marlena Delgado-Coen(3) ...................... 131,362 *
Jackie O'Brien(4) ............................ 72,075 *
Ariel Bentata(5) ............................. 1,614,550 4.4
Juan Carlos Campuzano(6) ..................... 8,329,951 23.3
Camilo Cruz(7) ............................... 4,098,950 11.3
Fred Ehrlich(8) .............................. 2,980,712 8.3
David R. Parker(9) ........................... 8,329,951 23.3
Sony Corporation of America .................. 2,980,712 8.3
550 Madison Avenue
New York, NY 10022
Interprise Technology Partners, L.P. ......... 8,329,951 23.3
1001 Brickell Bay Drive, 30th Floor
Miami, FL 33131
IFX Online, Inc.(10) ......................... 3,554,700 9.8
17701 Biscayne Blvd., 3rd Floor
Aventura, FL 33160
All executive officers and directors
as a group (14 persons)(11) ................ 25,136,511 63.5%
</TABLE>
- ----------------
* Less than 1%
(1) Includes 15,975 shares of common stock held jointly with Ms. Delgado-Coen,
48,036 shares of common stock held by a trust of which Mr. Coen is the
trustee, and 2,256,500 shares of common stock issuable upon exercise of
stock options. Also includes the right to purchase 225,650 shares of
common stock from Mr. Cruz.
(2) Includes 536,450 shares issuable upon exercise of stock options.
(3) Includes 15,975 shares of common stock held jointly with Mr. Coen, 16,012
shares of common stock held by a trust of which Ms. Delgado-Coen is the
trustee, and 75,925 shares of common stock issuable upon exercise of stock
options.
(4) Includes 64,075 shares of common stock issuable upon exercise of stock
options.
(5) Includes 361,475 shares of common stock issuable upon exercise of stock
options. Also includes the right to purchase 245,275 shares of common
stock from Mr. Cardona and the right to purchase 19,625 shares of common
stock from Mr. Cruz. Also includes an aggregate of 884,575 shares of
common stock held by two revocable trusts established by Mr. Bentata.
(6) Includes 8,329,951 shares of common stock beneficially owned by Interprise
Technology Partners, L.P. Mr. Campuzano is a director of the general
partner of Interprise Technology Partners, L.P. Mr. Campuzano disclaims
beneficial ownership of these shares, except to the extent of his
pecuniary interest therein.
(7) Includes 3,335,875 shares of common stock held by a revocable trust of
which Mr. Cruz is the trustee and 536,450 shares of common stock issuable
upon exercise of stock options.
(8) Includes 2,980,712 shares of common stock beneficially owned by Sony
Corporation of America. Mr. Ehrlich is the President of New Technology &
Business Development of Sony Music Entertainment Inc., an affiliate of
Sony Corporation of America. Mr. Ehrlich disclaims benefical ownership of
these shares.
(9) Includes 8,329,951 shares of common stock beneficially owned by Interprise
Technology Partners, L.P. Mr. Parker is the Managing Principal of the
general partner of Interprise Technology Partners, L.P. Mr. Parker
disclaims beneficial ownership of these shares, except to the extent of
his pecuniary interest therein.
(10) Includes the right of IFX Corporation, an affiliate of IFX Online, Inc.,
to purchase an aggregate of 647,525 shares of common stock from the
following individuals: 226,625 shares of common stock from each of Messrs.
Cruz and Cardona, 90,675 shares of common stock from Mr. Coen, and 103,600
shares of common stock from Mr. Bentata. Also includes 170,250 shares of
common stock owned by IFX Inc., an affiliate of IFX Corporation and IFX
Online, Inc.
(11) Includes 3,853,150 shares issuable upon exercise of stock options. Also
includes those shares of common stock referenced in footnotes 6 and 8. Also
includes Mr. Coen's right to acquire 225,650 shares of common stock from
Mr. Cruz, Mr. Bentata's right to acquire 245,275 shares of common Stock
from Mr. Cardona and Mr. Bentata's right to acquire 19,625 shares of common
stock from Mr. Cruz.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Following this offering our authorized capital stock will consist of
shares of common stock, par value $.0001 per share, and shares of
preferred stock, par value $.01 per share.
The following summary of certain provisions of our securities and various
provisions of our Fourth Amended and Restated Articles of Incorporation and our
Amended and Restated By-Laws is not intended to be complete and is qualified by
reference to the provisions of applicable law and to our Fourth Amended and
Restated Articles of Incorporation and Amended and Restated By-laws included as
exhibits to the Registration Statement of which this prospectus is a part. See
"Additional Information."
COMMON STOCK
At December 31, 1999, there were 16,187,681 shares of common stock
outstanding, which were held of record by 84 shareholders, and 9,242,476 shares
of preferred stock outstanding, which were held of record by 22 shareholders.
All outstanding shares of preferred stock will be automatically converted into
an aggregate 19,558,460 shares of common stock upon the closing of this
offering. In addition, as of December 31, 1999, there were outstanding stock
options for the purchase of a total of 9,289,514 shares of common stock. Based
upon the number of shares outstanding as of December 31, 1999 and giving effect
to the issuance of the shares of common stock offered by Yupi hereby and the
conversion of the preferred stock into common stock, there will be shares
of common stock outstanding upon the closing of this offering.
Holders of common stock are entitled to one vote per share for each share
held of record on all matters submitted to a vote of shareholders. The holders
of common stock are entitled to receive ratably lawful dividends as declared by
the Board of Directors. However, these dividends are subject to preferences of
holders of any outstanding shares of preferred stock. In the event of a
liquidation, dissolution or winding up of the affairs of Yupi, whether
voluntary or involuntary, the holders of common stock will be entitled to
receive pro rata all of the remaining assets of Yupi available for distribution
to its shareholders. The pro rata distribution would be junior to the rights of
the holders of any outstanding shares of preferred stock. The common stock has
no preemptive, redemption, conversion or subscription rights. The rights,
powers, preferences and privileges of holders of common stock are junior to,
and may be adversely affected by, the rights of the holders of shares of any
series of preferred stock which Yupi may designate and issue in the future.
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations
prescribed by Florida law, without further shareholder approval, to issue from
time to time up to shares of preferred stock, in one or more series. The
Board of Directors is also authorized, subject to the limitations of Florida
law, to establish the number of shares to be included in each series and to fix
the voting powers, preferences, qualifications and special or relative rights
or privileges of each series. The Board of Directors is authorized to issue
preferred stock with voting, conversion and other rights and preferences that
could adversely affect the voting power or other rights of the holders of
common stock.
We have no current plans to issue any preferred stock. However, if we do
so, the issuance of preferred stock or of rights to purchase preferred stock
could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from attempting to acquire, a majority of the
outstanding voting stock of Yupi.
REGISTRATION RIGHTS
After this offering, the holders of approximately 19,558,460 shares of
common stock will be entitled to rights with respect to the registration of
such shares under the Securities Act. If we
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<PAGE>
propose to register any of our securities under the Securities Act, either for
our own account or the account of other securityholders exercising registration
rights, these holders of registration rights are entitled to notice of the
registration and are entitled to include their shares of common stock in the
registration. Additionally, these holders have demand registration rights to
require us on up to three occasions to file a registration statement under the
Securities Act at our expense. We are required to use our best efforts to
effect the registration. Further, holders may require us to file two additional
registration statements on Form S-2 or Form S-3 at our expense. Under these
registration rights, the underwriters of an offering may limit the number of
shares included in the registration and it is our right not to effect a
requested registration within 180 days following an offering of our securities
pursuant to a Form S-1, including this offering.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE FLORIDA BUSINESS CORPORATION ACT AND
OUR CHARTER
The following provisions of the Florida Business Corporation Act and our
articles of incorporation and bylaws could have the effect of preventing or
delaying a person from acquiring or seeking to acquire a substantial interest
in, or control of, Yupi.
We are subject to anti-takeover provisions under the Florida Business
Corporation Act that apply to public corporations organized under Florida law
unless the corporation has elected to opt out of those provisions in its
articles of incorporation or bylaws. We have not chosen to opt out of these
provisions.
These provisions prohibit the voting of shares in a publicly-held Florida
corporation that are acquired in a "control share acquisition" unless:
/bullet/ the board of directors gives its prior approval of the control
share acquisition;
/bullet/ the corporation amends its articles of incorporation or bylaws to
make the statute inapplicable before a control share acquisition;
or
/bullet/ the holders of a majority of the corporation's voting shares,
excluding "interested" shares, approve the granting of voting
rights to the acquiring party.
A "control share acquisition" is defined as an acquisition that immediately
thereafter entitles the acquiring party, directly or indirectly, to vote or
direct the vote in the election of directors within any of the following ranges
of voting power:
/bullet/ 1/5 or more but less than 1/3;
/bullet/ 1/3 or more but less than a majority; or
/bullet/ a majority or more.
There are some exceptions to the "control share acquisition" provisions of the
Florida Business Corporation Act.
The Florida Business Corporation Act also contains an "affiliated
transaction" provision that prohibits a publicly-held Florida corporation from
engaging in a broad range of business combinations or other extraordinary
corporate transactions with an "interested shareholder" unless:
/bullet/ the transaction is approved by a majority of disinterested
directors before the person becomes an interested shareholder;
/bullet/ the corporation has not had more than 300 stockholders of record
during the past three years;
/bullet/ the interested shareholder has owned at least 80% of the
corporation's outstanding voting shares for at least five years;
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<PAGE>
/bullet/ the interested shareholder is the beneficial owner of at least 90%
of the voting shares, excluding shares acquired directly from the
corporation in a transaction not approved by a majority of the
disinterested directors;
/bullet/ consideration is paid to the corporation's shareholders equal to
the highest amount per share calculated under a complex formula,
and other specified conditions are met; or
/bullet/ the transaction is approved by the holders of two-thirds of the
corporation's voting shares other than those owned by the
interested shareholder.
An "interested shareholder" is defined as a person who, together with
affiliates and associates, beneficially owns more than 10% of a corporation's
outstanding voting shares. The Florida Business Corporation Act defines
"beneficial ownership" in more detail.
The Florida Business Corporation Act also contains "general standards for
directors" provisions. These provisions state that in discharging his or her
duties and in determining what is in our best interest, a director may consider
factors that the director deems relevant including:
/bullet/ the long term prospects and interests of Yupi and our
shareholders; and
/bullet/ the social, economic, legal or other effects of any proposed
actions on our employees, suppliers or customers, the community in
which we operate and the economy in general.
Therefore, directors who consider these other factors may make decisions which
are less beneficial to some, or a majority, of our shareholders than if the law
did not permit our directors to consider these factors.
INDEMNIFICATION AND LIMITATION OF LIABILITY
The Florida Business Corporation Act authorizes Florida corporations to
indemnify any person who was or is a party to any proceeding other than an
action by, or in the right of, the corporation, by reason of the fact that he
is or was a director, officer, employee, or agent of the corporation. The
indemnity also applies to any person who is or was serving at the request of
the corporation as a director, officer, employee, or agent of another
corporation or other entity. The indemnification applies against liability
incurred in connection with such a proceeding, including any appeal thereof, if
the person acted in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the corporation. To be eligible for
indemnity with respect to any criminal action or proceeding, the person must
have had no reasonable cause to believe his conduct was unlawful.
In the case of an action by or on behalf of a corporation, indemnification
may not be made if the person seeking indemnification is found liable, unless
the court in which the action was brought determines such person is fairly and
reasonably entitled to indemnification.
Under the Florida Business Corporation Act, a director is not personally
liable for monetary damages to a corporation or other person for any statement,
vote, decision, or failure to act unless:
/bullet/ the director breached or failed to perform his duties as a
director; and
/bullet/ the director's breach of, or failure to perform, those duties
constitutes:
-- a violation of criminal law, unless the director had
reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful;
-- a transaction from which the director derived an improper
personal benefit, either directly or indirectly;
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-- a circumstance under which an unlawful dividend, redemption or
other distribution is made;
-- in a derivative or shareholder proceeding, conscious disregard
for the best interest of the corporation or willful
misconduct; or
-- in a proceeding by another third party, recklessness or an act
or omission which was committed in bad faith or with malicious
purpose or in a manner exhibiting wanton and willful disregard
of human rights, safety or property.
A corporation may purchase and maintain insurance for its directors or
officers against liabilities asserted against them and incurred by them in
their capacity, whether or not the corporation would have the power to
indemnify them against this liability under the Florida Business Corporation
Act.
Our articles of incorporation and bylaws require us, to the fullest extent
permitted by law to indemnify all our directors, as well as officers or
employees to whom we have granted indemnification.
STOCK TRANSFER AGENT
The transfer agent and registrar for the common stock is .
56
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of our common stock in the public market
could adversely affect prevailing market prices from time to time. Furthermore,
since only a limited number of shares will be available for sale shortly after
this offering, because of contractual and legal restrictions on resale
described below, sales of substantial amounts of our common stock in the public
market after the restrictions lapse could adversely affect the prevailing
market price and our ability to raise equity capital in the future.
Based on shares outstanding at December 31, 1999, upon completion of this
offering we will have outstanding an aggregate of shares of common stock,
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options. If the underwriters exercise their over-allotment
option in full, we will have shares of common stock outstanding. The
shares sold in this offering will be freely tradable without restrictions or
further registration under the Securities Act, unless such shares are purchased
by an existing affiliate of Yupi as that term is defined in Rule 144 under the
Securities Act.
The remaining shares of common stock outstanding after this offering
are restricted shares or are subject to the contractual restrictions described
below. Restricted shares may be sold in the public market only if registered or
if they qualify for an exception from registration under Rules 144, 144(k) or
701 under the Securities Act, which are summarized below. Of these restricted
shares, shares will be available for resale in the public market in
reliance on Rule 144(k), of which shares are subject to lock-up
agreements described below. An additional shares will be available for
resale in the public market in reliance on Rule 144, of which shares are
subject to lock-up agreements. The remaining shares become eligible for resale
in the public market at various dates thereafter, of which shares are
subject to lock-up agreements.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned restricted
shares for at least one year would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of:
/bullet/ one percent of the number of shares of common stock then
outstanding, which will equal approximately shares immediately after
the offering, or
/bullet/ the average weekly trading volume of the common stock on the
Nasdaq National Market during the four calendar weeks preceding the sale.
Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about Yupi. Rule 144 also provides that affiliates of Yupi who are
selling shares of common stock that are not restricted shares must nonetheless
comply with the same restrictions applicable to restricted shares with the
exception of the holding period requirement.
Under Rule 144(k), a person who is not deemed to have been an affiliate of
Yupi at any time during the 90 days preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, is entitled to
sell such shares without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144.
RULE 701
Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased
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<PAGE>
from Yupi by its employees, directors, officers, consultants or advisors prior
to the date we become subject to the reporting requirements of the Exchange
Act. To be eligible for resale under Rule 701, shares must have been issued in
connection with written compensatory benefit plans or written contracts
relating to the compensation of such persons. In addition, the Securities and
Exchange Commission has indicated that Rule 701 will apply to typical stock
options granted by an issuer before it becomes subject to the reporting
requirements of the Exchange Act, along with the shares acquired upon exercise
of such options, including exercises after the date of this offering.
Securities issued in reliance on Rule 701 are restricted securities and,
subject to the contractual restrictions described below, beginning 90 days
after the date of this prospectus, may be sold by persons other than
affiliates, subject only to the manner of sale provisions of Rule 144, and by
affiliates, under Rule 144 without compliance with its one-year minimum holding
period requirements.
LOCK-UP AGREEMENTS
Yupi, its officers and directors and substantially all of its shareholders
and optionholders have agreed that they will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or in the case of Yupi,
file with the Securities and Exchange Commission a registration statement under
the Securities Act relating to, any shares of common stock or any securities
convertible into or exercisable or exchangeable for any shares of common stock,
or publicly disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of Credit Suisse First
Boston Corporation, for a period of 180 days after the date of this prospectus,
except under certain circumstances. Credit Suisse First Boston Corporation
currently has no plans to release any portion of the securities subject to
lock-up agreements. When determining whether or not to release shares from the
lock-up agreements, Credit Suisse First Boston Corporation will consider, among
other factors, the shareholder's reasons for requesting the release, the number
of shares for which the release is being requested and market conditions at the
time.
COMMON STOCK AND OPTIONS ISSUABLE UNDER OUR STOCK OPTION PLAN
Following this offering, we intend to file a registration statement under
the Securities Act covering approximately 10,000,000 shares of common stock
issuable upon the exercise of stock options, subject to outstanding options or
reserved for issuance under our Stock Incentive Plan. Accordingly, shares
registered under such registration statements will, subject to Rule 144
provisions applicable to affiliates, be available for sale in the open market,
except when such shares are subject to vesting restrictions and the lock-up
agreements described above. See "Management--Stock Plan."
REGISTRATION RIGHTS
After this offering, the holders of approximately 19,558,460 shares of
common stock will be entitled to rights with respect to the registration of
these shares under the Securities Act. If we propose to register any of our
securities under the Securities Act, either for our own account or for the
account of other securityholders exercising registration rights, these holders
are entitled to notice of such registration and are entitled to include shares
of common stock. Additionally, these holders have demand registration rights to
require us on up to three occasions to file a registration statement under the
Securities Act at our expense. We are required to use our best efforts to
effect any such registration. Further, holders may require us to file two
additional registration statements on Form S-2 or Form S-3 at our expense.
Under these registration rights, the underwriters of an offering can limit the
number of shares included in the registration, and we have the right not to
effect a requested registration within 180 days following an offering of our
securities on a Form S-1, including this offering.
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<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, the underwriters named below, for whom Credit
Suisse First Boston Corporation, Donaldson, Lufkin & Jenrette Securities
Corporation, Banc of America Securities LLC and SG Cowen Securities Corporation
are acting as representatives, have agreed to purchase from Yupi the following
respective number of shares of common stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ---------------------------------------------------------------- ----------
<S> <C>
Credit Suisse First Boston Corporation ......................
Donaldson, Lufkin & Jenrette Securities Corporation .........
Banc of America Securities LLC ..............................
SG Cowen Securities Corporation .............................
-----------
Total ......................................................
===========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in this offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares of common stock at the initial public
offering price, less the underwriting discounts and commissions. This option
may be exercised only to cover over-allotments of common stock.
The underwriters propose to offer the common stock initially at the public
offering price on the cover page of this prospectus and to selling group
members at that price less a concession of $ per share. The underwriters
and the selling group members may allow a discount of $ per share on
sales to other broker/dealers. After the offering, the public offering price
and concession and discount to broker/dealers may be changed by the
representatives.
The following table summarizes the compensation to be paid to the
underwriters by us and the expenses payable by us.
<TABLE>
<CAPTION>
PER SHARE TOTAL
----------------------------------- ----------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Underwriting discounts and commissions
paid by us ......................... $ $ $ $
Expenses payable by us ............... $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales by them to exceed 5% of the shares being offered.
Yupi, its officers and directors and substantially all of its shareholders
and optionholders have agreed that they will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or, in the case of
Yupi, file with the Securities and Exchange Commission a registration statement
under the Securities Act relating to, any shares of common stock or securities
convertible into or exchangeable or exercisable for any shares of common stock,
or publicly disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of Credit Suisse First
Boston Corporation for a period of 180 days after the date of this prospectus,
except
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under certain circumstances, including in the case of Yupi, for grants of
employee stock and stock options pursuant to the terms of our stock plan in
effect on the date hereof or issuances of securities pursuant to the exercise
of any such stock options.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for employees, directors and other
persons associated with Yupi who have expressed an interest in purchasing
common stock in the offering. The number of shares of common stock available
for sale to the general public in this offering will be reduced to the extent
the persons purchase the reserved shares. Any reserved shares not so purchased
will be offered by the underwriters to the general public on the same terms as
the other shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or to contribute to payments which the underwriters may be
required to make in that respect.
We have applied to list our common stock on the Nasdaq National Market
under the symbol "YUPI."
Prior to the offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between Yupi and the representatives. The principal factors considered in
determining the public offering price will include:
/bullet/ the information set forth in this prospectus and otherwise
available to the representatives;
/bullet/ the history of, and the prospects for, Yupi and the industry in
which it competes;
/bullet/ an assessment of our management;
/bullet/ the prospects for, and the timing of, our future earnings;
/bullet/ our present state of development and our current financial
condition;
/bullet/ our past and present earnings and operations;
/bullet/ the general condition of the securities markets at the time of the
offering;
/bullet/ the recent market prices of, and the demand for, publicly-traded
common stock of companies in businesses similar to those of Yupi;
/bullet/ market conditions for initial public offerings; and
/bullet/ other relevant factors.
We can offer no assurances that an active trading market will develop for
our common stock or that our common stock will trade in the public market
subsequent to the offering at or above the initial public offering price.
The representatives may engage in over-allotment, stabilizing
transactions, syndicate covering transactions and penalty bids in accordance
with Regulation M under the Exchange Act.
/bullet/ Over-allotment involves syndicate sales in excess of the offering
size, which creates a syndicate short position.
/bullet/ Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified
maximum.
/bullet/ Syndicate covering transactions involve purchases of common stock
in the open market after the distribution has been completed in
order to cover syndicate short positions.
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/bullet/ Penalty bids permit the representatives to reclaim a selling
concession from a syndicate member when the common stock
originally sold by such syndicate member is purchased in a
stabilizing or a syndicate covering transaction to cover syndicate
short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
In November 1999, an affiliate of Credit Suisse First Boston Corporation
purchased 86,957 shares of our Class C Convertible Preferred Stock for
approximately $1.0 million and an affiliate of Banc of America Securities LLC
purchased 260,870 shares of our Class C Convertible Preferred Stock for
approximately $3.0 million.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of our common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of our common stock are effected. Accordingly, any resale of our common
stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice prior to any
resale of our common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of our common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be readily available, including common law rights of action
for damages or recision or rights of action under the civil liability
provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such persons
in Canada or to enforce a judgment obtained in Canadian courts against such
issuer or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of our common stock to whom the SECURITIES ACT (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a
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report within ten days of the sale of any common stock acquired by such
purchaser pursuant to this offering. Such report must be in the form attached
to British Columbia Securities Commission Blanket Order BOR #95/17, a copy of
which may be obtained from us. Only one such report must be filed in respect of
common stock acquired on the same date and under the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of our common stock should consult their own legal and
tax advisors with respect to the tax consequences of an investment in our
common stock in their particular circumstances and with respect to the
eligibility of our common stock for investment by the purchaser under relevant
Canadian legislation.
LEGAL MATTERS
Certain legal matters will be passed upon for Yupi by Testa, Hurwitz &
Thibeault, LLP, Boston, Massachusetts. The validity of shares of common stock
offered hereby and certain other legal matters, including matters relating to
Florida law will be passed upon for Yupi by Steel Hector & Davis LLP, Miami,
Florida. Certain legal matters will be passed upon for the underwriters by
Piper Marbury Rudnick & Wolfe LLP, Reston, Virginia.
EXPERTS
The financial statements of Yupi as of December 31, 1997 and 1998 and for
the period from October 20, 1997 (date of incorporation) to December 31, 1997
and the year ended December 31, 1998, all of which are included in this
prospectus, have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements of Planificacion y Estrategia en Internet, S.L.
and Illimited, S.L. as of December 31, 1997 and 1998 and for the year ended
December 31, 1997 and 1998, all of which are included in this prospectus, have
been so included in reliance on the report of PricewaterhouseCoopers Auditores,
S.L., independent accountants, given on the authority of said firm as experts
in auditing and accounting.
The financial statements of Proveedora de Servicios para Red Bogota.com
Ltda., as of December 31, 1997, December 31, 1998 and June 30, 1999 and for the
period from November 27, 1997 (inception) through December 31, 1997, the year
ended December 31, 1998 and the six month period ended June 30, 1999, all of
which are included in this prospectus, have been so included in reliance on the
report of Price Waterhouse, independent accountants, given on the authority of
said firm as experts on auditing and accounting.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act. This prospectus does not
contain all of the information set forth in the registration statement. For
further information with respect to Yupi and our common stock, reference is
made to the registration statement. Statements contained in this prospectus as
to the contents of any contract or any other document referred to are not
necessarily complete, and, in each instance, reference is made to the copy of
the contract or document filed as an exhibit to the registration statement, and
each such statement is qualified in all respects by reference to such exhibit.
Copies of all or any portion of the registration statement may be obtained from
the Public Reference Section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, or by calling the Commission at
1-800-SEC- 0330, at prescribed rates. The Commission also maintains a Internet
site at http://www.sec.gov that contains registration statements, reports,
proxy and information statements and other information regarding registrants.
We intend to furnish to our shareholders annual reports containing
financial statements audited by an independent public accounting firm.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
YUPI INTERNET INC.
Report of Independent Certified Public Accountants ................... F-2
Financial Statements:
Consolidated Balance Sheets ......................................... F-3
Consolidated Statements of Operations ............................... F-4
Consolidated Statements of Changes in Shareholders' Equity (Deficit) F-5
Consolidated Statements of Cash Flows ............................... F-6
Notes to Consolidated Financial Statements .......................... F-7
PROVEEDORA DE SERVICIOS PARA RED BOGOTA.COM LTDA.
Report of Independent Accountants .................................... F-23
Financial Statements:
Balance Sheets ...................................................... F-24
Statements of Operations and Comprehensive Loss ..................... F-25
Statements of Changes in Partners' Capital .......................... F-26
Statements of Cash Flows ............................................ F-27
Notes to the Financial Statements ................................... F-28
PLANIFICACION Y ESTRATEGIA EN INTERNET, S.L. AND ILLIMITED, S.L.
Report of Independent Accountants .................................... F-31
Financial Statements:
Combined Balance Sheets ............................................. F-32
Combined Statements of Operations and Comprehensive Income .......... F-33
Combined Statements of Changes in Stockholders' Equity .............. F-34
Combined Statements of Cash Flows ................................... F-35
Notes to Combined Financial Statements .............................. F-36
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Yupi Internet Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in shareholders'
equity (deficit) and of cash flows present fairly, in all material respects,
the financial position of Yupi Internet Inc. and its subsidiaries at December
31, 1997 and 1998, and the results of their operations and their cash flows for
the period from October 20, 1997 (date of incorporation) through December 31,
1997 and for the year ended December 31, 1998, in conformity with accounting
principles generally accepted in the United States. 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 of these statements in accordance with auditing standards
generally accepted in the United States, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Miami, Florida
January 7, 2000
F-2
<PAGE>
YUPI INTERNET INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, 1999
---------------------------- --------------------------------
1997 1998 ACTUAL PRO FORMA
------------ --------------- --------------- ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................ $ 11,213 $ 106,425 $ 3,684,211 $ 64,326,911
Accounts receivable .............................................. -- 14,642 184,171 184,171
Prepaid expenses ................................................. -- 1,947 20,292 20,292
Notes receivable from employees .................................. -- -- 170,000 170,000
Other current assets ............................................. -- 1,745 117,145 117,145
--------- ------------ ------------- -------------
Total current assets .......................................... 11,213 124,759 4,175,819 64,818,519
Property and equipment, net ....................................... 2,898 16,554 855,511 855,511
Intangible assets, net of accumulated amortization of $18, $91, and
$1,260,731 as of December 31, 1997, December 31, 1998, and
September 30, 1999, respectively ................................. 347 40,274 11,847,481 11,847,481
Deferred marketing costs .......................................... -- -- -- 21,800,000
Other assets ...................................................... -- 29,587 463,391 109,616
--------- ------------ ------------- -------------
$ 14,458 $ 211,174 $ 17,342,202 $ 99,431,127
========= ============ ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Short term borrowings ............................................ $ -- $ -- $ 3,022,742 $ 22,742
Current portion of long-term debt ................................ 14,798 5,154 -- --
Amounts due to sellers of acquired companies ..................... -- 60,000 4,997,850 4,997,850
Accounts payable and accrued expenses ............................ 1,500 29,756 3,796,960 3,752,686
Due to principal shareholders .................................... 19,212 19,512 5,002 5,002
--------- ------------ ------------- -------------
Total current liabilities ..................................... 35,510 114,422 11,822,554 8,778,280
--------- ------------ ------------- -------------
Deposit on preferred stock issuance ............................... -- -- 5,000,000 --
--------- ------------ ------------- -------------
Long-term debt .................................................... -- 23,637 -- --
--------- ------------ ------------- -------------
Mandatorily redeemable preferred stock:
Class A convertible preferred stock, $0.01 par value, 428,762
shares authorized, issued and outstanding at September 30,
1999, stated at liquidation value, net of
related costs .................................................. -- -- 13,160,468 --
--------- ------------ ------------- -------------
Shareholders' equity (deficit):
Class A convertible preferred stock .............................. -- -- -- 13,160,468
Class B convertible preferred stock .............................. -- -- -- 34,007,799
Class C convertible preferred stock .............................. -- -- -- 63,625,400
Common stock, $0.0001 par value, 60,000,000 shares authorized,
10,625,000 shares, 16,143,650 shares, 16,148,340 shares and
16,148,340 shares issued and outstanding at December 31,
1997, December 31, 1998, September 30, 1999 and
September 30, 1999 on a pro forma basis, respectively .......... 10,625 16,144 16,149 16,149
Additional paid-in capital ....................................... -- 1,961,739 10,589,505 10,589,505
Deferred stock-based compensation ................................ -- -- (2,753,444) (2,753,444)
Accumulated other comprehensive income ........................... -- -- 11,043 11,043
Accumulated deficit .............................................. (31,677) (1,904,768) (20,504,073) (28,004,073)
--------- ------------ ------------- -------------
Total shareholders' equity (deficit) .......................... (21,052) 73,115 (12,640,820) 90,652,847
--------- ------------ ------------- -------------
Total liabilities and shareholders' equity (deficit) .......... $ 14,458 $ 211,174 $ 17,342,202 $ 99,431,127
========= ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
YUPI INTERNET INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
OCTOBER 20, 1997
(DATE OF NINE MONTHS ENDED
INCORPORATION) YEAR ENDED SEPTEMBER 30,
TO DECEMBER 31, DECEMBER 31, --------------------------------
1997 1998 1998 1999
----------------- --------------- ------------- ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues ................................ $ 2,095 $ 77,147 $ 46,856 $ 166,914
Operating expenses:
Product and technology
development .......................... 6,053 36,164 10,739 2,322,488
Sales and marketing .................... 300 14,221 6,613 7,796,671
General and administrative ............. 16,477 145,330 62,069 2,469,932
Depreciation and amortization .......... 742 2,197 2,807 1,324,361
Stock-based compensation ............... -- 1,750,587 989 216,557
----------- ------------ ---------- -------------
Total operating expenses ............ 23,572 1,948,499 83,217 14,130,009
----------- ------------ ---------- -------------
Loss from operations .................... (21,477) (1,871,352) (36,361) (13,963,095)
----------- ------------ ---------- -------------
Other income (expense):
Interest income ........................ -- -- -- 43,800
Interest expense ....................... -- (1,739) (1,321) (698,676)
Other .................................. -- -- -- 1,868
----------- ------------ ---------- -------------
-- (1,739) (1,321) (653,008)
----------- ------------ ---------- -------------
Loss before income taxes ................ (21,477) (1,873,091) (37,682) (14,616,103)
Income taxes ............................ -- -- -- --
----------- ------------ ---------- -------------
Net loss ................................ (21,477) (1,873,091) (37,682) (14,616,103)
Deemed dividend on convertible
preferred stock ....................... -- -- -- (3,983,202)
----------- ------------ ---------- -------------
Net loss available to common
shareholders .......................... $ (21,477) $ (1,873,091) $ (37,682) $ (18,599,305)
=========== ============ ========== =============
Basic and diluted net loss per
common share .......................... $ (0.00) $ (0.16) $ (0.00) $ (1.14)
=========== ============ ========== =============
Weighted average number of shares used
in computing basic and diluted net loss
per common share ...................... 10,625,000 11,903,777 11,193,153 16,246,918
=========== ============ ========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
YUPI INTERNET INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------- ADDITIONAL
PAID-IN
SHARES AMOUNT CAPITAL
--------------- ----------- ---------------
<S> <C> <C> <C>
Balance at October 20, 1997
(date of incorporation) ......... -- $ -- $ --
Sale of common stock ............. 10,625,000 10,625 --
Net loss ......................... -- -- --
---------- -------- -----------
Balance at
December 31, 1997 ............... 10,625,000 10,625 --
Stock-based compensation,
net of amortization of
deferred compensation ........... 2,981,250 2,981 1,750,587
Sale of common stock ............. 2,537,400 2,538 211,152
Net loss ......................... -- -- --
---------- -------- -----------
Balance at
December 31, 1998 ............... 16,143,650 16,144 1,961,739
Stock-based compensation,
net of amortization of
deferred compensation ........... -- -- 3,210,001
Sale of common stock ............. 756,675 757 658,604
Repurchase of
common stock .................... (1,013,750) (1,014) (173,986)
Issuance of shares in
connection with an
acquisition ..................... 261,765 262 949,945
Deemed dividend on
convertible
preferred stock ................. -- -- 3,983,202
Net loss ......................... -- -- --
Translation adjustment ........... -- -- --
---------- -------- -----------
Balance at September 30,
1999 (Unaudited) ................ 16,148,340 $ 16,149 $10,589,505
========== ======== ===========
<CAPTION>
OTHER
ACCUMULATED DEFERRED COMPREHENSIVE
DEFICIT COMPENSATION INCOME TOTAL
----------------- ---------------- -------------- -----------------
<S> <C> <C> <C> <C>
Balance at October 20, 1997
(date of incorporation) ......... $ -- $ -- $ -- $ --
Sale of common stock ............. (10,200) -- -- 425
Net loss ......................... (21,477) -- -- (21,477)
------------- ------------ ------- -------------
Balance at
December 31, 1997 ............... (31,677) -- -- (21,052)
Stock-based compensation,
net of amortization of
deferred compensation ........... -- -- -- 1,753,568
Sale of common stock ............. -- -- -- 213,690
Net loss ......................... (1,873,091) -- -- (1,873,091)
------------- ------------ ------- -------------
Balance at
December 31, 1998 ............... (1,904,768) -- -- 73,115
Stock-based compensation,
net of amortization of
deferred compensation ........... -- (2,753,444) -- 456,557
Sale of common stock ............. -- -- -- 659,361
Repurchase of
common stock .................... -- -- -- (175,000)
Issuance of shares in
connection with an
acquisition ..................... -- -- -- 950,207
Deemed dividend on
convertible
preferred stock ................. (3,983,202) -- -- --
Net loss ......................... (14,616,103) -- -- (14,616,103)
Translation adjustment ........... -- -- 11,043 11,043
------------- ------------ ------- -------------
Balance at September 30,
1999 (Unaudited) ................ $ (20,504,073) $ (2,753,444) $11,043 $ (12,640,820)
============= ============ ======= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
YUPI INTERNET INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
OCTOBER 20, 1997
(DATE OF NINE MONTHS ENDED
INCORPORATION) YEAR ENDED SEPTEMBER 30,
TO DECEMBER 31, DECEMBER 31, -------------------------------
1997 1998 1998 1999
----------------- ---------------- ------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Operating activities:
Net loss .............................................. $ (21,477) $ (1,873,091) $ (37,682) $ (14,616,103)
Adjustments to reconcile net loss to net cash
from operating activities:
Depreciation and amortization ........................ 742 2,197 2,807 1,324,361
Stock-based compensation ............................. -- 1,750,587 989 216,557
Non-cash interest charges ............................ -- -- -- 668,828
Changes in operating assets and liabilities:
Accounts receivable ................................. -- (14,642) (11,244) (169,529)
Prepaid expenses .................................... -- (1,947) -- (18,345)
Other assets ........................................ -- (11,332) -- (539,252)
Accounts payable and accrued expenses ............... 1,500 28,256 (436) 3,767,203
--------- ------------ --------- -------------
Net cash used in operating activities .............. (19,235) (119,972) (45,566) (9,366,280)
--------- ------------ --------- -------------
Investing activities:
Purchases of property and equipment ................... (3,640) (15,780) (10,097) (934,764)
Acquisition of businesses ............................. -- -- -- (7,157,656)
Other ................................................. (347) -- -- --
--------- ------------ --------- -------------
Net cash used in investing activities .............. (3,987) (15,780) (10,097) (8,092,420)
--------- ------------ --------- -------------
Financing activities:
Issuance of common stock .............................. 425 216,671 50,000 659,361
Repurchase of common stock ............................ -- -- -- (175,000)
Deposit on preferred stock issuance ................... -- -- -- 5,000,000
Issuance of redeemable convertible preferred
stock, net of related expenses ...................... -- -- -- 12,731,641
(Repayment of) proceeds from advances
from shareholders ................................... 19,212 300 300 (14,510)
Advances to employees ................................. -- -- -- (170,000)
Proceeds from issuance of debt ........................ 15,000 30,000 30,000 3,022,742
Repayment of long-term debt ........................... (202) (16,007) (14,577) (28,791)
--------- ------------ --------- -------------
Net cash provided by
financing activities ............................ 34,435 230,964 65,723 21,025,443
--------- ------------ --------- -------------
Effect of exchange rate changes on cash and
cash equivalents ..................................... -- -- -- 11,043
--------- ------------ --------- -------------
Net increase in cash and cash equivalents .............. 11,213 95,212 10,060 3,577,786
Cash and cash equivalents, beginning of period ......... -- 11,213 11,213 106,425
--------- ------------ --------- -------------
Cash and cash equivalents, end of period ............... $ 11,213 $ 106,425 $ 21,273 $ 3,684,211
========= ============ ========= =============
Supplemental disclosure of cash flow information:
Interest paid ......................................... $ -- $ 1,739 $ 1,321 $ 1,355
========= ============ ========= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
YUPI INTERNET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF OPERATIONS
Yupi Internet Inc. ("Yupi") was incorporated under the laws of the State
of Florida in October 1997. Yupi develops and maintains www.yupi.com, a branded
Internet site located on the World Wide Web (the "Web"). Additionally, Yupi
operates a number of other sites that provide chat, e-mail services and
country-specific information. Yupi and its network of sites provide a gateway
for Spanish users to the Web.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Yupi Internet Inc. and its wholly-owned subsidiaries (collectively, "Yupi" or
the "Company"). All significant intercompany account balances and transactions
have been eliminated in consolidation.
INITIAL PUBLIC OFFERING AND PRO FORMA BALANCE SHEET (UNAUDITED)
In January 2000, the Board of Directors of the Company authorized the
filing of a registration statement with the Securities and Exchange Commission
("SEC") that would permit the Company to sell shares of the Company's common
stock in connection with a proposed initial public offering ("IPO"). Upon the
closing of the IPO, all of the then outstanding shares of the Company's
convertible preferred stock (Class A, Class B and Class C--see Notes 6 and 12)
will be converted into shares of common stock. The unaudited pro forma
consolidated balance sheet does not reflect the impact of any dilution that may
result in the proposed IPO.
The following are the pro forma adjustments made for the purposes of the
accompanying unaudited pro forma consolidated balance sheet as of September 30,
1999:
1. Proceeds from the sale of 2,955,016 shares of Class B convertible
preferred stock in exchange for $5.0 million in cash (advanced prior to
September 30, 1999) and approximately $29.3 million in services, net of
transaction costs of approximately $292,000. Certain of the services
were deemed delivered upon the closing of the sale.
2. Proceeds from the sale of 5,858,698 shares of Class C convertible
preferred stock for (i) $64.4 million in cash, net of commissions of
approximately $3.5 million and transaction costs of approximately
$217,000, of which approximately $62,000 had been incurred as of
September 30, 1999 and (ii) discharge of $3.0 million of short term
borrowings and the payment in cash of accrued interest of approximately
$44,000 on such short term borrowings.
3. The elimination of the redemption feature of the Class A convertible
preferred stock.
FOREIGN CURRENCY TRANSLATION
For purposes of preparation of its financial statements, the Company uses
the local currency of its foreign subsidiaries as the functional currency.
Assets and liabilities of such subsidiaries are translated
F-7
<PAGE>
YUPI INTERNET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:--(CONTINUED)
into United States dollars at the exchange rate in effect at the end of the
period, while revenues and expenses of these subsidiaries are translated at the
average exchange rate during the period. Resulting translation adjustments are
recorded in a separate component of shareholders' equity (deficit), accumulated
other comprehensive income. Revenues of the Company's foreign subsidiaries and
assets of the foreign subsidiaries were not significant for all periods
presented.
CASH AND CASH EQUIVALENTS
All highly liquid investments purchased with an original maturity of three
months or less are considered to be cash equivalents. Such amounts are stated
at cost which approximates market value.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation and amortization is
provided using the straight line method over the estimated useful lives of the
assets, which range from three to five years. The cost of maintenance and
repairs is charged to expense as incurred. The cost of major repairs and
improvements which extend the lives of the related assets are capitalized and
depreciated.
INTANGIBLE ASSETS
Intangible assets consist mainly of property rights to the trade names and
Internet domain names of companies acquired. These property rights are
amortized using the straight line method over a period of five years. The
Company evaluates the realizability of its intangible assets when an event
occurs that indicates that impairment may have occurred. The Company determines
potential impairment by comparing the carrying amount to the undiscounted
future cash flows of the related assets. Cash flow forecasts are based on
trends of historical performance and management's estimate of future
performance.
OFFERING COSTS
As of September 30, 1999, other assets include approximately $354,000 of
transaction costs relating to the offering of certain preferred shares, which
offerings were completed in October 1999 and November 1999. Upon the closings
of these offerings, these costs were deducted from the proceeds.
INCOME TAXES
The Company uses the liability method of accounting for income taxes,
whereby deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities as measured by the current enacted tax rates which will be in
effect when these temporary differences are expected to be recovered or
settled. Deferred tax expense is the result of changes in deferred tax assets
and liabilities. Valuation allowances are provided when the expected
realization of tax assets does not meet a "more likely than not" criteria.
F-8
<PAGE>
YUPI INTERNET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:--(CONTINUED)
REVENUE RECOGNITION
The Company derives revenue principally from the sale of advertisements.
Advertising revenues are recognized in the period in which the advertisement is
displayed. Company obligations under advertising contracts typically include
guarantees of minimum number of impressions, or times that an advertisement
appears in pages viewed by users on the Company's sites. Revenue for
impressions invoiced but not delivered is deferred until the commitment is met.
The Company is also involved in revenue sharing arrangements with certain
parties ("partners") under which the Company principally hosts co-branded
sites. Revenue is allocated to each partner based on the percentage of
impressions at each site. The allocated revenue is shared according to
distribution agreements. Revenue is recorded net of the payments under these
revenue sharing arrangements.
Revenues from barter transactions, which are transactions in which the
Company exchanges advertisements on its sites for promotions with its
advertisers, are recognized during the period in which the advertisements are
displayed on the Company's sites. Barter transactions are recorded at the lower
of estimated fair value of the goods or services received or the estimated fair
value of the advertisements given. For financial reporting purposes, the
Company establishes the value of barter transactions based on cost-per-thousand
impressions of cash-only transactions of similar scope, size and prominence.
For the period from inception to September 30, 1999, the Company did not have
sufficient revenue from cash-only advertising sales to establish a basis of
value for its barter transactions. Accordingly, the Company did not record the
revenue or the expense portion of these transactions in the accompanying
financial statements. The Company will recognize revenues from barter
transactions when a historical practice of receiving cash for similar
advertising transactions is established.
PRODUCT DEVELOPMENT
Costs incurred in the classification and organization of listings within
the Company's sites and the development of new products and enhancements to
existing products are charged to expense as incurred.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising and marketing
expenditures reflected in the accompanying consolidated statements of
operations amounted to approximately $300, $8,400, $4,500 and $7.0 million, for
the period from October 20, 1997 (date of incorporation) to December 31, 1997,
the year ended December 31, 1998, and for the nine month periods ended
September 30, 1998 and 1999, respectively.
USE OF ESTIMATES
In preparing financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reported
period. Actual results could differ from those estimates.
F-9
<PAGE>
YUPI INTERNET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:--(CONTINUED)
STOCK-BASED COMPENSATION
The Company accounts for employee stock-based compensation using the
intrinsic value method. Stock-based compensation to non-employees is accounted
for using the fair value method. The Company also provides disclosure of
certain pro forma information as if the Company accounted for its employee
stock-based compensation using the fair value method.
When options are granted to employees, a non-cash charge representing the
difference, if any, between the exercise price and the fair value of the common
stock underlying the vested options on the date of grant is recorded as
stock-based compensation expense and the balance is deferred and amortized over
the remaining vesting period.
COMPUTATION OF HISTORICAL NET LOSS PER SHARE
Basic loss per share is computed by dividing net losses available to
common shareholders for the period by the weighted average number of common
shares outstanding. Diluted loss per share has not been presented as the effect
of the issuance of common equivalent shares is anti-dilutive. Common equivalent
shares consist of the incremental common shares issuable upon the conversion of
the Preferred Stock (using the if-converted method) and shares issuable upon
the exercise of stock options (using the treasury stock method).
STOCK SPLITS
On May 12, 1999, the Board of Directors of the Company (the "Board")
approved a 25-for-1 stock split. On December 28, 1998, the Board approved a
1,000-for-1 stock split. All share information has been restated to reflect all
stock splits.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reflected in the consolidated balance sheets for cash
and cash equivalents, accounts receivables, current portion of long-term debt
and accounts payable approximate fair value due to the short maturities of
these instruments. The fair value of the long-term debt and mandatorily
redeemable preferred stock approximated the carrying value for all periods
presented.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to credit risk
consist primarily of cash and cash equivalents and accounts receivables. The
Company maintains the majority of its cash and cash equivalents with one
financial institution. The Company's sales are primarily to companies located
in the United States. The Company performs ongoing credit evaluations of
customers and generally does not require collateral. Accounts receivable are
due principally from large U.S. companies under stated contract terms and the
Company provides for estimated credit losses at the time of sale. Such losses
have not been significant to date.
F-10
<PAGE>
YUPI INTERNET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:--(CONTINUED)
COMPREHENSIVE INCOME
As reflected in the consolidated statements of changes in shareholders'
equity (deficit), comprehensive income is a measure of net income and all other
changes in equity of the Company that result in transactions other than with
shareholders. Comprehensive income (loss) consists of net loss and foreign
currency translation adjustments.
SEGMENT INFORMATION
As of and for the periods presented, substantially all of the Company's
assets were located in the U.S., and the Company derived substantially all of
its revenue from businesses located in the U.S. The disclosure of segment
information was not required as the Company operates in only one business
segment.
NEW ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133, "ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Historically, the Company
has not entered into derivative contracts to hedge existing risks or for
speculative purposes. Accordingly, the Company does not expect the adoption of
the new standard on January 1, 2001 to affect its financial statements.
2. ACQUISITIONS:
In February 1999, the Company acquired certain assets and assumed certain
liabilities from Planificacion y Estrategia en Internet, S.L. and Illimited,
S.L. ("CiudadFutura.com"), entities which had ownership rights to the Internet
domain of CiudadFutura.com. The purchase price for CiudadFutura.com of
approximately $10.1 million, including transaction costs incurred by the
Company, was substantially allocated to property rights of trade names and
Internet domain names. The purchase price was payable in cash of $6.0 million
and the remainder payable at the sellers' option in (i) cash of $4.0 million or
(ii) shares of the Company's common stock at a 25% discount of the per share
value assigned in the next investment round completed by the Company. In August
1999, the sellers exercised their option to be paid in the form of cash. As of
September 30, 1999, the Company owed the sellers of CiudadFutura.com $4.0
million and subsequently issued a note payable to the sellers. This note bears
interest at 9% per year and is due on March 15, 2000. The acquisition has been
accounted for under the purchase method and, accordingly, the results of
CiudadFutura.com have been included in the consolidated operating results since
the date of acquisition.
In August 1999, the Company completed the acquisition of Proveedora de
Servicios para Red Bogota.com ("Bogota.com"). Bogota.com is a Web site
originally established in Colombia and targeting a Colombian audience. The
purchase price for Bogota.com was $2.0 million in cash and
F-11
<PAGE>
YUPI INTERNET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
2. ACQUISITIONS:--(CONTINUED)
261,765 shares of the Company's common stock. The fair value assigned to the
shares issued in connection with the acquisition of Bogota.com was
approximately $1.0 million, based on a third party valuation. As of September
30, 1999, the Company owed the sellers of Bogota.com approximately $1.0
million. The acquisition of Bogota.com has been accounted for under the
purchase method and, accordingly the results of Bogota.com have been included
in the consolidated operating results since the date of acquisition. The
purchase price of approximately $3.0 million was substantially allocated to
property rights of trade names and Internet domain names.
The following unaudited pro forma consolidated results of operations for
the year ended December 31, 1998 and the nine months ended September 30, 1999
assume the CiudadFutura.com and Bogota.com acquisitions occurred as of January
1, 1998.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------- ------------------
1998 1999
---------------- ------------------
<S> <C> <C>
Revenues .......................................... $ 255,553 $ 303,170
Net loss .......................................... $ (4,518,599) $ (15,373,016)
Net loss available to common shareholders ......... $ (4,518,599) $ (19,356,218)
Basic and diluted loss per common share ........... $ (0.37) $ (1.17)
</TABLE>
3. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------- --------------
1997 1998 1999
--------- ---------- --------------
<S> <C> <C> <C>
Computer equipment and software ......... $3,622 $ 11,333 $ 846,498
Furniture and fixtures .................. -- 8,070 101,821
------ -------- ---------
3,622 19,403 948,319
Less: accumulated depreciation .......... (724) (2,849) (92,808)
------ -------- ---------
$2,898 $ 16,554 $ 855,511
====== ======== =========
</TABLE>
4. DEBT:
As of December 31, 1997, the Company's debt consisted of a $15,000 bank
note, collateralized by a certificate of deposit from a shareholder, bearing
interest of 8.5% per year, with monthly payments of principal and interest of
$309 from December 21, 1997 through October 1998, and a principal payment of
$12,707 plus accrued interest due on November 21, 1998. In September 1998, this
debt was repaid and the Company borrowed $30,000 under similar terms with
monthly payments of $617 from October 1998 through September 2003. In July
1999, the Company repaid the debt outstanding.
On February 13, 1999, the Company executed a $3 million line of credit
agreement bearing no interest. Pursuant to this agreement, the Company granted
the lender the right to acquire up to $3 million of the Company's equity
securities. In the event a Private Investment, as defined, is completed by the
F-12
<PAGE>
YUPI INTERNET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
4. DEBT:--(CONTINUED)
Company prior to March 15, 1999, the lender had the right to invest at an
equivalent value to that contemplated in the Private Investment provided that
$1 million of the total investment would be at a 30% discount. Absent a Private
Investment prior to March 15, 1999, the lender would have the right to acquire
a 15% equity interest in the Company for $3 million. Because the Company
expected to consummate a Private Investment prior to March 15, 1999, it valued
the acquisition rights granted to the lender at approximately $428,000, the
value of the discount to be granted to the lender upon its investment.
The Company borrowed $3 million under the line of credit and on March 15,
1999 offered to repay the outstanding balance to the lender. On March 30, 1999,
the Company agreed with the lender to permit the purchase of up to $3 million
of Class A convertible preferred stock through April 30, 1999 in accordance
with the terms previously negotiated. Further, the Company's then principal
shareholders granted the lender options to purchase an aggregate of 647,525
shares of their common stock in the Company at a per share price of $0.93.
In connection with the agreement, the Company has recognized an aggregate
of $688,800 of interest charges representing the estimated value of the
acquisition rights on the date of the line of credit agreement and the
estimated fair value of the options provided by the Company's then principal
shareholders to the lender.
During August and September 1999, the Company borrowed an aggregate of
$3.0 million from a holder of its Class A convertible preferred stock. This
debt bears interest at 8% per year, and was payable upon demand. In November
1999, the principal amount of this debt was discharged in exchange for shares
of Class C convertible preferred stock (see Note 12).
5. INCOME TAXES:
The Company did not record an income tax provision during the period from
October 20, 1997 (date of incorporation) through December 31, 1997 and for the
year ended December 31, 1998 because it was operating as an S Corporation.
Effective January 1, 1999, the Company ceased to operate as an S Corporation
for U.S. income tax purposes. As of January 1, 1999, the differences between
the financial statement and the tax bases of the Company's assets and
liabilities were insignificant. For the nine months ended September 30, 1999,
the Company is subject to federal, state and foreign income taxes but has not
incurred a liability for such as a result of losses incurred.
F-13
<PAGE>
YUPI INTERNET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
5. INCOME TAXES:--(CONTINUED)
The components of losses before income taxes consists of the following:
<TABLE>
<CAPTION>
OCTOBER 20, 1997
(DATE OF
INCORPORATION) YEAR ENDED NINE MONTHS ENDED
TO DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
----------------- ---------------- ---------------------------------
1997 1998 1998 1999
----------------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C>
Domestic ......... $ (21,477) $ (1,873,091) $ (37,682) $ (14,267,817)
Foreign .......... -- -- -- (348,286)
--------- ------------ --------- -------------
$ (21,477) $ (1,873,091) $ (37,682) $ (14,616,103)
========= ============ ========= =============
</TABLE>
Significant components of the Company's deferred tax assets are as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
--------------
<S> <C>
Net operating loss carryforwards ......... 5,183,466
Depreciation and amortization ............ 299,840
Stock-based compensation ................. 83,375
-----------
5,566,681
Valuation allowance ...................... (5,566,681)
-----------
$ --
===========
</TABLE>
The effective income tax rate differs from the statutory rate as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1999
------------------
<S> <C>
Income taxes at the United States statutory rate ......... $ (5,115,637)
State income taxes ....................................... (497,179)
Effect of foreign taxes .................................. 8,901
Permanent differences .................................... 37,234
Valuation allowance ...................................... 5,566,681
------------
Effective tax rate ....................................... $ --
============
</TABLE>
For federal income tax purposes at September 30, 1999, the Company had net
operating loss carryforwards of approximately $13.5 million which expire from
2004 through 2019. The net operating loss carryforwards may be subject to
limitations on their utilization. The deferred tax assets have been fully
offset by a valuation allowance resulting from the uncertainty surrounding the
future realization of these net operating loss carryforwards. Subsequently
recognized tax benefits relating to the valuation allowance for deferred tax
assets as of September 30, 1999 will be allocated to income from continuing
operations.
F-14
<PAGE>
YUPI INTERNET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
6. SHAREHOLDERS' EQUITY (DEFICIT):
REDEEMABLE CONVERTIBLE PREFERRED STOCK
In April 1999, the Board of Directors of the Company authorized the
issuance and sale of up to 428,762 shares of Class A convertible preferred
stock, par value $0.01 per share. From April 1999 to August 1999, the Company
issued 428,762 shares of Class A convertible preferred stock, for aggregate
consideration of approximately $13.0 million at prices of $21.92 (see Note 4)
and $31.32 per share. The holders of Class A convertible preferred stock are
entitled to receive, if and when declared, cash dividends. Further, the Class A
convertible preferred stock had a liquidation value equal to the greater of
market value plus accrued and unpaid dividends, or $31.32 per share. The Class
A convertible preferred stock was redeemable upon the occurrence of certain
events, including a change in control or a fundamental change, as defined.
The previously described sale of Class A convertible preferred stock was
completed pursuant to the terms of a preferred stock purchase agreement dated
April 23, 1999. Of the total shares of Class A convertible preferred stock sold,
a portion of the shares were sold during May, July and August 1999 for aggregate
consideration of approximately $5 million. Because on the date of issuance of
such shares, the estimated fair market value of the Company's common stock
exceeded the conversion price, the Company has treated as a preferred stock
dividend an amount of approximately $4.0 million related to these transactions.
In November 1999, the holders of Class A convertible preferred stock
elected to eliminate their redemption rights and amend their liquidation rights
to a liquidation value equal to $31.32 per share. As a result, since that date,
all of the Class A convertible preferred stock has been reflected within
shareholders' equity. The holders of Class A convertible preferred stock may
convert at any time all or any portion of the Class A convertible preferred
stock into common stock at the rate of 25 shares of common stock per share of
Class A convertible preferred stock, subject to certain anti-dilution
adjustments. The Class A convertible preferred stock is automatically converted
into common stock upon completion of a qualified IPO, as defined. The holders
of the Class A convertible preferred stock are entitled to the number of votes
equal to the number of common shares that could be obtained upon conversion on
the date of the vote.
No preferred stock dividends have been declared or paid as of September
30, 1999.
The Company has recorded issuance costs incurred in connection with the
preferred shares as a reduction in the proceeds from the issuance of the
preferred shares.
COMMON STOCK
During 1997, the Company issued 10,625,000 shares of common stock in
exchange for $425. During 1998, the Company issued 2,537,400 shares of common
stock in exchange for approximately $217,000. During 1999, the Company issued
756,675 shares of common stock for approximately $659,000.
In November 1998, the Company issued 2,981,250 shares of common stock in
connection with a settlement agreement to satisfy outstanding claims by an
individual against the Company. The
F-15
<PAGE>
YUPI INTERNET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
6. SHAREHOLDERS' EQUITY (DEFICIT):--(CONTINUED)
Company recognized stock-based compensation of approximately $1.6 million
related to the aggregate estimated fair value of such shares of common stock.
As part of the agreement, the Company had an option to repurchase 1,013,750
shares for an aggregate price of $175,000. In 1999, the Company exercised its
option to repurchase such shares.
The Company is required to reserve and keep available out of its
authorized but unissued shares, a sufficient number of shares for the
conversion of redeemable convertible preferred shares.
From October 1997 to November 1999, the Company increased its authorized
common shares from 1,000 shares with a $1.00 par value to 60,000,000 shares
with a $0.0001 par value.
7. RELATED PARTY TRANSACTIONS:
A member of the Company's Board is an attorney at a law firm that provides
legal services to the Company. The Company paid this law firm, in part, by
granting it options to purchase 31,450 shares of the Company's common stock at
$0.0025 per share for services rendered through January 1999. Since February
1999, the Company has paid cash for all services rendered by this law firm.
Total legal fees paid by the Company to this law firm, including the estimated
fair value of options granted, amounted to approximately $88,200 for the nine
month period ended September 30, 1999.
During the nine month period ended September 30, 1999, the Company loaned
an aggregate of $170,000 to several key employees of the Company. The
promissory notes bear interest of 8% per year. All notes are for one year term
and mature in various dates during 2000.
The Company leases certain office space from an advertising company, the
owner of which is a shareholder and officer of the Company. The lease agreement
requires monthly base rent payments of $2,100 and other expenses. Total rent
expense paid by the Company to such advertising company amounted to
approximately $4,800 and $18,900 for the year ended December 31, 1998 and nine
month period ended September 30, 1999, respectively.
F-16
<PAGE>
YUPI INTERNET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
8. LOSS PER SHARE:
The following table sets forth the computation of basic and diluted
earnings per common share:
<TABLE>
<CAPTION>
OCTOBER 20, 1997
(DATE OF NINE MONTHS ENDED
INCORPORATION) YEAR ENDED SEPTEMBER 30,
TO DECEMBER 31, DECEMBER 31, ---------------------------------
1997 1998 1998 1999
----------------- ---------------- -------------- -----------------
<S> <C> <C> <C> <C>
Numerator:
Net loss ............................ $ (21,477) $ (1,873,091) $ (37,682) $ (14,616,103)
Deemed dividend on convertible
preferred stock ................... -- -- -- (3,983,202)
----------- ------------ ----------- -------------
Numerator for basic and diluted
net loss per common share ......... $ (21,477) $ (1,873,091) $ (37,682) $ (18,599,305)
=========== ============ =========== =============
Denominator:
Denominator for basic and diluted
net loss per common share--
weighted average shares ........... 10,625,000 11,903,777 11,193,153 16,246,918
=========== ============ =========== =============
Basic and diluted net loss per
common share ........................ $ (0.00) $ (0.16) $ (0.00) $ (1.14)
=========== ============ =========== =============
</TABLE>
Diluted loss per share has not been presented separately from basic loss
per share, as the outstanding stock options and preferred shares are
anti-dilutive for each period presented. Securities that could potentially
dilute basic earnings per share in the future that were not included in the
computation of diluted loss per share because their effect on periods presented
was anti-dilutive amount to 0, 3,956,575, 3,707,800 and 9,037,628 options to
purchase shares of common stock for the period from October 20, 1997 (date of
incorporation) to December 31, 1997, the year ended December 31, 1998 and for
the nine month periods ended September 30, 1998 and 1999, respectively, or
10,719,075 shares of common stock for the nine months ended September 30, 1999
issuable upon the conversion of Preferred Stock on an "as if converted" basis,
as the effect of their inclusion is anti-dilutive during each period.
F-17
<PAGE>
YUPI INTERNET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
8. LOSS PER SHARE:--(CONTINUED)
The following table sets forth the computation of the unaudited pro forma
basic and diluted loss per common share, assuming the Class A convertible
preferred stock was converted upon issuance in April 1999, and excluding the
impact, if any, of dilution that may result in the proposed IPO:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------- ------------------
1998 1999
---------------- ------------------
<S> <C> <C>
Numerator:
Net loss ..................................................... $ (1,873,091) $ (14,616,103)
Deemed dividend on convertible preferred stock ............... -- (3,983,202)
------------ -------------
Numerator for pro forma net loss available
to common shareholders ....................................... $ (1,873,091) $ (18,599,305)
============ =============
Denominator:
Weighted average number of common shares ..................... 11,903,777 16,246,918
Assumed conversion of preferred stock to common shares
(if converted method) ...................................... -- 6,024,667
------------ -------------
Denominator for pro forma basic and diluted net loss
per common share ............................................. 11,903,777 22,271,585
============ =============
Pro forma basic and diluted net loss per common share ......... $ (0.16) $ (0.84)
============ =============
</TABLE>
9. STOCK OPTIONS:
In February 1999, the Company adopted a stock option plan (the "Plan") to
provide directors, officers, employees, consultants, distributors and others
with the opportunity to receive grants of incentive stock options,
non-qualified stock options and stock awards. The maximum number of shares
issuable under the Plan is 10,000,000. Certain of the grants are intended to
qualify as incentive stock options and non-qualified stock options to purchase
common stock to eligible participants. Under the terms of the Company's stock
option agreements, options have a maximum term of ten years from the date of
grant. The option vesting periods vary from full vesting upon issuance to
vesting over a period of four years.
For the period from October 20, 1997 (date of incorporation) through
December 31, 1997, the year ended December 31, 1998 and for the nine month
periods ended September 30, 1998 and 1999, the Company recognized approximately
$0, $141,000, $1,000 and $217,000, respectively, of stock-based compensation
expense and expects to recognize additional expense of approximately $2.5
million over the remaining vesting period of the options.
F-18
<PAGE>
YUPI INTERNET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
9. STOCK OPTIONS:--(CONTINUED)
The following transaction occurred with respect to the Plan:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
------------ -----------------
<S> <C> <C>
Balance at October 20, 1997 (date of incorporation) ......... -- $ --
Granted ..................................................... -- --
Canceled .................................................... -- --
-- -------
Outstanding, December 31, 1997 .............................. -- --
Granted ..................................................... 3,956,575 $0.0225
Canceled .................................................... -- --
Exercised ................................................... -- --
--------- -------
Outstanding, December 31, 1998 .............................. 3,956,575 $0.0225
--------- -------
Granted ..................................................... 5,081,053 $2.7127
Canceled .................................................... -- --
Exercised ................................................... -- --
--------- -------
Outstanding, September 30, 1999 ............................. 9,037,628 $1.5350
========= =======
</TABLE>
The following table summarizes information concerning outstanding options
as of September 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------------- --------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE REMAINING EXERCISE EXERCISE
PRICE NUMBER CONTRACTUAL PRICE NUMBER PRICE
($/SHARE) OUTSTANDING LIFE (YEARS) ($/SHARE) OUTSTANDING ($/SHARE)
- ----------- ------------- -------------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
$ 0.0001 362,550 2.3 $0.0001 362,550 $0.0001
0.0010 146,250 1.2 0.0010 6,750 0.0010
0.0100 33,725 2.3 0.0100 33,725 0.0100
0.0240 3,704,425 7.9 0.0240 3,704,425 0.0240
2.6400 4,309,431 9.0 2.6400 17,700 2.6400
5.0000 481,247 10.0 5.0000 -- 5.0000
</TABLE>
Included in the preceding table are 1,933,239 stock options, of which
403,025 are exercisable at September 30, 1999, with a weighted average exercise
price of $2.49 per share and a weighted average remaining contractual life of
7.7 years. The exercise price of such stock options was less than the grant
date fair value of the underlying common stock.
F-19
<PAGE>
YUPI INTERNET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
9. STOCK OPTIONS:--(CONTINUED)
The Company accounts for its stock options using the intrinsic value
method. Had compensation expense for the Company stock-based compensation been
determined based on the fair value method, the Company's net loss would have
been increased to the pro forma amounts presented below:
<TABLE>
<CAPTION>
OCTOBER 20, 1997
(DATE OF
INCORPORATION) YEAR ENDED NINE MONTHS ENDED
TO DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
----------------- ---------------- ---------------------------------
1997 1998 1998 1999
----------------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C>
Pro forma net loss available to
common shareholders ........... $ (21,477) $ (1,995,903) $ (97,536) $ (30,584,656)
Pro forma basic and diluted loss
per common share .............. $ (0.00) $ (0.17) $ (0.01) $ (1.88)
</TABLE>
The fair value for these options was estimated at the date of grant using
the Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
ASSUMPTIONS DECEMBER 31, SEPTEMBER 30,
- -------------------------------------------- -------------- ------------------
1998 1999
-------------- ------------------
<S> <C> <C>
Average risk-free interest rate ......... 7.0% 7.0%
Dividend yield .......................... 0.0% 0.0%
Average life ............................ 8 years 8 years
</TABLE>
Because the determination of fair value of all options granted after such
time as the Company becomes a public company will include an expected
volatility factor in addition to the factors described in the preceding
paragraph, the above results may not be representative of future periods.
The 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. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its stock options.
F-20
<PAGE>
YUPI INTERNET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
10. COMMITMENTS:
The Company leases equipment and office space under noncancelable
operating lease agreements. The minimum annual rental commitments under such
operating leases that have remaining terms in excess of one year are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30:
- --------------------------
<S> <C>
2000 ................ $179,600
2001 ................ 73,600
2002 ................ 66,400
2003 ................ 30,400
2004 ................ 17,300
--------
$367,300
========
</TABLE>
Rent expense amounted to approximately $8,700, $13,300, $7,200 and
$115,600 for the period from October 20, 1997 (date of incorporation) through
December 1997, the year ended December 31, 1998 and for the nine month periods
ended September 30, 1998 and 1999, respectively.
11. SIGNIFICANT CUSTOMERS AND GEOGRAPHIC CONCENTRATION:
For the year ended December 31, 1998, one customer accounted for
approximately 17% of the Company's total revenue. For the nine month period
ended September 30, 1998, the Company's largest customer accounted for 19% of
the Company's total revenue. For the nine month period ended September 30,
1999, the four largest customers accounted for approximately 25%, 15%, 10% and
10% of the Company's total revenue, respectively.
12. SUBSEQUENT EVENTS:
In October 1999, the Company issued 2,955,016 shares of Class B
convertible preferred stock in exchange for $5.0 million in cash and
approximately $29.3 million in services to be performed by Sony Corporation of
America ("Sony") over a three-year term pursuant to a contract entered into by
Sony and the Company. Sony advanced the cash portion of this agreement prior to
September 30, 1999, which amount has been recorded in the accompanying
consolidated balance sheet as a deposit on preferred stock issuance.
The services to be provided by Sony have negotiated values agreed to
between Sony and the Company which the Company will use as a basis to expense
these services over the term of the agreement. Certain of the services to be
provided by Sony were deemed delivered on the date of the agreement and
recorded as sales and marketing expense on such date. The agreement provides
for a significant cash penalty in the event of cancellation or non-performance
by Sony.
The holders of Class B convertible preferred stock are entitled to
receive, if and when declared, cash dividends. The Class B convertible
preferred stock has a liquidation value equal to $11.60 per share. The holders
of Class B convertible preferred stock may convert at any time all or any
portion of the Class B convertible preferred stock into common stock at the
rate of 1.009 shares of common stock per share of Class B convertible preferred
stock, subject to certain anti-dilution provisions and
F-21
<PAGE>
YUPI INTERNET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
12. SUBSEQUENT EVENTS:--(CONTINUED)
conversion ratio adjustments. The Class B convertible preferred stock will
automatically convert into common stock upon completion of a qualified IPO, as
defined. The holders of the Class B convertible preferred stock are entitled to
the number of votes equal to the number of common shares that could be obtained
upon conversion on the date of the vote.
In November 1999, the Company acquired La Cosa Interactive S.R.L. ("La
Cosa"), a Web site in Argentina, for $500,000 in cash and 37,397 shares of
common stock of the Company. The acquisition will be accounted for as a
purchase.
In November 1999, the Board of Directors of the Company authorized the
issuance and sale of up to 6,000,000 shares of Class C convertible preferred
stock, par value $0.01 per share. The Company issued 5,858,698 shares of Class
C convertible preferred stock in exchange for $67.4 million. The holders of
Class C convertible preferred stock are entitled to receive, if and when
declared, cash dividends. The Class C convertible preferred stock has a
liquidation value equal to $11.50 per share. The holders of the Class C
convertible preferred stock may at any time convert all or any portion of the
Class C convertible preferred stock into shares of common stock on a 1-for-1
basis, subject to certain anti-dilution provisions and conversion ratio
adjustments. The Class C convertible preferred stock will automatically convert
into common stock in the event of a qualified IPO, as defined. The holders of
the Class C convertible preferred stock are entitled to the number of votes
equal to the number of common shares that could be obtained upon conversion on
the date of the vote.
F-22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Proveedora de Servicios para Red Bogota.Com Ltda.
We have audited the balance sheets of Proveedora de Servicios para Red
Bogota.Com Ltda. as of December 31, 1997 and 1998 and June 30, 1999 and the
related statements of operations and comprehensive loss, of changes in
partners' capital, and of cash flows for the period from November 27
(inception) through December 31, 1997, the year ended December 31, 1998 and the
six month period ended June 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. 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 audited by us present fairly, in
all material respects, the financial position of Proveedora de Servicios para
Red Bogota.Com Ltda. at December 31, 1997 and 1998 and June 30, 1999 and the
results of its operations and its cash flows for the period from November 27,
1997 (inception) through December 31, 1997, the year ended December 31, 1998
and the six month period ended June 30, 1999, in conformity with accounting
principles generally accepted in the United States of America.
Price Waterhouse
Bogota, Colombia
August 23, 1999
F-23
<PAGE>
PROVEEDORA DE SERVICIOS PARA RED BOGOTA.COM LTDA.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1997 1998 1999
---------- ---------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ......................... $12,430 $36,188 $12,757
Accounts receivable, net .......................... -- 20,114 23,244
Prepaid expenses and other assets ................. -- 1,003 759
------- ------- -------
Total current assets ............................ 12,430 57,305 36,760
Equipment, net ...................................... 5,283 29,316 27,359
------- ------- -------
$17,713 $86,621 $64,119
======= ======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Account payable and accrued expenses .............. $ 553 $25,134 $12,961
Due to partners ................................... 4,992 28,438 29,519
Deferred income ................................... -- 47 7,019
------- ------- -------
Total liabilities ............................... 5,545 53,619 49,499
Partners' capital ................................... 12,168 33,002 14,620
------- ------- -------
Total liabilities and partners' capital ......... $17,713 $86,621 $64,119
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
PROVEEDORA DE SERVICIOS PARA RED BOGOTA.COM LTDA.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 27 SIX MONTH
(INCEPTION) TO YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
1997 1998 1999
---------------- -------------- -------------
<S> <C> <C> <C>
Revenues .................................................. $ -- $ 104,869 $ 133,547
Operating expenses:
General and administrative .............................. 9,838 150,131 97,910
Sales and marketing ..................................... -- 37,410 53,592
Depreciation and amortization ........................... 74 1,834 2,914
--------- --------- ---------
Total operating expenses .............................. 9,912 189,375 154,416
--------- --------- ---------
Loss from operations ...................................... (9,912) (84,506) (20,869)
Other income (expenses):
Interest income ......................................... -- 172 1,477
Interest expense ........................................ -- (848) (1,921)
Other ................................................... -- 375 1,241
--------- --------- ---------
Income/(loss) before provision for income tax ......... (9,912) (84,807) (20,072)
Provision for income tax .................................. -- -- (719)
--------- --------- ---------
Net loss during the period ............................ $ (9,912) $ (84,807) $ (20,791)
Translation adjustment .................................... (3,119) (8,085) 2,409
--------- --------- ---------
Comprehensive loss during the period .................. $ (13,031) $ (92,892) $ (18,382)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
PROVEEDORA DE SERVICIOS PARA RED BOGOTA.COM LTDA.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
CUMULATIVE
PARTNERS' TRANSLATION
CAPITAL ADJUSTMENT TOTAL
----------- ------------ -----------
<S> <C> <C> <C>
Balance, November 27, 1997 ......... $ -- $ -- $ --
Partner contributions .............. 25,199 -- 25,199
Translation adjustment ............. -- (3,119) (3,119)
Net loss ........................... (9,912) -- (9,912)
--------- --------- ---------
Balance, December 31, 1997 ......... 15,287 (3,119) 12,168
Partner contributions .............. 113,726 -- 113,726
Translation adjustment ............. -- (8,085) (8,085)
Net loss ........................... (84,807) -- (84,807)
--------- --------- ---------
Balance, December 31, 1998 ......... 44,206 (11,204) 33,002
Translation adjustment ............. -- 2,409 2,409
Net loss ........................... (20,791) -- (20,791)
--------- --------- ---------
Balance, June 30, 1999 ............. $ 23,415 $ (8,795) $ 14,620
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
PROVEEDORA DE SERVICIOS PARA RED BOGOTA.COM LTDA.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTH
DECEMBER 31, PERIOD ENDED
---------------------------- JUNE 30,
1997 1998 1999
------------ ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss for the period ............................................. $ (9,912) $ (84,807) $ (20,791)
Adjustment to reconcile net loss for the period to net cash
used in operating activities:
Depreciation and amortization ..................................... 74 1,834 2,914
In-kind services contributed by a partner ......................... -- 113,726 --
Changes in operating assets and liabilities:
Accounts receivable ............................................. -- (20,114) (3,130)
Prepaid expenses ................................................ -- (1,003) 244
Account payable and accrued expenses ............................ 553 24,581 (12,173)
Due to partners ................................................. 4,992 23,446 1,081
Deferred income ................................................. -- 47 6,972
-------- --------- ---------
Net cash used in operating activities ................................. (4,293) 57,710 (24,883)
-------- --------- ---------
Cash flows from investing activities:
Purchase of equipment ............................................... (5,357) (25,867) (957)
-------- --------- ---------
Cash flows from financing activities:
Contribution by partners ............................................ 25,199 -- --
-------- --------- ---------
Effects of exchange rate changes on cash and cash equivalents ......... (3,119) (8,085) 2,409
-------- --------- ---------
Net (decrease) increase in cash and cash equivalents .................. 12,430 23,758 (23,431)
Cash and cash equivalents, beginning of period ........................ -- 12,430 36,188
-------- --------- ---------
Cash and cash equivalents, end of period .............................. $ 12,430 $ 36,188 $ 12,757
======== ========= =========
</TABLE>
SUPPLEMENTAL INFORMATION OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During the year ending December 31, 1998, the Company issued 384 shares to a
partner in exchange for in kind services valued at $113,726. See note 3.
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
PROVEEDORA DE SERVICIOS PARA RED BOGOTA.COM LTDA.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998, JUNE 30, 1999
(IN U.S. DOLLARS)
1. NATURE OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
Proveedora de Servicios para Red Bogota.Com Ltda. (the Company) is a
limited liability partnership incorporated in Colombia on November 27, 1997,
for a 10-year life-term. Its principal office is in the city of Bogota.
The Company develops and maintains www.bogota.com, a branded Internet
online site located on the World Wide Web.
The Company owns a domain named Bogota.com, which was donated by one of
the partners.
A summary of the significant accounting policies followed in the
preparation of the accompanying financial statements is presented below:
ACCOUNTING ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the 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. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash equivalents include investments with original maturities of three
months or less and are stated at cost, which approximates market value.
PROVISION FOR BAD DEBTS ACCOUNTS
The provision for bad debt accounts is reviewed and updated at the end of
the period based on the aging analysis of balances and evaluation of the
account collections made by management.
EQUIPMENT
Equipment is recorded at cost. Depreciation and amortization are computed
using the straight-line method over the estimated useful lives of the
respective assets. Repairs and maintenance are charged to expense as incurred,
while expenditures, which extend the useful lives of the assets, are
capitalized.
COMPREHENSIVE INCOME (LOSS)
Comprehensive income is a measure of net income and all other changes in
equity of the Company that result from transactions other than with partners.
Comprehensive income (loss) consists of net income (loss) and foreign currency
translation adjustments.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consists primarily of cash and cash equivalents,
and accounts receivable. The Company maintains
F-28
<PAGE>
PROVEEDORA DE SERVICIOS PARA RED BOGOTA.COM LTDA.
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998, JUNE 30, 1999
(IN U.S. DOLLARS)
1. NATURE OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES--(CONTINUED)
the majority of its cash and cash equivalents in various financial
institutions. The Company's sales are primarily to companies located in
Colombia. The Company performs periodic credit evaluations of its customers'
financial condition and does not require collateral.
FOREIGN CURRENCY
The functional currency of the Company is the Colombian peso. The
financial statements of the Company are translated to U.S. dollars using
period-end rates of exchange for assets and liabilities, and average rates for
the period for revenues, costs, and expenses. Translation gains and losses are
deferred and accumulated as a component of partners' capital. Operations are
generally translated at the weighted average exchange rate in effect during the
period. The resulting foreign exchange gains and losses are recorded as a
component of partners' capital.
INCOME TAXES
The Company uses the liability method of accounting for income taxes,
whereby deferred income taxes are provided on items recognized for financial
reporting purposes over different periods than for income tax purposes.
Valuation allowances are provided when the expected realization of the tax
assets does not meet a more likely than not criteria.
2. EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------ -----------
1997 1998 1999
---------- ----------- -----------
<S> <C> <C> <C>
Office equipment ............................. $ 771 $ 1,571 $ 2,104
Computer and communication equipment ......... 4,586 29,653 30,077
------ -------- --------
5,357 31,224 32,181
LESS--Accumulated depreciation ............... (74) (1,908) (4,822)
------ -------- --------
Equipment, net ............................ $5,283 $ 29,316 $ 27,359
====== ======== ========
</TABLE>
3. PARTNERS' CAPITAL
At June 30, 1999 the partners' capital consisted of 400 shares with a
value of Colombian pesos $5,000,000 each. By means of Public Deed No. 2992
dated November 23, 1999, 384 shares correspond to a partner's contribution in
kind of $113,726 whose valuation was agreed to by the partners in a general
meeting.
4. INCOME TAX
The Company is subject to taxes in Colombia at a rate of 35% of the
taxable income as long as such income is greater than the presumptive income,
which is defined as the greater of 5% of partners' equity or 1.5% of the
preceding year's assets. For the years ended December 31, 1997 and 1998 and
F-29
<PAGE>
PROVEEDORA DE SERVICIOS PARA RED BOGOTA.COM LTDA.
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998, JUNE 30, 1999
(IN U.S. DOLLARS)
4. INCOME TAX--(CONTINUED)
the six-month period ended June 30, 1999, the Company determined the income tax
based on the presumptive income described above. A valuation allowance had been
recognized to fully offset the deferred tax asset resulting from net operating
loss carry forwards due to the uncertainty surrounding its realization. As of
June 30, 1999 net operating loss carry forward amounting to approximately
Colombian pesos $29,393,000 (US$16,270) could be used to offset future taxable
income and expire in 2003.
5. SUBSEQUENT EVENTS
On August 26, 1999, the Company was sold to a third party.
F-30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and the Boards of Directors of
Planificacion y Estrategia en Internet, S.L. and Illimited, S.L.
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations and comprehensive income, of changes in
stockholder's equity and of cash flows present fairly, in all material
respects, the financial position of Planificacion y Estrategia en Internet,
S.L. and Illimited, S.L. ("the Entities") at December 31, 1998 and 1997, and
the results of their operations and their cash flows for the years then ended
in conformity with accounting principles generally accepted in the United
States of America. These combined financial statements are the responsibility
of the Entities' management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in
the United States of America, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
The Entities, as described in Note 3, have extensive transactions with
their stockholders. Because of these relationships, it is possible that the
terms of these transactions are not the same as those that would result from
transactions among wholly unrelated parties.
PricewaterhouseCoopers Auditores, S.L.
Madrid, Spain
July 27, 1999
F-31
<PAGE>
PLANIFICACION Y ESTRATEGIA EN INTERNET, S.L.
ILLIMITED, S.L.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1998
------------ ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................. $ 36,741 $ 43,803
Accounts receivable, net .................. 6,570 9,754
Short-term investments .................... 102,105 --
Other ..................................... 57 --
--------- --------
Total current assets ........................ 145,473 53,557
Property and equipment, net ................. 8,125 5,707
--------- --------
$ 153,598 $ 59,264
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................... $ 3,668 $ 17,191
Due to stockholders ....................... -- 26,660
--------- --------
Total current liabilities ................... 3,668 43,851
--------- --------
Contingencies (Note 5) ...................... -- --
--------- --------
Stockholders' equity:
Common stock .............................. 19,045 17,803
Retained earnings (deficit) ............... 156,539 (2,554)
Cumulative translation adjustment ......... (25,654) 164
--------- --------
Total Stockholders' equity .................. 149,930 15,413
--------- --------
$ 153,598 $ 59,264
========= ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-32
<PAGE>
PLANIFICACION Y ESTRATEGIA EN INTERNET, S.L.
ILLIMITED, S.L.
COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1998
------------ ------------
<S> <C> <C>
Revenues ......................................................... $ 2,547 $ 73,537
Operating expenses:
Product and technology development .............................. -- 1,864
Sales and marketing ............................................. -- 2,364
General and administrative ...................................... 13,029 82,178
Depreciation and amortization ................................... 7,332 7,543
--------- ---------
Total operating expenses ......................................... 20,361 93,949
--------- ---------
Loss from operations ............................................. (17,814) (20,412)
Other income (expense):
Interest income ................................................. 1,665 49,043
Interest expense ................................................ (5) (29)
Other ........................................................... -- 20
--------- ---------
Income/(loss) before provision for income tax .................... (16,154) 28,622
Provision for income tax ......................................... -- (4,434)
--------- ---------
Net income/(loss) for the year ................................... (16,154) 24,188
Change in cumulative translation adjustment for the year ......... (25,196) 164
--------- ---------
Comprehensive income/(loss) for the year ......................... $ (41,350) $ 24,352
========= =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-33
<PAGE>
PLANIFICACION Y ESTRATEGIA EN INTERNET, S.L.
ILLIMITED, S.L.
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
RETAINED CUMULATIVE
COMMON EARNINGS TRANSLATION
STOCK (DEFICIT) ADJUSTMENT TOTAL
---------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1997 ............................... $ 19,045 $ 172,693 $ (458) $ 191,280
Net loss ................................................. -- (16,154) -- (16,154)
Cumulative translation adjustment ........................ -- -- (25,196) (25,196)
-------- ---------- --------- ----------
Balance at December 31, 1997 ............................. 19,045 156,539 (25,654) 149,930
Purchase and retirement of common stock (Note 3) ......... (1,242) (183,281) 25,654 (158,869)
Net income ............................................... -- 24,188 -- 24,188
Cumulative translation adjustment ........................ -- -- 164 164
-------- ---------- --------- ----------
Balance at December 31, 1998 ............................. $ 17,803 $ (2,554) $ 164 $ 15,413
======== ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-34
<PAGE>
PLANIFICACION Y ESTRATEGIA EN INTERNET, S.L.
ILLIMITED, S.L.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) ..................................................... $ (16,154) $ 24,188
Adjustments to reconcile net income/(loss) to net cash provided by
operating activities:
Depreciation and amortization ......................................... 7,332 7,543
Changes in operating assets and liabilities:
Accounts receivable .................................................. 924 (2,603)
Other current assets ................................................. (59) 57
Accounts payable ..................................................... 1,249 37,973
--------- ----------
Net cash (used in) provided by operating activities ................. (6,708) 67,158
--------- ----------
Cash flows from investing activities:
Sale of short-term investments ....................................... -- 103,678
Purchase of property and equipment ................................... -- (4,719)
--------- ----------
Net cash provided by investing activities ........................... -- 98,959
--------- ----------
Cash flows from financing activities:
Repurchase of shares from stockholders................................ -- (158,869)
Repayment of advances from stockholders............................... -- (2,902)
--------- ----------
Net cash used in financing activities................................ -- (161,771)
--------- ----------
Effects of exchange rate changes on cash and cash equivalents ......... (6,491) 2,716
--------- ----------
Net (decrease) increase in cash and cash equivalents .................. (13,199) 7,062
Cash and cash equivalents, beginning of year .......................... 49,940 36,741
--------- ----------
Cash and cash equivalents, end of year ................................ $ 36,741 $ 43,803
========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest ............................... $ 5 $ 24
========= ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-35
<PAGE>
PLANIFICACION Y ESTRATEGIA EN INTERNET, S.L. AND ILLIMITED, S.L.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998
1. NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Planificacion y Estrategia en Internet, S.L. and Illimited, S.L. (the
"Entities") were incorporated in Spain. The Entities are 100% owned by a single
individual and his wife (the "Stockholders").
These combined financial statements were prepared to assist the Entities
to comply with certain requirements of a purchase agreement (see Note 6). The
combined financial statements were prepared under accounting principles
generally accepted in the United States of America and include the historical
basis of the accounts of Illimited, S.L. and Planificacion y Estrategia en
Internet, S.L. The equity accounts in these combined financial statements
represent the sum of the corresponding equity accounts of the Entities. All
significant intercompany transaction and accounts are eliminated in
combination.
The Entities principally develop and maintain www.ciudadfutura.com, a
branded Internet online network (the "Network") located on the World Wide Web
(the "Web"). The Network is organized around interest specific channels,
community features, search capabilities and online shopping in Spanish.
A summary of the significant accounting policies followed in the
preparation of the accompanying combined financial statements is presented
below:
ACCOUNTING ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the 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. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Entities' revenues are derived principally from the sale of banner
advertisements and sponsorships. Advertising revenues on both banner and
sponsorship contracts, are recognized ratably in the period in which the
advertisement is displayed. A number of the Entities' agreements provide for
the Entities to receive a percentage of revenues from electronic commerce
transactions conducted by advertisers who are selling goods or services to
users of the Network. These revenues are recognized by the entities upon
notification from the advertiser of its share of revenues earned by the
Entities and, to date, have not been significant.
COMPREHENSIVE INCOME (LOSS)
Comprehensive income is a measure of net income and all other changes in
equity of the Entities that result from transactions other than with
stockholders. Comprehensive income (loss) consists of net income (loss) and
foreign currency translation adjustments.
CASH AND CASH EQUIVALENTS
Cash equivalents include investments with original maturities of three
months or less and are stated at cost which approximates market value.
F-36
<PAGE>
PLANIFICACION Y ESTRATEGIA EN INTERNET, S.L. AND ILLIMITED, S.L.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
1. NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)
SHORT-TERM INVESTMENTS
Short-term investments are comprised of marketable debt which are
categorized as available for sale and, accordingly, are stated at their fair
values.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation and amortization
are computed using the straight line method over the estimated useful lives of
the respective assets. Repairs and maintenance are charged to expense as
incurred, while expenditures which extend the useful lives of the assets are
capitalized.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Entities to significant
concentrations of credit risk consist principally of cash and cash equivalents,
short-term investments and accounts receivable. The Entities maintain the
majority of their cash and cash equivalents with various financial
institutions. Short-term investments consist of Spain government debt. The
Entities' sales are primarily to companies located in the United States and
Spain. The Entities perform periodic credit evaluations of their customers'
financial condition and do not require collateral.
FOREIGN CURRENCY
The functional currency of the Entities is the Spanish peseta. The
financial statements of these Entities are translated to U.S. dollars using
year-end rates of exchange for assets and liabilities, and average rates for
the year for revenues, costs, and expenses. Translation gains and losses are
deferred and accumulated as a component of stockholders' equity. Operations are
generally translated at the weighted average exchange rate in effect during the
period. The resulting foreign exchange gains and losses are recorded in the
combined statement of operations.
INCOME TAXES
The Entities use the liability method of accounting for income taxes,
whereby deferred income taxes are provided on items recognized for financial
reporting purposes over different periods than for income tax purposes.
Valuation allowances are provided when the expected realization of tax assets
does not meet a more likely than not criteria.
F-37
<PAGE>
PLANIFICACION Y ESTRATEGIA EN INTERNET, S.L. AND ILLIMITED, S.L.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1998
--------- ---------
<S> <C> <C>
Computer equipment ...................................... $ 9,188 $ 4,362
Furniture and fixtures .................................. 69,102 74,461
Other ................................................... -- 704
------- -------
78,290 79,527
Less: accumulated depreciation and amortization ......... 70,165 73,820
------- -------
$ 8,125 $ 5,707
======= =======
</TABLE>
3. RELATED PARTY TRANSACTIONS
The Entities, as described hereafter, have extensive transactions and
relationships with their two Stockholders. Because of these relationships, it
is possible that the terms of these transactions are not the same as those that
would result from transactions among wholly unrelated parties.
One of the Stockholders is the general manager of the Entities. The other
stockholder provides certain maintenance services to the Network. These
services have not been charged to the Entities. In addition, the two
Stockholders have provided financing and office space, among other services, at
no charge.
On November 30, 1998, the Stockholders sold 25 shares of the Entities'
common stock to the Entities for an aggregate price of $158,869. On the same
date, the 25 shares were retired.
4. INCOME TAXES
The Entities are only subject to income tax in Spain. At December 31,
1997, the Entities had net operating losses carry forwards amounting to
approximately $15,000 which were used to partially offset taxable income for
the year ended December 31, 1998. A valuation allowance had been recognized to
fully offset the deferred tax asset resulting from the net operating loss carry
forwards due to the uncertainty surrounding its realization. Other than net
operating loss carry forwards, there are no significant items recognized for
financial reporting purposes over different periods than for income tax
purposes.
5. CONTINGENCIES
Under Spanish business law, a company is generally prohibited from buying
back its own shares when retained earnings are not sufficient to cover the
difference between the repurchase price of the shares and its nominal value. As
reflected in the statements of changes in stockholders' equity, the purchase
and retirement of the Entities' own shares resulted in a deficit of $2,554 at
December 31, 1998. Management believes that this matter will not have a
material impact on the Entities' financial condition and results of operations.
6. SUBSEQUENT EVENTS
On February 15, 1999, the Stockholders entered into a purchase agreement
with a third party to sell their Internet network business and related assets.
F-38
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than underwriting discounts and commissions)
payable in connection with the sale of the common stock offered hereby are as
follows:
<TABLE>
<S> <C>
SEC registration fee ................................... $45,540
NASD filing fee ........................................ 17,750
Nasdaq National Market listing fee ..................... *
Printing and engraving expenses ........................ *
Legal fees and expenses ................................ *
Accounting fees and expenses ........................... *
Transfer agent and registrar fees and expenses ......... *
Miscellaneous .......................................... *
-------
$ *
Total ................................................
=======
</TABLE>
- ----------------
Yupi will bear all expenses shown above.
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Florida Business Corporation Act and Yupi's Fourth Amended and
Restated Articles of Incorporation and Amended and Restated By-Laws provide for
indemnification of Yupi's directors and officers for liabilities and expenses
that they may incur in such capacities. In general, directors and officers are
indemnified with respect to actions taken in good faith in a manner reasonably
believed to be in, or not opposed to, the best interests of Yupi and, with
respect to any criminal action or proceeding, actions that the indemnitee had
no reasonable cause to believe were unlawful. Reference is made to Yupi's
Fourth Amended and Restated Articles of Incorporation and Amended and Restated
By-Laws filed as Exhibits 3.02 and 3.04 hereto, respectively.
The Underwriting Agreement provides that the underwriters are obligated,
under certain circumstances, to indemnify directors, officers and controlling
persons of Yupi against certain liabilities, including liabilities under the
Securities Act of 1933. Reference is made to the form of Underwriting Agreement
filed as Exhibit 1.01 hereto.
In addition, Yupi has a directors' and officers' liability insurance
policy.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since its inception, the registrant has sold the following securities
(which have been adjusted to reflect the 1,000-for-1 stock split on December
28, 1998 and the 25-for-1 stock split effected in the form of a stock dividend
on May 12, 1999) that were not registered under the Securities Act:
1. On October 20, 1997, the registrant sold an aggregate of 10,625,000
shares of its common stock to Camilo Cruz and Carlos Cardona at a price
of $0.00004 per share for the aggregate purchase price of $425.
2. On May 27, 1998, July 23, 1998 and November 15, 1998, the registrant
sold an aggregate of 2,287,500 shares of its common stock to Ariel
Bentata at a price of $0.022 per share for the aggregate purchase price
of $50,000.
3. On November 15, 1998, in connection with the execution of a settlement
agreement between the registrant, Craig Doriot, Camilo Cruz, Carlos
Cardona and Ariel Bentata, the registrant sold 2,981,250 shares of its
common stock to Mr. Doriot.
II-1
<PAGE>
4. During the period from November 6, 1998 to February 19, 1999, the
registrant sold an aggregate of 742,375 shares of its common stock to
18 investors, including executive officers and directors of the
registrant, at a price of $0.6668 per share for the aggregate purchase
price of approximately $495,209.
5. In March 1999, the registrant sold an aggregate of 264,200 shares of
its common stock to 13 investors, including executive officers and
directors of the registrant, at a price of $1.2528 per share for the
aggregate purchase price of approximately $330,066.
6. On April 23, 1999, the registrant sold (i) 45,620 shares of its Class A
Convertible Preferred Stock to IFX Online, Inc. at a price of $21.92
per share for the aggregate purchase price of approximately $999,990
and (ii) an aggregate of 223,500 shares of its Class A Convertible
Preferred Stock to IFX Online, Inc. and Interprise Technology Partners,
L.P. at a price of $31.32 per share for the aggregate purchase price of
approximately $7,000,020.
7. On May 13, 1999, the registrant sold 95,785 shares of its Class A
Convertible Preferred Stock to Interprise Technology Partners, L.P. at
a price of $31.32 per share for the aggregate purchase price of
approximately $3,000,000.
8. On July 12, 1999 and July 28, 1999, the registrant sold an aggregate of
31,928 shares of its Class A Convertible Preferred Stock to Interprise
Technology Partners, L.P. at a price of $31.32 per share for the
aggregate purchase price of approximately $1,000,000.
9. On August 2, 1999, the registrant sold 31,929 shares of its Class A
Convertible Preferred Stock to Interprise Technology Partners, L.P. at
a price of $31.32 per share for the aggregate purchase price of
approximately $1,000,000.
10. On August 25, 1999, the registrant issued an aggregate of 261,765
shares of its common stock to the former shareholders of Proveedora de
Servicios para Red Bogota.com Ltda. as partial consideration for the
purchase of all of the outstanding share capital of such company.
11. On October 1, 1999, the registrant agreed to sell an aggregate of 1,944
shares of its common stock to the owners of certain assets relating to
the Internet domain www.claqueta.com as partial consideration for the
purchase of those assets.
12. On October 27, 1999, the registrant sold an aggregate of 2,955,016
shares of its Class B Convertible Preferred Stock to Sony Corporation
of America at a price of $11.60 per share for the aggregate purchase
price of $34,300,000 consisting of $5 million in cash and the
obligation to perform future services valued by the parties at
$29,300,000.
13. On November 5, 1999, the registrant sold an aggregate of 5,858,698
shares of its Class C Convertible Preferred Stock to 20 investors at a
price of $11.50 per share for the aggregate purchase price of
approximately $67,375,044, consisting of $64,375,044 in cash and
$3,000,000 in retired debt.
14. On November 29, 1999, the registrant issued an aggregate of 37,397
shares of its common stock to the shareholders of La Cosa Interactive
S.R.L. as partial consideration for the registrant's purchase of all of
the outstanding share capital of such company.
15. During the period from June 1, 1998 to December 31, 1999, the
registrant granted, net of forfeited options, options to purchase an
aggregate of 9,289,514 shares of the registrant's common stock with
exercise prices ranging from $0.0001 to $8.00 per share.
No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon the exemption provided by Section 4(2) of the
Securities Act for transactions not involving a public offering and/or
Regulation D and/or Regulation S under the Securities Act and/or Rule 701 under
the Securities Act.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------------- ----------------------------------------------------------------------------------------
<S> <C>
1.01 Form of Underwriting Agreement.
3.01/dagger/ Third Amended and Restated Certificate of Incorporation of Yupi, as amended.
3.02/dagger/ Form of Fourth Amended and Restated Certificate of Incorporation of Yupi, to be filed
after the closing of this offering.
3.03 By-laws, as amended, of Yupi.
3.04/dagger/ Form of Amended and Restated By-laws of Yupi, to be effective after the closing of this
offering.
4.01/dagger/ Specimen Certificate for shares of Yupi's Common Stock.
5.01/dagger/ Legal Opinion of Testa, Hurwitz & Thibeault, LLP.
5.02/dagger/ Legal Opinion of Steel Hector & Davis LLP.
10.01* Yupi Internet Inc. Stock Incentive Plan.
10.02 Standard Office Lease dated September 22, 1999 by and between Yupi Internet Inc. and
Marina Glencoe, LLC.
10.03 Second Amended and Restated Registration Rights Agreement dated November 5, 1999.
10.04/dagger/+ Letter Agreement dated October 27, 1999 by and between Yupi Internet Inc. and Sony
Corporation of America.
10.05 Lease dated October 11, 1999 by and between Yupi Internet Inc. and 1688 Partners Ltd.
10.06 Lease Agreement dated April 22, 1999 by and between Yupi Internet Inc. and South
Beach Tristar LLC.
10.07/dagger/+ Value-Added Link Agreement dated July 20, 1999 by and between AltaVista Equipment
Corporation and Yupi Internet Inc.
10.08 Unsecured Promissory Note dated April 28, 1999 by Jacqueline O'Brien to Yupi Internet
Inc.
10.09 Unsecured Promissory Note dated April 28, 1999 by Carlos Cardona to Yupi Internet Inc.
10.10 Unsecured Promissory Note dated April 28, 1999 by Marlena Delgado to Yupi Internet
Inc.
10.11 Unsecured Promissory Note dated April 28, 1999 by Oscar Coen to Yupi Internet Inc.
10.12 Unsecured Promissory Note dated October 27, 1999 by Rudy Vila to Yupi Internet Inc.
10.13 Unsecured Promissory Note dated November 24, 1999 by Victor Gutierrez to Yupi
Internet Inc.
10.14 Unsecured Promissory Note dated November 24, 1999 by Gustavo Morles to Yupi
Internet Inc.
10.15 Unsecured Promissory Note dated November 30, 1999 by Jose Luque to Yupi Internet
Inc.
10.16 Unsecured Promissory Note dated November 30, 1999 by Rodolfo Vila to Yupi Internet
Inc.
10.17 Unsecured Promissory Note dated December 23, 1999 by Damaris Valero to Yupi
Internet Inc.
21.01 Subsidiaries.
23.01/dagger/ Consent of Testa, Hurwitz & Thibeault, LLP (contained in Exhibit 5.01).
23.02/dagger/ Consent of Steel Hector & Davis LLP (contained in Exhibit 5.02)
23.03 Consent of PricewaterhouseCoopers LLP.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- --------------------------------------------------
<S> <C>
23.04 Consent of PricewaterhouseCoopers Auditores, S.L.
23.05 Consent of Price Waterhouse.
24.01 Power of Attorney (See page II-5).
27.01 Financial Data Schedule.
27.02 Financial Data Schedule.
27.03 Financial Data Schedule.
</TABLE>
- ----------------
* Indicates a management contract or any compensatory plan, contract or
arrangement.
/dagger/ To be filed by amendment.
+ Confidential treatment to be requested as to omitted portions pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
(b) Financial Statement Schedules.
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser; (2) that for
purposes of determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as of
the time it was declared effective; and (3) that for the purpose of determining
any liability under the Securities Act, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Miami Beach, Florida
on January 18, 2000.
YUPI INTERNET INC.
By: /s/ OSCAR L. COEN
------------------------------------
Oscar L. Coen
President, Chief Executive Officer
and Director
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Yupi Internet Inc., hereby
severally constitute and appoint Oscar L. Coen and Luis E. San Miguel, and each
of them singly, our true and lawful attorneys, with full power to them and each
of them singly, to sign for us in our names in the capacities indicated below,
any registration statement related to the offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933 (a "462(b)
Registration Statement"), any and all amendments and exhibits to this
registration statement or any 462(b) Registration Statement, and any and all
applications and other documents to be filed with the Securities and Exchange
Commission pertaining to the registration of the securities covered hereby or
thereby, and generally to do all things in our names and on our behalf in such
capacities to enable Yupi Internet Inc. to comply with the provisions of the
Securities Act of 1933 and all requirements of the Securities and Exchange
Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
- ---------------------------------- ----------------------------------------- -----------------
<S> <C> <C>
/s/ OSCAR L. COEN President, Chief Executive Officer and January 18, 2000
- ---------------------------------- Director (Principal Executive Officer)
Oscar L. Coen
/s/ LUIS E. SAN MIGUEL Vice President, Chief Financial Officer January 18, 2000
- ---------------------------------- and Treasurer (Principal Financial
Luis E. San Miguel and Accounting Officer)
/s/ ARIEL BENTATA Director January 18, 2000
- ----------------------------------
Ariel Bentata
/s/ CARLOS CARDONA Director January 18, 2000
- ----------------------------------
Carlos Cardona
/s/ JUAN CARLOS CAMPUZANO Director January 18, 2000
- ----------------------------------
Juan Carlos Campuzano
/s/ CAMILO CRUZ Director January 18, 2000
- ----------------------------------
Camilo Cruz
/s/ FRED EHRLICH Director January 12, 2000
- ----------------------------------
Fred Ehrlich
/s/ DAVID R. PARKER Director January 18, 2000
- ----------------------------------
David R. Parker
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------------- ----------------------------------------------------------------------------------------
<S> <C>
1.01 Form of Underwriting Agreement.
3.01/dagger/ Third Amended and Restated Certificate of Incorporation of Yupi, as amended.
3.02/dagger/ Form of Fourth Amended and Restated Certificate of Incorporation of Yupi, to be filed
after the closing of this offering
3.03 By-laws, as amended, of Yupi.
3.04/dagger/ Form of Amended and Restated By-laws of Yupi, to be effective after the closing of this
offering
4.01/dagger/ Specimen Certificate for shares of Yupi's Common Stock.
5.01/dagger/ Legal Opinion of Testa, Hurwitz & Thibeault, LLP.
5.02/dagger/ Legal Opinion of Steel Hector & Davis LLP.
10.01* Yupi Internet Inc. Stock Incentive Plan.
10.02 Standard Office Lease dated September 22, 1999 by and between Yupi Internet Inc. and
Marina Glencoe, LLC.
10.03 Second Amended and Restated Registration Rights Agreement dated November 5, 1999.
10.04/dagger/+ Letter Agreement dated October 27, 1999 by and between Yupi Internet Inc. and Sony
Corporation of America
10.05 Lease dated October 11, 1999 by and between Yupi Internet Inc. and 1688 Partners Ltd.
10.06 Lease Agreement dated April 22, 1999 by and between Yupi Internet Inc. and South
Beach Tristar LLC.
10.07/dagger/+ Value-Added Link Agreement dated July 20, 1999 by and between AltaVista Equipment
Corporation and Yupi Internet Inc.
10.08 Unsecured Promissory Note dated April 28, 1999 by Jacqueline O'Brien to Yupi Internet
Inc.
10.09 Unsecured Promissory Note dated April 28, 1999 by Carlos Cardona to Yupi Internet Inc.
10.10 Unsecured Promissory Note dated April 28, 1999 by Marlena Delgado to Yupi Internet
Inc.
10.11 Unsecured Promissory Note dated April 28, 1999 by Oscar Coen to Yupi Internet Inc.
10.12 Unsecured Promissory Note dated October 27, 1999 by Rudy Vila to Yupi Internet Inc.
10.13 Unsecured Promissory Note dated November 24, 1999 by Victor Gutierrez to Yupi
Internet Inc.
10.14 Unsecured Promissory Note dated November 24, 1999 by Gustavo Morles to Yupi
Internet Inc.
10.15 Unsecured Promissory Note dated November 30, 1999 by Jose Luque to Yupi Internet
Inc.
10.16 Unsecured Promissory Note dated November 30, 1999 by Rodolfo Vila to Yupi Internet
Inc.
10.17 Unsecured Promissory Note dated December 23, 1999 by Damaris Valero to Yupi
Internet Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------------- ------------------------------------------------------------------------
<S> <C>
21.01 Subsidiaries.
23.01/dagger/ Consent of Testa, Hurwitz & Thibeault, LLP (contained in Exhibit 5.01).
23.02/dagger/ Consent of Steel Hector & Davis LLP (contained in Exhibit 5.02)
23.03 Consent of PricewaterhouseCoopers LLP.
23.04 Consent of PricewaterhouseCoopers Auditores, S.L.
23.05 Consent of Price Waterhouse.
24.01 Power of Attorney (See page II-5).
27.01 Financial Data Schedule.
27.02 Financial Data Schedule.
27.03 Financial Data Schedule.
</TABLE>
- ----------------
* Indicates a management contract or any compensatory plan, contract or
arrangement.
/dagger/ To be filed by amendment.
+ Confidential treatment to be requested as to omitted portions pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
EXHIBIT 1.01
[___________]
YUPI INTERNET INC.
COMMON STOCK, PAR VALUE $.0001
UNDERWRITING AGREEMENT
[___________], 2000
CREDIT SUISSE FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
BANC OF AMERICA SECURITIES LLC
SG COWEN SECURITIES CORPORATION
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. INTRODUCTORY. Yupi Internet Inc., a Florida corporation ("COMPANY"),
proposes to issue and sell [_________] shares ("FIRM SECURITIES") of its Common
Stock, par value $.0001 per share ("SECURITIES" or "COMMON STOCK"), and also
proposes to issue and sell to the Underwriters, at the option of the
Underwriters, an aggregate of not more than [______] additional shares
("OPTIONAL SECURITIES") of its Securities as set forth below. The Firm
Securities and the Optional Securities are herein collectively called the
"OFFERED SECURITIES". As part of the offering contemplated by this Agreement,
Donaldson, Lufkin & Jenrette Securities Corporation (the "DESIGNATED
UNDERWRITER") has agreed to reserve out of the Firm Securities purchased by it
under this Agreement, up to [_____] shares, for sale to the Company's directors,
officers, employees and other parties associated with the Company (collectively,
"PARTICIPANTS"), as set forth in the Prospectus (as defined herein) under the
heading "Underwriting" (the "DIRECTED SHARE PROGRAM"). The Firm Securities to be
sold by the Designated Underwriter pursuant to the Directed Share Program (the
"DIRECTED SHARES") will be sold by the Designated Underwriter pursuant to this
Agreement at the public offering price. Any Directed Shares not orally confirmed
for purchase by a Participant by the end of the business day on which this
Agreement is executed will be offered to the public by the Underwriters as set
forth in the Prospectus. The Company hereby agrees with the several Underwriters
named in Schedule A hereto ("UNDERWRITERS") as follows:
1
<PAGE>
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement (No. 333-[_______]) relating to the
Offered Securities, including a form of prospectus, has been filed with
the Securities and Exchange Commission ("COMMISSION") and either (i)
has been declared effective under the Securities Act of 1933 ("ACT")
and is not proposed to be amended or (ii) is proposed to be amended by
amendment or post-effective amendment. If such registration statement
("INITIAL REGISTRATION STATEMENT") has been declared effective, either
(i) an additional registration statement ("ADDITIONAL REGISTRATION
STATEMENT") relating to the Offered Securities may have been filed with
the Commission pursuant to Rule 462(b) ("RULE 462(B)") under the Act
and, if so filed, has become effective upon filing pursuant to such
Rule and the Offered Securities all have been duly registered under the
Act pursuant to the initial registration statement and, if applicable,
the additional registration statement or (ii) such an additional
registration statement is proposed to be filed with the Commission
pursuant to Rule 462(b) and will become effective upon filing pursuant
to such Rule and upon such filing the Offered Securities will all have
been duly registered under the Act pursuant to the initial registration
statement and such additional registration statement. If the Company
does not propose to amend the initial registration statement or if an
additional registration statement has been filed and the Company does
not propose to amend it, and if any post-effective amendment to either
such registration statement has been filed with the Commission prior to
the execution and delivery of this Agreement, the most recent amendment
(if any) to each such registration statement has been declared
effective by the Commission or has become effective upon filing
pursuant to Rule 462(c) ("RULE 462(C)") under the Act or, in the case
of the additional registration statement, Rule 462(b). For purposes of
this Agreement, "EFFECTIVE TIME" with respect to the initial
registration statement or, if filed prior to the execution and delivery
of this Agreement, the additional registration statement means (i) if
the Company has advised the Representatives that it does not propose to
amend such registration statement, the date and time as of which such
registration statement, or the most recent post-effective amendment
thereto (if any) filed prior to the execution and delivery of this
Agreement, was declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c), or (ii) if the Company
has advised the Representatives that it proposes to file an amendment
or post-effective amendment to such registration statement, the date
and time as of which such registration statement, as amended by such
amendment or post-effective amendment, as the case may be, is declared
effective by the Commission. If an additional registration statement
has not been filed prior to the execution and delivery of this
Agreement but the Company has advised the Representatives that it
proposes to file one, "EFFECTIVE TIME" with respect to such additional
registration statement means the date and time as of which such
registration statement is filed and becomes effective pursuant to Rule
462(b). "EFFECTIVE DATE" with respect to the initial registration
statement or the additional registration statement (if any) means the
date of the Effective Time thereof. The initial registration statement,
as amended at its Effective Time, including all information contained
in the additional registration statement (if any) and deemed to be a
part of the initial registration statement as of the Effective Time of
the additional registration statement pursuant to the General
Instructions of the Form on which it is filed and including all
information (if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b) ("RULE
430A(B)") under the Act, is hereinafter referred to as the "INITIAL
REGISTRATION STATEMENT". The additional registration statement, as
amended at its Effective Time, including the contents of the initial
registration statement incorporated by reference therein and including
all information (if any) deemed to be a part of the additional
registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the "ADDITIONAL REGISTRATION
STATEMENT". The Initial Registration Statement and the Additional
Registration Statement are herein referred to collectively as the
2
<PAGE>
"REGISTRATION STATEMENTS" and individually as a "REGISTRATION
STATEMENT". The form of prospectus relating to the Offered Securities,
as first filed with the Commission pursuant to and in accordance with
Rule 424(b) ("RULE 424(B)") under the Act or (if no such filing is
required) as included in a Registration Statement, is hereinafter
referred to as the "PROSPECTUS". No document has been or will be
prepared or distributed in reliance on Rule 434 under the Act.
(b) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement: (i) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement conformed in all respects to the requirements of
the Act and the rules and regulations of the Commission ("RULES AND
REGULATIONS") and did not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, (ii) on the
Effective Date of the Additional Registration Statement (if any), each
Registration Statement conformed, or will conform, in all respects to
the requirements of the Act and the Rules and Regulations and did not
include, or will not include, any untrue statement of a material fact
and did not omit, or will not omit, to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading and (iii) on the date of this Agreement, the Initial
Registration Statement and, if the Effective Time of the Additional
Registration Statement is prior to the execution and delivery of this
Agreement, the Additional Registration Statement each conforms, and at
the time of filing of the Prospectus pursuant to Rule 424(b) or (if no
such filing is required) at the Effective Date of the Additional
Registration Statement in which the Prospectus is included, each
Registration Statement and the Prospectus will conform, in all respects
to the requirements of the Act and the Rules and Regulations, and
neither of such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading. If the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of
this Agreement: on the Effective Date of the Initial Registration
Statement, the Initial Registration Statement and the Prospectus will
conform in all respects to the requirements of the Act and the Rules
and Regulations, neither of such documents will include any untrue
statement of a material fact or will omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and no Additional Registration Statement has
been or will be filed. The two preceding sentences do not apply to
statements in or omissions from a Registration Statement or the
Prospectus based upon written information furnished to the Company by
any Underwriter through the Representatives specifically for use
therein, it being understood and agreed that the only such information
is that described as such in Section 7(b) hereof.
(c) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Florida,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the Prospectus; and the
Company is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification.
(d) Each subsidiary of the Company has been duly incorporated and
is an existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority (corporate
and other) to own its properties and conduct its business as described
in the Prospectus; and each subsidiary of the Company is duly qualified
to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification; all of the issued
and outstanding capital stock of each subsidiary of the Company has
been duly authorized and validly issued and is fully paid and
nonassessable; and the capital stock of each subsidiary owned by the
Company, directly or through subsidiaries, is owned free from liens,
encumbrances and defects.
3
<PAGE>
(e) The Offered Securities, the Securities to be issued upon
conversion of the Company's preferred stock as described in the
Prospectus (the "CONVERSION SHARES") and all other outstanding shares
of capital stock of the Company have been duly authorized; all
outstanding shares of capital stock of the Company are, the Conversion
Shares, upon issuance, will be and, when the Offered Securities have
been delivered and paid for in accordance with this Agreement on each
Closing Date (as defined below), such Offered Securities will have
been, validly issued, fully paid and nonassessable and will conform to
the description thereof contained in the Prospectus; and the
stockholders of the Company have no preemptive rights with respect to
the Securities. The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. The
descriptions of the Company's stock option, stock bonus and other stock
plans or arrangements, and the options or other rights granted and
exercised thereunder, described in the Prospectus, accurately and
fairly present the information required to be shown with respect to
such plans, arrangements, options and rights. The Company is not
subject to any obligation to repurchase or otherwise acquire or retire
any shares of its capital stock of the Company, other than as described
in the Prospectus.
(f) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person that
would give rise to a valid claim against the Company or any Underwriter
for a brokerage commission, finder's fee or other like payment in
connection with this offering.
(g) There are no contracts, agreements or understandings between
the Company and any person granting such person the right to require
the Company to file a registration statement under the Act with respect
to any securities of the Company owned or to be owned by such person,
other than as described in the Prospectus, or to require the Company to
include such securities in the securities registered pursuant to a
Registration Statement or in any securities being registered pursuant
to any other registration statement filed by the Company under the Act,
other than as described in the Prospectus.
(h) The Offered Securities have been approved for listing on the
Nasdaq Stock Market's National Market.
(i) No consent, approval, authorization, or order of, or filing
with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement in
connection with the issuance and sale of the Offered Securities by the
Company, except such as have been obtained and made under the Act and
such as may be required under state securities laws.
(j) The execution, delivery and performance of this Agreement, and
the issuance and sale of the Offered Securities will not result in a
breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, any rule, regulation or order
of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company or any subsidiary of the Company
or any of their properties, or any agreement or instrument to which the
Company or any such subsidiary is a party or by which the Company or
any such subsidiary is bound or to which any of the properties of the
Company or any such subsidiary is subject, or the charter or by-laws of
the Company or any such subsidiary, and the Company has full power and
authority to authorize, issue and sell the Offered Securities as
contemplated by this Agreement.
(k) This Agreement has been duly authorized, executed and
delivered by the Company.
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(l) Except as disclosed in the Prospectus, the Company and its
subsidiaries have good and marketable title to all real properties and
all other properties and assets owned by them, in each case free from
liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or to be made thereof
by them; and except as disclosed in the Prospectus, the Company and its
subsidiaries hold any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere
with the use made or to be made thereof by them.
(m) The Company and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate governmental
agencies or bodies necessary to conduct the business now operated by
them and have not received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries
taken as a whole ("MATERIAL ADVERSE EFFECT").
(n) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
might have a Material Adverse Effect.
(o) The Company and its subsidiaries own, possess or can acquire
on reasonable terms, adequate trademarks, trade names, service marks
and other rights to inventions, know-how, patents, copyrights,
confidential information and other intellectual property (collectively,
"INTELLECTUAL PROPERTY RIGHTS") necessary to conduct the business now
operated by them, or presently employed by them, and have not received
any notice of infringement of or conflict with asserted rights of
others with respect to any intellectual property rights that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect. Each
current and former employee, officer, consultant and other person or
party engaged by the Company has executed a confidentiality and
proprietary rights protection agreement pursuant to which all
inventions and improvements necessary for the conduct of the Company's
business have been assigned to the Company and each such person has
agreed to the protection of the trade secrets and confidential
information of the Company and of third parties which have been
developed by such person for or on behalf of the Company. No current
employee or officer has excluded works or inventions made prior to his
or her employment with the Company from his or her assignment of
inventions pursuant to such employee's agreement.
(p) The computer systems and software owned or developed by
the Company, and to the best of the Company's knowledge, the computer
systems and software licensed from third parties, are able to
accurately process date data, including but not limited to,
calculating, comparing and sequencing from, into and between the
twentieth century (through year 1999), the year 2000 and the
twenty-first century, including leap year calculations, except to the
extent that any failure to do so will not have a Material Adverse
Effect.
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(q) Except as disclosed in the Prospectus, neither the Company nor
any of its subsidiaries is in violation of any statute, any rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic
substances (collectively, "ENVIRONMENTAL LAWS"), owns or operates any
real property contaminated with any substance that is subject to any
environmental laws, is liable for any off-site disposal or
contamination pursuant to any environmental laws, or is subject to any
claim relating to any environmental laws, which violation,
contamination, liability or claim would individually or in the
aggregate have a Material Adverse Effect; and the Company is not aware
of any pending investigation which might lead to such a claim.
(r) Except as disclosed in the Prospectus, there are no pending
actions, suits or proceedings against or affecting the Company, any of
its subsidiaries or any of their respective properties that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect, or
would materially and adversely affect the ability of the Company to
perform its obligations under this Agreement, or which are otherwise
material in the context of the sale of the Offered Securities; and no
such actions, suits or proceedings are threatened or, to the Company's
knowledge, contemplated.
(s) The financial statements included in each Registration
Statement and the Prospectus present fairly the financial position of
the Company and its consolidated subsidiaries as of the dates shown and
their results of operations and cash flows for the periods shown, and
such financial statements have been prepared in conformity with the
generally accepted accounting principles in the United States applied
on a consistent basis and the schedules included in each Registration
Statement present fairly the information required to be stated therein;
and the assumptions used in preparing the pro forma financial
statements included in each Registration Statement and the Prospectus
provide a reasonable basis for presenting the significant effects
directly attributable to the transactions or events described therein,
the related pro forma adjustments give appropriate effect to those
assumptions, and the pro forma columns therein reflect the proper
application of those adjustments to the corresponding historical
financial statement amounts. PriceWaterhouseCoopers, who has certified
the financial statements filed with the Commission as part of the
Registration Statement, are independent public accountants as required
by the Act and the Rules and Regulations.
(t) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (a) transactions are
executed in accordance with management's general or specific
authorization; (b) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (c) access to assets is permitted only in accordance with
management's general or specific authorization; and (d) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(u) Except as disclosed in the Prospectus, since the date of the
latest audited financial statements included in the Prospectus there
has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of
the Company and its subsidiaries taken as a whole, and, except as
disclosed in or contemplated by the Prospectus, there has been no
dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.
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(v) The Company carries, or is covered by, insurance from
responsible and reputable insurance companies or associations in such
amounts and covering such risks as is adequate for the conduct of its
businesses and the value of its respective properties and as is
customary for companies of similar size engaged in similar businesses
and owning similar properties in the same general areas in which the
Company operates.
(w) Except as described in the Prospectus, no officer, director or
shareholder of the Company or any "Affiliate" or "Associate" (as these
terms are defined in Rule 405 under the Act) of any of the foregoing
persons or entities has or has had, either directly or indirectly (a)
an interest in any person or entity that (i) furnishes or sells
services or products which are furnished or sold or that are proposed
to be furnished or sold by the Company, or (ii) purchases from or sells
or furnishes to the Company any goods or services, or (b) a beneficial
interest in any contract or agreement to which the Company is a party
or by which it may be bound or affected. Except as set forth in the
Prospectus under the captions "Certain Transactions" and "Management",
there are no existing or proposed agreements, arrangements,
understandings or transactions between or among the Company and any
officer, director, or principal shareholder of the Company or any
partner, affiliate or associate of any of the foregoing persons or
entities.
(x) The Company is not and, after giving effect to the offering
and sale of the Offered Securities and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as defined in the Investment Company Act of 1940.
(y) Except as described in the Prospectus, there are no
agreements, claims, payment, arrangements or understandings, whether
oral or written, for services in the nature of finder's, consulting or
origination fees with respect to the sale of the Offered Securities or
any other arrangements, agreements, understandings or payments with
respect to the Company or any of its officers, directors, shareholders,
partners, employees, or affiliates that may affect the Underwriters'
compensation as determined by the National Association of Securities
Dealers, Inc. (the "NASD").
(z) The Company is not in violation of its charter or by-laws.
The Company is not in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any bond,
debenture, note or other evidence of indebtedness, or in any lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which the Company is a
party or by which it or its properties may be bound, which defaults
would individually or in the aggregate have a Material Adverse Effect;
and the Company is not in violation of any law, order, rule,
regulation, writ, injunction, judgment or decree of any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or over its properties of which it has
knowledge, which violations or defaults would individually or in the
aggregate have a Material Adverse Effect.
(aa) Furthermore, the Company represents and warrants to the
Underwriters that (i) the Registration Statement, the Prospectus and
any preliminary prospectus comply, and any further amendments or
supplements thereto will comply, with any applicable laws or
regulations of foreign jurisdictions in which the Prospectus or any
preliminary prospectus, as amended or
7
<PAGE>
supplemented, if applicable, are distributed in connection with the
Directed Share Program, and that (ii) no authorization, approval,
consent, license, order, registration or qualification of or with any
government, governmental instrumentality or court, other than such as
have been obtained, is necessary under the securities law and
regulations of foreign jurisdictions in which the Directed Shares are
offered outside the United States.
(bb) The Company has not offered, or caused the Underwriters to
offer, any offered Securities to any person pursuant to the Directed
Share Program with the specific intent to unlawfully influence (i) a
customer or supplier of the Company to alter the customer's or
supplier's level or type of business with the Company or (ii) a trade
journalist or publication to write or publish favorable information
about the Company or its products.
3. PURCHASE, SALE AND DELIVERY OF OFFERED SECURITIES. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to purchase
from the Company, at a purchase price of $[____] per share, the respective
numbers of shares of Firm Securities set forth opposite the names of the
Underwriters in Schedule A hereto.
The Company will deliver the Firm Securities to the Representatives for
the accounts of the Underwriters, against payment of the purchase price in
Federal (same day) funds by official bank check or checks or wire transfer to an
account at a bank acceptable to Credit Suisse First Boston Corporation ("CSFBC")
drawn to the order of the Company at the office of Piper Marbury Rudnick & Wolfe
LLP, 1200 Nineteenth Street, N.W., Washington, D.C. 20036, at 10:00 A.M., New
York time, on [______________], 2000, or at such other time not later than seven
full business days thereafter as CSFBC and the Company determine, such time
being herein referred to as the "FIRST CLOSING DATE". For purposes of Rule
15c6-1 under the Securities Exchange Act of 1934, the First Closing Date (if
later than the otherwise applicable settlement date) shall be the settlement
date for payment of funds and delivery of securities for all the Offered
Securities sold pursuant to the offering. The certificates for the Firm
Securities so to be delivered will be in definitive form, in such denominations
and registered in such names as CSFBC requests and will be made available for
checking and packaging at the above office of Piper Marbury Rudnick & Wolfe LLP
at least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company from
time to time not more than 30 days subsequent to the date of the Prospectus, the
Underwriters may purchase all or less than all of the Optional Securities at the
purchase price per Security to be paid for the Firm Securities. The Company
agrees to sell to the Underwriters the number of shares of Optional Securities
specified in such notice and the Underwriters agree, severally and not jointly,
to purchase such Optional Securities. Such Optional Securities shall be
purchased for the account of each Underwriter in the same proportion as the
number of shares of Firm Securities set forth opposite such Underwriter's name
bears to the total number of shares of Firm Securities (subject to adjustment by
CSFBC to eliminate fractions) and may be purchased by the Underwriters only for
the purpose of covering over-allotments made in connection with the sale of the
Firm Securities. No Optional Securities shall be sold or delivered unless the
Firm Securities previously have been, or simultaneously are, sold and delivered.
The right to purchase the Optional Securities or any portion thereof may be
exercised from time to time and to the extent not previously exercised may be
surrendered and terminated at any time upon notice by CSFBC to the Company.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "OPTIONAL CLOSING DATE", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "CLOSING DATE"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. The Company will deliver the
Optional Securities being purchased on each
8
<PAGE>
Optional Closing Date to the Representatives for the accounts of the several
Underwriters, against payment of the purchase price therefor in Federal (same
day) funds by official bank check or checks or wire transfer to an account at a
bank acceptable to CSFBC drawn to the order of the Company, at the office of
Piper Marbury Rudnick & Wolfe LLP, 1200 Nineteenth Street, N.W., Washington,
D.C. 20036. The certificates for the Optional Securities being purchased on each
Optional Closing Date will be in definitive form, in such denominations and
registered in such names as CSFBC requests upon reasonable notice prior to such
Optional Closing Date and will be made available for checking and packaging at
the above office of Piper Marbury Rudnick & Wolfe LLP, at a reasonable time in
advance of such Optional Closing Date.
4. OFFERING BY UNDERWRITERS. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. CERTAIN AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters that:
(a) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, the Company will
file the Prospectus with the Commission pursuant to and in accordance
with subparagraph (1) (or, if applicable and if consented to by CSFBC,
subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the
second business day following the execution and delivery of this
Agreement or (B) the fifteenth business day after the Effective Date of
the Initial Registration Statement.
The Company will advise CSFBC promptly of any such filing pursuant to
Rule 424(b). If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement and
an additional registration statement is necessary to register a portion
of the Offered Securities under the Act but the Effective Time thereof
has not occurred as of such execution and delivery, the Company will
file the additional registration statement or, if filed, will file a
post-effective amendment thereto with the Commission pursuant to and in
accordance with Rule 462(b) on or prior to 10:00 P.M., New York time,
on the date of this Agreement or, if earlier, on or prior to the time
the Prospectus is printed and distributed to any Underwriter, or will
make such filing at such later date as shall have been consented to by
CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration
statement as filed or the related prospectus or the Initial
Registration Statement, the Additional Registration Statement (if any)
or the Prospectus and will not effect such amendment or supplementation
without CSFBC's consent; and the Company will also advise CSFBC
promptly of the effectiveness of each Registration Statement (if its
Effective Time is subsequent to the execution and delivery of this
Agreement) and of any amendment or supplementation of a Registration
Statement or the Prospectus and of the institution by the Commission of
any stop order proceedings in respect of a Registration Statement and
will use its best efforts to prevent the issuance of any such stop
order and to obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act,
the Company will promptly notify CSFBC of such event and will promptly
prepare and file with the Commission, at its own expense, an amendment
or supplement which will correct such statement or omission or
9
<PAGE>
an amendment which will effect such compliance. Neither CSFBC's consent
to, nor the Underwriters' delivery of, any such amendment or supplement
shall constitute a waiver of any of the conditions set forth in Section
6.
(d) As soon as practicable, but not later than the Availability
Date (as defined below), the Company will make generally available to
its securityholders an earnings statement covering a period of at least
12 months beginning after the Effective Date of the Initial
Registration Statement (or, if later, the Effective Date of the
Additional Registration Statement) which will satisfy the provisions of
Section 11(a) of the Act. For the purpose of the preceding sentence,
"AVAILABILITY DATE" means the 45th day after the end of the fourth
fiscal quarter following the fiscal quarter that includes such
Effective Date, except that, if such fourth fiscal quarter is the last
quarter of the Company's fiscal year, "AVAILABILITY DATE" means the
90th day after the end of such fourth fiscal quarter.
(e) The Company will furnish to the Representatives copies of
each Registration Statement (four of which will be signed and will
include all exhibits), each related preliminary prospectus, and, so
long as a prospectus relating to the Offered Securities is required to
be delivered under the Act in connection with sales by any Underwriter
or dealer, the Prospectus and all amendments and supplements to such
documents, in each case in such quantities as CSFBC requests. The
Prospectus shall be so furnished on or prior to 3:00 P.M., New York
time, on the business day following the later of the execution and
delivery of this Agreement or the Effective Time of the Initial
Registration Statement. All other documents shall be so furnished as
soon as available. The Company will pay the expenses of printing and
distributing to the Underwriters all such documents.
(f) The Company will arrange for the qualification of the Offered
Securities for sale under the laws of such jurisdictions as CSFBC
designates and will continue such qualifications in effect so long as
required for the distribution.
(g) During the period of five years hereafter, the Company will
furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal year,
a copy of its annual report to stockholders for such year; and the
Company will furnish to the Representatives (i) as soon as available, a
copy of each report and any definitive proxy statement of the Company
filed with the Commission under the Securities Exchange Act of 1934 or
mailed to stockholders, and (ii) from time to time, such other
information concerning the Company as CSFBC may reasonably request.
(h) The Company will pay all expenses incident to the performance
of its obligations under this Agreement, for any filing fees and other
expenses (including fees and disbursements of counsel) incurred in
connection with qualification of the Offered Securities for sale under
the laws of such jurisdictions as CSFBC designates and the printing of
memoranda relating thereto, for the filing fee incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in
connection with, the review by the National Association of Securities
Dealers, Inc. of the Offered Securities, for any travel expenses of the
Company's officers and employees and any other expenses of the Company
in connection with attending or hosting meetings with prospective
purchasers of the Offered Securities and for expenses incurred in
distributing preliminary prospectuses and the Prospectus (including any
amendments and supplements thereto) to the Underwriters.
(i) For a period of 180 days after the date of the initial public
offering of the Offered Securities, the Company will not offer, sell,
contract to sell, pledge or otherwise dispose of,
10
<PAGE>
directly or indirectly, or file with the Commission a registration
statement under the Act relating to, any additional shares of its
Securities or securities convertible into or exchangeable or
exercisable for any shares of its Securities, or publicly disclose the
intention to make any such offer, sale, pledge, disposition or filing,
without the prior written consent of CSFBC, except issuances of
Securities pursuant to the conversion or exchange of convertible or
exchangeable securities or the exercise of warrants or options, in each
case outstanding on the date hereof, grants of employee stock or stock
options pursuant to the terms of any plan or plans in effect on the
date hereof or issuances of Securities pursuant to the exercise of such
options.
(j) In connection with the Directed Share Program, the Company
will ensure that the Directed Shares will be restricted to the extent
required by the NASD or the NASD rules from sale, transfer, assignment,
pledge or hypothecation for a period of three months following the date
of the effectiveness of the Registration Statement. The Designated
Underwriter will notify the Company as to which Participants, if any,
will need to be so restricted. The Company will direct the transfer
agent to place stop transfer restrictions upon such securities for such
period of time.
(k) The Company will pay all fees and disbursements of counsel
incurred by the Underwriters in connection with the Directed Shares
Program and stamp duties, similar taxes or duties or other taxes, if
any, incurred by the Underwriters in connection with the Directed Share
Program.
(l) If at any time during the 25-day period after a Registration
Statement becomes effective or during the period prior to any Closing
Date, any rumor, publication or event relating to or affecting the
Company shall occur as a result of which in the Representatives'
reasonable judgment the market price of the Securities has been or is
likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after notice from the Representatives
advising the Company to the effect set forth above, forthwith prepare,
consult with the Representatives concerning the substance of, and
disseminate a press release or other public statement reasonably
satisfactory to the Representatives, responding to or commenting on
such rumor, publication or event.
Furthermore, the Company covenants with the Underwriters that the
Company will comply with all applicable securities and other applicable
laws, rules and regulations in each foreign jurisdiction in which the
Directed Shares are offered in connection with the Directed Share
Program.
6. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The obligations
of the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company herein, to the accuracy of the statements
of Company officers made pursuant to the provisions hereof, to the performance
by the Company of its obligations hereunder and to the following additional
conditions precedent:
(a) The Representatives shall have received a letter, dated the
date of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, shall be on or prior to the date of this Agreement or, if
the Effective Time of the Initial Registration Statement is subsequent
to the execution and delivery of this Agreement, shall be prior to the
filing of the amendment or post-effective amendment to the registration
statement to be filed shortly prior to such Effective Time), of
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PriceWaterhouseCoopers confirming that they are independent public
accountants within the meaning of the Act and the applicable published
Rules and Regulations thereunder and stating to the effect that:
(i) in their opinion the financial statements and schedules
examined by them and included in the Registration Statements
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published
Rules and Regulations;
(ii) on the basis of a reading of the latest available interim
financial statements of the Company, inquiries of officials of
the Company who have responsibility for financial and
accounting matters and other specified procedures, nothing
came to their attention that caused them to believe that:
(A) at the date of the latest available
balance sheet read by such accountants, or at a
subsequent specified date not more than three
business days prior to the date of such letter, there
was any change in the capital stock or any increase
in short-term indebtedness or long-term debt of the
Company and its consolidated subsidiaries or, at the
date of the latest available balance sheet read by
such accountants, there was any decrease in
consolidated net current assets or net assets, as
compared with amounts shown on the latest balance
sheet included in the Prospectus; or
(B) for the period from the closing date of
the latest income statement included in the
Prospectus to the closing date of the latest
available income statement read by such accountants
there were any decreases, as compared with the
corresponding period of the previous year, in
consolidated net sales, net operating income or in
the total or per share amounts of consolidated income
before extraordinary items or net income,
except in all cases set forth in clauses (A) and (B) above for
changes, increases or decreases which the Prospectus discloses
have occurred or may occur or which are described in such
letter;
(iii) on the basis of reading the unaudited pro forma
condensed consolidated balance sheet and the unaudited pro
forma condensed consolidated income statement included in the
Prospectus, inquiries of officials of the Company who have
responsibility for financial and accounting matters and other
specified procedures, nothing came to their attention that
caused them to believe that the unaudited pro forma condensed
consolidated financial statements included in the Prospectus
do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
published Rules and Regulations and the pro forma adjustments
have not been properly applied to the historical amounts in
the compilation of those statements;
(iv) they have compared "Selected Financial Data" and
executive compensation information in the Prospectus with the
requirements of the Act and the related published Rules and
Regulations and inquired of officials of the Company who have
responsibility for financial and accounting matters whether
the information conforms in all material respects with the
disclosure requirements of the Act and the related published
Rules and Regulations and based on the above procedures,
nothing came to their attention that caused them to believe
that the information does not comply as to form in all
material
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<PAGE>
respects with the disclosure requirements of the Act and the
related published Rules and Regulations;
(v) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the Registration Statements
(in each case to the extent that such dollar amounts,
percentages and other financial information are derived from
the general accounting records of the Company and its
subsidiaries subject to the internal controls of the Company's
accounting system or are derived directly from such records by
analysis or computation) with the results obtained from
inquiries, a reading of such general accounting records and
other procedures specified in such letter and have found such
dollar amounts, percentages and other financial information to
be in agreement with such results, except as otherwise
specified in such letter.
For purposes of this subsection and subsection (b), (i) if the
Effective Time of the Initial Registration Statement is subsequent to
the execution and delivery of this Agreement, "REGISTRATION STATEMENTS"
shall mean the initial registration statement as proposed to be amended
by the amendment or post-effective amendment to be filed shortly prior
to its Effective Time, (ii) if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement but the Effective Time of the Additional Registration is
subsequent to such execution and delivery, "REGISTRATION STATEMENTS"
shall mean the Initial Registration Statement and the additional
registration statement as proposed to be filed or as proposed to be
amended by the post-effective amendment to be filed shortly prior to
its Effective Time, and (iii) "PROSPECTUS" shall mean the prospectus
included in the Registration Statements.
(b) The Representatives shall have received letters, dated the
date of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, shall be on or prior to the date of this Agreement or, if
the Effective Time of the Initial Registration Statement is subsequent
to the execution and delivery of this Agreement, shall be prior to the
filing of the amendment or post-effective amendment to the registration
statement to be filed shortly prior to such Effective Time), of
PriceWaterhouseCoopers confirming that they are independent public
accountants within the meaning of the Act and the applicable published
Rules and Regulations thereunder and stating with respect to Proveedora
de Servicios para Red Bogota.com Ltda. and Planificacion y Estrategia
en Internet, S.L. and Illimited, S.L. to the effect of subsections
(a)(i) and (a)(v).
(c) If the Effective Time of the Initial Registration
Statement is not prior to the execution and delivery of this Agreement,
such Effective Time shall have occurred not later than 10:00 P.M., New
York time, on the date of this Agreement or such later date as shall
have been consented to by CSFBC. If the Effective Time of the
Additional Registration Statement (if any) is not prior to the
execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 P.M., New York time, on the date of
this Agreement or, if earlier, the time the Prospectus is printed and
distributed to any Underwriter, or shall have occurred at such later
date as shall have been consented to by CSFBC. If the Effective Time of
the Initial Registration Statement is prior to the execution and
delivery of this Agreement, the Prospectus shall have been filed with
the Commission in accordance with the Rules and Regulations and Section
5(a) of this Agreement. Prior to such Closing Date, no stop order
suspending the effectiveness of a Registration Statement shall have
been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Company or the Representatives,
shall be contemplated by the Commission.
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(d) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any
development or event involving a prospective change, in the condition
(financial or other), business, properties or results of operations of
the Company and its subsidiaries taken as one enterprise which, in the
judgment of a majority in interest of the Underwriters including the
Representatives, is material and adverse and makes it impractical or
inadvisable to proceed with completion of the public offering or the
sale of and payment for the Offered Securities; (ii) any material
suspension or material limitation of trading in securities generally on
the New York Stock Exchange, or any setting of minimum prices for
trading on such exchange, or any suspension of trading of any
securities of the Company on any exchange or in the over-the-counter
market; (iii) any banking moratorium declared by U.S. Federal or New
York authorities; or (iv) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of
war by Congress or any other substantial national or international
calamity or emergency if, in the judgment of a majority in interest of
the Underwriters including the Representatives, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the Offered Securities.
(e) The Representatives shall have received an opinion, dated
such Closing Date, of Testa, Hurwitz & Thibeault, LLP, counsel for the
Company, to the effect that:
(i) The Offered Securities delivered on such Closing
Date, the Conversion Shares and all other outstanding shares
of the Common Stock of the Company conform to the description
thereof contained in the Prospectus; and the stockholders of
the Company have no preemptive rights with respect to the
Securities.
(ii) There are no contracts, agreements or
understandings known to such counsel between the Company and
any person granting such person the right to require the
Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned
by such person, except as described in the Prospectus, or to
require the Company to include such securities in the
securities registered pursuant to the Registration Statement
or in any securities being registered pursuant to any other
registration statement filed by the Company under the Act,
other than as described in the Prospectus.
(iii) The Company is not and, after giving effect to
the offering and sale of the Offered Securities and the
application of the proceeds thereof as described in the
Prospectus, will not be an "investment company" as defined in
the Investment Company Act of 1940;
(iv) No consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court
is required for the consummation of the transactions
contemplated by this Agreement in connection with the issuance
or sale of the Offered Securities by the Company, except such
as have been obtained and made under the Act and such as may
be required under state securities laws;
(v) The execution, delivery and performance of this
Agreement and the issuance and sale of the Offered Securities
will not result in a breach or violation of any of the terms
and provisions of, or constitute a default under, any statute,
any rule, regulation or order of any governmental agency or
body or any court having jurisdiction over the Company or any
subsidiary of the Company or any of their properties, or any
agreement or instrument to which the Company or any such
subsidiary is a party or by
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<PAGE>
which the Company or any such subsidiary is bound or to which
any of the properties of the Company or any such subsidiary is
subject; and
(vi) The Initial Registration Statement was declared
effective under the Act as of the date and time specified in
such opinion, the Additional Registration Statement (if any)
was filed and became effective under the Act as of the date
and time (if determinable) specified in such opinion, the
Prospectus either was filed with the Commission pursuant to
the subparagraph of Rule 424(b) specified in such opinion on
the date specified therein or was included in the Initial
Registration Statement or the Additional Registration
Statement (as the case may be), and, to the best of the
knowledge of such counsel, no stop order suspending the
effectiveness of a Registration Statement or any part thereof
has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the Act, and
each Registration Statement and the Prospectus, and each
amendment or supplement thereto, as of their respective
effective or issue dates, complied as to form in all material
respects with the requirements of the Act and the Rules and
Regulations; the descriptions in the Registration Statements
and Prospectus of statutes, legal and governmental proceedings
and contracts and other documents are accurate and fairly
present the information required to be shown; and such counsel
do not know of any legal or governmental proceedings required
to be described in a Registration Statement or the Prospectus
which are not described as required or of any contracts or
documents of a character required to be described in a
Registration Statement or the Prospectus or to be filed as
exhibits to a Registration Statement which are not described
and filed as required.
Such counsel have no reason to believe that any
part of a Registration Statement or any amendment thereto, as
of its effective date or as of such Closing Date, contained
any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary
to make the statements therein not misleading or that the
Prospectus or any amendment or supplement thereto, as of its
issue date or as of such Closing Date, contained any untrue
statement of a material fact or omitted to state any material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; it being understood that such counsel need express
no opinion as to the financial statements or other financial
data contained in the Registration Statements or the
Prospectus.
(f) The Representatives shall have received an opinion, dated
such Closing Date, of Steel Hector & Davis LLP, Florida counsel for the
Company, to the effect that:
(i) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the
State of Florida, with corporate power and authority to own
its properties and conduct its business as described in the
Prospectus; and the Company is duly qualified to do business
as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or
the conduct of its business requires such qualification;
(ii) The Offered Securities delivered on such Closing
Date, the Conversion Shares and all other outstanding shares
of the Common Stock of the Company have been duly authorized
and validly issued, are fully paid and nonassessable and
conform to the description thereof contained in the
Prospectus; and the stockholders of the Company have no
preemptive rights with respect to the Securities;
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<PAGE>
(iii) No consent, approval, authorization or order
of, or filing with, any governmental agency or body or any
court is required for the consummation of the transactions
contemplated by this Agreement in connection with the issuance
or sale of the Offered Securities by the Company, except such
as have been obtained and made under the Act and such as may
be required under state securities laws;
(iv) The execution, delivery and performance of this
Agreement and the issuance and sale of the Offered Securities
will not result in a breach or violation of any of the terms
and provisions of, or constitute a default under, any Florida
statute, any rule, regulation or order of any governmental
agency or body or any court having jurisdiction over the
Company or any subsidiary of the Company or any of their
properties, or the charter or by-laws of the Company or any
such subsidiary, and the Company has full power and authority
to authorize, issue and sell the Offered Securities as
contemplated by this Agreement;
(v) This Agreement has been duly authorized, executed
and delivered by the Company;
(vi) The Company does not have outstanding any stock
or other securities convertible or exchangeable for any shares
of its capital stock, nor does it have outstanding any rights,
agreements or options to subscribe for, receive or to purchase
its capital stock or any stock or securities convertible into
or exchangeable for its capital stock, in each case other than
as described in the Prospectus; and
(vii) The descriptions in the Registration Statements
and Prospectus of Florida statutes, legal and governmental
proceedings and the charter and by-laws of the Company are
accurate and fairly present the information required to be
shown; and such counsel do not know of any Florida legal or
governmental proceedings required to be described in a
Registration Statement or the Prospectus which are not
described as required or of any contracts or documents of a
character required to be described in a Registration Statement
or the Prospectus or to be filed as exhibits to a Registration
Statement which are not described and filed as required;
(g) The Representatives shall have received from Piper Marbury
Rudnick & Wolfe LLP, counsel for the Underwriters, such opinion or
opinions, dated such Closing Date, with respect to the incorporation of
the Company, the validity of the Offered Securities delivered on such
Closing Date, the Registration Statements, the Prospectus and other
related matters as the Representatives may require, and the Company
shall have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters. In rendering
such opinion,
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Piper Marbury Rudnick & Wolfe LLP may rely as to the incorporation of
the Company and all other matters governed by Florida law upon the
opinion of Steel Hector & Davis LLP referred to above.
(h) The Representatives shall have received a certificate,
dated such Closing Date, of the President or any Vice President and a
principal financial or accounting officer of the Company in which such
officers, to the best of their knowledge after reasonable
investigation, shall state that: the representations and warranties of
the Company in this Agreement are true and correct; the Company has
complied with all agreements and satisfied all conditions on its part
to be performed or satisfied hereunder at or prior to such Closing
Date; no stop order suspending the effectiveness of any Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are contemplated by the Commission; the Additional
Registration Statement (if any) satisfying the requirements of
subparagraphs (1) and (3) of Rule 462(b) was filed pursuant to Rule
462(b), including payment of the applicable filing fee in accordance
with Rule 111(a) or (b) under the Act, prior to the time the Prospectus
was printed and distributed to any Underwriter; and, subsequent to the
date of the most recent financial statements in the Prospectus, there
has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of
the Company and its subsidiaries taken as a whole except as set forth
in or contemplated by the Prospectus or as described in such
certificate.
(i) The Representatives shall have received a letter, dated
such Closing Date, of PriceWaterhouseCoopers which meets the
requirements of subsections (a) and (b)(ii) of this Section, except
that the specified date referred to in such subsection will be a date
not more than three days prior to such Closing Date for the purposes of
this subsection.
(j) The "lock-up" agreements between you and certain
stockholders, directors and officers of the Company relating to sales
and certain dispositions of shares of Common Stock or any securities
convertible into or exerciseable or exchangeable for such Common Stock,
delivered to you before the date hereof, shall be in full force and
effect on such Closing Date.
(k) The Offered Securities shall have been approved for
listing on the Nasdaq Stock Market's National Market.
The Company will furnish the Representatives with such conformed copies of such
opinions, certificates, letters and documents as the Representatives reasonably
request. CSFBC may in its sole discretion waive on behalf of the Underwriters
compliance with any conditions to the obligations of the Underwriters hereunder,
whether in respect of an Optional Closing Date or otherwise.
7. INDEMNIFICATION AND CONTRIBUTION. (a) The Company will indemnify and
hold harmless each Underwriter, its partners, directors and officers and each
person, if any, who controls such Underwriter within the meaning of Section 15
of the Act, against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement,
the Prospectus, or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
each Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss,
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claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with written information furnished
to the Company by any Underwriter through the Representatives specifically for
use therein, it being understood and agreed that the only such information
furnished by any Underwriter consists of the information described as such in
subsection (b) below.
The Company agrees to indemnify and hold harmless the Designated
Underwriter and each person, if any, who controls the Designated Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act (the "DESIGNATED ENTITIES"), from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) (i) caused by any untrue statement or
alleged untrue statement of a material fact contained in any material prepared
by or with the consent of the Company for distribution to Participants in
connection with the Directed Share Program or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) caused by the
failure of any Participant to pay for and accept delivery of Directed Shares
that the Participant agreed to purchase; or (iii) related to, arising out of, or
in connection with the Directed Share Program, other than losses, claims,
damages or liabilities (or expenses relating thereto) that are finally
judicially determined to have resulted from the bad faith or gross negligence of
the Designated Entities.
(b) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company, its directors and officers and each person, if any who
controls the Company within the meaning of Section 15 of the Act, against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by such Underwriter through the Representatives specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred, it being understood
and agreed that the only such information furnished by any Underwriter consists
of the following information in the Prospectus furnished on behalf of each
Underwriter: the concession and reallowance figures appearing in the [____]
paragraph under the caption "Underwriting".
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of
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<PAGE>
investigation. Notwithstanding anything contained herein to the contrary, if
indemnity may be sought pursuant to the last paragraph in Section 7 (a) hereof
in respect of such action or proceeding, then in addition to such separate firm
for the indemnified parties, the indemnifying party shall be liable for the
reasonable fees and expenses of not more than one separate firm (in addition to
any local counsel) for the Designated Underwriter for the defense of any losses,
claims, damages and liabilities arising out of the Directed Share Program, and
all persons, if any, who control the Designated Underwriter within the meaning
of either Section 15 of the Act of Section 20 of the Exchange Act. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened action in respect of
which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party unless such settlement (i)
includes an unconditional release of such indemnified party from all liability
on any claims that are the subject matter of such action and (ii) does not
include a statement as to, or an admission of, fault, culpability or a failure
to act by or on behalf of an indemnified party.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Underwriters.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company under this Section shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Company, to each officer of the Company
who has signed a Registration Statement and to each person, if any, who controls
the Company within the meaning of the Act.
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8. DEFAULT OF UNDERWRITERS. If any Underwriter or Underwriters default
in their obligations to purchase Offered Securities hereunder on either the
First or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company for the purchase of such Offered
Securities by other persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Offered Securities that such defaulting Underwriters
agreed but failed to purchase on such Closing Date. If any Underwriter or
Underwriters so default and the aggregate number of shares of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
number of shares of Offered Securities that the Underwriters are obligated to
purchase on such Closing Date and arrangements satisfactory to CSFBC and the
Company for the purchase of such Offered Securities by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company, except
as provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
9. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Underwriter, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If this Agreement is terminated pursuant
to Section 8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the respective
obligations of the Company and the Underwriters pursuant to Section 7 shall
remain in effect, and if any Offered Securities have been purchased hereunder
the representations and warranties in Section 2 and all obligations under
Section 5 shall also remain in effect. If the purchase of the Offered Securities
by the Underwriters is not consummated for any reason other than solely because
of the termination of this Agreement pursuant to Section 8 or the occurrence of
any event specified in clause (iii), (iv) or (v) of Section 6(c), the Company
will reimburse the Underwriters for all out-of-pocket expenses (including fees
and disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.
10. NOTICES. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representatives, c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department--Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at 830 Lincoln Road, Second
Floor, Miami Beach, Florida 33139, Attention: Oscar L. Coen; provided, however,
that any notice to an Underwriter pursuant to Section 7 will be mailed,
delivered or telegraphed and confirmed to such Underwriter.
11. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder.
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12. REPRESENTATION OF UNDERWRITERS. The Representatives will act for
the several Underwriters in connection with this financing, and any action under
this Agreement taken by the Representatives will be binding upon all the
Underwriters.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
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If the foregoing is in accordance with the Representatives'
understanding of our agreement, kindly sign and return to the Company one of the
counterparts hereof, whereupon it will become a binding agreement between the
Company and the several Underwriters in accordance with its terms.
Very truly yours,
YUPI INTERNET INC.
By..................................................
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
BANC OF AMERICA SECURITIES LLC
SG COWEN SECURITIES CORPORATION
Acting on behalf of themselves and as the
Representatives of the several
Underwriters
By CREDIT SUISSE FIRST BOSTON CORPORATION
By......................................
Name:
Title:
22
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SCHEDULE A
UNDERWRITER NUMBER OF
FIRM SECURITIES
Credit Suisse First Boston Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
Banc of America Securities LLC
SG Cowen Securities Corporation
_____________
Total........................................... =============
23
EXHIBIT 3.03
BYLAWS
OF
YUPI INTERNET, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The initial registered office of Yupi Internet,
Inc., a Florida corporation (the "Corporation"), shall be located in the State
of Florida.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at such other
places, either within or without the State of Florida, as the Board of Directors
of the Corporation (the "Board of Directors") may from time to time determine or
as the business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETINGS. All annual meetings of the shareholders of the
Corporation for the election of directors and for such other business as may
properly come before the meeting shall be held (i) on the fourth Friday of each
calendar year at 10:00 a.m., Eastern time, or on such other date or at such
other time as may be fixed, from time to time, by the Board of Directors, and
(ii) at such place, within or without the State of Florida, as may be designated
by the Board of Directors and stated in the notice of meeting or in a duly
executed waiver of notice thereof.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be called
by the Board of Directors, the President or the holders of not less than 10% of
the Corporation's stock entitled to vote on any issue proposed to be considered
at such meeting. Special meetings of shareholders may be held at such time and
date, and at such place, or without the State of Florida as shall be designated
by the Board of Directors and set forth in the notice of meeting required
pursuant to Section 3 of this Article. A meeting properly requested by
shareholders shall be called for a date not less than 10 nor more than 60 days
after the request is properly made. The call for the meeting shall be issued by
the secretary, unless the Board of Directors, the President or the shareholders
requesting the calling of the meeting, designate another person to do so. Only
business within the purpose or purposes described in the notice required
pursuant to section 3 of this Article may be conducted at a special meeting of
shareholders.
SECTION 3. NOTICE. A written notice of each meeting of shareholders shall be
given to each shareholder entitled to vote at the meeting at the address as it
appears on the stock transfer records of the Corporation, not less than ten (10)
nor more than sixty (60) days before the date of the meeting, by or at the
direction of the President, the Secretary or the officer or persons calling the
meeting, it may be done by a class of United states mail other than first class.
The notice so given shall state the date, time and place of the meeting and, in
the case of a special shareholders' meeting, the purpose or purposes for which
the meeting is called. If mailed, notice shall be deemed to be delivered when
deposited in the United States mail addressed to the shareholder at his address
as it appears on the stock transfer books of the Corporation, with postage
thereon prepaid. If a shareholders' meeting is adjourned to a different date,
time or place, notice need not be given of the new date, time or place if the
new date, time or place is announced at the meeting before an adjournment is
taken.
<PAGE>
SECTION 4. WAIVER OF NOTICE. Shareholders may waive notice of any meeting before
or after the date and time specified in the written notice of meeting. Any such
waiver of notice must be in writing, be signed by the shareholder entitled to
the notice and be delivered to the Corporation for inclusion in the appropriate
corporate records. Neither the business to be transacted at, nor the purposes of
any shareholders' meeting need be specified in any written waiver of notice.
Attendance of a person at a shareholders' meeting shall constitute a waiver of
notice of such meeting, unless the shareholder at the beginning of the meeting
objects to holding the meeting or transacting business at the meeting.
SECTION 5. RECORD DATE. For the purpose of determining shareholders entitled to
notice of or to vote at a shareholders' meeting to demand a special meeting, to
act by written consent or to take any other action, the Board of Directors may
fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy (70) days nor,
in the case of a shareholders' meeting, less than ten (10) days, prior to the
date on which the particular action requiring such determination of shareholders
is to be taken. If no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a shareholders' meeting, then the record
date for such meeting shall be the close of business on the day before the first
notice is delivered to shareholders. A determination of shareholders entitled to
notice of or to vote at a shareholders' meeting is effective for any adjournment
of the meeting unless the Board of Directors fixes a new record date for the
adjourned meeting, which it must do if the meeting is adjourned to a date more
than 120 days after the date fixed for the meeting-
SECTION 6. QUORUM. A majority of the shares entitled to vote on a matter,
represented in person or by proxy, shall constitute a quorum for action on that
matter at a meeting of shareholders. If a quorum is not present or represented
at a meeting of shareholders, the holders of a majority of the shares
represented, and who would be entitled to vote at a meeting if a quorum were
present, may adjourn the meeting from time to time. Once a quorum has been
established at a shareholders' meeting, the subsequent withdrawal of
shareholders, so as to reduce the number of shares entitled to vote at the
meeting below the number required for a quorum shall not affect the validity of
any action taken at the meeting or any adjournment thereof
SECTION 7. VOTING. If a quorum is present, action on a matter, other than the
election of directors, shall be approved if the votes cast by the shareholders
represented at the meeting and entitled to vote on the subsequent matter
favoring the action exceeds the votes cast opposing the action, unless a greater
number of affirmative votes or voting by classes is required by Florida law or
by the Articles of Incorporation and unless such matter is reserved for decision
by the Board of Directors as specified in. Directors shall be elected in
accordance with Article III, Section 3, of these Bylaws. Each outstanding share
shall be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders, unless otherwise provided under the articles of incorporation or
any amendment thereof or under Florida law. An alphabetical list of shareholders
entitled to notice of a shareholder's meeting shall be available for inspection
by any shareholder for a period of ten (10) days prior to the meeting or such
shorter time as exists between the record date and the meeting and continuing
through the meeting at a place as permitted by section 607.0720 of Florida law.
SECTION 8. PROXIES. A shareholder entitled to vote at any meeting of
shareholders or any adjournment thereof may vote in person or by proxy to vote
or otherwise act for him by signing an appointment form, either personally or by
his attorney-in-fact. An appointment of proxy is effective when received by the
Secretary or other officer or agent authorized to tabulate votes. If an
appointment form designates two or more persons to act as proxies, a majority of
these persons present at the meeting, or if only one is present, that one, has
all of the powers conferred by the instrument upon all the persons designated
unless the instrument provides otherwise. No appointment shall be valid for more
than 11 months after the date of its execution unless a longer period is
expressly provided in the appointment form.
<PAGE>
SECTION 9. SHAREHOLDER ACTION WITHOUT A MEETING. Any action required or
permitted to be taken at any shareholders' meeting may be taken without a
meeting, without prior notice and without a vote if the action is taken by the
holders of outstanding stock entitled to vote thereon having not less than the
minimum number of votes necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voted. In order to
be effective, the action must be evidenced by one or more written consents
describing the action to be taken, dated and signed by approving shareholders
having the requisite number of votes entitled to vote thereon, and delivered to
the Secretary or other officer or agent of the Corporation having custody of the
book in which proceedings of meetings of the Corporation are recorded. Within
ten (10) days after obtaining such authorization by writing consent, notice must
be given to those shareholders who have not consented in writing or who are not
entitled to vote on the action which notice shall comply with the provisions of
Florida law.
ARTICLE III
DIRECTORS
SECTION 1. POWERS. All corporate powers shall be exercised by or under the
authority of, and the business and affairs of the corporation shall be managed
under the direction of the Board of Directors. Directors must be natural persons
who are at least 18 years of age but need not to be residents of Florida or
shareholders of the Corporation. Except for the following, all actions and
decisions by the Board of Directors shall be made and approved with the
affirmative vote of the majority of the directors. The following actions and
decisions shall be made and taken only if approved by the affirmative vote of
the majority of the directors of the Corporation: (i) the adoption of annual
budgets of the Corporation and investment and spending plans, (ii) issuance,
sale or other disposition of Shares of the Corporation in any manner whatsoever,
(iii) amendment of articles of incorporation or bylaws of the Corporation, (iv)
sale of any major assets of the Corporation, (v) merger, consolidation or any
other type of corporate consolidation or restructuring, (vi) payment of
dividends or any other kind of distributions, (vii) fixing the salaries payable
to the employees, officers or Directors of the Corporation, (viii) the mortgage,
pledge, hypothecation or any other encumbrance or placement of any lien in any
assets of the Corporation, and (ix) incurring in any indebtedness in any manner
whatsoever.
SECTION 2. COMPENSATION. Unless specifically authorized by resolution of a
Shareholders meeting, the directors shall serve in such capacity without
compensation. The directors may be paid their expenses, if any, of attendance at
each meeting of the board of directors. No such payments shall preclude any
director from serving in any other capacity and receiving compensation therefor.
SECTION 3. NUMBER, ELECTION & TERM. The number of directors of the corporation
shall be fixed from time to time, within any limits set forth in the Articles of
Incorporation, by resolution of the board of Directors. Any decrease in the
number of directors shall not shorten the term of an incumbent director.
Directors shall be elected annually, at the annual meeting of shareholders of
the Corporation, by the votes cast by the shares entitled to vote in the
election at a meeting at which a quorum is present. The term of the initial
directors of the Corporation expire at the next shareholders' meeting at which
directors are elected and when their successors are elected directors expire at
the next annual shareholders' meeting following their election and when their
successors are elected, or upon their earlier resignation, removal from office
or death. The Chairman of the Board of Directors shall preside at all meetings
of directors and of shareholders.
SECTION 4. VACANCIES. Any vacancy occurring in the Board of Directors, including
a vacancy created by an increase in the number of directors, may be filled by
the affirmative vote of a majority of the remaining directors, until such time
as the Shareholders at an annual or special meeting called for that purpose
elect a
<PAGE>
director to fill such vacancy. A director elected to fill a vacancy shall hold
office only until the next Shareholders' meeting at which directors are elected.
If there are no remaining directors, any vacancy shall be filled by the
Shareholders.
SECTION 5. REMOVAL OF DIRECTORS. The Shareholders entitled to elect a specific
director may remove such director with or without cause. A Director may be
removed by the corresponding shareholders at a meeting of shareholders, provided
the notice of the meeting states that the purpose or one of the purposes, of the
meeting is the removal of the director.
SECTION 6. QUORUM AND VOTING. A majority of the number of directors fixed by or
in accordance with these Bylaws shall constitute a quorum for the transaction of
business at any meeting of directors. If a quorum is present when a vote is
taken, the affirmative vote of a majority of the directors present shall be the
act of the board of directors, unless a greater majority is required as
specified in Section 1.
SECTION 7. DEEMED ASSENT. A director who is present at a meeting of the Board of
Directors when corporate action is taken is deemed to have assented to the
action taken unless (i) the director objects at the beginning of the meeting (or
promptly upon his arrival) to the holding or transacting specified business at
the meeting (or promptly upon his arrival) to the holding of the meeting or
transacting specified business at the meeting, or (ii) the director votes
against or abstains from the action taken.
SECTION 8. COMMITTEES. The Board of Directors, may designate from among its
members an executive committee and one or more other committees each of which
must have at least two members and, to the extent provided in the designating
resolution, shall have and may exercise all the authority to the Board of
Directors, except such authority as may be reserved to the board of Directors
under Florida law.
SECTION 9. MEETINGS. Regular and special meetings of the Board of Directors
shall be held at the principal place of business of the Corporation or at any
other place, within or without the State of Florida designated by the person or
persons entitled to give notice of or otherwise call the meeting. Meetings of
the Board of Directors may be called by the Chairman of the Board or by the
President. A majority of the directors present, whether or not a quorum exists,
may adjourn any meeting of the Board of Directors to another time and place.
Notice of an adjourned meeting shall be given to the directors who were not
present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the directors
who were present. Members of the Board of Directors (and any committee of the
Board) may participate in a meeting of the Board (or any committee of the Board)
by means of a telephone conference or similar communications equipment through
which all persons participating may simultaneously hear each other during the
meeting; participation by these means constitutes presence in person at the
meeting.
SECTION 10. NOTICE OF MEETINGS. Regular meetings of the Board of Directors may
be held without notice of the date, time, place or purpose of the meeting, so
long as the date, time and place of such meetings are fixed generally by the
Board of Directors. Special meetings of the Board of Directors must be preceded
by at least two (2) days' written notice of the date, time and place of the
meeting. The notice need not describe either the business to be transacted at or
the purpose of the special meeting.
SECTION 11. WAIVER OF NOTICE. Notice of meeting of the Board of Directors need
not be given to a director who signs a waiver of notice either before or after
the meeting. Attendance of a director at a meeting shall constitute a waiver of
notice of that meeting and a waiver of any and all objections to the place of
the meeting, the time of the meeting and the manner in which it has been called
or convened, except when a
<PAGE>
director states, at the beginning of the meeting or promptly upon arrival at the
meeting, any objection to the transaction of business because the meeting is not
lawfully called or convened. The waiver of notice need not describe either the
business to be transacted at or the purpose of the special meeting.
SECTION 12. DIRECTOR ACTION WITHOUT A MEETING. Any action required or permitted
to be taken at a meeting of the Board of Directors (or a committee of the Board)
may be taken without a meeting if the action is taken by the written consent of
all members of the Board of Directors (or the committee of the Board). The
action must be evidenced by one or more written consents describing the action
to be taken and signed by each director (or committee member), which consent(s)
shall be filed in the minutes of the proceedings of the Board. The action taken
shall be deemed effective when the last director signs the consent, unless the
consent specifies otherwise.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The Corporation shall have a president, one or more Vice
Presidents, a Secretary and a Treasurer, each of whom shall be appointed by the
Board of Directors. Such officers and assistant officers and agents as may be
deemed necessary or desirable may be appointed by the Board of Directors from
time to time. Any two or more offices may be held by the same person.
SECTION 2. DUTIES. The officers of the Corporation shall have the following
duties:
The PRESIDENT shall be the chief operating officer of the Corporation
and shall have general and active management of the business and
affairs of the Corporation subject to the direction of the Board of
Directors. The President shall see to it that all orders and
resolutions of the Board are carried into effect. The President shall
preside at all meetings of the Board of Directors and Shareholders.
Each VICE PRESIDENT shall have such powers and perform such duties as
the Board of Directors shall from time to time designate. In the
absence or disability of the President, a Vice President specifically
designated by the vote of the Board of Directors shall have the
powers and shall exercise the duties of the president.
The SECRETARY shall have custody of and shall maintain all of the
corporate records (except the financial records), shall record the
minutes of all meetings of the shareholders and the Board of
Directors, shall authenticate records of the Corporation, shall send
notices of meetings and shall perform such other duties as are
prescribed by the Board of Directors.
The TREASURER shall have custody of all corporate funds, securities
and financial records, shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and
to the credit of the Corporation in such depositaries as may be
designated by the Board of Directors. He shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, taking
proper vouchers of such disbursements, and shall render an account of
all his transactions as Treasurer and of the financial condition of
the Corporation at regular meetings of the Board or when the Board of
Directors so requests. The Treasurer shall also perform such other
duties as are prescribed by the Board of Directors.
<PAGE>
Each ASSISTANT SECRETARY and ASSISTANT TREASURER, if any, shall be
appointed by the Board of Directors and shall have such powers and
shall perform such duties as shall be assigned by them by the Board
of Directors.
SECTION 3. RESIGNATION OF OFFICER. An officer may resign at any time by
delivering notice to the Corporation. The resignation shall be effective upon
receipt, unless the notice specifies a later effective date. If the resignation
is effective at a later date and the Corporation accepts the future effective
date, the Board of Directors may fill the pending vacancy before the effective
date provided the Board of Directors provides that the successor officer does
not take office until the future effective date.
SECTION 4. REMOVAL OF OFFICER. The Board of Directors may remove any officer at
any time with or without cause. Any officer or assistant officer, if appointed
by another officer, may be removed by the appointing officer.
SECTION 5. COMPENSATION. The compensation of officers shall be fixed form time
to time at the discretion of the Board of Directors. The Corporation may enter
into employment agreements with any officer of the Corporation.
ARTICLE V
STOCK CERTIFICATES
SECTION 1. ISSUANCE. Every holder of shares in this Corporation shall be
entitled to have certificate representing all shares to which he is entitled. No
certificate shall be issued for any share until the consideration therefor has
been fully paid.
SECTION 2. FORM. Certificates representing shares in this corporation shall be
signed by the President and the Secretary of the Corporation, or by any other
two officers designated by the Board of Directors.
SECTION 3. REGISTERED SHAREHOLDERS. The Corporation shall be entitled to treat
the holder of record of shares as the holder in fact and, except as otherwise
provided by the laws of Florida, shall not be bound to recognize any equitable
or other claim to or interest in the shares.
SECTION 4. TRANSFER OF SHARES. Shares of the Corporation shall be transferred on
its books only after the surrender to the Corporation or the transfer agent of
the share certificates duly endorsed by the holder of record or
attorney-in-fact. If the surrendered certificates are canceled, new certificates
shall be issued to the person entitled to them, and the transaction recorded on
the books of the Corporation.
SECTION 5. LOST, STOLEN OR DESTROYED CERTIFICATES. If a Shareholder claims that
one or more of his certificates of shares issued by the Corporation have been
lost, stolen or destroyed, a new certificate shall be issued upon delivery to
the Corporation of an affidavit of that fact by the person claiming the
certificate of stock to be lost, stolen or destroyed, and, at the discretion of
the Board of Directors, upon the deposit of a bond or other indemnity as the
Board reasonably requires.
ARTICLE VI
DISTRIBUTIONS
The Board of Directors may from time to time authorize and declare, and
the Corporation may pay, distributions (including but not limited to dividends
on, and redemption and other acquisitions of
<PAGE>
shares of the Corporation's stock) on its outstanding shares in cash, property,
or its own shares, provided any such distribution is in compliance with the
applicable restrictions and other provisions of Florida Law.
ARTICLE VII
CORPORATE RECORDS; SHAREHOLDER
INSPECTION RIGHTS: FINANCIAL INFORMATION
SECTION 1. CORPORATE RECORDS.
(A) The Corporation shall keep as permanent records minutes of all
meetings of its shareholders and Board of Directors, a record
of all actions taken by the Shareholders or Board of Directors
without a meeting and a record of all actions taken by a
committee of the Board of Directors in place of the Board of
Directors on behalf of the Corporation.
(B) The Corporation or its agent shall maintain accurate
accounting records and a record of its Shareholders in a form
that preparation of a list of the names and addresses of all
Shareholders in alphabetical order by class of shares showing
the number and series of shares held by each.
(C) The Corporation shall keep a copy of its articles or restated
articles of incorporation and all amendments to them currently
in effect; its Bylaws or restates Bylaws and all amendments
currently in effect; resolution adopted by the Board of
Directors creating one or more classes or series of shares and
fixing their relative rights, preferences, and limitations, if
shares issued pursuant to those resolutions are outstanding;
the minutes of all shareholders' meetings and records of all
actions taken by shareholders without a meeting for the past
three years, written communications to all shareholders
generally or all shareholders of a class of series within the
past three years, including the financial statements furnished
for the past three years, a list of names and business street
addresses of its current directors and officers; and its most
recent annual report delivered to the Department of State.
(D) The Corporation shall maintain its records in written form or
in another form capable of conversion into written form within
a reasonable time.
SECTION 2. SHAREHOLDER INSPECTION RIGHTS.
(A) A shareholder is entitled to inspect and copy, during regular
business hours at the Corporation's principal office, any of
the corporate records described in section 1 (C) of this
Article if such shareholder gives the Corporation written
notice of the demand at least five (5) business days before
the date on which he wishes to inspect and copy the records.
(B) A shareholder is entitled to inspect and copy, during regular
business hours at reasonable location specified by the
Corporation any of the following records of the Corporation if
the shareholder gives the Corporation written notice of this
demand at least (5) business days before the date on which he
wishes to inspect and copy the records, provided (a) the
demand is made in good faith and for a proper purpose; (b) the
shareholder describes with reasonable particularity the
purpose and the records he desires to inspect; and (c) the
records are directly connected with his purpose: (i) excerpts
from minutes of any meetings of the Board of Directors,
records of any action of a committee of the Board of Directors
while acting in place of the Board on behalf of the
Corporation, minutes of any meeting of shareholders, and
records of any action taken by the shareholders or Board of
Directors without a meeting; (ii) accounting records of the
Corporation; (iii) the record of shareholders; and (iv) any
other books and records of the Corporation.
<PAGE>
(C) This section does not affect the right of a shareholder to
inspect the Corporation's list of shareholders pursuant to
Article II, Section 7 of this Bylaws or, if the shareholder is
in litigation with the Corporation, to the same extent as any
other litigant or the power of a court to compel the
production of corporate records for examination.
(D) The Corporation may deny any demand for inspection made
pursuant to subsection (B) of this section 2 if the demand was
made for an improper purpose, or if the demanding shareholder
has within the two years preceding his demand, sold or offered
for sale any list of shareholders of the Corporation or of any
other Corporation, has aided or abetted any person in
procuring any list of shareholders for that purpose, or has
improperly used any information secured through any prior
examination of the records of this Corporation or any other
Corporation.
SECTION 3. FINANCIAL STATEMENTS FOR SHAREHOLDERS.
(A) Unless modified by resolution of the shareholders 120 days
after the close of each fiscal year, the Corporation shall
furnish its shareholders with annual financial statements
which may be consolidated or combined statements of the
Corporation and one or more of its subsidiaries, as
appropriate, that include a balance sheet as of the end of the
fiscal year, an income statement for that year, and a
statement of cash flows for that year. If financial statements
are prepared for the Corporation on the basis of generally
accepted accounting principles, the annual financial
Statements must also be prepared on that basis.
(B) If the annual financial statements are reported upon by public
accountant, his report must accompany them. If not, the
statements must be accompanied by a statement of the
President, the Treasurer or the person responsible for the
Corporation's accounting records stating his reasonable belief
whether the statements were prepared on the basis of generally
accepted accounting principles and, if not, describing the
basis of preparation and describing any respects in which the
statements were not prepared on a basis of accounting
consistent with the statements prepared for the preceding
year.
(C) The Corporation shall mail the annual financial statements to
each shareholder 120 days after the close of each fiscal year
or such additional time thereafter as is reasonably necessary
to enable the Corporation to prepare its financial statements
if, for reasons beyond the Corporation's control it is unable
to prepare its financial statements within the prescribed
period. Thereafter, on written request from shareholder who
was not mailed the statements, the Corporation shall mail him
later annual financial statements.
SECTION 4. OTHER REPORTS TO SHAREHOLDERS.
(A) If the Corporation indemnities or advances expenses to any
director, officer, employee or agent otherwise than by court
order or action by the shareholders or by an insurance carrier
pursuant to insurance maintained by the Corporation, the
Corporation shall report the indemnification or advance in
writing to the shareholders with or before the notice of the
next shareholders' meeting, or prior to the meeting if the
indemnification or advance occurs after the giving of the
notice but prior to the time the meeting is held. This report
shall include a statement specifying the persons paid, the
amounts paid, and the nature and status time of such payment
of the litigation or threatened litigation.
(B) If the Corporation issues or authorizes the issuance of shares
for promises to render services in the future, the Corporation
shall report in writing to the shareholders the number of
shares authorized or issued, and the consideration received by
the Corporation, with or before the notice of the next
shareholders' meeting.
<PAGE>
ARTICLE VIII
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. Each person (including here and
hereinafter, the heirs, executors, administrators, or estate of such person) who
is or was a director or officer of the Corporation, or who is or was serving at
the request of the Corporation in the position of a director, officer, trustee,
partner, agent, or employee of another corporation, partnership, joint venture,
trust or other enterprise and as to whom the Corporation has agreed to grant
such indemnity by separate resolution adopted by the Board of Directors, shall
be indemnified by the Corporation as of right to the fullest extent permitted or
authorized by current or future legislation or by current or future judicial or
administrative decision (but, in the case of any future legislation or decision,
only to the extent that it permits the Corporation to provide broader
indemnification rights than permitted prior to the legislation or decision),
against all fines, liabilities, settlements, losses, damages, costs and
expenses, including attorneys' fees, asserted against him or incurred by him in
his capacity as such director, officer, trustee, partner, agent or employee, or
arising out of his status as such director, officer, trustee, partner, agent or
employee. The foregoing right of indemnification shall not be exclusive of other
rights to which those seeking indemnification may be entitled. The Corporation
may maintain insurance, at its expense, to protect itself and any such person
against any such fine, liability, cost or expense, including attorney's fees,
whether or not the Corporation would have the legal power to directly indemnify
him against such liability.
SECTION 2. ADVANCES. Costs, charges and expenses (including attorney's fees)
incurred by a person referred to in section 1 of this Article in defending a
civil or criminal suit, action or proceeding may be paid (and, in the case of
directors of the Corporation, shall be paid) by the Corporation in advance of
the final disposition thereof upon receipt of an undertaking to repay all
amounts advanced if it is ultimately determined that the person is not entitled
to be indemnified by the Corporation as authorized by this Article, and upon
satisfaction of other conditions established from time to time by the Board of
Directors or required by current or future legislation (but, with respect to
future legislation, only to the extent that it provides conditions less
burdensome than those previously provided).
SECTION 3. SAVINGS CLAUSE. If this Article or any portion of it is invalidated
on any ground by a court of competent jurisdiction, the Corporation nevertheless
indemnifies each director of the Corporation to the fullest extent permitted by
all portions of this Article that has not been invalidated and to the fullest
extent permitted by law.
ARTICLE IX
MISCELLANEOUS
SECTION 1. CORPORATE SEAL. The corporate seal of the Corporation shall be
circular in form and shall include the name and jurisdiction of incorporation of
the Corporation.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall end on December
31 of each calendar year, unless otherwise fixed by resolution of the Board of
Directors.
SECTION 3. CHECKS. All checks, drafts or other orders for the payment of money,
notes or other evidences of indebtedness issued in the name of the Corporation
shall be signed by the president, the Treasurer or such other officer(s) or
agent(s) of the Corporation as shall be determined from time to time by
resolution of the Board of Directors.
<PAGE>
ARTICLE X
AMENDMENT
These Bylaws may be altered, amended or repealed, and new Bylaws
adopted, by the Board of Directors or by the shareholders, as more fully
described in Section 1, Article III.
The foregoing Bylaws were adopted by the Board of Directors of the
Corporation by written consent duly executed on July 20, 1998.
/S/ DAPHNA BENTATA
---------------------------
Daphna Bentata
Secretary
EXHIBIT 10.01
YUPI INTERNET, INC.
STOCK INCENTIVE PLAN
SECTION 1.
PURPOSE
The purpose of this Plan is to promote the interests of the Company by
providing the opportunity to purchase Shares or to receive compensation which is
based upon appreciation in the value of Shares to Employees and Key Persons in
order to attract and retain Employees and Key Persons by providing an incentive
to work to increase the value of Shares and a stake in the future of the Company
which corresponds to the stake of each of the Company's shareholders. The Plan
provides for the grant of Incentive Stock Options, Non-Qualified Stock Options,
Restricted Stock Awards and Stock Appreciation Rights to aid the Company in
obtaining these goals.
SECTION 2.
DEFINITIONS
Each term set forth in this Section shall have the meanings set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular, and reference to one gender shall include the other gender.
2.1 BOARD means the Board of Directors of the Company.
2.2 CODE means the Internal Revenue Code of 1986, as amended.
2.3 COMMITTEE means the Compensation Committee of the Board.
2.4 COMMON STOCK means the $.001 par value per share common stock of
the Company.
2.5 COMPANY means Yupi Internet, Inc., a Florida corporation, and any
successor to such organization.
2.6 EMPLOYEE means an employee of the Company, a Subsidiary or a
Parent.
2.7 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
2.8 EXERCISE PRICE means the price which shall be paid to purchase one
(1) Share upon the exercise of an Option granted under this Plan.
2.9 FAIR MARKET VALUE means the price at which the Committee, acting in
good faith, determines through any reasonable valuation method that a Share
might change hands between a
<PAGE>
- 2 -
willing buyer and a willing seller, neither being under any compulsion to buy or
to sell and both having reasonable knowledge of the relevant facts.
2.10 ISO means an option granted under this Plan to purchase Shares
which is intended by the Company to satisfy the requirements of Code Section 422
as an incentive stock option.
2.11 KEY PERSON means (i) a member of the Board who is not an Employee,
(ii) a consultant, distributor or other person who has rendered valuable
services to the Company, a Subsidiary or a Parent, (iii) a person who has
incurred, or is willing to incur, financial risk in the form of guaranteeing or
acting as co-obligor with respect to debts or other obligations of the Company,
or (iv) a person who has extended credit to the Company. Key Persons are not
limited to individuals and, subject to the preceding definition, may include
corporations. partnerships, associations and other entities.
2.12 NON-ISO means an option granted under this Plan to purchase Shares
which is not intended by the Company to satisfy the requirements of Code Section
422.
2.13 OPTION means an ISO or a Non-ISO.
2.14 PARENT means any corporation which is a parent of the Company
(within the meaning of Code Section 424).
2.15 PARTICIPANT means an individual who receives a Stock Incentive
hereunder.
2.16 PLAN means the Yupi Internet, Inc. Stock Incentive Plan, as
amended from time to time.
2.17 SHARE means a share of the Common Stock of the Company.
2.18 STOCK INCENTIVE means an ISO, a Non-ISO, a Restricted Stock Award
or a Stock Appreciation Right.
2.19 STOCK INCENTIVE AGREEMENT means an agreement between the Company
and a Participant evidencing an award of a Stock Incentive.
2.20 SUBSIDIARY means any corporation which is a subsidiary of the
Company (within the meaning of Code Section 424(o).
2.21 SURRENDERED SHARES means the Shares described in Section 8.2 which
(in lieu of being purchased) are surrendered for cash or Shares, or for a
combination of cash and Shares, in accordance with Section 8.
2.22 TEN PERCENT SHAREHOLDER means a person who owns (after taking into
account the attribution rules of Code Section 424(d)) more than ten percent
(10%) of the total combined voting power of all classes of shares of either the
Company, a Subsidiary or a Parent.
<PAGE>
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SECTION 3.
SHARES SUBJECT TO STOCK INCENTIVES
The total number of Shares that may be issued pursuant to Stock
Incentives under this Plan shall not exceed Ten Million Shares (10,000,000) as
adjusted pursuant to Section 11. Such Shares shall be reserved, to the extent
that the Company deems appropriate, from authorized but unissued Shares, and
from Shares which have been reacquired by the Company. Furthermore, any Shares
subject to a Stock Incentive which remain after the cancellation, expiration or
exchange of such Stock Incentive thereafter shall again become available for use
under this Plan, but any Surrendered Shares which remain after the surrender of
an ISO or a Non-ISO under Section 8 shall not again become available for use
under this Plan.
SECTION 4.
EFFECTIVE DATE
The effective date of this Plan shall be the date it is adopted by the
Board, provided the shareholders of the Company approve this Plan within twelve
(12) months after such effective date. If such effective date comes before such
shareholder approval, any Stock Incentives GRANTED under this Plan before the
date of such approval automatically shall be granted subject to such approval.
SECTION 5.
ADMINISTRATION
This Plan shall be administered by the Board. The Board, actin in its
absolute discretion, shall exercise such powers and take such action as
expressly called for under this Plan. The Board shall have the power to
interpret this Plan and, subject to Section 13 to take such other action in the
administration and operation of the Plan as it deems equitable under the
circumstances. The Board's actions shall be binding on the Company, on each
affected Employee or Key Person, and on each other person directly or indirectly
affected by such actions.
The Board may delegate its authority under the Plan, in whole or in
part, to a Committee appointed by the Board consisting of not less than two (2)
directors, each of whom does not while a member of the Committee, or has not
during the one (1) year prior to serving as a member of the Committee. received
equity securities of the Company, Parent or Subsidiary, pursuant to this Plan or
any other plan of the Company, Parent or Subsidiary, except as may be permitted
under Section 16(b)(3) of the Exchange Act. The Committee (if appointed) shall
act according to the policies and procedures set forth in the Plan and to those
policies and procedures established by the Board, and the Committee shall have
such powers and responsibilities as are set forth by the Board. Reference to the
Board in this Plan shall specifically include reference to the Committee where
the Board has delegated it authority to the Committee, and any action by the
Committee pursuant to a delegation of authority by the Board shall be deemed an
action by the Board under the Plan. Notwithstanding the above, the Board may
assume the powers and responsibilities granted to the Committee at any time, in
whole or in part.
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SECTION 6.
ELIGIBILITY
Except as provided below, only Employees shall be eligible for the
grant of Stock Incentives under this Plan, but no Employee shall have the right
to be ranted a Stock Incentive under this Plan merely as a result of his or her
status as an Employee. Key Persons may be eligible, subject to written approval
by the Board, for the grant of Stock Incentives under this Plan, but only if the
Key Person has provided valuable services to the Company, a Subsidiary or a
Parent, and only if the Stock Incentive is not an ISO.
SECTION 7
TERMS OF STOCK INCENTIVES
7.1 TERMS AND CONDITIONS OF ALL STOCK INCENTIVES.
(a) The Committee, in its absolute discretion. shall grant
Stock Incentives under this Plan from time to time and shall have the RIGHT to
grant new Stock Incentives in exchange for outstanding Stock Incentives. Stock
Incentives shall be granted to Employees or Key Persons selected by the
Committee, and the Committee shall be under no obligation whatsoever to grant
Stock Incentives to all Employees or Key Persons. or to grant all Stock
Incentives subject to the same terms and conditions. Each grant of a Stock
Incentive shall be evidenced by a Stock Incentive Agreement.
(b) The number of Shares as to which a Stock Incentive shall
be granted shall be determined by the Committee in its sole discretion, subject
to the provisions of Section 3 as to the total number of shares available for
grants under the Plan.
(c) Each Stock Incentive shall be evidenced by a Stock
Incentive Agreement executed by the Company and the Participant, which shall be
in such form and contain such terms and conditions as the Committee in its
discretion may, subject to the provisions of the Plan, from time to time
determine.
(d) The date a Stock Incentive is granted shall be the date on
which the Committee has approved the terms and conditions of the Stock Incentive
Agreement and has determined the recipient of the Stock Incentive and the number
of Shares covered by the Stock Incentive and has taken all such other action
necessary to complete the grant of the Stock Incentive.
7.2 TERMS AND CONDITIONS OF OPTIONS. Each grant of an Option shall be
evidenced by a Stock Incentive Agreement which shall:
(I) specify whether the Option is an ISO or Non-ISO; and
(II) incorporate such other terms and conditions as the
Committee, actin in its absolute discretion, deems consistent with the terms of
this Plan, including (without limitation) a restriction on the number of Shares
subject to the Option which first become exercisable or subject to surrender
during any calendar year.
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In determining Employee(s) or Key Person(s) to whom an Option
shall be granted and the number of Shares to be covered by such Option, the
Committee may take into account the recommendations of the President of the
Company and its other officers, the duties of the Employee or Key Person, the
present and potential contributions of the Employee or Key Person to the success
of the Company, the anticipated number of years of service remaining before the
attainment by the Employee of retirement age, and other factors deemed relevant
by the Committee, in its sole discretion, in connection with accomplishing the
purpose of this Plan. An Employee or Key Person who has been granted an Option
to purchase Shares, whether under this Plan or otherwise, may be granted one or
more additional Options.
If the Committee grants an ISO and a Non-ISO to an Employee on
the same date, the right of the Employee to exercise or surrender one such
Option shall not be conditioned on his or her failure to exercise or surrender
the other such Option.
(a) EXERCISE PRICE. Subject to adjustment in accordance with
Section 11 and the other provisions of this Section, the Exercise Price shall be
as set forth in the applicable Stock Incentive Agreement. With respect to each
grant of an ISO to a Participant who is not a Ten Percent Shareholder, the
Exercise Price shall not be less than the Fair Market Value on the date the ISO
is granted. With respect to each grant of an ISO to a Participant who is a Ten
Percent Shareholder, a Ten Percent Shareholder shall not be less than one
hundred ten percent (I 109/o) of the Fair Market Value on the date the ISO is
granted. If a Stock Incentive .s a Non-ISO. the Exercise Price for each Share
shall be no less than the minimum price required by applicable state law, or by
the Company's governing instrument, or $0.01, whichever price is greater.
(b) OPTION TERM. Each Option granted under this Plan shall be
exercisable in whole or in part at such time or times as set forth in the
related Stock Incentive Agreement, but no Stock Incentive Agreement shall:
(i) make an Option exercisable before the date such
Option is granted; or
(ii) make an option exercisable after the earlier of
the:
(A) the date such Option is exercised in
full, or
(B) the date which is the tenth (10th)
anniversary of the date such Option is granted. if such Option is a Non-ISO or
an ISO granted to a non-Ten Percent Shareholder. or the date which is the fifth
(5th) anniversary of the date such Option is granted, if such Option is an ISO
granted to a Ten Percent Shareholder.
A Stock Incentive Agreement may provide for the exercise of an
Option after the employment of an Employee has terminated for any reason
whatsoever, including death or disability.
(c) PAYMENT. Payment for all shares of Stock purchased
pursuant to exercise of an Option shall be made in cash or, if the Stock
Incentive Agreement provides, by delivery to the Company of a number of Shares
which have been owned by the holder for at least six (6)
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months prior to the date of exercise having an aggregate Fair Market Value of
not less than the product of the Exercise Price multiplied by the number of
Shares the Participant intends to purchase upon exercise of the Option on the
date of delivery. In addition, the Stock Incentive Agreement may provide for
cashless exercise through a brokerage transaction following registration of the
Company's equity securities under Section 12 of the Securities Exchange Act of
1934. Except as provided in subparagraph (f) below, payment shall be made at the
time that the Option or any part thereof is exercised, and no Shares shall be
issued or delivered upon exercise of an Option until full payment has been made
by the Participant. The holder of an Option, as such, shall have none of the
rights of a stockholder.
Notwithstanding the above, and in the sole discretion of the
Committee, an Option may be exercised as to a portion or all (as determined by
the Committee) of the number of Shares specified in the Stock Incentive
Agreement by delivery to the Company of a promissory note, such promissory note
to be executed by the Participant and which shall include, with such other terms
and conditions as the Committee shall determine, provisions in a form approved
by the Committee under which: (i) the balance of the aggregate purchase price
shall be payable in equal installments over such period and shall bear interest
at such rate (which shall not be less than the prime bank loan rate as
determined by the Committee) as the Committee shall approve, and (11) the
Participant shall be personally liable for payment of the unpaid principal
balance and all accrued but unpaid interest.
(d) CONDITIONS TO EXERCISE OF AN OPTION. Each Option granted
under the Plan shall be exercisable at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Committee shall
specify in the Stock Incentive Agreement: provided, however, that subsequent to
the grant of an Option. the Committee, at any time before complete termination
of such Option, may accelerate the time or times at which such Option may be
exercised in whole or in part.
(e) NONTRANSFERABILITY OF OPTIONS. Except as provided in
subparagraph (f) below, an Option shall not be transferable or ASSIGNABLE except
by will or by the laws of descent and distribution and shall be exercisable,
during the Participant's lifetime, only by the Participant, or in the event of
the disability of the Participant, by the legal representative of the
Participant.
(f) SPECIAL PROVISIONS FOR CERTAIN SUBSTITUTE OPTIONS.
Notwithstanding anything to the contrary in this Section, any Option in
substitution for a stock option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code Section
424(a) is applicable, may provide for an exercise price computed in accordance
with such Code Section and the regulations thereunder and may contain such other
terms and conditions as the Committee may prescribe to cause such substitute
Option to contain as nearly as possible the same terms and conditions (including
the applicable vesting and termination to in termination provisions) as those
contained in the previously issued stock option being replaced thereby.
7.3 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. A Stock
Appreciation Right may be granted in connection with all or any portion of a
previously or contemporaneously granted Option or not in connection with an
Option. A Stock Appreciation Right shall entitle the Participant to receive upon
exercise or payment the excess of: (1) the Fair Market Value of a
<PAGE>
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specified number of Shares at the time of exercise, over (II) a specified price
which shall be not less than the Exercise Price for that number of Shares in the
case of a Stock Appreciation Right granted in connection with a previously or
contemporaneously granted Option., or in the case of any other Stock
Appreciation Right not less than one hundred percent (1009/o) of the Fair Market
Value of that number of Shares at the time the Stock Appreciation Right was
granted. A Stock Appreciation Right granted in connection with an Option may
only be exercised to the extent that the related Option has not been exercised.
The exercise of a Stock Appreciation Right shall result in a pro rata surrender
of the related Option to the extent the Stock Appreciation Right has been
exercised.
(a) PAYMENT. Upon exercise or payment of a Stock Appreciation
Right, the Company shall pay to the Participant the appreciation in cash or
Shares (at the aggregate Fair Market Value on the date of payment or exercise)
as provided in the Stock Incentive Agreement or, in the absence of such
provision. as the Committee may determine.
(b) CONDITIONS TO EXERCISE. Each Stock Appreciation Right
granted under the Plan shall be exercisable at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Committee shall
specify in the Stock Incentive Agreement; provided, however, that subsequent to
the grant of a Stock Appreciation Right, the Committee, at any time before
complete termination of such Stock Appreciation Right, may accelerate the time
or times at which such Stock Appreciation Right may be exercised in whole or in
part.
(c) NONTRANSFERABILITY OF STOCK APPRECIATION RIGHT. A Stock
Appreciation Right shall not be transferable or assignable except by will or by
the laws of descent and distribution and shall be exercisable, during the
Participant's lifetime, only by the Participant, or in the event of the
disability of the Participant, by the legal representative of the Participant.
7.4 TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS. Shares awarded
pursuant to Restricted Stock Awards shall be subject to restrictions for periods
determined by the Committee. The Committee shall have the power to permit. in
its discretion,, an acceleration of the expiration of the applicable restriction
period with respect to any part or all of the Shares awarded to a Participant.
The Committee may require a cash payment from the Participant in an amount no
greater than the aggregate Fair Market Value of the Shares awarded determined at
the date of grant in exchange for the grant of a Restricted Stock Award or may
grant a Restricted Stock Award without the requirement of a cash payment.
SECTION 8.
SURRENDER OF OPTIONS
8.1 GENERAL RULE. The Committee, acting in its absolute discretion, may
incorporate a provision in a Stock Incentive Agreement to allow an Employee or
Key Person to surrender his or Option in whole or in part in lieu of the
exercise in whole or in part of that Option on any date that:
(a) the Fair Market Value of the Shares subject to such Option
exceeds Exercise Price for such Shares, and
<PAGE>
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(b) the Option to purchase such Shares is otherwise
exercisable.
8.2 PROCEDURE. The surrender of an Option in whole or in part shall be
effected by the delivery of the Stock Incentive Agreement to the Committee,
together with a statement signed by the Participant which specifies the number
of Shares ("Surrendered Shares") as to which the Participant surrenders his or
her Option and how he or she desires payment be made for such Surrendered
Shares.
8.3 PAYMENT. A Participant in exchange for his or her Surrendered
Shares shall receive a payment in cash or in Shares, or in a combination of cash
and Shares. equal in amount on the date such surrender is effected to the excess
of the Fair Market Value of the Surrendered Shares on such date over the
Exercise Price for the Surrendered Shares. The Committee, acting in its absolute
discretion, can approve or disapprove. a Participant's request for payment in
whole or in part in cash and can make that payment in cash or in such
combination of cash and Shares as the Committee deems appropriate. A request for
payment only in Shares shall be approved and made in Shares to the extent
payment can be made in whole shares of Shares and (at the Committee's
discretion) in cash in lieu of any fractional Shares.
8.4 RESTRICTIONS. Any Stock Incentive Agreement which incorporates a
provision to allow a Participant to surrender his or her Option in whole or in
part also shall incorporate such additional restrictions on the exercise or
surrender of such Option as the Committee deems necessary to satisfy the
conditions to the exemption under Rule 16b3 (or any successor exemption) to
Section 16(b) of the Exchange Act.
SECTION 9.
SECURITIES REGULATION
Each Stock Incentive Agreement may provide that. upon the receipt of
Shares as a result of he surrender or exercise of a Stock Incentive, the
Participant shall, if so requested by the Company. hold such Shares for
investment and not with a view of resale or distribution to the public and, if
so requested by the Company. shall deliver to the Company a written statement
satisfactory to the Company to that effect. Each Stock Incentive Agreement may
also provide that. if so requested by the Company, the Participant shall make a
written representation to the Company that he or she will not sell or offer to
sell any of such Shares unless a registration statement shall be in effect with
respect to such Shares under the Securities Act of 1933, as amended (" 1933
Act"), and any applicable state securities law or, unless he or she shall have
furnished to the Company an opinion, in form and substance sat. factory to the
Company, of legal counsel acceptable to the Company, that such registration is
not required. Certificates representing the Shares transferred upon the exercise
or surrender of a Stock Incentive granted under this Plan may at the discretion
of the Company bear a legend to the effect that such Shares have not been
registered under the 1933 Act or any applicable state securities law and that
such Shares may not be sold or offered for sale in the absence of an effective
registration statement as to such Shares under the 19')') Act and any applicable
state securities law or an opinion. in to and substance satisfactory to the
Company. of legal counsel acceptable to he Company. that such registration is
not required.
<PAGE>
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SECTION 10.
LIFE OF PLAN
No Stock Incentive shall be GRANTED under this Plan on or after the
earlier of.
(a) the tenth (10th) anniversary of the effective date of this
Plan (as determined under Section 4 of this Plan), in which event this Plan
otherwise thereafter shall continue in effect until all outstanding Stock
Incentives have been surrendered or exercised in full or no longer are
exercisable,
(b) or the date on which all of the Shares reserved under
Section 3 of this Plan have (as a result of the surrender or exercise of Stock
Incentives granted under this Plan) been issued or no longer are available for
use under this Plan, in which event this Plan also shall terminate on such date.
SECTION 11.
ADJUSTMENT
The number of Shares reserved under Section 3 of this Plan, and the
number of Shares subject to Stock Incentives granted under this Plan, and the
Exercise Price of any Options, shall be adjusted by the Committee in an
equitable manner to reflect any change in the capitalization of the Company,
including, but not limited to, such changes as stock dividends or stock splits.
Furthermore, the Committee shall have the right to adjust (in a manner which
satisfies the requirements of Code Section 424(a)) the number of Shares reserved
under Section 3, and the number of Shares subject to Stock Incentives granted
under this Plan, and the Exercise Price of any Options in the event of any
corporate transaction described in Code Section 424(a) which provides for the
substitution or assumption of such Stock Incentives. If any adjustment under
this Section creates a fractional Share or a right to acquire a fractional
Share, such fractional Share shall be disregarded, and the number of Shares
reserved under this Plan and the number subject to any Stock Incentives granted
under this Plan shall be the next lower number of Shares, rounding all fractions
downward. An adjustment made under this Section by the Committee shall be
conclusive and binding on all affected persons and, further, shall not
constitute an increase in the number of Shares reserved under Section 3.
SECTION 12.
SALE OR MERGER OF THE COMPANY
If the Company agrees to sell substantially all of its assets for cash
or property, or for a combination of cash and property, or agrees to any merger,
consolidation, reorganization, division or other transaction in which Shares are
converted into another security or into the right to receive securities or
property and such agreement does not provide for the assumption or substitution
of the Stock Incentives granted under this Plan, each Stock Incentive at the
direction and discretion of the Committee, or as is otherwise provided in the
Stock Incentive Agreements, may be canceled unilaterally by the Company in
exchange for the whole Shares (or, subject to satisfying the conditions to the
exemption under Rule 16b3 or any successor exemption to Section 16(b) of the
Exchange Act, for the whole Shares and the cash in lieu of a fractional Share)
which
<PAGE>
- 10 -
each Participant otherwise would receive if he or she had the right to surrender
or exercise his or her outstanding Stock Incentive in full and he or she
exercised that right exclusively for Shares on a date fixed by the Committee
which comes before such sale or other corporate transaction.
SECTION 13.
AMENDMENT OR TERMINATION
This Plan may be amended by the Board from time to time to the extent
that the Board deems necessary or appropriate; provided, however. no such
amendment shall be made absent the approval of the shareholders of the Company:
(a) to increase the number of Shares reserved under Section 3, except as set
forth in Section 11, (b) to extend the maximum life of the Plan under Section 10
or the maximum exercise period under Section 7, (c) to decrease the minimum
Exercise Price under Section 7, or (d) to change the designation of Employees or
Key Persons eligible for Stock Incentives under Section 6. The Board also may
suspend the granting of Stock Incentives under this Plan at any time and may
terminate this Plan at any time, provided, however, the Company shall not have
the right to modify, amend or cancel any Stock Incentive granted before such
suspension or termination unless: (1) the Participant consents in writing to
such modification, amendment or cancellation, or (11) there is a dissolution or
liquidation of the Company or a transaction described in Section 11 or Section
12.
SECTION 14.
MISCELLANEOUS
14.1 SHAREHOLDER RIGHTS. No Participant shall have any rights as a
shareholder of the Company as a result of the grant of a Stock Incentive to him
or to her under this Plan or his or her exercise or surrender of such Stock
Incentive pending the actual delivery of Shares subject to such Stock Incentive
to such Participant.
14.2 NO GUARANTEE OF CONTINUED RELATIONSHIP. The grant of a Stock
Incentive to a Participant under this Plan shall not constitute a contract of
employment and shall not confer on a Participant any rights upon his or her
termination of employment or relationship with the Company in addition to those
rights, if any, expressly set forth in the Stock Incentive Agreement which
evidences his or her Stock Incentive.
14.3 WITHHOLDING. The exercise or surrender of any Stock Incentive
granted under this Plan shall constitute a Participant's full and complete
consent to whatever action the Committee directs to satisfy the federal and
state tax withholding requirements, if any, which the Committee in its
discretion deems applicable to such exercise or surrender.
14.4 TRANSFER. The transfer of an Employee between or among the
Company, a Subsidiary or a Parent shall not be treated as a termination of his
or her employment under this Plan.
14.5 CONSTRUCTION. This Plan shall be construed under the laws of the
State of Georgia.
EXHIBIT 10.02
STANDARD OFFICE LEASE-GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. BASIC LEASE PROVISIONS ("Basic Lease Provisions")
1.1. PARTIES: This Lease, dated, for reference purposes only, SEPTEMBER
22, 1999, is made by and between MARINA GLENCOE, LLC, A CALIFORNIA LIMITED
LIABILITY COMPANY (herein called "Lessor") and YUPI INTERNET, INC., a Florida
corporation doing business under the name of YUPI.COM (herein called "Lessee").
1.2. PREMISES: Suite Number(s): C-209, located on the SECOND floor(s),
consisting of approximately 1942 feet, more or less, as defined in paragraph 2
and as shown on Exhibit "A" hereto (the "Premises").
1.3. BUILDING: Commonly described as being located at 4223 GLENCOE
AVE., in the City of MARINA DEL REY,
County of LOS ANGELES,
State of California, as more particularly described in Exhibit A hereto, and as
defined in paragraph 2.
1.4. USE: General Office, subject to paragraph 6.
1.5. TERM: APPROXIMATELY THREE YEARS commencing OCTOBER 7, 1999
("Commencement Date") and ending OCTOBER 31, 2002, as defined in paragraph 3.
1.6. BASE RENT: $3,884.00 per month, payable on the FIRST (1ST) day of
each month, per paragraph 4.1.
1.7. BASE RENT INCREASE: On the FIRST (1ST) ANNIVERSARY AND EACH
SUBSEQUENT ANNIVERSARY THEREAFTER, the monthly Base Rent payable under paragraph
1.6 above shall be adjusted as provided in paragraph 61 below.
1.8. RENT PAID UPON EXECUTION: $3,884.00 for the FIRST (1ST) MONTH'S
BASE RENT.
1.9. SECURITY DEPOSIT: $15,536.00 paid upon execution - see paragraph
75 below.
1.10. LESSEE'S SHARE OF OPERATING EXPENSE INCREASE: 3% as defined in
Paragraph 4.2.
2. PREMISES, PARKING AND COMMON AREAS.
2.1. PREMISES. The Premises are a portion of a building, herein
sometimes referred to as the "Building" identified in paragraph 1.3 of the Basic
Lease Provisions. "Building" shall include adjacent parking structures used in
connection therewith. The Premises, the Building, the Common Areas, the land
upon which the same are located, along with all other buildings and improvements
thereon or thereunder, are herein collectively referred to as the "Office
Building Project." Lessor hereby leases to Lessee and Lessee leases from Lessor
for the term, at the rental and upon all of the conditions set forth herein, the
real property referred to in the Basic Lease Provisions, paragraph 1.2, as the
"Premises", including rights to the Common Areas as hereinafter specified.
<PAGE>
2.2. VEHICLE PARKING. So long as Lessee is not in default, and subject
to the rules and regulations attached hereto, and as established by Lessor from
time to time, Lessee shall be entitled to rent and use FOUR (4) parking spaces
in the Office Building Project at NO CHARGE. TO AVAILABILITY IN THE SOLE
DISCRETION OF LESSOR, LESSEE MAY RENT AND USE ADDITIONAL PARKING PRIVILEGES AT
the monthly rate applicable from time to time for monthly parking as set by
Lessor and/or its licensee. THE CURRENT MONTHLY RATE IS $50 PER MONTH PER
PRIVILEGE.
2.2.1. If Lessee commits, permits or allows any of the
prohibited activities described in the Lease or the rules then in effect, then
Lessor shall have the right, without notice, in addition to such other rights
and remedies that it may have, to remove or tow away the vehicle involved and
charge the cost to Lessee, which cost shall be immediately payable upon demand
by Lessor.
2.3. COMMON AREAS - DEFINITION. The Term "Common Areas" is defined as
all areas and facilities outside the Premises and within the exterior boundary
line of the Office Building Project that are provided and designated by the
Lessor from time to time for the general non-exclusive use of Lessor, Lessee and
of other lessees of the Office Building Project and their respective employees,
suppliers, contractors, shippers, customers and invitees, including but not
limited to common entrances, lobbies, corridors, stairways and stairwells,
public restrooms, elevators, excalators, parking areas to the extent not
otherwise prohibited by this Lease, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, ramps, driveways, landscaped areas and
decorative walls.
2.4. COMMON AREAS-RULES AND REGULATIONS. Lessee agrees to abide by and
conform to the rules and regulations attached hereto as Exhibit B with respect
to the Office Building Project and Common Areas, and to cause its employees,
suppliers, shippers, customers, and invitees to so abide and conform. Lessor or
such other person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
modify, amend and enforce said rules and regulations. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees, their agents, employees and invitees of the Office Building
Project.
2.5. COMMON AREAS-CHANGES. Lessor shall have the right, in Lessor's
sole discretion, from time to time:
2.5.1. To make changes to the Building interior and exterior
and Common Areas, including without limitation, changes in the location, size,
shape, number, and appearance thereof, including but not limited to the lobbies,
windows, stairways, air shafts, elevators, escalators, restrooms, driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, decorative walls, landscaped areas and walkways;
provided, however, Lessor shall at all times provide the parking facilities
required by applicable law;
2.5.2. To close temporarily any of the Common Areas for
maintenance purposes so long as reasonable access to the Premises remains
available;
2.5.3. To designate other land and improvements outside the
boundaries of the Office Building Project to be a part of the Common Areas,
provided that such other land and improvements have a reasonable and functional
relationship to the Office Building Project;
2.5.4. To add additional buildings and improvements to the
Common Areas;
2.5.5. To use the Common Areas while engaged in making
additional improvements, repairs or alterations to the Office Building, or any
portion thereof; and/or
2
<PAGE>
2.5.6. To do and perform such other acts and make such other
changes in, to or with respect to the Common Areas and Office Building Project
as Lessor may, in the exercise of sound business judgment deem to be
appropriate.
3. TERM
3.1. Term. The term and Commencement Date of this Lease shall be as
specified in paragraph 1.5 of the Basic Lease Provisions.
3.2. DELAY IN POSSESSION. Notwithstanding said Commencement Date, if
for any reason Lessor cannot deliver possession of the Premises to Lessee on
said date and subject to paragraph 3.2.2, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease or
the obligations of Lessee here under or extend the term hereof; but, in such
case, Lessee shall not be obligated to pay rent or perform any other obligation
of Lessee under the terms of this Lease, except as may be otherwise provided in
this Lease, until possession of the Premises is tendered to Lessee, as
hereinafter defined; provided, however, that if Lessor shall not have delivered
possession of the Premises within sixty (60) days following said Commencement
Date, as the same may be extended under the terms of a Work Letter executed by
Lessor and Lessee, Lessee may, at Lessee's option, by notice in writing to
Lessor within ten (10) days thereafter, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided, however,
that as to Lessee's obligations, Lessee first reimburses Lessor for all costs
incurred for Non-Standard improvements and, as to Lessor's obligations, Lessor
shall return any money previously deposited by Lessee (less any offsets due
Lessor for Non-Standard improvements); and provided further, that if such
written notice by Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease hereunder shall terminate and be of
no further force or effect.
3.2.1. POSSESSION TENDERED-DEFINED. Possession of the Premises
shall be deemed tendered to Lessee ("Tender of Possession") when (1) Lessee has
reasonable access to the Premises, and (2) two (2) days shall have expired
following advance written notice to Lessee of the occurrence of the matters
described in (1) above of this paragraph 3.2.1.
3.2.2. DELAYS CAUSED BY LESSEE. There shall be no abatement of
rent, and the sixty (60) day period following the Commencement Date before which
Lessee's right to cancel this Lease accrues under paragraph 3.2, shall be deemed
extended to the extent of any delays caused by acts or omissions of Lessee,
Lessee's agents, employees and contractors.
3.3. EARLY POSSESSION. If Lessee occupies the Premises prior to said
Commencement Date, such occupancy shall be subject to all provisions of this
Lease, such occupancy shall not change the termination date, and Lessee shall
pay rent for such occupancy,.
3.4. UNCERTAIN COMMENCEMENT. In the event commencement of the Lease
term is defined as the completion of the commencements, Lessee and Lessor shall
execute an amendment to this Lease establishing the date of Tender of Possession
(as defined in paragraph 3.2.1) or the actual taking of possession by Lessee,
whichever first occurs, as the commencement Date.
4. RENT
4.1. BASE RENT. Subject to adjustments as hereinafter provided in
paragraph 4.3, and except as may be otherwise expressly provided in this Lease,
Lessee shall pay to Lessor the Base Rent for the Premises set forth in paragraph
1.6 of the Basic Lease Provisions, without offset or deduction. Lessee shall pay
Lessor upon execution hereof the advance Base Rent described in paragraph 1.8 of
the Basic
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Lease Provisions. Rent for any period during the term hereof which is for less
than one month shall be prorated based upon the actual number of days of the
calendar month involved. Rent shall be payable in lawful money of the United
States to Lessor at the address stated herein or to such other persons or at
such other places as Lessor may designate in writing.
4.2. OPERATING EXPENSE INCREASE. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share, as hereinafter
defined, of the amount by which all Operating Expenses, as hereinafter defined,
for each Comparison Year exceeds the amount of all Operating Expenses for the
Base Year, such excess being hereinafter referred to as the "Operating Expense
Increase", in accordance with the following provisions:
4.2.1. "Lessee's Share" is defined, for purposes of this
Lease, as the percentage set forth in paragraph 1.10 of the Basic Lease
Provisions, which percentage has been determined by dividing the approximate
square footage of the Premises by the total approximate square footage of the
rentable space contained in the Office Building Project . It is understood and
agreed that the square footage figures set forth in the Basic Lease Provisions
are approximations which Lessor and Lessee agree are reasonable and shall not be
subject to revision except in connection with an actual change in the size of
the Premises or a change in the space available for lease in the Office Building
Project.
4.2.2. "Base Year" is defined as the calendar year ENDING
DECEMBER 31, 2000.
4.2.3. "Comparison Year" is defined as each calendar year
during the term of this Lease subsequent to the Base Year; provided, however,
Lessee shall have no obligation to pay a share of the Operating Expense Increase
applicable to the first twelve (12) months of the Lease Term (other than such as
are mandated by a governmental authority, as to which government mandated
expenses Lessee shall pay Lessee's Share, notwithstanding they occur during the
first twelve (12) months). Lessee's Share of the Operating Expense Increase for
the first and last Comparison Years of the Lease Term shall be prorated
according to that portion of such Comparison Year as to which Lessee is
responsible for a share of such increase.
4.2.4. "Operating Expenses" is defined. for purposes of this
Lease, to include all costs, if any, incurred by Lessor in the exercise of its
reasonable discretion for:
(I) The operation, repair, maintenance, and replacement, in
neat, clean, safe, good order and condition, of the office Building Project,
including but not limited to, the following:
(1) The Common Areas, including their surfaces,
coverings decorative items, carpets, drapes and window coverings, and including
parking areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, stairways, driveways, landscaped areas, striping, bumpers, irrigation
systems, Common Area lighting facilities, building exteriors and gates; and
(2) All heating, air conditioning, plumbing,
electrical systems, life safety equipment, telecommunication and other equipment
used in common by, or for the benefit of, lessees or occupants of the Office
Building Project, including elevators and escalators, tenant directories, fire
detection systems, sprinkler system maintenance and repair.
(II) Trash disposal, janitorial and security services;
(III) Any other service to be provided by Lessor that is
elsewhere in this Lease stated to be an "Operating Expense";
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(IV) The cost of the premiums for the liability and property
insurance policies to be maintained by Lessor under paragraph 8 hereof;
(V) The amount of the real property taxes to be paid by
Lessor under paragraph 10.1 hereof;
(VI) The cost of water, sewer, gas, electricity, and other
publicly mandated services to the Office Building Project;
(VII) Labor, salaries and applicable fringe benefits and
costs, materials, supplies and tools used in maintaining and/or cleaning the
Office Building Project, accounting, and a management fee attributable to the
operation of the Office Building Project;
(VIII) Replacing and/or adding improvements mandated by any
governmental agency and any repairs or removals necessitated thereby amortized
over its useful life according to the reasonable judgment of Lessor (including
interest on the unamortized balance);
(IX) Replacements of equipment or improvements:
(1) Replacements of equipment or improvements that
have a useful life at commercially accepted rates of five (5) years or more,
shall be amortized over such life according to the reasonable judgment of Lessor
(including interest on the unamortized balance); and
(2) Replacements and improvements that have a useful
life of five (5) years or less according to reasonable judgment of Lessor.
4.2.5. Intentionally Deleted.
4.2.6. Operating Expenses shall not include any expenses paid
by any lessee directly to third parties, or as to which Lessor is otherwise
reimbursed by any third Party, by any other tenant, or by insurance proceeds.
4.2.7. Lessee's Share of Operating Expense increase shall be
payable by Lessee within ten (10) days after a reasonably detailed statement of
actual expenses is presented to Lessee by Lessor. At Lessors option, however, an
amount may be estimated by Lessor from time to time in advance of Lessee's Share
of the Operating Expense Increase for any Comparison Year, and the same shall be
payable monthly or quarterly, as Lessor shall designate, during each Comparison
Year of the Lease term, on the same day as the Base Rent is due hereunder. In
the event that Lessee pays Lessors estimate of Lessee's Share of Operating
Expense Increase as aforesaid, Lessor shall deliver to Lessee within sixty (60)
days after the expiration of each Comparison Year a reasonably detailed
statement showing Lessee's Share of the actual Operating Expense Increase
incurred during such year. If Lessee's payments under this paragraph 4.2.7
during said Comparison Year exceed Lessee's Share as indicated on said
statement, Lessee shall be entitled to credit the amount of such overpayment
against Lessee's Share of Operating Expense Increase next falling due. If
Lessee's payments under this paragraph during said Comparison Year were less
than Lessee's Share as indicated on said statement, Lessee shall pay to Lessor
the amount of the deficiency within ten (10) days after delivery by Lessor to
Lessee of said statement. Lessor and Lessee shall forthwith adjust between them
by cash payment any balance determined to exist with respect to that portion of
the last Comparison Year for which Lessee is responsible as to Operating Expense
Increases, notwithstanding that the Lease term may have terminated before the
end of such Comparison Year.
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4.3. Rent Increase. SEE PARAGRAPH 61
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor, concurrently upon
execution hereof, the security deposit set forth in paragraph 1.9 of the Basic
Lease Provisions as security for Lessee's faithful performance of Lessee's
obligations hereunder. If Lessee fails to pay rent or other charges due
hereunder, or otherwise defaults with respect to any provision of this Lease,
Lessor may use, apply or retain all or any portion of said deposit for the
payment of any rent or other charge in default, for the payment of any other sum
to which Lessor may become obligated by reason of Lessee's default, or to
compensate Lessor for any loss or damage which Lessor may suffer thereby. If
Lessor so uses or applies all or any portion of said deposit, Lessee shall
within ten (10) days after written demand therefor deposit cash with Lessor in
an amount sufficient to restore said deposit to the full amount then required of
Lessee. If the monthly Base Rent shall, from time to time, increase during the
term of this Lease, Lessee shall, at the time of such increase, deposit with
Lessor additional money as a security deposit so that the total amount of
security deposit held by Lessor shall at all times bear the same proportion to
the then current Base Rent as the initial security deposit bears to the initial
Base Rent set forth in paragraph 1.6 of the Basic Lease Provisions. Lessor shall
not be required to keep said security deposit separate from its general
accounts. If Lessee performs all of Lessee's obligations hereunder, said
deposit, or so much thereof as has not heretofore been applied by Lessor, shall
be returned, without payment of interest or other increment for its use, to
Lessee (or, at Lessors option, to the last assignee, if any, of Lessee's
interest hereunder) within sixty (60) days following the expiration of the term
hereof and after Lessee has vacated the Premises. No trust relationship is
created herein between Lessor and Lessee with respect to said Security Deposit.
The Lessee shall not have the right to apply the security deposit against rent
owning during the final month(s) of the Term. SEE PARAGRAPH 75.
6. USE.
6.1. USE. The Premises shall be used and occupied only for the purpose
set forth in paragraph 1.4 of the Basic Lease Provisions or for any other use
which is reasonably comparable to that use and for no other purpose.
6.2. COMPLIANCE WITH LAW.
6.2.1. Lessor warrants to Lessee that the Premises, in the
state existing on the date that the Lease term commences, but without regard to
alterations or improvements made by Lessee or the use for which Lessee will
occupy the Premises, do not violate any covenants or restrictions of record, or
any applicable building code, regulation or ordinance in effect on such
Commencement Date. In the event it is determined that this warranty has been
violated, then it shall be the obligation of the Lessor after written notice
from Lessee, to promptly, at Lessor's sole cost and expense, rectify any such
violation.
6.2.2. Except as provided in paragraph 6.2.1, Lessee shall, at
Lessee's expense, promptly comply with all applicable ordinances, rules,
regulations, orders, covenants and restrictions of record, and requirements of
any fire insurance underwriters, bureaus, now in effect or which may hereafter
come into effect, whether or not they reflect a change in policy from that now
existing, during the term or any part of the term hereof, relating in any manner
to the Premises or the occupation and use by Lessee of the Premises. Lessee
shall conduct its business in a lawful manner and shall not use or permit the
use of the Premises or the Common Areas in any manner that will tend to create
waste or a nuisance or shall tend to disturb other occupants of the Office
Building Project.
6.3. CONDITION OF PREMISES.
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6.3.1. Lessor shall deliver the Premises to Lessee in a clean
condition on the Commencement Date (unless Lessee is already in possession) and
Lessor warrants to Lessee that the plumbing, air conditioning, and heating
system in the Premises shall be in good operating condition. In the event that
it is determined that this warranty has been violated, then it shall be the
obligation of Lessor, after receipt of written notice from Lessee setting forth
with specificity the nature of the violation, to promptly, at Lessors sole cost,
rectify such violation.
6.3.2. Except as otherwise provided in this Lease, Lessee
hereby accepts the Premises and the Office Building Project in their condition
existing as of the Commencement Date or the date that Lessee takes possession of
the Premises, whichever is earlier, subject to all applicable zoning, municipal,
county and state laws, ordinances and regulations governing and regulating the
use of the Premises, and any easements, covenants or restrictions of record, and
accepts this Lease subject thereto and to all matters disclosed thereby and by
any exhibits attached hereto. Lessee acknowledges that it has satisfied itself
by its own independent investigation that the Premises are suitable for its
intended use, and that neither Lessor nor Lessors agent or agents has made any
representation or warranty as to the present or future suitability of the
Premises, Common Areas, or Office Building Project for the conduct of Lessee's
business.
7. MAINTENANCE, REPAIRS, ALTERATIONS AND COMMON AREA SERVICES.
7.1. LESSOR'S OBLIGATION. Lessor shall keep the Office Building
Project, including the Premises, exterior walls. roof, and common areas, and the
equipment whether used exclusively for the Premises or in common with other
premises, in good condition and repair; provided, however, Lessor shall not be
obligated to paint, repair or replace wall coverings, or to repair or replace
any improvements that are not ordinarily a part of the Building or are above
then Building standards. Except as provided in paragraph 9.5, there shall be no
abatement of rent or liability of Lessee on the account of any injury or
interference with Lessee's business with respect to any improvements,
alterations or repairs made by Lessor to the Office Building Project or any part
thereof. Lessee expressly waives the benefits of any statute now or hereafter in
effect which would otherwise afford Lessee the right to make repairs at Lessor's
expense or to terminate this Lease because of Lessors failure to keep the
Premises in good order, condition and repair.
7.2. LESSEE'S OBLIGATION.
7.2.1. Notwithstanding Lessor's obligation to keep the
Premises in good condition and repair, Lessee shall be accountable for the
payment of the cost thereof to Lessor as additional rent for that portion of the
cost of any maintenance and repair of the Premises, or any equipment (wherever
located) that serves only Lessee or the Premises, to the extent such cost is
attributable to causes beyond normal wear and tear. Lessee shall be responsible
for the cost of painting, repairing or replacing wall coverings, and to repair
or replace any Premises improvements that are not ordinarily a part of the
Building or that are above then Building standards. Lessor may, at its option,
upon reasonable notice, elect to have Lessee perform any such maintenance or
repairs the cost of which is otherwise Lessee's responsibility hereunder and be
reimbursed by Lessee.
7.2.2. On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same condition
as received, ordinary wear and tear excepted, clean and free of debris. Any
damage or deterioration of the Premises shall not be deemed ordinary wear and
tear if the same could have been prevented by good maintenance practices by
Lessee. Lessee shall repair any damage to the Premises occasioned by the
installation or removal of Lessee's trade fixtures, alterations, furnishings and
equipment. Except as otherwise stated in this Lease, Lessee shall leave the air
lines, power panels, electrical distribution systems, lighting fixtures, air
conditioning, window coverings, wall coverings, carpets, wall paneling, ceilings
and plumbing on the Premises and in good operating condition.
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7.3. ALTERATIONS AND ADDITIONS.
7.3.1. Lessee shall not, without Lessors prior written consent
make any alterations, improvements, additions, Utility Installations or repairs
in, on or about the Premises or the Office Building Project. As used in this
paragraph 7.3 the term "Utility Installation" shall mean carpeting, window and
wall coverings, power panels, electrical distribution systems, lighting
fixtures, air conditioning, plumbing, and telephone and telecommunication wiring
and equipment. At the expiration of the term, Lessor may require the removal of
any or all of said alterations, improvements, additions or Utility
Installations, and the restoration of the Premises and the Office Building
Project to their prior condition, at Lessee's expense. Should Lessor permit
Lessee to make its own alterations, improvements , additions or Utility
Installations, Lessee shall use only such contractor as has been expressly
approved by Lessor and Lessor may require Lessee to provide Lessor, at Lessee's
sole cost and expense, a lien and completion bond in an amount equal to one and
one-half times the estimated cost of such improvements, to insure Lessor against
any liability for mechanic's and materialmen's liens and to insure completion of
the work. Should Lessee make any alterations, improvements, additions or Utility
Installations without the prior approval of Lessor, or use a contractor not
expressly approved by Lessor, Lessor may, at any time during the term of this
Lease, require that Lessee remove any part or all of the same.
7.3.2. Any alterations improvements additions or Utility
Installations in or about the Premises or the Office Building Project that
Lessee shall desire to make shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent to Lessee's making
such alteration, improvement, addition or Utility Installation, the consent
shall be deemed conditioned upon Lessee acquiring a permit to do so from the
applicable governmental agencies, furnishing a copy thereof to Lessor prior to
the commencement of the work, and compliance by Lessee with all conditions of
said permit in a prompt and expeditious manner.
7.3.3. Lessee shall pay when due all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use in the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, the Building or the Office Building
Project, or any interest therein.
7.3.4. Lessee shall give Lessor not less than ten (10) days'
notice prior to the commencement of any work in the Premises by Lessee, and
Lessor shall have the right to post notices of non-responsibility in or on the
Premises or the Building as provided by law. If Lessee shall, in good faith
contest the validity of any such lien, claim or demand, then Lessee shall, at
its sole expense, defend itself and Lessor against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before the
judgement thereof against the Lessor or the Premises, the Building or the Office
Building Project, upon the condition that if Lessor shall, Lessee shall furnish
to Lessor a surety bond satisfactory to Lessor in an amount equal to such
contested lien, claim or demand indemnifying Lessor against liability for the
same and holding the Premises, the Building and the Office Building Project free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessor's reasonable attorneys' fees and costs in participating in such
action if Lessor shall decide it is to Lessor's best interest so to do.
7.3.5. All alterations, improvements, additions and Utility
Installations (whether or not such Utility Installations constitute trade
fixtures of Lessee), which may be made to the Premises by Lessee, including but
not limited to, floor coverings, panelings, doors, drapes, built-ins, moldings,
sound attenuation, and lighting and telephone or communication systems, conduit,
wiring and outlets, shall be made and done in a good and workmanlike manner and
of good and sufficient quality and materials and shall be the property of Lessor
and remain upon and be surrendered with the Premises at the expiration of the
Lease term, unless Lessor requires their removal pursuant to paragraph 7.3.1.
Provided Lessee is not
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in default, notwithstanding the provisions of this paragraph 7.3.5, Lessee's
personal property and equipment, other than that which is affixed to the
Premises so that it cannot be removed without material damage to the Premises or
the Building, and other than Utility Installations, shall remain the property of
Lessee and may be removed by Lessee subject to the provisions of paragraph 7.2.
7.3.6. Lessee shall provide Lessor with as-built plans and
specifications for any alterations, improvements additions or Utility
Installations.
7.4. UTILITY ADDITIONS. Lessor reserves the right to install new or
additional utility facilities throughout the Office Building Project for the
benefit of Lessor or Lessee, or any other lessee of the Office Building Project,
including, but not by way of limitation, such utilities as plumbing, electrical
systems, communication systems, and fire protection and detection systems, so
long as such installations do not unreasonably interfere with Lessee's use of
the Premises.
8. INSURANCE; INDEMNITY.
8.1. LIABILITY INSURANCE-LESSEE. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease a policy of Comprehensive
General Liability insurance utilizing an Insurance Services Office standard form
with Broad Form General Liability Endorsement (GLO404) or equivalent, in an
amount of not less that $1,000,000 per occurrence of bodily injury and property
damage combined or in a greater amount as reasonably determined by Lessor and
shall insure Lessee with Lessor being named as an additional insured against
liability arising out of the use, occupancy or maintenance of the Premises.
Compliance with the above requirement shall not, however, limit the liability of
Lessee hereunder.
8.2. LIABILITY INSURANCE-LESSOR. Lessor shall obtain and keep in force
during the term of this Lease a policy of Combined Single Limit Bodily Injury
and Broad Form Property Damage Insurance, plus coverage against such other risks
Lessor deems advisable from time to time, insuring Lessor, but not Lessee,
against liability arising out of the ownership, use, occupancy or maintenance of
the Office Project in an amount not less than $5,000,000.00 per occurrence.
8.3. PROPERTY INSURANCE-LESSEE. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease for the benefit of
Lessee, replacement cost fire and extended coverage insurance, with vandalism
and malicious mischief, sprinkler leakage and earthquake sprinkler leakage
endorsements, in an amount sufficient to cover not less than 100% of the full
replacement cost, as the same may exist from time to time, of all of Lessee's
personal property, fixtures, equipment and tenant improvements.
8.4. PROPERTY INSURANCE-LESSOR. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering loss or
damage to the Office Building Project improvements, but not Lessee's personal
property, fixtures, equipment or other improvements, in the amount of the full
replacement cost thereof, as the same may exist from time to time, utilizing
Insurance Services Office standard form, or equivalent, providing protection
against all perils included within the classification of fire, extended
coverage, vandalism, malicious mischief, plate glass and such other perils as
Lessor deems advisable or may be required by a lender having a lien on the
Office Building Project. In addition, Lessor shall obtain and keep in force
during the term of this Lease a policy of rental value insurance covering a
period of one year, with loss payable to Lessor, which insurance shall also
cover all Operating Expenses for said period. Lessee will not be named in any
such policies carried by Lessor and shall have no right to any proceeds
therefrom. The policies required by these paragraphs 8.2 and 8.4 shall contain
such deductibles as Lessor or the aforesaid lender may determine. In the event
that the Premises shall suffer an Insured Loss as defined in paragraph 9.1.6
hereof, the deductible amounts under the
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applicable insurance policies shall be deemed an Operating Expense. Lessee shall
not do or permit to be done anything which shall invalidate the insurance
policies carried by Lessor. Lessee shall pay the entirety of any increase in the
property insurance premium for the Office Building Project over what it was
immediately prior to the commencement of the term of this Lease if the increase
is specified by Lessor's insurance carrier as being caused by the nature of
Lessee's occupancy or any act or omission of Lessee.
8.5. INSURANCE POLICIES. Lessee shall deliver to Lessor copies of
liability insurance policies and ENDORSEMENT NAMING LESSOR AS AN ADDITIONAL
INSURED required under paragraph 8.1 or certificates evidencing the existence
and amounts of such insurance and ENDORSEMENTS within seven (7) days after the
Commencement Date of this Lease. No such policy shall be cancelable or subject
to reduction of coverage or other modification except after thirty (30) days
prior written notice to Lessor. Lessee shall, at least thirty (30) days prior to
the expiration of such policies furnish Lessor with renewals thereof.
8.6. WAIVER OF SUBROGATION. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other,
for direct or consequential loss or damage arising out of or incident to the
perils covered by property insurance carried by such party, whether due to the
negligence of Lessor or Lessee or their agents, employees, contractors and/or
invitees. If necessary all property insurance policies required under this Lease
shall be endorsed to so provide.
8.7. INDEMNITY. Lessee shall indemnify and hold harmless Lessor and its
agents, Lessor's master or ground lessor, partners and lenders, from and against
any and all claims for damage to the person or property of anyone or any entity
arising from Lessee's use of the Office Building Project, or from the conduct of
Lessee's business or from any activity, work or things done, permitted or
suffered by Lessee in or about the Premises or elsewhere and shall further
indemnify and hold harmless Lessor from and against any and all claims, costs
and expenses arising from any breach or default in the performance of any
obligation on Lessee's part to be performed under the terms of this Lease, or
arising from any act or omission of Lessee, or any of Lessee's agents,
contractors, employees or invitees, and from and against all costs, attorney's
fees, expenses and liabilities incurred by Lessor as the result of any such use,
conduct, activity, work, things done, permitted or suffered, breach, default or
negligence, and in dealing reasonably therewith, including, but not limited to
the defense or pursuit of any claims or any action or proceeding involved
therein; and in case any action or proceeding be brought against Lessor by
reason of any such matter, Lessee upon notice form Lessor shall defend the same
at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be indemnified. Lessee, as a material part of the
consideration to Lessor, hereby assumes all risk of damage to property of Lessee
and to persons, in, upon or about the Office Building Project arising from any
cause and Lessee hereby waives all claims in respect thereof against Lessor.
8.8. EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of income
therefrom or loss of or damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other person
in or about the Premises or the Office building Project, nor shall Lessor be
liable for injury to the person of Lessee, Lessee's employees, agents or
contractors, whether such damage is caused by or results from theft, fire,
steam, electricity, gas, water or rain or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause whether said
damage or injury results from conditions arising upon the Premises or upon other
portions of the Office Building Project, or from other sources or places, or
from new construction or the repair, alteration or improvement of any part of
the Office Building Project, or of the equipment, fixtures or appurtenances
applicable thereto, and regardless of whether the cause of such damage or injury
or the means of repairing the same is inaccessible, Lessor shall not be liable
for any damages arising from any
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act or neglect of any other lessee, occupant or user of the Office Building
Project, nor from the failure of Lessor to enforce the provisions of any other
lease of any other lessee of the Office Building Project.
8.9. NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance specified in
this paragraph 8 are adequate to cover Lessee's property or obligations under
this Lease.
9. DAMAGE OR DESTRUCTION
9.1. DEFINITIONS.
9.1.1. "Premises Damage" shall mean if the Premises are
damaged or destroyed to any extent.
9.1.2. "Premises Building Partial Damage" shall mean if the
Building of which the Premises are a part is damaged or destroyed to the extent
that the cost to repair is less than fifty percent (50%) of the then Replacement
Cost of the Building.
9.1.3. "Premises Building Total Destruction" shall mean if the
Building of which the Premises are a part is damaged or destroyed to the extent
that the cost to repair is fifty percent (50%) or more of the then Replacement
Cost of the Building..
9.1.4. "Office Building Project Buildings" shall mean all of
the buildings on the Office Building Project site.
9.1.5. "Office Building Project Buildings Total Destruction"
shall mean if the Office Building Project Buildings are damaged or destroyed to
the extent that the cost of repair is fifty percent (50%) or more of the then
Replacement Cost of the Office Building Project Buildings.
9.1.6. "Insured Loss" shall mean damaged or destruction which
was caused by an event required to be covered by the insurance described in
paragraph 8. The fact that an Insured Loss has a deductible amount shall not
make the loss an uninsured loss.
9.1.7. "Replacement Cost" shall mean the amount of money
necessary to be spent in order to repair or rebuild the damaged area to the
condition that existed immediately prior to the damage occurring, excluding all
improvements made by the lessees, other than those installed by Lessor at
Lessee's expense.
9.2. PREMISES DAMAGE; PREMISES BUILDING PARTIAL DAMAGE.
9.2.1 Insured Loss: Subject to the provisions of paragraphs
9.4 and 9.5, if at any time during the term of this Lease there is damage which
is an Insured Loss and which falls into the classification of either Premises
Damage or Premises Building Partial Damage, then Lessor shall, as soon as
reasonably possible and to the extent that the required materials and labor are
readily available through usual commercial channels, at Lessor's expense, repair
such damage (but not Lessee's fixtures, equipment or tenant improvements
originally paid for by Lessee) to its condition existing at the time of the
damage, and this Lease shall continue in full force and effect.
9.2.2 Uninsured Loss: Subject to the provisions of paragraphs
9.4 and 9.5, if at any time during the term of this Lease there is damage which
is not an Insured Loss and which falls within the classification of the Premises
Damage or Premises Building Partial Damage, unless caused by a negligent
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or willful act of Lessee (in which event Lessee shall make the repairs at
Lessee's expense), which damage prevents Lessee from making any substantial use
of the Premises, Lessor may, at Lessor's option, either (i) repair such damage
as soon as reasonably possible at Lessor's expense, in which event this Lease
shall continue in full force and effect, or (ii) give written notice to Lessee
within thirty (30) days after the date of the occurrence of such damage of
Lessor's intention to cancel and terminate this Lease as of the date of the
occurrence of such damage, in which event this Lease shall terminate as of the
date of the occurrence of such damage.
9.3. PREMISES BUILDING TOTAL DESTRUCTION; OFFICE BUILDING PROJECT TOTAL
DESTRUCTION. Subject tot he provisions of paragraphs 9.4 and 9.5, if at any time
during the term of this Lease there is damage, whether or not it is an Insured
Loss, which falls into the classification of either (i) Premises Building Total
Destruction, or (ii) Office Building Project Total Destruction, then Lessor may,
at Lessor's option, either (i) repair such damage or destruction as soon as
reasonably possible at Lessor's expense (to the extent the required materials
are readily available through usual commercial channels) to its condition
existing at the time of the damage, but not Lessee's fixtures, equipment or
tenant improvements, and the Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after the date of
occurrence of such damage of Lessor's intention to cancel and terminate this
Lease, in which case this Lease shall terminate as of the date of the occurrence
of such damage.
9.4. DAMAGE NEAR END OF TERM.
9.4.1 Subject to paragraph 9.4.2, if at any time during the
last twelve (12) months of the term of this Lease there is substantial damage to
the Premises, Lessor may at Lessor's option cancel and terminate this Lease as
of the date of occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within thirty (30) days after the date of occurrence
of such damage.
9.4.2 Notwithstanding paragraph 9.4.1, in the event that
Lessee has an option to extend or renew this Lease, and the time within which
said option may be exercised has not yet expired, Lessee shall exercise such
option, if it is to be exercised at all, no later than twenty (20) days after
the occurrence of an Insured Loss falling within the classification of Premises
Damage during the last twelve (12) months of the term of this Lease. If Lessee
duly exercises such option during said twenty (20) day period, Lessor shall, at
Lessor's expense, repair such damage, but not Lessee's fixtures, equipment or
tenant improvements, as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option
during said twenty (20) day period, then Lessor may, at Lessor's option,
terminate and cancel this Lease as of the expiration of said twenty (20) day
period by giving written notice to Lessee of Lessor's election to do so within
ten (10) days after the expiration of said twenty (20) day period,
notwithstanding any term or provision in the grant of option to the contrary.
9.5. ABATEMENT OF RENT; LESSEE'S REMEDIES.
9.5.1 In the event Lessor repairs or restores the Building or
Premises pursuant to the provisions of this paragraph 9, and any part of the
Premises are not usable (including loss of use due to loss of access or
essential services), the rent payable hereunder (including Lessee's Share of
Operating Expense Increase) for the period during which such damage, repair or
restoration continues shall be abated, provided (1) the damage was not the
result of the negligence of Lessee, and (2) such abatement shall only be to the
extent the operation and profitability of Lessee's business as operated from the
Premises is adversely affected. Except for said abatement of rent, if any,
Lessee shall have no claim against Lessor for any damage suffered by reason of
any such damage, destruction, repair or restoration.
9.5.2 If Lessor shall be obligated to repair or restore the
Premises or the Building under the provisions of this paragraph 9 and shall not
commence such repair or restoration within ninety (90) days
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after such occurrence, or if Lessor shall not complete the restoration and
repair within six (6) months after such occurrence, Lessee may, at Lessee's
option, cancel and terminate this Lease by giving Lessor written notice of
Lessee's election to do so at any time prior to the commencement or completion,
respectively, of such repair or restoration. In such event this Lease shall
terminate as of the date of such notice.
9.5.3 Lessee agrees to cooperate with Lessor in connection
with any such restoration and repair, including but not limited to the approval
and/or execution of plans and specifications required.
9.6. TERMINATION-ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall, in
addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.7. WAIVER. Lessor and Lessee waive the provisions of any statute
which relate to termination of leases when leased property is destroyed and
agree that such event shall be governed by the terms of this Lease.
10. REAL PROPERTY TAXES.
10.1. PAYMENT OF TAXES. Lessor shall pay the real property tax, as
defined in paragraph 10.3, applicable to the Office Building Project subject to
reimbursement by Lessee of Lessee's Share of such taxes in accordance with the
provisions of paragraph 4.2, except as otherwise provided in paragraph 10.2.
10.2. ADDITIONAL IMPROVEMENTS. Lessee shall not be responsible for
paying any increase in real property tax specified in the tax assessor's records
and work sheets as being caused by additional improvements placed upon the
Office Building Project by other lessees or by Lessor for the exclusive
enjoyment of any other lessee. Lessee shall, however, pay to Lessor at any time
that Operating Expenses are payable under paragraph 4.2.3 the entirety of any
increase in real property tax if assessed solely by reason of additional
improvements placed upon the Premises by Lessee or at Lessee's request.
10.3. DEFINITION OF "REAL PROPERTY TAX". As used herein, the term "real
property tax" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed on the Office Building Project or any portion thereof
by any authority having the direct or indirect power to tax, including any city,
county, state or federal government, or any school agricultural, sanitary, fire,
street, drainage or other improvement district thereof, as against any legal or
equitable interest of lessor in the Office Building Project or in any portion
thereof, as against Lessor's right to rent or together income therefrom, and as
against Lessor's business of leasing the Office Building Project. The term "real
property tax" shall also include any tax, fee, levy, assessment or charge (i) in
substitution of, partially or totally, any tax, fee, levy, assessment or charge
hereinabove included within the definition of "real property tax", or (ii) the
nature of which was hereinbefore included within the definition of "real
property tax", or (iii) which is imposed for a service or right not charged
prior to June 1, 1978, or, if previously charged, has been increased since June
1, 1978, or (iv) which is imposed as a result of a change in ownership, as
defined by applicable local statutes for property tax purposes, of the Office
Building Project or which is added to a tax or charge hereinbefore included
within the definition of real property tax by reason of such change of
ownership, or (v) which is imposed by reason of this transaction, any
modifications or changes hereto, or any transfers hereof.
10.4. JOINT ASSESSMENT. If the improvements or property, the taxes for
which are to be paid separately by Lessee under paragraph 10.2 or 10.5 are not
separately assessed, Lessee's portion of that tax shall be equitably determined
by Lessor from the respective valuations assigned in the assessor's work
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sheets or such other information (which may include the cost of construction) as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.
10.5. PERSONAL PROPERTY TAXES.
10.5.1 Lessee shall pay prior to delinquency all taxes
assessed against and levied upon trade fixtures, furnishings, equipment and all
other personal property of Lessee contained in the Premises or elsewhere.
10.5.2 If any of Lessee's said personal property shall be
assess with Lessor's real property, Lessee shall pay to Lessor the taxes
attributable to Lessee within ten (10) days after receipt of a written statement
setting forth the taxes applicable to Lessee's property.
11. UTILITIES.
11.1. SERVICES PROVIDED BY LESSOR. Lessor shall provide heating,
ventilation, air conditioning, and janitorial service as reasonably required,
reasonable amounts of electricity for normal lighting and office machines, water
for reasonable and normal drinking and lavatory use, and replacement fluorescent
tubes and ballast for standard overhead fixtures.
11.2. HOURS OF SERVICE. Said services and utilities shall be provided
during generally accepted business days and hours or such other days or hours as
may hereafter be set forth. Utilities and services required at other times shall
be subject to advance request and reimbursement by Lessee to Lessor of the cost
thereof.
11.3. EXCESS USAGE BY LESSEE. Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water, lighting
or power, or suffer or permit any act that causes extra burden upon the
utilities or services, including but not limited to security services, over
standard office usage for the Office Building Project. Lessor shall require
Lessee to reimburse Lessor for any excess expenses or costs that may arise out
of a breach of this subparagraph by Lessee. Lessor may in its sole discretion,
install at Lessee's expense supplemental equipment and/or separate metering
applicable to Lessee's excess usage or loading.
11.4. INTERRUPTIONS. There shall be no abatement of rent and Lessor
shall not be liable in any respect whatsoever for the inadequacy, stoppage,
interruption or discontinuance of any utility or service due to riot, strike,
labor dispute, breakdown, accident, repair or other cause beyond Lessor's
reasonable control or in cooperation with governmental request or directions.
12. ASSIGNMENT AND SUBLETTING.
12.1. LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a material
default and breach of this Lease without the need for notice to Lessee under
paragraph 13.1. "Transfer" within the meaning of this paragraph 12 shall include
the transfer or transfers aggregating: (a) if Lessee is a corporation, more than
twenty-five percent (25%) of the voting stock of such corporation, or (b) if
Lessee is a partnership or limited liability company, more than twenty-five
percent (25%) of the profit and loss participation in such partnership or
limited liability company.
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12.2. LESSEE AFFILIATE. Notwithstanding the provisions of paragraph
12.1 hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by or
is under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all the assets of Lessee as a going concern of the business that is being
conducted on the Premises, all of which are referred to as "Lessee Affiliate"
provided that before such assignment shall be effective, (a) said assignee shall
assume, in full, the obligations of Lessee under this Lease and Lessor shall be
given written notice of such assignment and assumption. Any such assignment
shall not, in any way, affect or limit of Lessee under the terms of this Lease
even if after such assignment or subletting the terms of this Lease are
materially changed or altered without the consent of Lessee, the consent of whom
shall not be necessary.
12.3. TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
12.3.1 Regardless of Lessor's consent, no assignment or
subletting shall release Lessee of Lessee's obligation hereunder or alter the
primary liability of Lessee to pay the rent and other sums due Lessor hereunder
including Lessee's Share of Operating Expense Increase, and to perform all other
obligations to be performed by Lessee hereunder.
12.3.2 Lessor may accept rent from any person other than
Lessee pending approval or disapproval of such assignment.
12.3.3 Neither a delay in the approval or disapproval of such
assignment or subletting, nor the acceptance of rent, shall constitute a waiver
or estoppel of Lessor's right to exercise its remedies for the breach of any of
the terms or conditions of this paragraph 12 or this Lease.
12.3.4 If Lessee's obligations under this Lease have been
guaranteed by third parties, then an assignment or sublease, and Lessor's
consent thereto, shall not be effective unless said guarantor give their written
consent to such sublease and the terms thereof.
12.3.5 The consent by Lessor to any assignment or subletting
shall not constitute a consent to any subsequent assignment or subletting by
Lessee or to any subsequent or successive assignment or subletting by the
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable on the Lease or sublease and without obtaining
their consent and such action shall not relieve such persons from liability
under this Lease or said sublease; however, such persons shall not be
responsible to the extent any such amendment or modification enlarges or
increases the obligations of the Lessee or sublessee under this Lease or such
sublease.
12.3.6 In the event of any default under this Lease, Lessor
may proceed directly against Lessee, any guarantors or any one else responsible
for the performance of this Lease, including the sublessee, without first
exhausting Lessor's remedies against any other person or entity responsible
therefor to Lessor, or any security held by Lessor or Lessee.
12.3.7 Lessor's written consent to any assignment or
subletting of the Premises by Lessee shall not constitute an acknowledgment that
no default then exists under this Lease of the obligations to be performed by
Lessee nor shall such consent be deemed a waiver of any then existing default,
except as may be otherwise stated by Lessor at the time.
12.3.8 The discovery of the fact that any financial statement
relied upon by Lessor in giving its consent to an assignment or subletting was
materially false shall, at Lessor's election, render Lessor's said consent null
and void.
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12.4. ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING:
Regardless of Lessor's consent, the following terms and conditions shall apply
to any subletting by Lessee of all or any part of the Premises and shall be
deemed included in all subleases under this ___________ whether or not expressly
incorporated therein:
12.4.1. Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any sublease heretofore
or hereafter made by Lessee, and Lessor may collect such rent and income and
apply same toward Lessee's obligations under this Lease; provided, however, that
until a default shall occur in the performance of Lessee's obligations under
this Lease, Lessee may receive, collect and enjoy the rents accruing under such
sublease. Lessor shall not, by reason of this or any other assignment of such
sublease to Lessor nor by reason for the collection of the rents from a
sublessee, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee under such
sublease. Lessee hereby irrevocably authorizes and directs any such sublessee,
upon receipt of a written notice from Lessor stating that a default exists in
the performance of Lessee's obligations under this Lease, to pay to Lessor the
rents due and to become due under the sublease. Lessee agrees that such
sublessee shall have the right to rely upon any such statement and request from
Lessor, and that such sublessee shall pay such rents to Lessor without any
obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against said sublessee or Lessor for any such rents
so paid by said sublessee to Lessor;
12.4.2. No sublease entered into by Lessee shall be effective
unless and until it has been approved in writing by Lessor. In entering into any
sublease, Lessee shall use only such form of sublessee as is satisfactory to
Lessor, and once approved by Lessor, such sublease shall not be changed or
modified without Lessor's prior written consent. Any sublessee shall, by reason
of entering into a sublease under this Lease, be deemed, for the benefit of
Lessor, to have assumed and agreed to conform and comply with each and every
obligation herein to be performed by Lessee other than such obligations as are
contrary to or inconsistent with provisions contained in a sublease to which
Lessor has expressly consented in writing;
12.4.3. In the event Lessee shall default in the performance
of its obligations under this Lease, Lessor at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of Lessee under such sublease from
the time for the exercise of said option to the termination of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to Lessee or for any other prior defaults of
Lessee under such sublease;
12.4.4. No sublessee shall further assign or sublet all or any
part of the Premises without Lessor's prior written consent; and
12.4.5. With regard to any subletting to which Lessor has
consented, Lessor agrees to deliver a copy of any notice of default by Lessee to
the sublessee. Such sublessee shall have the right to cure a default of Lessee
within three (3) days after service of said notice of default upon such
sublessee, and the sublessee shall have a right of reimbursement and offset from
and against Lessee for any such defaults cured by the sublessee.
12.5. LESSOR'S EXPENSE. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor for any act proposes to do then Lessee
shall pay Lessor's reasonable costs and expenses incurred in connection
therewith, including attorneys', architects', engineers' or other consultants'
fees.
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12.6. CONDITIONS TO CONSENT. Lessor reserves the right to condition any
approval to assign or sublet upon Lessor's determination that (a) the proposed
assignee or sublessee shall conduct a business on the Premises of a quality
substantially equal to that of Lessee and consistent with the general character
of the other occupants of the Office Building Project and not in violation of
any exclusives or rights then held by other tenants, and (b) the proposed
assignee or sublessee be at least as financially responsible as Lessee was
expected to be at the time of the execution of this Lease or such assignment or
subletting, whichever is greater.
13. DEFAULT; REMEDIES.
13.1. DEFAULT. The occurrence of any one or more of the following
events shall constitute a material default of this Lease by Lessee:
13.1.1 The vacation or abandonment of the Premises by Lessee;
vacation of the Premises shall include the failure to occupy the Premises for a
continuous period of sixty (60) days or more, whether or not the rent is paid;
13.1.2 The breach of Lessee of any of the covenants,
conditions or provisions of paragraphs 7.3.1, 7.3.2 or 7.3.4 (alterations), 12.1
(assignment or subletting), 13.1.1 (vacation or abandonment), 13.1.5
(insolvency), 13.1.6 (false statement), 16.1 (estoppel certificate), 30.2
subordination), 33 (auctions), or 41.1 (easements), all of which are hereby
deemed to be material, non-curable defaults without the necessity of any notice
by Lessor to Lessee thereof;
13.1.3 The failure by Lessee to make any payment of rent or
any other payment required to be made by Lessee hereunder, as and when due,
where such failure shall continue for a period of three (3) days after written
notice thereof from Lessor to Lessee. In the event that Lessor serves Lessee
with a Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer
statutes such Notice to Pay Rent or Quit shall also constitute the notice
required by this subparagraph;
13.1.4 The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
Lessee other than those reference in subparagraphs 13.1.2 or 13.1.3, above,
where such failure shall continue for a period of thirty (30) days after written
notice thereof from lessor to Lessee; provided, however, that if the nature of
Lessee's noncompliance is such that more than thirty (30) days are reasonably
required for its cure, then Lessee shall not be deemed to be in default if
Lessee commenced such cure within said thirty (30 day period and thereafter
diligently pursues such cure to completion. To the extent permitted by law, such
thirty (30) day notice shall constitute the sole and exclusive notice required
to be given to Lessee under applicable Unlawful Detainer statutes;
13.1.5 (i) The making by Lessee of any general arrangement or
general assignment for the benefit of creditors; (ii) Lessee becoming a "debtor"
as defined in 11 U.S.C. ss.101 or any successor statute thereto (unless, in the
case of a petition filed against Lessee, the same is dismissed within sixty (60)
days; (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within thirty
(30) days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within thirty (30)
days. In the event that any provision of this paragraph 13.1.5 is contrary to
any applicable law, such provision shall be of no force or effect; and/or
13.1.6 The discovery by Lessor that any financial statement
given to Lessor by Lessee, or its successor in interest or by any guarantor of
Lessee's obligation hereunder, was materially false.
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13.2. REMEDIES. In the event of any material default or breach of this
Lease by Lessee, Lessor may at any time thereafter, with or without notice or
demand and without limiting Lessor in the exercise of any right or remedy which
lessor may have by reason of such default:
13.2.1 Terminate Lessee's right to possession of the Premises
by any lawful means, in which case this Lease and term hereof shall terminate
and Lessee shall immediately surrender possession of the Premises to Lessor. In
such event Lessor shall be entitled to recover from Lessee all damages incurred
by Lessor by reason of Lessee's default including, but not limited to, the cost
of recovering possession of the Premises; expenses or reletting, including
necessary renovation and alteration of the Premises, reasonable attorneys' fees,
and any real estate commission actually paid; the worth at the time of award by
which the court having jurisdiction thereof of the amount by which the unpaid
rent for the balance of the term after the time of such award exceeds the amount
of such rental loss for the same period that Lessee proves could be reasonably
avoided; that portion of the leasing commission paid by Lessor pursuant to
paragraph 53 applicable to the unexpired term of this Lease;
13.2.2 Maintain Lessee's right to possession in which case
this Lease shall continue in effect whether or not Lessee shall have vacated or
abandoned the Premises. In such event Lessor shall be entitled to enforce all of
Lessor's rights and remedies under this Lease, including the right to recover
the rent as it becomes due hereunder; and/or
13.2.3 Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the premises
are located. Unpaid installments of rent and other unpaid monetary obligations
of Lessee under the terms of this Lease shall bear interest from the date due at
the maximum rate then allowable by law.
13.3. DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but in
no event later than thirty (30) days after written notice by Lessee to Lessor
and to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to Lessee in
writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such 30-day period and thereafter
diligently pursues the same to completion.
13.4. LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of Base Rent, Lessee's Share of Operating Expense Increase or
other sums due hereunder will cause Lessor to incur costs not contemplated by
this Lease, the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and accounting charges,
and late charges which may be imposed on Lessor by the terms of any mortgage or
trust deed covering the Office Building Project. Accordingly, if any installment
of Base Rent, Operating Expense Increase, or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to 6% of such overdue amount. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of late payment by Lessee.
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee's default with respect to such overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder.
14. CONDEMNATION. If the Premises or any portion thereof or the Office Building
Project are taken under the power of eminent domain, or sold under the threat of
the exercise of said power (all of which are herein called "condemnation",) this
Lease shall terminate as to the date the condemning authority
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takes title or possession, whichever first occurs; provided that if so much of
the Premises or the Office Building Project are taken by such condemnation as
would substantially and adversely affect the operation and profitability of
Lessee's business conducted from the Premises, Lessee shall have the option, to
be exercised only in writing within thirty (30) days after Lessor shall have
given Lessee written notice of such taking (or in the absence of such notice,
within thirty (30) days after the condemning authority shall have taken
possession), to terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the rent and Lessee's Share of
Operating Expense increase shall be reduced in the proportion that the floor
area of the Premises taken bears to the total floor area of the Premises. Common
Areas taken shall be excluded from the Common Areas usable by Lessee and no
reduction of rent shall occur with respect thereto or by reason thereof. Lessor
shall have the option in its sole discretion to terminate this lease as of the
taking of possession by the condemning authority, by giving written notice to
Lessee of such election within thirty (30) days after receipt of notice of a
taking by condemnation of any part of the Premises or the Office Building
Project. Any award for the taking of all or any part of the Premises or the
Office Building Project under the power of eminent domain or any payment made
under threat of the exercise of such power shall be the property of Lessor,
whether such award shall be made as compensation for diminution in value of the
leasehold or for the taking of the fee, or as severance damages; provided,
however, that Lessee shall be entitled to any separate award for loss of or
damage to Lessee's trade fixtures, removable personal property and unamortized
tenant improvements that have been paid for by lessee. For that purpose the cost
of such improvements shall be amortized over the original term of this Lease
excluding any options. In the event that this lease is not terminated by reason
of such condemnation, repair any damage to the Premises caused by such
condemnation, Lessor shall to the extent of severance damages received by Lessor
in connection with such condemnation, repair any damage to the Premises caused
by such condemnation except to the extent that Lessee has been reimbursed
therefor by the condemning authority. Lessee shall pay any amount in excess of
such severance damages required to complete such repair.
16. ESTOPPEL CERTIFICATE.
16.1. Each party (as "responding party") shall at any time upon not
less than ten (10) days' prior written notice from the other party ("requesting
party") execute, acknowledge and deliver to the requesting party a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to the responding party's knowledge, any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed and (iii) any other provisions of the standard from
AIR Estoppel. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrances of the Office Building Project or of the
business of the Lessee.
16.2. At the requesting party's option, the failure to deliver such
statement within such time shall be a material default of this Lease by the
party who is to respond, without any further notice to such party, or it shall
be conclusive upon such party that (i) this Lease is in full force and effect,
without modification except as may be represented by the requesting party, (ii)
there are no uncured defaults in the requesting party's performance, and (iii)
if Lessor is the requesting party, not more than one month's rent has been paid
in advance.
16.3. If Lessor desires to finance, refinance, or sell the Office
Building Project, or any part thereof, Lessee hereby agrees to deliver to any
lender or purchaser designated by Lessor such financial statements of lessee as
may be reasonably required by such lender or purchaser. Such statements shall
include the
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past three (3) years' financial statements of lessee. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "lessor" as used herein shall mean only the
owner or owners, at the time in question, of the fee title or an interest in a
ground lease of the Office Building Project, in the event of any transfer of
such title or interest. Lessor herein named case of any subsequent transfers
then the grantor) shall be relieved from and after the date of such transfer of
all liability as respects Lessor's obligations thereafter to be performed,
provided that any funds in the hands of Lessor or the then grantor at the time
of such transfer, in which Lessee has an interest, shall be delivered to the
grantee. The obligations contained in this Lease to be performed by Lessor
shall, subject as aforesaid, be binding on lessor's successors and assigns, only
during their respective periods of ownership.
18. SEVERABILITY. The invalidity of any provision of this Lease as determined by
a court of competent jurisdiction shall in no way affect the validity of any
other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum rate
then allowable by law or judgments from the date due. Payment of such interest
shall not excuse or cure any default by Lessee under this Lease; provided,
however, that interest shall not be payable on late charges incurred by Lessee
nor on any amounts upon which late charges are paid by Lessee.
20. TIME OF ESSENCE. Time is of the essence with respect to the obligations to
be performed under this Lease.
21. ADDITIONAL RENT. All monetary obligations of Lessee to Lessor under the
terms of this Lease, including but not limited to Lessee's share of Operating
Expense Increase and any other expenses payable by Lessee hereunder shall be
deemed to be rent.
22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
or contemporaneous agreement or understanding pertaining to any such matter
shall be effective. This Lease may be modified in writing only, signed by the
parties in interest at the time of the modification. Except as otherwise stated
in this Lease, Lessee hereby acknowledges that neither the real estate broker
listed in paragraph 53 hereof nor any cooperating broker on this transaction or
the Lessor or any employee or agents of any of said persons has made any oral or
written warranties or representations to Lessee relative to the condition or use
by Lessee of the Premises or the Office Building Project and Lessee acknowledges
that Lessee assumes all responsibility regarding the Occupational Safety Health
Act, the legal sue and adaptability of the Premises and the compliance thereof
with all applicable laws and regulations in effect during the term of this
Lease.
23. NOTICES. Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal delivery or by certified or registered
mail, and shall be deemed sufficiently given if delivered or addressed to Lessee
or to Lessor at the address noted below or adjacent to the signature of the
respective parties, as the case may be. Mailed notices shall be deemed given
upon actual receipt at the address required, or forty-eight hours following
deposit in the mail, postage prepaid, whichever first occurs. Either party may
by notice to the other specify a different address for notice purposes except
that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice purposes. A copy of all notices required
or permitted to be given to Lessor hereunder shall be concurrently transmitted
to such party or parties at such addresses as Lessor may from time to time
hereinafter by notice to Lessee.
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24. WAIVERS. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder by
Lessor shall not be a waiver of any preceding breach by Lessee of any provision
hereof, other than the failure of Lessee to pay the particular rent so accepted,
regardless of lessor's knowledge of such preceding breach at the time of
acceptance of such rent.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other, execute
acknowledge and deliver to the other a "short form" memorandum of this Lease for
recording purposes.
26. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession of the
Premises or any part thereof after the expiration or early termination of the
term hereof, such occupancy shall be a tenancy from month to month upon all the
provisions of this Lease pertaining to the obligations of lessee, except that
the rent payable shall be ONE HUNDRED FIFTY PERCENT (150%) of the rent payable
immediately preceding the termination date of this Lease, and all Options, if
any, granted under the terms of this Lease shall be deemed terminated and be of
no further effect during said month to month tenancy. If Lessee, without
Lessor's consent, remains in possession of the Premises or any part thereof
after the expiration or early termination of the term hereof, such occupancy
shall be a tenancy at sufferance upon all the provisions of this Lease
pertaining to the obligations of Lessee, except that the rent payable shall be
two hundred percent (200%) of the rent payable immediately preceding the
termination date of this Lease.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. Each provision of this Lease performable by lessee
shall be deemed both a covenant and a condition.
29. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof restricting
assignment or subletting by Lessee and subject to the provisions of paragraph
17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
where the Office Building Project is located and any litigation concerning this
lease between the parties hereto shall be initiated in the county in which the
Office Building Project is located and any litigation concerning this Lease
between the parties hereto shall be initiated in the county in which the Office
building Project is located.
30. SUBORDINATION.
30.1. This Lease, and any Option or right of first refusal granted
hereby, at Lessor's option, shall be subordinate to any ground lease, mortgage,
deed of trust, or any other hypothecation or security now or hereafter placed
upon the Office Building Project and to any and all advances made on the
security thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof. Notwithstanding such subordination,
Lessee's right to quiet possession of the premises shall not be disturbed if
Lessee is not in default and so long as Lessee shall pay the rent and observe
and perform all of the provisions of this Lease, unless this Lease is otherwise
terminated pursuant to its terms. If any mortgagee, trustee or ground Lessor
shall elect to have this Lease and any Options granted hereby prior to the lien
of its mortgage, deed of trust or ground lease, and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
mortgage, deed of trust or ground lease, whether this Lease or such Options are
dated prior or subsequent to the date of said mortgage, deed of trust or ground
lease or the date of recording thereof.
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30.2. Lessee agrees to execute all documents required to effectuate an
attornment, a subordination, or to make this Lease granted herein prior to the
lien of any mortgage, deed of trust or ground lease, as the case may be.
Lessee's failure to execute such documents within ten (10) days after written
demand shall constitute a material default by lessee hereunder without further
notice to Lessee or, at Lessor's option, Lessor shall execute such documents on
behalf of Lessee as Lessee's attorney-in-fact. Lessee does hereby make,
constitute and irrevocably appoint Lessor as Lessee's attorney-in-fact and in
Lessee's name, place and stead, to execute such documents in accordance with
this paragraph 30.2.
31. ATTORNEY'S FEES.
31.1. If either party brings an action to enforce the terms hereof or
declare rights hereunder, the prevailing party in any such action, trial or
appeal thereon, shall be entitled to reasonable attorneys' fees to be paid by
the losing party as fixed by the court in the same or a separate suit, and
whether or not such action is pursued to decision or judgment.
31.2. The attorneys' fees award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorneys' fees reasonably incurred in good faith.
31.3. Lessor shall be entitled to reasonable attorneys' fees and all
other costs and expenses incurred in the preparation and service of notice of
default and consultations in connection therewith, whether or not a legal
transaction is subsequently commenced in connection with such default.
32. LESSOR'S ACCESS.
32.1. Lessor and Lessor's agents shall have the right to enter the
Premises at reasonable times for the purposes of inspecting the same, performing
any services required of Lessor, showing the same to prospective purchasers,
lenders, or lessees, taking such safety measures, erecting such scaffolding or
other necessary structures, making such alterations, repairs, improvements or
additions to the Premises or to the Office Building Project as Lessor may
reasonably deem necessary or desirable and the erecting, using and maintaining
of utilities, services, pipes and conduits through the premises and/or other
premises as long as there is no material adverse effect to Lessee's use of the
Premises. Lessor may at any time place on or about the Premises or the Building
any ordinary "For Sale" signs and Lessor may at any times during the last one
hundred twenty (120) days of the term hereof place on or about the Premises any
ordinary "For Lease" signs.
32.2. All activities of Lessor pursuant to this paragraph shall be
without abatement of rent, nor shall Lessor have any liability to Lessee for the
same.
32.3. Lessor shall have the right to retain keys to the Premises and to
unlock all doors in or upon the Premises other than to files, vaults and safes
and in the case of emergency, to enter the Premises by any reasonably
appropriate means, and any such entry shall not be deemed a forcible or unlawful
entry or detainer of the Premises or an eviction. Lessee waives any charges for
damages or injuries with Lessee's property or business in connection therewith.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common Areas
without first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary, in this Lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent. The holding of any auction on the Premises or Common Areas in violation
of this paragraph shall constitute a material default in this Lease.
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34. SIGNS. Lessee shall not place any sign upon the Premises or the Office
Building Project without Lessor's prior written consent. Under no circumstances
shall Lessee place a sign on any roof of the Office Building Project.
35. MERGER. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
36. CONSENTS. Except for paragraphs 33 (auctions) and 34 (signs) hereof,
wherever in this Lease the consent of one party is required to an act of the
other party such consent shall not be unreasonably withheld or delayed.
37. GUARANTOR. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. QUIET POSSESSION. Upon Lessee paying the rent for the Premises and observing
and performing all of the covenants, conditions and provisions on Lessee's part
to be observed and performed hereunder, Lessee shall have quiet possession of
the Premises for the entire term hereof subject to all of the provisions of this
lease. The individuals executing this Lease on behalf of Lessor represent and
warrant to Lessee that they are fully authorized and legally capable of
executing this Lease on behalf of Lessor and that such execution is binding upon
all parties holding an ownership interest in the Office Building Project.
39. OPTIONS.
39.1. DEFINITION. As used in this paragraph the word "Option" has the
following meaning: (1) the right or option to extend the term of this lease or
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option of right of first refusal to lease the
Premises or the right of first refusal to lease other space within the Office
Building Project or other property of Lessor or the right of first offer to
lease other space within the Office Building Project or other property of
Lessor; (3) the right or option to purchase the Premises or the Office building
Project, or the right of first refusal to purchase the Premises or the Office
Building Project or the right of first offer to purchase the Premises or the
Office Building Project, or the right or option to purchase other property of
Lessor, or the right of first refusal to purchase other property of Lessor or
the right of first offer to purchase other property of Lessor.
39.2. OPTIONS PERSONAL. Each Option granted to Lessee in this Lease is
personal to the original Lessee and may be exercised the original Lessee while
occupying the premises who does so without the intent of thereafter assigning
this lease or subletting the Premises or any portion thereof, and may not be
exercised or be assigned, voluntarily or involuntarily, by or to any person or
entity other than Lessee; provided, however, that an Option may be exercised by
or assigned to any Lessee Affiliate as defined in paragraph 12.2 of this Lease.
The Options, if any, herein granted to Lessee are not assignable separate and
apart from this Lease, nor may any Option be separated from this Lease in any
manner, either by reservation or otherwise.
39.3. MULTIPLE OPTIONS. In the event that Lessee has any multiple
options to extend or renew this Lease a later option cannot be used unless the
prior option to extend or renew this Lease has been so exercised.
39.4. EFFECT OF DEFAULT ON OPTIONS.
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39.4.1 Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, (i) during
the time commencing from the date Lessor gives to Lessee a notice of default
pursuant to paragraph 13.1.3 or 13.1.4 and continuing until the noncompliance
alleged in said notice of default is cured, or (ii) during the period of time
commencing on the day after a monetary obligation to Lessor is due from Lessee
and unpaid (without any necessity for notice thereof to Lessee) and continuing
until the obligation is paid, or (iii) in the event Lessor has given to Lessee
three or more notices of default under paragraph 13.1.3, or paragraph 13.1.4,
whether or not the defaults are cured during the 12-month period of time
immediately prior to the time that Lessee attempts to exercise the subject
Option, or (iv) if Lessee has committed any non-curable breach, including
without limitation those described in paragraph 13.1.2, or is otherwise in
default of any of the terms, covenants or conditions of this Lease.
39.4.2 The period of time within which an Option may be
exercised shall not be extended or enlarged by reason of Lessee's inability to
exercise an Option because of the provisions of paragraph 39.4.1.
39.4.3 All rights of Lessee under the provisions of an Option
shall terminate and be of no further force or effect, notwithstanding Lessee's
due and timely exercise of the Option, if, after such exercise and during the
term of this lease, (i) Lessee fails to pay to Lessor a monetary obligation of
Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereof to Lessee), or (ii)
Lessee fails to commence to cure a default specified in paragraph 13.1.4 within
thirty (30) days after the date that Lessor gives notice to Lessee of such
default and/or Lessee fails thereafter to diligently prosecute said cure to
completion, or (iii) Lessor gives to Lessee three or more notices of default
under paragraph 13.1.3, or paragraph 13.1.4 whether or not the defaults are
cured, or (iv) if Lessee has committed any non-curable breach, including without
limitation those described in paragraph 13.1.2, or is otherwise in default of
any of the terms, covenants and conditions of this Lease.
40. SECURITY MEASURES-LESSOR'S RESERVATIONS.
40.1. Lessee hereby acknowledges that Lessor shall have no obligation
whatsoever to provide guard service or other security measures for the benefit
of the Premises or the Office Building Project. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invitees and the
property of Lessee and of Lessee's agents and invitees from acts of third
parties. Nothing herein contained shall prevent Lessor, at Lessor's sole option,
from providing security protection for the Office Building Project or any part
thereof, in which event the cost thereof shall be included within the definition
of Operating Expenses, as set forth in paragraph 4.2.2.
40.2. Lessor shall have the following rights:
40.2.1 To change the name, address or title of the Office
Building Project or building in which the Premises are located Not less than
ninety (90) days' prior written notice;
40.2.2 To, at Lessee's expense, provide and install Building
standard graphics on the door of the Premises and such portions of the Common
Areas as Lessor shall reasonably deem appropriate;
40.2.3 To permit any lessee the exclusive right to conduct any
business as long as such exclusive does not conflict with any rights expressly
given herein; and
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40.2.4 To place such signs, notices or displays as Lessor
reasonably deems necessary or advisable upon the roof, exterior of the buildings
or the Office building Project or on pole signs in the Common Areas.
40.3. Lessee shall not:
40.3.1 Use a representation (photographic or otherwise) of the
Building or the Office Building Project or their name(s) in connection with
Lessee's business; or
40.3.2 Suffer or permit anyone, except in emergency, to go
upon the roof of the Building.
41. EASEMENTS.
41.1. Lessor reserves to itself the right, from time to time, to grant
such easements, rights and dedications that Lessor deems necessary or desirable,
and to cause the recordation of the Parcel maps and restrictions, so long as
such easements, rights, dedications, maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall
constitute a material default of this Lease by Lessee without the need for
further notice to Lessee.
41.2. The obstruction of Lessee's view, air or light by any structure
erected in the vicinity of the Building, whether by Lessor or third parties,
shall in no way affect this Lease or impose any liability upon Lessor.
42. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the provisions
hereof, the party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall be
regarded as a voluntary payment, and there shall survive the right on the part
of said party to institute suit for recovery of such sum. If it shall be
adjudged that there was no legal obligation on the part of said party to pay
such sum or any part thereof, said party shall be entitled to recover such sum
or so much thereof as it was not legally required to pay under the provisions of
this Lease.
43. AUTHORITY. If Lessee is a corporation, trust, or general or limited
partnership, Lessee, and each individual executing this Lease on behalf of such
entity represent and warrant that such individual is duly authorized to execute
and deliver this Lease on behalf of said entity. If Lessee is a corporation,
trust or partnership, Lessee shall, within thirty (30) days after execution of
this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
44. CONFLICT. Any conflict between the printed provisions, Exhibits or Addenda
of this Lease and the typewritten or handwritten provisions, shall be controlled
by the typewritten or handwritten provisions.
45. NO OFFER. Preparation of this Lease by Lessor's agent and submission of same
to Lessee shall not be deemed an offer to Lessee to lease. This Lease shall
become binding upon Lessor and Lessee only when fully executed by both parties.
46. LENDER MODIFICATION. Lessee agrees to make such reasonable modifications to
this Lease as may be reasonably required by an institutional lender in
connection with the obtaining of normal financing or refinancing of the Office
Building Project.
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47. MULTIPLE PARTIES. If more than one person or entity is named as either
Lessor or Lessee herein, except as otherwise expressly provided herein, the
obligations of the Lessor or lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee,
respectively.
48. WORK LETTER. This Lease is supplemented by that certain Work Letter of even
date executed by Lessor and Lessee, attached hereto as Exhibit C, if any, and
incorporated herein by this reference.
49. ATTACHMENTS. Attached hereto are the following documents which constitute a
part of this Lease: Exhibits A & B, Addendum.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION
RELATING THERETO; THE PARTIES SHALL RELY SOLELY UPON THE ADVISE OF
THEIR OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE.
LESSOR LESSEE
Marina Glencoe, LLC, a California Yupi Internet, Inc. a Florida corporation
limited liability company
By /S/ By /s/ Luis E. San Miguel
------------------------------- --------------------------------------
its MANAGING MEMBER its CHIEF FINANCIAL OFFICER
By By Luis E. San Miguel
------------------------------- ------------------------------------
its its
--------------------- --------------------------
Executed at BEVERLY HILLS Executed at
--------------------- --------------------------
on 10/04/99 on 10/04/99
------------------------------- ------------------------------------
Address 721 N. Elm St. Address
-------------------------- ------------------------------
Beverly Hills, CA 90210
c/o PMI Mgmt.
1000 Roscomone Rd.
Los Angeles, CA 90017
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<PAGE>
ADDENDUM TO LEASE
50. HAZARDOUS MATERIALS.
50.1. LESSEE'S COVENANTS REGARDING HAZARDOUS MATERIALS.
50.1.1 LESSOR'S PRIOR CONSENT. Notwithstanding anything
contained in this Lease to the contrary, Lessee has not caused or permitted, and
shall not cause or permit any "Hazardous Materials" (as defined in subparagraph
50.1.2 below) to be brought upon, kept, stored, discharged, released or used in,
under or about the Office Building Project by Lessee, its agents, employees,
contractors, subcontractor licensees or invitees, unless (1) such Hazardous
Materials are reasonably necessary to Lessee's business and will be handled,
used, kept, stored and disposed of in a manner which complies with all
"Hazardous Materials Laws" (as defined in subparagraph 50.1.2 below); (2) Lessee
will comply with such other rules or requirements as Lessor may from time to
time impose, including without limitation that: (i) such materials are in small
quantities, properly labeled and contained; (ii) such materials are handled and
disposed of in accordance with the highest accepted industry standards for
safety, storage, use and disposal; and (iii) such materials are for use in the
ordinary course of the business (I.E. as with office or cleaning supplies); (3)
notice of and a copy of the current material safety data sheet is provided to
Lessor for each such Hazardous Material; and (4) Lessor shall have granted its
prior written consent to the use of such Hazardous Materials.
50.1.2 COMPLIANCE WITH HAZARDOUS MATERIALS LAWS. As used
herein, the term "Hazardous Materials" means any (1) oil, petroleum, petroleum
products, flammable substances, explosives, radioactive materials, hazardous
wastes or substances, toxic wastes or substances or any other wastes, materials
or pollutants which (i) pose a hazard to the Office Building Project or to
persons on or about the Office Building Project or (ii) cause the Office
Building Project to be in violation of any Hazardous Materials Laws (as
hereinafter defined); (2) asbestos in any form, urea formaldehyde foam
insulation, transformers or other equipment which contain dielectric fluid
containing levels of polychlorinated biphenyls, or radon gas; (3) chemical,
material or substance defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
waste," "restricted hazardous waste," or "toxic substances" or words of similar
import under any applicable local, state or federal law or under the regulations
adopted or publications promulgated pursuant thereto, including, but not limited
to, the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. 9601, ET SEQ.; the Resources Conservation Recovery
Act, 42 U.S. C. 6901, ET SEQ.; the Hazardous Materials Transportation Act as
amended, 49 U.S.C. 1801, ET SEQ.; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. 125-1, et SEQ.; Sections 25115, 25117, 25122.7, 25140,
25249.8, 25281, 25316 and 25501 of the California Health and Safety Code; and
Article 9 or Article 11 of Title 22 of the California Code of Regulations,
Division 4, Chapter 20; (4) other chemical, material or substance, exposure to
which is prohibited, limited or regulated by any governmental authority or may
or could pose a hazard to the health and safety of the occupants of the office
Building Project or the owners and/or occupants of property adjacent to or
surrounding the Office Building Project, or any other Person coming upon the
Office Building Project or adjacent property; and (5) other chemical, materials
or substance which may or could pose a hazard to the environment. As used here
the term "Hazardous Materials Laws" means any federal, state or local laws,
ordinances, regulations or policies relating to the environment, health and
safety, and Hazardous Materials (including, without limitation, the use,
handling, transportation, production, disposal, discharge or storage thereof) or
to industrial hygiene or the environmental conditions on, under or about the
Office Building Project, including, without limitation, soil, groundwater and
indoor and ambient air conditions. Lessee shall at all times and in all respects
comply with all Hazardous Materials Laws.
<PAGE>
50.1.3 HAZARDOUS MATERIALS REMOVAL. Upon expiration or earlier
termination of this Lease, Lessee shall, at Lessee's sole cost and expense,
cause all Hazardous Materials brought on the Office Building Project with
Lessor's consent to be removed from the Office Building Project in compliance
with all applicable Hazardous Materials Laws. If Lessee or its employees,
agents, or contractors violates the provisions of the foregoing two paragraphs,
or if Lessee's acts, negligence, or business operations contaminate, or expand
the scope of contamination of, the Office Building Project from such Hazardous
Materials, then Lessee shall promptly, at Lessee's expense, take all
investigatory and/or remedial action (collectively, the "Remediation") that is
necessary in order to clean up, remove and dispose of such Hazardous Materials
causing the violation on the Office Building Project or the underlying
groundwater or the properties adjacent to the Office Building Project to the
extent such contamination was caused by Lessee, in compliance with all
applicable Hazardous Materials Laws. Lessee shall further repair any damage to
the Office Building Project caused by the Hazardous Material contamination.
Lessee shall provide prior written notice to Lessor of such Remediation, and
Lessee shall commence such Remediation no later than thirty (30) days after such
notice to Lessor and diligently and continuously complete such Remediation. Such
written notice shall also include Lessee's method, time or procedure of the
Remediation. Lessee shall not take any Remediation in response to the presence
of any Hazardous Materials in or about the Office Building Project or enter into
any settlement agreement, consent decree or other compromise in respect to any
claims relating to any Hazardous Materials in any way connected with the Office
Building Project, without first notifying Lessor of Lessee's intentions to do so
and affording Lessor ample opportunity to appear, intervene or otherwise
appropriately assert and protect Lessor's interests with respect thereto.
50.1.4 NOTICES. Lessee shall immediately notify Lessor in
writing of (i) any enforcement, cleanup, removal or other governmental or
regulatory action threatened, instituted, or completed pursuant to any Hazardous
Materials Laws with respect to the Office Building Project; (ii) any claim,
demand, or complaint made or threatened by any person against Lessee or the
Office Building Project relating to damage, contribution, cost recovery
compensation, loss or injury resulting from any Hazardous Materials; and (iii)
any reports made to any governmental authority arising out of any Hazardous
Materials on or removed from the Office Building Project. Lessor shall have the
right (but not the obligation) to join and participate, as a party, in any legal
proceedings or actions affecting the Office Building Project initiated in
connection with any Hazardous Materials Laws.
50.2. INDEMNIFICATION OF LESSOR. Lessee shall indemnify, protect,
defend and forever hold Lessor harmless from any and all damages, losses,
expenses, liabilities, obligations and costs arising out of any failure of
Lessee to observe the foregoing limitations on covenants.
51. LESSOR'S DEFAULT. Any damages or judgments arising out of Lessor's default
of its obligations under this Lease shall be satisfied only out of Lessor's
interest and estate in the Office Building Project, and Lessor shall have no
personal liability beyond such interest and estate with respect to such damages
or judgments.
52. REMEDIES. The following is added to paragraph 13.2 of the Lease as an
additional provision: If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to, the obtaining of reasonably required
bonds, insurance policies, or governmental licenses, permits or approvals. The
costs and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefore.
53. BROKER'S COMMISSIONS. Lessee and Lessor each represent and warrant to the
other that neither has had any dealings with any person, firm, broker or finder
(other than those persons, if any, whose names
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are set forth in this Paragraph 53) in connection with the negotiation of this
Lease and/or the consummation of the transaction contemplated hereby, and no
other broker or other person, firm or entity is entitled to any commission or
finder's fee in connection with said transaction and Lessee and Lessor do each
hereby indemnify and hold the other harmless from and against any costs,
expenses, attorneys' fees or liability for compensation, commission or charges
which may be claimed by any such unnamed broker, finder or other similar party
by reason of any dealings or actions of the indemnifying party. Named brokers:
Lessor's Broker: LEE & ASSOCIATES
Lessee's Broker-. BAILES & ASSOCIATES
The commission payable to Lessor's Broker with respect to this Lease shall be
pursuant to the separate commission agreement in effect between Lessor and
Lessor's Broker. No other commission shall be payable, notwithstanding any other
provisions of the Lease, and no commission shall be paid on options, expansions,
or renewals. Lessor's Broker shall pay a portion of its commission to Lessee's
Broker, if so provided in any agreement between Lessor's Broker and Lessee's
Broker. Nothing in this Lease shall impose any obligation on Lessor to pay a
commission or fee to any party other than Lessor's Broker.
54. DELETED
55. SUBLEASE AND ASSIGNMENT REVENUES.
55.1. SUBLEASE REVENUES. In the event that Lessee subleases all or any
portion of the Premises and the total of all amounts payable to Lessee for any
month under any such sublease exceeds the total of all amounts payable to Lessor
hereunder for such month for the same space, the following shall apply to such
excess (the "Net Sublease Revenues"):
(i) the Net Sublease Revenues shall first be paid to
Lessee to the extent of the applicable monthly portion, (calculated by
amortizing each cost on a straight-line basis over the term of the applicable
sublease) of each of the following costs to the extent reasonably incurred): (A)
all brokerage commissions and attorneys' fees reasonably incurred by Lessee in
connection with such sublease; and (B) all improvement allowances and other
economic concessions (space planning allowances, moving allowances, etc.) paid
to such subtenant; and
(ii) 50% of any additional Net Sublease Revenues
received by Lessee for any month shall be paid to Lessor within five (5)
business days thereafter.
55.2. ASSIGNMENT REVENUES. In the event that Lessee assigns this Lease
with respect to all or any portion of the Premises, Lessee shall pay to Lessor
50% of the amount, if any, by which all amounts paid to Lessee in consideration
of such assignment exceed all brokerage commissions and attorneys' fees
reasonably incurred by the assigning Lessee in connection with such assignment.
Sublease Revenues, Assignment Revenues, and consideration shall include and not
be limited to base rent, additional rent, and other consideration payable by
assignee or sublessee (including key money and bonus money and any payment in
excess of the fair market value for services rendered by Lessee or personal
property transferred by Lessee to Assignee or Sublessee or assets, fixtures,
inventory equipment or furniture transferred by Subtenant or Assignee to
Lessee). Lessee, prior to execution of the sublessor assignment shall provide an
accurate written disclosure to Lessor of any consideration proffered than that
contained in the Sublease or Assignment documents.
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56. OPERATING EXPENSE GROSS UP. The following is added at the end of Paragraph
4.2:
If the Building is not ninety-five percent (95%) occupied during all or
any portion of the Base Year and/or any Comparison Year, Lessor shall make an
appropriate adjustment to the variable components of Operating Expenses for that
Base Year and/or any Comparison Year, as applicable, as reasonably determined by
Lessor employing sound accounting and management principles, to determine the
amount of Operating Expenses that would have been paid had the Building been
ninety-five percent (95%) occupied and the amount so determined shall be deemed
to have been the amount of Operating Expenses for that Base Year and/or
Comparison Year, as applicable.
57. REPAIR AND RESTORATION. Anything to the contrary in this Lease
notwithstanding, Lessor shall in no event be obligated or required to restore or
repair (i) any tenant improvements to a quality or design that exceeds building
standard or (ii) any alterations made by Lessee.
58. ASSIGNMENT AND SUBLETTING.
58.1. Without limiting Lessor's right to refuse to give such consent
for any other reason or reasons, Lessor may refuse to consent to a proposed
assignee or subtenant and shall be deemed to have acted reasonably if (a) the
proposed use to be made of the Premises by the proposed assignee or subtenant is
(i) not generally consistent with the character and nature of other tenancies
within the Building, (ii) a use which would conflict with any exclusive use
provision in any other lease with any other tenant in the Building, (iii) a use
which would be prohibited by any provision of this Lease, including without
limitation that rules and regulations which are a part hereof, (iv) a use which
is materially different from the use permitted in paragraph 6.1, or (v) a use
which would involve the generation, use, storage, treatment or disposal of any
Hazardous Materials: (b) the financial condition or responsibility of the
proposed assignee or subtenant is not reasonably satisfactory to Lessor or in
any event is not at least equal to that of Lessee as of the date hereof; (c) the
proposed assignee or subtenant would denigrate the image of the Building; or (d)
proposed assignee or subtenant or its proposed use of the Premises would be
materially inconsistent with or have an adverse impact on the tenant mix in the
Building.
59. ARBITRATION
In the event of any controversy, dispute, claim, or other disagreement
between or among the parties to the Lease, or any of them, and except as
otherwise set forth in this section, and section 74.5 (if any) any and all such
controversies, disputes, claims, or disagreements shall be resolved by mandatory
and binding arbitration as set forth in this section. The provisions of this
section contain the sole and exclusive methods, means, and procedures for
resolving any and all such controversies, disputes, claims, or disagreements.
The parties to the Lease hereby irrevocably waive any and all rights, if any, to
the contrary, including the right to a trial by jury, in favor of the exclusive
and mandatory binding arbitration provided for in this section, and shall at all
times conduct themselves in strict, full, complete, and timely compliance with
this section. Any and all attempts to circumvent the provisions of this section
shall be absolutely null and void, and of no force and effect whatsoever. It is
the intent of the parties to the Lease that any and all controversies, disputes,
claims, or disagreements which arise under or relate to the Lease, or which
involve the actual or purported performance or non-performance by any of the
parties to the Lease of any terms of the Lease (including, with limitation, any
claims as to the interpretation or validity of the Lease or of the scope of this
section) are encompassed within this provision, which is intended to be applied
as broadly as possible to any dispute implicating the Lease.
Notwithstanding the foregoing, this arbitration clause shall not apply
to any claim for unlawful detainer, which may be brought in any Court of proper
jurisdiction, nor to any matter where the amount of the controversy does not
exceed the principal sum of $5,000, exclusive of interest, cost, and attorneys'
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fees, nor to any matter where the relief requested by any of the parties is as a
matter of law not permissible or available in an arbitration proceeding nor to
any right to seek writs, injunctive relief, restraining orders or specific
performance. The parties by electing arbitration do not intend to limit their
ability to obtain a writ of attachment and shall have the same right as if a
lawsuit had commenced, and the parties hereby waive any provision of Civil Code
1281.8 to the contrary.
An arbitration under this section may be commenced at any time by any
party to the Lease. Prior to the commencement of any such arbitration, however,
the party seeking to commence the arbitration shall provide not less than ten
(10) days prior written notice, in accordance with the notice provisions of this
Lease, of his, her, or its intent to commence an arbitration. Such notice shall
identify the nature of the dispute and the parties who will be joined in the
arbitration.
Ten (10) or more days after the giving of the notice of the intent to
commence the arbitration, any party to this Lease may file or otherwise commence
an arbitration as set forth in this section. The arbitration shall be submitted
to one of the following organizations, at the sole and absolute discretion of
the party who first provided the notice of intent to commence the arbitration,
and who then commences the arbitration:
1. The Los Angeles office of the American Arbitration
Association, in accordance with the commercial arbitration
rules of the American Arbitration Association; or
2. The Judicial Arbitration and Mediation Services
(JAMS/Endispute), Los Angeles or Santa Monica office; or
3. The Los Angeles County Bar Association Dispute Resolution
Services.
4. Any court of competent jurisdiction.
5. Only in the cases of the collection of rent owed by Lessee or
CAM disputes, by any professional association of lawyers in
existence for not less than ten years with more than 100
members and whose geographical boundaries extend to Los
Angeles County.
Irrespective of which of the five above-referenced organizations are
selected by the party giving the initial notice of and commencing the
arbitration, the following rules and procedures of the arbitration shall apply:
1. The matter shall be presided over and decided by a single, neutral
arbitrator.
2. The arbitrator shall be either a retired judge of the Superior Court
of the State of California, or a retired appellate justice of the California
Court of Appeals, or a retired United States District Judge, or a lawyer
actively engaged in the licensed and full time practice of law in the County of
Los Angeles for a continuous period of not less than ten (10) years immediately
preceding the selection of such person as an arbitrator. In the case of CAM
disputes, the arbitrator may be a Certified Public Accountant.
3. The arbitrator shall not at any time have ever represented or
otherwise acted on behalf of any of the parties to the arbitration.
4. No party to the Lease shall communicate with the arbitrator,
directly or indirectly, except in the presence of all other parties to the
arbitration, except to the extent that the parties may submit written materials
in accordance with the rules of the arbitrator or arbitration organization.
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5. Except in cases of claims exceeding $200,000.00, the arbitrator
shall be appointed no later than thirty (30) days after the initial filing of
the arbitration. It is the intent of the parties that the arbitrator reach his
or her decision within a maximum of sixty (60) days after the appointment of the
arbitrator, and no party shall take any action which would result in any delay
of such proceedings.
6. The selection of the specific arbitrator to hear the matter on
behalf of the American Arbitration Association, JAMS/Endispute, or the Los
County Bar Association, shall be made in accordance with the neutral selection
procedures established by such organizations from time to time, and not
unilaterally by the party commencing the arbitration.
7. The parties agree that the arbitrator shall have no liability
whatsoever for any acts or omissions performed or omitted in good faith pursuant
to the provisions of this section.
8. The arbitrator shall enforce and interpret the rights and
obligations set forth in the Lease to the full extent permitted by law; shall
fix and establish any and all rules as the arbitrator shall consider to be
appropriate in the arbitrator's sole and absolute discretion to govern the
proceedings before the arbitrator consistent with the established rules of the
arbitration organization through which he or she is appointed, including any and
all rules of discovery, procedure, and/or evidence, except as otherwise set
forth in this Section 59; shall properly enter a default judgment if the other
party fails to answer or otherwise respond to the arbitration petition or
complaint in a timely fashion; shall make and issue any and all orders, final or
otherwise, and any all awards, as any court of competent jurisdiction sitting at
law or in equity could make and as the arbitrator shall consider appropriate in
the arbitrator's sole and absolute discretion, to the fullest extent permissible
by law, including the awarding of any and all monetary damages and attorneys'
fees, and any and all provisional remedies and injunctive relief, to the fullest
extent permitted by law.
9. Discovery shall be governed by the rules of the body pursuant to
which the arbitration proceeding is initiated and conducted, except to the
fullest extent permitted by law, the parties agree that, except for claims
exceeding $200,000.00, there shall be no pre-trial discovery, except for: no
more than one (1) deposition taken by each party to the dispute, which
deposition shall last for no more than four (4) hours, and shall not include or
require the production of any documents at the deposition; no document requests,
interrogatories, or requests for admission shall be permitted, however, each
party shall exchange with each other party, and provide in writing to each other
party, not less than fifteen (15) days before the date first set for the
commencement of the arbitration: (1) a witness list including the names,
addresses, and phone numbers of all witnesses who the party proposes to have
testify, together with a brief statement of the nature and subject matter of the
witnesses' anticipated testimony; and (2) a full complete, and legible set of
any and all exhibits which the party anticipates introducing into evidence at
the trial (except for purposes of impeachment), together with an exhibit list
identifying each such document by date, general description, and exhibit number.
10. Except for claims exceeding $200,000.00, if any party wishes to
present expert (opinion) testimony through non-percipient, retained experts,
then, not later than twenty (20) days before the date first set for the
commencement of the arbitration, such party shall disclose the identity,
address, and phone number of such expert, together with a full written report
containing all of the information and meeting all of the requirements of Rule
26(a)(2)(B) of the Federal Rules of Civil Procedure, and all other parties shall
have twenty (20) days from the date of such disclosure to: (a) counter-designate
a equal number of expert witnesses for each such topic or subject matter; and
(b) similarly provide a full written report, as specified above.
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11. Except for claims exceeding $200,000.00, each side at the
arbitration shall have a maximum of a single full and regular business day to
present its side of the arbitration, including opening statement, examination of
its witnesses, cross-examination of any witnesses called by any other side, the
presentation of evidence, and closing argument.
12. The arbitration, and all proceedings and hearings leading up to the
arbitration, shall be conducted without a court reporter, except that any party
who so requests may, at that party's expense, have a certified shorthand
reporter transcribe the proceedings. The party shall pay for the certified
shorthand reporter, but any party shall be able to obtain a copy of the
transcript at the cost of the party making the request.
13. The decision of the arbitrator shall be final and binding, and may
be confirmed and entered by any court of competent jurisdiction at the request
of any party. The decision of the arbitrator shall not be appealable to a court
of competent jurisdiction or otherwise, but, rather, shall be final and binding
to the full extent permitted by the law, except that in the case of any award
which exceeds $250,000, exclusive of costs and interest (but inclusive of fees),
such an award may be appealed to any court of competent jurisdiction, in which
case the standard of review shall be for manifest error of law or fact.
14. The arbitrator shall retain jurisdiction over any dispute until the
arbitrator's award has been implemented, and judgment on such award may be
entered in any court having appropriate jurisdiction.
15. The prevailing party shall be awarded reasonable attorney fees, and
other costs and expenses incurred in connection with the arbitration, in
accordance with paragraph 31, and the non prevailing parry shall pay the cost of
the arbitrator and arbitration.
60. RECOVERY OF CONCESSIONS UPON EARLY TERMINATION. In the event that Lessee's
right of possession of the Premises is terminated prior to the end of the
initial term by reason of default, legal process, abandonment, or any other
reason other than mutual agreement of the parties, then immediately upon such
termination, an amount shall be due and payable by Lessee to Lessor equal to the
unamortized portion as of that date (which amortization shall exclude any Option
Terms and shall be based on an interest rate of ten (10%) percent per annum) of
the sum of (i) the value of the free Base Rent (i.e., the Base Rent stated in
this Lease to be abated as an inducement to Lessee's entering into this Lease)
enjoyed as of that date by Lessee, and (ii) the amount of all commissions paid
by Lessor in order to procure this Lease.
61. BASE RENT - INITIAL TERM. The monthly Base Rent during the initial THREE
year term shall be as set forth in the following schedule which shall be payable
on the first day of each month as provided in paragraph 4.1:
MONTHS TOTAL MONTHLY
BASE RENT
------ -------------
1 - 12 $3,884.00
13- 24 $3,981.10
25- 36 $4,175.30
IN THE EVENT THAT BOTH CONDITIONS REQUIRED IN PARAGRAPH 75 ARE MET WITHIN NINETY
DAYS OF LEASE EXECUTION, THE MONTHLY BASE RENT DUE FOR MONTH 36 IN THE AMOUNT OF
$4,175.30 SHALL BE ABATED. AT ANY TIME DURING THIS LEASE, AT LESSOR'S OPTION,
LESSOR SHALL HAVE THE RIGHT TO PAY TO LESSEE IN CASH THE PRESENT VALUE OF THE
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REMAINING AMOUNT OF ANY CREDITS DUE TENANT AGAINST ITS RENT. THE PRESENT VALUE
OF THE CREDITS SHALL EQUAL THE AMOUNT OF STILL REMAINING, FOR FUTURE MONTHS
DISCOUNTED FOR TIME AT THE RATE OF 5% PER ANNUM. UPON RECEIPT OF SUCH MONEY,
LESSEE SHALL RECEIVE NO FURTHER CREDITS AGAINST ITS RENT UNDER THIS PARAGRAPH
AND SHALL, UPON THE REQUEST OF LESSOR, EXECUTE AN AMENDMENT, WHICH SHALL
EVIDENCE THAT ALL OBLIGATIONS UNDER THIS PARAGRAPH HAVE BEEN SATISFIED.
62. Omitted.
63. DELIVERY OF POSSESSION: Notwithstanding anything to the contrary in
paragraph 3.2.1(4), possession shall be considered tendered upon the earlier of
(1) two (2) days after notice from Lessor to Lessee of the occurrence of the
items in (1) of paragraph 3.2.1 of the Lease or (2) the date that Lessee
occupies the suite.
64. CAPITAL IMPROVEMENTS REDUCING OPERATING EXPENSES. Notwithstanding any other
provision of paragraph 4.2.5 of the original Lease, the cost of any repair or
replacement constituting a capital costs shall be included in operating expenses
by amortizing the cost of the repair or replacement over its useful life if the
repair or replacement was made wholly or partially for the purpose of reducing
operating expenses. Notwithstanding anything to the contrary in paragraph 4.2,
the determination of a replacement of equipment or improvement's useful life and
if over five years or mandated by a government agency, its amortization period
shall be reasonably determined by Lessor.
65. DISPUTES AS TO PAYMENTS OF RENT. Lessee agrees to pay the Rent required
under this Lease within the time limits set forth in this Lease. If Lessee
receives from Lessor an invoice, statement, or notice, which is sent by Lessor
in good faith, and Lessee in good faith disputes whether all or part of such
Rent is due and owing, Lessee shall nevertheless pay to Lessor the amount of the
Rent indicated on the invoice or statement until Lessee receives a final
judgment from a court of competent jurisdiction (or when arbitration is
permitted, receives a final award from an arbitrator) relieving or mitigating
Lessee's obligation to pay such Rent. In such instance where Lessee shall,
concurrently with the payment of such rent, provide Lessor with a letter or
notice entitled "Payment Under Protest", specifying in detail why Lessee is not
required to pay all or part of such Rent. Lessee will be deemed to have waived
its right to contest any past payment of Rent unless it has filed a lawsuit
against Lessor (or when arbitration is permitted or required, filed for
Arbitration and has served Lessor with notice of such filing), and has served a
summons on Lessor, within one (1) year of such payment or the requirement
therefor. Until an Event of Default by Lessee occurs, Lessor shall continue to
provide the services and utilities required by this Lease. Inconvenience
resulting from noise or conditions related to the construction of tenant
improvements in other premises or renovation to the Building shall not be
grounds for rent abatement.
66. CONFLICT. In the event of a conflict between the Lease and the Addendum, the
Addendum shall control.
67. SUBORDINATION AND ESTOPPEL STATEMENT. Lessee agrees that the Lenders holding
any such Security Device shall have no duty, liability or obligation to perform
any of the obligations of Lessor under this Lease, but that in the event of
Lessor's default with respect to any such obligation, Lessee will give any
Lender whose name and address have been furnished Lessee in writing for such
purpose notice of Lessor's default and allow such Lender thirty (30) days
following receipt of such notice for the cure of said default before invoking
any remedies Lessee may have by reason thereof. If any Lender shall elect to
have this Lease and/or any Option granted hereby superior to the lien of is
Security Device and shall give written notice thereof to Lessee, this Lessee and
such Options shall be deemed prior to such Security Device, notwithstanding the
relative dates of the documentation or recordation thereof. Subject to the
non-disturbance provisions in the Lease, Lessee agrees to attorn to a Lender or
any other party who acquires Ownership of the Premises by reason of a
foreclosure of a Security Device, and that in the event
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of such foreclosure, such new owner shall not: (i) be liable for any act or
omission of any prior lessor or with respect to events occurring prior to
acquisition of ownership, (ii) be subject to any offsets or defenses which
Lessee might have against any prior lessor (iii) be bound by prepayment of more
than one (1) month's rent or (iv) be bound by any assignment surrender,
termination, cancellation, waiver, release amendment, or modification of the
Lease made without its express written consent, or be liable for the return of
any security deposit. Tenant shall provide an AIREA 1987 Standard Tenant
Statement in accordance with the terms of paragraph 16a and in addition to any
other document required in paragraph 30, a nondisturbance, attornment, and
subordination agreement in favor of lender in the form as typically required by
GE Capital or, upon Lessor's election, any other commercially reasonable form.
68. LESSOR'S PROPERTY. All alterations, improvements, fixtures and or equipment
which may be permanently installed and/or affixed in or about the Premises shall
be and become the property of Lessor at the termination or earlier expiration of
this Lease, regardless of who pays for such alterations, improvements, fixtures
and/or equipment and Lessee may not remove any such items during the Term,
expiration or other earlier termination of this Lease unless any such items are
specifically exempted from this provision elsewhere in this Lease or by written
amendment thereto. Notwithstanding the foregoing and anything to the contrary
contained herein, all alterations, improvements, fixtures and or equipment
existing in or about the Premises prior to the date of this Lease or installed
and or affixed in or about the Premises at Lessor's expense or with any
improvement allowance funds provided to Lessee by Lessor shall become the
property of Lessor upon installation in or about the Premises.
69. RIGHT TO MAKE IMPROVEMENTS. Lessor shall have the right to improve other
tenant suites and normal repairs and restoration to the Property, and Lessee
acknowledges that the concomitant noise and inconvenience shall be temporarily
permitted in a manner as consistent with industry practice.
70. EFFECTIVENESS OF LEASE. The Lease shall not be effective until it is
mutually signed and delivered to both parties, and neither party should
detrimentally rely until such time. No amendment or modification shall be
effective until it is mutually signed and delivered to both parties, and neither
party should rely upon any amendment or modification until such time.
71. LIGHT BULBS. Lessor shall only be responsible for replacement of tubular
florescent bulbs.
72. EXCESS USAGE. Notwithstanding anything to the contrary in the Lease, Lessee
hereby acknowledges and agrees that the HVAC and the electrical systems for the
Building and the Premises were designed primarily for general office use and not
for the HVAC and electrical load requirements of "industrial" and/or
"entertainment" equipment including, without limitation, equipment used for or
in the process of producing and editing motion pictures and television/cable
programming. Accordingly, Lessee shall not without Lessor's prior consent, which
may be withheld in its sole discretion, use heat-generating equipment or other
lighting, machinery or equipment including, without limitation, computers,
telephone switches, photocopiers and electronic data processing machines which
may effect the temperature otherwise maintained in any portion of the Premises
or the Building by the HVAC system (except that with respect to normal
fractional office equipment this restriction shall only be applicable to the
usage thereof beyond what is customary for general office purposes.) If such
temperatures is affected as a result of any such use or as a result of (i) the
occupancy of the Premises by more than one person per two hundred (200) square
feet of Rentable Area therein; or (ii) an average electrical demand of three (3)
watts (connected load) per square foot of Usable Area in the Premises, or six
(6) watts per square foot per any one office (the "Standard Electrical Usage"),
Lessor shall have the right (in addition to and not in lieu of all its other
rights contained in the Lease arising from a Lessee default) to install any
machinery or equipment which Lessor reasonably deems necessary to restore
temperature balance, including, without limitation, reconfiguration of the
ductwork distribution, upgrading or adding additional VAV boxes, installation of
additional HVAC compressor units, and the cost thereof including the cost of
equipment
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and installation and any additional cost of operation and maintenance incurred
thereby, shall be paid by Lessee to Lessor upon demand by Lessor. Lessor makes
no representation with respect to the adequacy of fitness of the HVAC equipment
in the building to maintain temperatures which may be required for, or because
of any equipment of Lessee, and Lessor shall have no liability for loss or
damage in connection therewith.
ELECTRICITY. In light of the acknowledgments contained above in this
Section 72 and as an inducement to Lessor to enter into this Lease with Lessee,
Lessee agrees that it shall not exceed the Standard Electrical Usage, without
the prior written consent of Lessor, which may be withheld in its sole
discretion. In furtherance thereof, Tenant shall not (A) install additional
electrical outlets in the Premises or (B) install or operate in the Premises any
electrically operated machinery, appliance or equipment (including without
limitations, computers, electronic data processing machines, word processors,
photocopiers, and punch card machines, and machines used in excess of 110 volts)
which would exceed the capacity of the Building Systems as determined by Lessor
in its sole discretion. As a condition of Lessor's approval of either (A) or (B)
above, Lessee shall pay directly (instead of as part of Operating Expenses and
in addition to Operating Expense payments pursuant to Section 5.1) for the cost
of electrical current (at rates no higher than that charged by the public
utility providing similar service) used by Lessee in excess of the Standard
Electrical Usage. The amount of such excess usage shall be determined by Lessor
in its sole discretion. As a further condition of Lessor's approval of either
(A) or (B) above or, in any event, if Lessor determines at any time during the
term that Lessee is using electric current in excess of the Standard Electrical
Usage, Lessor may, in its sole and absolute discretion, install a submeter on
any floor or floors of the Premises to determine the actual amount of electric
current which Lessee is utilizing from time to time. If such submeter indicates
that Lessee's use of electrical current is in excess of the Standard Electrical
Usage, then Lessee shall pay Lessor the actual cost of equipment and
installation for such submeter and shall pay directly (instead of as part of
Operating Expenses) for the actual cost of electric current in excess of the
Standard Electrical Usage, plus any additional ongoing expense incurred in
keeping account of the electric current so consumed. Lessor shall have the right
to install such submeter at any time and from time to time during the Term or
any renewal thereof. In the alternative, at Lessor's sole discretion, Lessor may
determine the estimated cost of the electric current in excess of the Standard
Electrical Usage by obtaining such estimate from a licensed mechanical engineer
or a reportable energy consultant or by any other reasonable means established
by Lessor and Lessee shall pay the cost of the estimated amount of electric
current in excess of the Standard Electrical Usage plus the cost of obtaining
the estimated amount.
HVAC/AFTER HOURS USAGE. Notwithstanding anything to the contrary in the
Lease, Lessee hereby agrees that Lessor is required to provide HVAC and/or
electrical current to the Premises during normal business hours, 8:00am to
6:00pm Monday through Friday and 9:00am to 1:00pm Saturday, which shall exclude
legal holidays. If Lessee requires HVAC and/or electrical current prior to or
after normal business hours, it shall pay for such usage at an hourly rate
established by an independent mechanical engineer. Lessee acknowledges that
Lessor may estimate the hours of such usage by (i) requiring the Lessee to
request Lessor's representative that the HVAC and/or electrical current be
turned on for specified hours, (ii) using monitoring devices at the Premises, or
(iii) by any other reasonable means established by Lessor.
73. BUSINESS INTERRUPTION. Lessee shall obtain and maintain loss of income and
extra expense insurance in amounts as will reimburse Lessee for direct or
indirect loss of earnings attributable to all perils commonly insured against by
prudent Lessees in the business of Lessee. Lessee shall name Lessor as an
additional insured pursuant to paragraph 8.5, and the provisions of the Waiver
of Subrogation pursuant to paragraph 8.6 shall apply.
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74. "AS IS PROVISION". Lessee further acknowledges and agrees that (i) Lessee
has inspected the Premises and is fully satisfied with the physical condition
thereof; (ii) Lessee is accepting possession of the Premises from Lessor in an
"as is" condition; (iii) Lessor is performing no work with respect to the
Premises; and (iv) any and all work required for Lessee to operate its business
in the Premises shall be performed by Lessee, at its sole cost and expense, in
accordance with plans and specifications approved in writing by Lessor.
75. PARTIAL RELEASE OF SECURITY DEPOSIT. IN THE EVENT LESSEE OBTAINS ADDITIONAL
EQUITY FINANCING AFTER THE LEASE COMMENCEMENT DATE, AND PROVIDED THAT LESSEE IS
NOT IN DEFAULT OF THIS LEASE, LESSOR SHALL RELEASE $11,652 OF THE SECURITY
DEPOSIT HELD IF ALL OF THE FOLLOWING CONDITIONS IN LESSOR'S REASONABLE JUDGMENT
ARE MET:
(A) THE NEW EQUITY FINANCING EXCEEDS $25,000,000.
(B) THE RATIO OF NEW EQUITY FINANCING IS THREE TIMES GREATER THAN THE
CASH OPERATING LOSS FOR the PREVIOUS TWELVE MONTHS.
11
<PAGE>
RULES AND REGULATIONS FOR
STANDARD OFFICE LEASE
AIR
(re-typed)
Dated: SEPTEMBER 22, 1999
By and Between: MARINA GLENCOE LLC AND YUPI INTERNET, INC.
GENERAL RULES
1. Lessee shall not suffer or permit the obstruction of any Common
Areas, including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor in
good faith judges to be a threat to the safety, reputation, or property of the
Office Building and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or
interfere with other lessees or persons having business with the Office Building
Project.
4. Lessee shall not keep animals or birds within the Office Building
Project, and shall not bring bicycles, motorcycles or other vehicles into areas
not designated as authorized for same.
5. Lessee shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6. Lessee shall not alter any lock or install new or additional locks
or bolts.
7. Lessee shall be responsible for the inappropriate use of any toilet
rooms, plumbing or other utilities. No foreign substances of any kind are to be
inserted therein.
8. Lessee shall not deface the walls, partitions or other surfaces of
the Premises or Office Building Project.
9. Lessee shall not suffer or permit any thing in or around the
Premises or Building that causes excessive vibration or floor loading in any
part of the Office Building Project.
10. Furniture, significant freight and equipment shall be moved into or
out of the building only with the Lessor's knowledge and consent, and subject to
such reasonable limitations, techniques and timing, as may be designated by
Lessor. Lessee shall be responsible for any damage to the Office Building
Project arising from any such activity.
11. Lessee shall not employ any service or contractor for services or
work to be performed in the Building, except as REASONABLY approved by Lessor.
12. Lessor reserves the right to close and lock the Building on
Saturdays, Sundays and legal holidays, and on other days between the hours of 6
P.M. and 8 A.M. of the following day. If Lessee uses the Premises during such
periods, Lessee shall be responsible for securely locking any doors it may have
opened for entry.
13. Lessee shall return all keys at the termination of its tenancy and
shall be responsible for the cost of replacing any keys that are lost.
14. No window coverings, shades or awnings shall be installed or used
by Lessee.
15. No Lessee, employee or invitees shall go upon the roof of the
Building.
16. Lessee shall not suffer or permit smoking or carrying of lighted
cigars or cigarettes in areas reasonably designated by Lessor or by applicable
government agencies as non-smoking areas.
17. Lessee shall not use any method of heating or air conditioning
other than as provided by Lessor.
18. Lessee shall not install, maintain or operate any vending machines
upon the Premises without Lessor's written consent
19. The Premises shall not be used for lodging or manufacturing,
cooking or food preparation OTHER THAN COFFEE MAKERS, MICROWAVE OVENS, TOASTER
OVENS USED FOR LESSEE'S EMPLOYEES AND INVITEES.
20. Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agency.
<PAGE>
21. Lessor reserves the right to waive any one of these rules or
regulations, and/or as to any particular Lessee, and any such waiver shall not
constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Lessee.
22. Lessee assumes all risk from theft or vandalism and agrees to keep
its Premises locked as may be required.
23. Lessor reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the appropriate
operation and safety of the Office Building Project and its occupants. Lessee
agrees to abide by these and such rules and regulations.
PARKING RULES
1. Parking areas shall be used only for parking by vehicles no longer
than full size, passenger automobiles herein called "Permitted Size Vehicles."
2. Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers, or
invitees to be loaded, unloaded, or parked in areas other than those designated
by Lessor for such activities.
3. Parking stickers or identification devices shall be the property of
Lessor and be returned to Lessor by the holder thereof upon termination of the
holder's parking privileges. Lessee will pay such replacement charge as is
reasonably established by Lessor for the loss of such devices.
4. Lessor reserves the right to refuse the sale of monthly
identification devices to any person or entity that willfully refuses to comply
with the applicable rules, regulations, laws and/or agreements.
5. -Lessor reserves the right to relocate all or a part of parking
spaces from floor to floor, within one floor, and/or to reasonably adjacent
offsite location(s), and to reasonably allocate them between compact and
standard size spaces, as long as the same complies with applicable laws,
ordinances and regulations.
6. Users of the parking area will obey all posted signs and park only
in the areas designated for vehicle parking. Unless otherwise instructed, every
person using the parking area is required to park and lock his own vehicle.
Lessor will not be responsible for any damage to vehicles, injury to persons or
loss of property, all of which risks are assumed by the party using the parking
area.
7. Unless otherwise instructed, every person using the parking area is
required to park and lock his own vehicle. Lessor will not be responsible for
any damage to vehicles, injury to persons or loss of property, all of which
risks are assumed by the party using the parking area.
8. Validation, if established, will be permissible only by such method
or methods as Lessor and/or its licensee may establish at rates generally
applicable to visitor parking.
9. The maintenance, washing, waxing or cleaning of vehicles in the
parking structure or Common Areas is prohibited.
10. Lessee shall be responsible for seeing that all of its employees,
agents and invitees comply with the applicable parking rules, regulations, laws
and agreements.
11. Lessor reserves the right to modify these rules and/or adopt such
other reasonable and non-discriminatory rules and regulations as it may deem
necessary for the proper operation of the parking area.
12. Such parking use as is herein provided is intended merely as a
license only and no bailment is intended or shall be created hereby.
2
EXHIBIT 10.03
================================================================================
SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
================================================================================
THIS SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this
"AGREEMENT") is made as of November 5, 1999, by and among YUPI INTERNET INC., a
Florida corporation (the "COMPANY"), INTERPRISE TECHNOLOGY PARTNERS, L.P., a
Delaware limited partnership ("INTERPRISE"), SONY CORPORATION OF AMERICA
("SONY") and IFX ONLINE, INC., a Delaware corporation ("IFX"), and the
Purchasers, as defined in the purchase agreement (the "PURCHASE AGREEMENT"),
dated as of the date hereof between the Company and the Purchasers (the
"PURCHASERS", and together with Interprise, Sony and IFX, the "INVESTORS").
RECITALS:
A. The Company and certain of the Investors are parties to that certain
Amended and Restated Registration Rights Agreement dated as of October 27, 1999
(the "PRIOR REGISTRATION AGREEMENT").
B. The Investors are holders of the Company's Class A Convertible
Preferred Stock (the "CLASS A PREFERRED"), Class B Convertible Preferred Stock
(the "CLASS B PREFERRED") and/or Class C Convertible Preferred Stock (the "CLASS
C PREFERRED", together with the Class A Preferred and Class B Preferred the
"PREFERRED STOCK").
C. The parties hereto desire to amend and restate the Prior
Registration Agreement in its entirety as set forth herein to include the
Purchasers and to make certain other changes.
D. The Company is willing to enter into this Agreement as an inducement
to the Purchasers to purchase shares of Class C Preferred pursuant to the
Purchase Agreement.
E. Unless otherwise provided in this Agreement, capitalized terms used
herein shall have the meanings set forth in SECTION 9 hereof.
AGREEMENT
The parties hereto agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. At any time after the earlier
to occur of (i) 180 days after the closing of the Initial Public Offering, and
(ii) November 5, 2001, the holders of a majority of the Registrable Securities
may request three (3) registrations under the Securities Act of all or any
portion of their Registrable Securities (but not less than twenty percent (20%)
of the Registrable Securities held by such holders requesting such registration)
on Form S-1 or any similar long-form registration ("LONG-FORM REGISTRATIONS"),
pursuant to this SECTION 1. The Company shall pay all Registration Expenses in
connection with the Long-Form Registrations. A registration shall not count as
one of the permitted Long-Form Registrations until it has become effective
(unless such Long-Form Registration has not become effective due to the fault of
the holders of Registrable Securities requesting registration) and no
registration shall count as one of the permitted Long-Form Registrations unless
the holders of Registrable Securities are able to register and sell at least
ninety percent (90%) of the Registrable Securities requested to be included in
such registration.
<PAGE>
(b) SHORT-FORM REGISTRATIONS. In addition to the Long-Form
Registrations provided pursuant to SECTION L(A), the holders of twenty percent
(20%) of the Registrable Securities shall be entitled to request two (2)
registrations under the Securities Act of all or part of their Registrable
Securities, the reasonably anticipated aggregate price to the public of which
would exceed $1,000,000, on Forms S-2 or S-3 or any similar short-form
registration ("SHORT-FORM REGISTRATIONS") in which the Company shall pay all
Registration Expenses. The Company shall use its reasonable best efforts to make
Short-Form Registrations on Form S-3 available for the sale of Registrable
Securities, including, without limitation, as a "shelf registration" if so
requested by the holders of twenty percent (20%) of the Registrable Securities.
Notwithstanding the foregoing, the Company shall not be obligated to effect any
Short-Form Registrations within 90 days after the effective date of any previous
Demand Registration or a previous registration in which holders of Registrable
Securities were given piggyback rights pursuant to SECTION 2.
(c) DEMAND REGISTRATIONS. All registrations requested pursuant
to SECTIONS L(A) and (B) are referred to herein as "DEMAND REGISTRATIONS."
Demand Registrations shall be Short-Form Registrations whenever the Company is
permitted to use any applicable short form. Each request for a Demand
Registration shall specify the approximate number of Registrable Securities
requested to be registered and the anticipated per share price range for such
offering. Within ten (10) days after receipt of any such request, the Company
shall give written notice of such requested registration to all other holders of
Registrable Securities and, except as provided in SECTION 1(D) below, shall
include in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within fifteen
(15) days after the receipt of the Company's notice.
(d) PRIORITY ON DEMAND REGISTRATIONS. Unless the holders
requesting registration pursuant to a Demand Registration have been able to
include all of the Registrable Securities requested by such holders in such
Demand Registration, the Company shall not include in any Demand Registration
any securities which are not Registrable Securities. If a Demand Registration is
an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the holders of Registrable
Securities making such Demand Registration, the Company shall include in such
registration: (i) first, the Investor Registrable Securities, pro rata among the
holders of such Investor Registrable Securities on the basis of the number of
shares owned by such holders; and (ii) second, other securities which are not
Registrable Securities requested to be included in such registration pursuant to
contractual registration rights ("OTHER REGISTRABLE SECURITIES"), pro rata among
the holders thereof on the basis of the number of their securities requested to
be included therein. Without the consent of the Company, any Persons, other than
holders of Registrable Securities, who participate in Demand Registrations which
are not at the Company's expense must pay their share of the Registration
Expenses as provided in SECTION 5 hereof.
(e) RESTRICTIONS ON LONG-FORM REGISTRATIONS. The Company shall
not be obligated to effect any Long-Form Registration within 180 days after the
effective date of a previous Long-Form Registration or a previous registration
in which the holders of Registrable Securities were given piggyback rights
pursuant to SECTION 2. The Company may postpone for up to 90 days the filing or
the effectiveness of a registration statement for a Demand Registration if the
Company believes that such Demand Registration would reasonably be expected to
have a material adverse effect on any proposal or plan by the Company or any of
its subsidiaries to engage in any acquisition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer,
reorganization or similar transaction; PROVIDED THAT in such event, the holders
of Registrable Securities initially requesting such Demand Registration shall be
entitled to withdraw such request and, if such request is withdrawn, such Demand
Registration shall not count as one of the permitted Long Form Registrations
hereunder and the Company shall pay all Registration Expenses in connection with
such registration. The Company may delay a Demand Registration hereunder only
once in any twelve (12) month period.
-2-
<PAGE>
(f) SELECTION OF UNDERWRITERS. The holders of a majority of
the Registrable Securities included in any Long-Form Registration, which is a
Demand Registration, shall have the right to select the investment banker(s),
subject to the reasonable approval of a majority of the Board of Directors, and
manager(s) to administer the offering.
(g) OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement, the Company shall not grant to any Persons the right to require the
Company to register any equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such securities, which
rights are superior to or pari passu with the rights granted to the holders of
the Registrable Securities hereunder, without the prior written consent of the
holders of a majority of the Registrable Securities, PROVIDED, HOWEVER, that if
such grant of additional registration rights materially and adversely affect the
registration rights granted herein of a given class or series of stock in a
different manner than it does another class or series of stock, the grant of
such additional registration rights shall also require the consent of the
holders of a majority of the Registrable Securities held by the holders of the
class or series of stock so materially and adversely affected.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities under the Securities Act (other than the Initial
Public Offering or pursuant to a Demand Registration or a registration on Form
S-4, Form S-8 or any successor form) and the registration form to be used may be
used for the registration OF Registrable Securities (a "PIGGYBACK
REGISTRATION"), the Company shall give prompt written notice (in any event
within five (5) business days after its receipt of notice of any exercise of
demand registration rights other than under this Agreement) to all holders of
Registrable Securities of its intention to effect such a registration and shall
include in such registration, in accordance with the terms of this Agreement,
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within twenty (20) days after the receipt
of the Company's notice.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the
holders of Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such offering
within a price range acceptable to the Company, the Company shall include in
such registration (i) first, the securities the Company proposes to sell; (ii)
second, the Investor Registrable Securities, pro rata among the holders of such
Investor Registrable Securities on the basis of the number of shares owned by
such holders; and (iii) third, Other Registrable Securities requested to be
included in such registration, pro rata among the holders thereof on the basis
of the number of Other Registrable Securities requested to be included therein.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
Other Registrable Securities, and the managing underwriters advise the Company
in writing that in their opinion the number of securities requested to be
included in such registration exceeds the number which can be sold in an orderly
manner in such offering within a price range acceptable to the holders of a
majority of the Registrable Securities to be included in such registration, the
Company shall include in such registration (i) first, the securities requested
to be included therein by the holders of Other Registrable Securities requesting
such registration, (ii) second, the Investor Registrable Securities requested to
be included in such registration, pro rata among the holders of such Investor
Registrable Securities on the basis of the number of shares owned by such
holders; and (iii) third, any non-requesting Other Registrable Securities
requested to be included in such registration, pro rata among the holders
thereof on the basis of the number of their securities requested to be included
therein.
-3-
<PAGE>
3. HOLDBACK AGREEMENTS.
(a) HOLDERS OF REGISTRABLE SECURITIES. Each holder of
Registrable Securities agrees, in connection with the Company's Initial Public
Offering of securities and upon request of the Company or the underwriters
managing such Initial Public Offering of the Company's securities, not to sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for up to one hundred eighty (180) days
following the effective date of a registration statement of the Company filed
under the Securities Act. For avoidance of doubt, the foregoing restrictions
shall only apply if the Company's initial public offering is an Initial Public
Offering. With respect to any shares of the Company offered or traded in the
public market (including pursuant to the Company's Initial Public Offering or
any market that may develop pursuant to Rule 144A promulgated under the
Securities Act), each holder of Registrable Securities shall be permitted freely
to acquire or dispose of any such shares to the fullest extent permitted by law.
Notwithstanding the amendment provisions of this Agreement, this Section 3(a)
shall not be amended with respect to any holder of Registrable Securities
without the consent of such holder.
(b) THE COMPANY. The Company shall not effect any public sale
or distribution of any of its equity securities, or any securities convertible
into or exchangeable or exercisable for such securities, during the period
beginning seven (7) days prior to and ending 120 days following the first
effective date of any underwritten Demand Registration or any underwritten
Piggyback Registration (except as part of such Demand Registration or Piggyback
Registration or pursuant to registrations on Form S-4, Form S-8 or any successor
form), unless the underwriters managing the registered public offering otherwise
agree.
4. REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company shall
as expeditiously as reasonably possible:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable Securities
and use its best efforts to cause such registration statement to become
effective; PROVIDED THAT before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company shall furnish to the counsel
selected by the holders of a majority of the Registrable Securities included in
such registration statement copies of all such documents proposed to be filed,
which documents shall be subject to the review and comment (without obligation
being imposed on the Company thereby) of such counsel;
(b) notify each holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the Securities and Exchange Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a period
of not less than 120 days, if applicable, and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement; PROVIDED, HOWEVER, that if the Company is eligible to use Form S-3,
the holders of Registrable Securities may require the Company to keep such
registration effective as a "shelf registration" for a period of up to nine (9)
months;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
-4-
<PAGE>
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller; provided that the Company shall not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction, or (iii) consent to general service of
process in any such jurisdiction;
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use its best
efforts to secure designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system security" within the
meaning of Rule llAa2-1 of the Securities and Exchange Commission or, failing
that, to secure NASDAQ authorization for such Registrable Securities;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including effecting a stock split or
a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Securities and Exchange Commission,
and make available to its security holders, as soon as reasonably practicable,
an earnings statement covering the period of at least twelve (12) months
beginning with the first day of the Company's first full calendar quarter after
the effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(k) permit any holder of Registrable Securities, which holder,
in the Company's sole and exclusive judgment, might be deemed to be an
underwriter or a controlling Person of the Company, to participate in the
preparation of such registration or comparable statement and to require the
insertion therein of material furnished to the Company in writing, which in the
reasonable judgment of such holder and its counsel and counsel to the Company
should be included;
(l) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order;
-5-
<PAGE>
(m) subject to SECTION 4(D) above, use its reasonable best
efforts to cause any Registrable Securities covered by such registration
statement to be registered with or approved by such other governmental agencies
or authorities as may be necessary to enable the sellers thereof to consummate
the disposition of such Registrable Securities;
(n) obtain a cold comfort letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by cold comfort letters as the holders of a
majority of the Registrable Securities being sold reasonably request; and
(o) if the offering is underwritten and at the request of any
seller of Registrable Securities, and if and to the extent requested by any
underwriter of such offering, use its best efforts to furnish on the date that
Registrable Securities are delivered to the underwriters for sale pursuant to
such registration an opinion dated such date of counsel representing the Company
for the purposes of such registration, addressed to the underwriters and to such
seller, stating that such registration statement has become effective under the
Securities Act and that (i) to the best knowledge of such counsel, no stop order
suspending the effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the Securities
Act, (ii) the registration statement, the related prospectus and each amendment
or supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements contained therein) and (iii) to such
other matters as reasonably may be requested by counsel for the underwriters.
5. REGISTRATION EXPENSES.
(a) PAYMENT OF REGISTRATION EXPENSES. All expenses incident to
the Company's performance of or compliance with this Agreement, including
without limitation all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws, printing expenses, messenger and
delivery expenses, fees and disbursements of custodians, and fees and
disbursements of counsel for the Company (excluding expenses of counsel to
holders of Registrable Securities which are covered by SECTION 5(B)) and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Company (all such expenses being
herein called "REGISTRATION EXPENSES"), shall be borne as provided in this
Agreement, except that the Company shall, in any event, pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any liability insurance and
the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed, or on the NASD automated quotation system.
(b) REIMBURSEMENT OF REGISTRATION EXPENSES. In connection with
each Demand Registration and each Piggyback Registration, the Company shall
reimburse the holders of Registrable Securities included in such registration
for the reasonable fees and disbursements of up to $100,000 of one counsel
chosen by the holders of a majority of the Registrable Securities included in
such registration.
6. RULE 144 REPORTING.
With a view to making available to the holders of Registrable
Securities the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
-6-
<PAGE>
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act; and
(c) So long as a holder of Registrable Securities own any
Registrable Securities, furnish to such holder forthwith upon request: a written
statement by the Company as to its compliance with the reporting requirements of
said Rule 144 of the Securities Act, and of the Exchange Act (at any time after
it has become subject to such reporting requirements); a copy of the most recent
annual or quarterly report of the Company; and such other reports and documents
as such holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing it to sell any such securities without
registration.
7. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify, to the extent permitted by law, each holder of Registrable
Securities, its officers and directors and each Person who controls such holder
(within the meaning of the Securities Act) against all losses, claims, damages,
liabilities and expenses caused by any untrue or alleged untrue statement of
material fact contained in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as the same are
caused by or contained in any information furnished in writing to the Company by
such holder expressly for use therein or by such holder's failure to deliver a
copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such holder with a
sufficient number of copies of the same. In connection with an underwritten
offering, the Company shall indemnify such underwriters, their officers and
directors and each Person who controls such underwriters (within the meaning of
the Securities Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.
(b) INDEMNIFICATION BY THE HOLDERS OF REGISTRABLE SECURITIES.
In connection with any registration statement in which a holder of Registrable
Securities is participating, each such holder shall furnish to the Company in
writing such information and affidavits as the Company reasonably requests for
use in connection with any such registration statement or prospectus and, to the
extent permitted by law, shall indemnify the Company, its directors and officers
and each Person who controls the Company (within the meaning of the Securities
Act) against any losses, claims, damages, liabilities and expenses resulting
from any untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, but only to
the extent that such untrue statement or omission is contained in any
information or affidavit so furnished in writing by such holder; provided that
the obligation to indemnify shall be individual, not joint and several, for each
holder, except as a result of actual fraud of such holder and shall be limited
to the net amount of proceeds received by such holder from the sale of
Registrable Securities pursuant to such registration statement.
(c) PROCEDURE FOR INDEMNIFICATION. Any Person entitled to
indemnification hereunder shall (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
(provided that the failure to give prompt notice shall not impair any Person's
right to indemnification hereunder to the extent such failure has not prejudiced
the indemnifying party) and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. An indemnifying party who is not entitled to, or elects not
to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one (1) counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim. The indemnifying party shall not be subject to any liability for any
settlement made by the indemnified party without its consent (but such consent
shall not be unreasonably withheld).
-7-
<PAGE>
(d) SURVIVAL. The indemnification provided for under this
Agreement shall remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director or
controlling Person of such indemnified party and shall survive the transfer of
securities. The Company also agrees to make such provisions, as are reasonably
requested by any indemnified party, for contribution to such party in the event
the Company's indemnification is unavailable for any reason.
8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder unless such Person:
(a) in the case of a registration which is underwritten,
agrees to sell such Person's securities on the basis provided in the applicable
underwriting arrangement; PROVIDED, HOWEVER, that no holder shall be required to
make any representations or warranties to the Company or the underwriters except
to the extent customary for similarly situated holders (other than
representations and warranties regarding such holder, such holder's ownership of
stock and such holder's intended method of distribution) and except as otherwise
provided in SECTION 7 hereof;
(b) as expeditiously as possible, notifies the Company, at any
time when a prospectus relating to such Person's Registrable Securities is
required to be delivered under the Securities Act, of the happening of any event
as a result of which such prospectus contains an untrue statement of a material
fact or omits any fact necessary to make the statements therein not misleading;
(c) complies with all reasonable requests made by the Company
or its counsel with respect to the registration of such Person's Registrable
Securities; and
(d) completes, executes and delivers all questionnaires,
powers of attorney, indemnities, underwriting agreements and other usual and
customary documents necessary or appropriate with respect to the offering of
such Person's Registrable Securities, and in the case of a registration which is
underwritten, necessary or appropriate under the terms of such underwriting
arrangements (subject to the provision in SECTION 8(A) above).
9. DEFINITIONS.
(a) The term "INITIAL PUBLIC OFFERING" means an initial
registered public offering of the Company's Common Stock by the Company under
the Securities Act in which (i) the aggregate offering price for such shares is
at least $22.5 million and (ii) the price paid by the public for such shares is
at least $5.75 per share (appropriately adjusted to reflect the occurrence of
any event described in Section 5.1D of the Company's Articles of Incorporation).
(b) The term "INVESTOR REGISTRABLE SECURITIES" means all
Registrable Securities (i) acquired by the Investors under the purchase
agreement dated April 23, 1999 (the "CLASS A REGISTRABLE SECURITIES"), under the
purchase agreement dated August 3, 1999, as amended (the "CLASS B REGISTRABLE
SECURITIES") and under the Purchase Agreement (the "CLASS C REGISTRABLE
SECURITIES"); and (ii) all other Registrable Securities subsequently acquired by
holders of Investor Registrable Securities (including Miller Technology
Management, L.P., its affiliates and partners pursuant to any liquidation of
Interprise). Investor Registrable Securities will continue to be Investor
Registrable Securities if held or acquired by any holder of Registrable
Securities.
(c) The term "PERMITTED TRANSFEREE" shall mean a Person to
whom a Permitted Transfer is made. The term "Permitted Transfer" is defined as a
permissible transfer pursuant to the Amended and Restated Shareholders Agreement
of even date herewith among certain of the Company's stockholders and the
Company as it may be amended from time to time.
-8-
<PAGE>
(d) The term "PERSON" means any individual, corporation,
partnership, joint venture, association, joint-stock company, limited liability
company, trust or unincorporated organization.
(e) The term "REGISTRATION EXPENSES" has the meaning set forth
in SECTION 5 above.
(f) The term "REGISTRABLE SECURITIES" means (i) any Common
Stock issued pursuant to or upon conversion or recapitalizaton of any securities
issued pursuant to the purchase agreement dated April 23, 1999, the purchase
agreement dated August 3, 1999 and the Purchase Agreement, (ii) any other Common
Stock issued or issuable with respect to the securities referred to in clause
(i) by way of a stock dividend or stock split or in connection with an exchange
or combination of shares, recapitalization, merger, consolidation or other
reorganization, and (iii) any other shares of Common Stock held by Persons
holding securities described in clauses (i) and (ii), inclusive above,
including, without limitation, any shares of Common Stock issued upon conversion
of the Company's preferred stock. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when they have been
distributed to the public pursuant to a offering registered under the Securities
Act or sold to the public through a broker, dealer or market maker in compliance
with Rule 144 under the Securities Act (or any similar rule then in force). For
purposes of this Agreement, a Person shall be deemed to be a holder of
Registrable Securities whenever such Person has the right to acquire such
Registrable Securities (upon conversion of any capital stock or upon exercise of
any options or warrants or in connection with a transfer of securities or
otherwise, but disregarding any restrictions or limitations upon the exercise of
such right), whether or not such acquisition has actually been effected.
(g) The term "SECURITIES ACT" means the Securities Act of
1933, as amended, or any similar federal law then in force.
(h) The term "SECURITIES EXCHANGE ACT" means the Securities
Exchange Act of 1934, as amended, or any similar federal law then in force.
(i) The term "LETTER AGREEMENT" means a certain agreement
dated October 27, 1999 between Sony and the Company, which provides for the
performance by Sony of certain services to the Company, as such may be amended
from time to time.
10. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement.
(b) REMEDIES. Any Person having rights under any provision of
this Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(c) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only upon the
prior written consent of the Company and the holders of a majority of all
Registrable Securities; PROVIDED, HOWEVER, that (i) no amendment or waiver which
materially and adversely affects the rights of the holders of the Class A
Registrable Securities, Class B Registrable Securities or Class C Registrable
Securities, respectively, hereunder may be made without the consent of a
majority of the Class A Registrable Securities, Class B Registrable Securities
or Class C Registrable Securities, as applicable and (ii) no amendment or waiver
of the definition of Initial Public Offering which would result in the
-9-
<PAGE>
reduction of the price paid by the public for such shares to below $5.75 per
share without the consent of the holders of sixty-six and two-thirds percent (66
2/3%) of the shares of Registrable Securities.
(d) SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities, including
without limitation any Permitted Transferee. Notwithstanding the foregoing, Sony
may assign this Agreement but only if immediately thereafter (i) Sony will have
all of the same obligations and liabilities under this Agreement to the same
extent as if such assignment shall not have occurred, (ii) Sony will have full
control and will perform directly under the Letter Agreement to the same extent
as if the assignment shall not have occurred, and (iii) the nature and character
of the Sony or other branding of products and services contemplated under the
Letter Agreement will remain substantially the same and continue to be
associated with the Company to the same extent as if the assignment shall not
have occurred.
(e) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(f) COUNTERPARTS; FACSIMILE TRANSMISSION. This Agreement may
be executed simultaneously in two or more counterparts, any one of which need
not contain the signatures of more than one party, but all such counterparts
taken together shall constitute one and the same Agreement. Each party to this
Agreement agrees that it will be bound by its own telecopied signature and that
it accepts the telecopied signature of each other party to this Agreement.
(g) DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Florida, without
giving effect to any choice of law or conflict of law rules or provisions
(whether of the State of Florida or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Florida.
(i) NOTICES. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient, sent to the recipient by reputable overnight
courier service (charges prepaid) or forty-eight (48) hours after deposited in
the United States mail, certified or registered to the recipient by postage
prepaid or by facsimile. Such notices, demands and other communications shall be
sent to each Investor at the addresses indicated on the Schedule of Holders
attached hereto and to the Company at the address of its corporate headquarters
or to such other address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending party.
(j) NEW PARTIES. During the term of this Agreement, the
Company may, with the consent of the Company's Board of Directors and the
holders of a majority of the Investor Registrable Securities, allow other
Persons to become parties to this Agreement by executing a Joinder Agreement,
and the SCHEDULE OF HOLDERS attached hereto as EXHIBIT A shall be revised and
updated accordingly. Any person who may, after the date hereof, purchase shares
of Class C Preferred pursuant to the Purchase Agreement shall become a
"Purchaser" for all purposes hereunder, all upon execution of a counterpart to
this Agreement signed by such person and the Company.
-10-
<PAGE>
(k) TERMINATION OF AGREEMENT. All registration rights granted
hereunder will expire and this Agreement will be terminated at the earlier of:
(a) such time as eighty-five percent (85%) of the Registrable Securities have
been sold to the public (either in an offering registered under the Securities
Act or pursuant to Rule 144 promulgated under the Securities Act); (b) such time
as the Investors, their Permitted Transferees and affiliates cease to hold,
collectively, twenty percent (20%) of the Registrable Securities; or (c) seven
(7) years from the date hereof.
(l) AMENDMENT OF PRIOR AGREEMENT. By their execution of this
Agreement, the Company and the Investors who were parties to the Prior
Registration Agreement agree that the Prior Registration Agreement is hereby
amended and restated in its entirety as set forth herein, and that this
Agreement supersedes the Prior Registration Agreement in its entirety. The
amendment and restatement of the Prior Registration Agreement effected hereby
shall be binding upon all persons and entities included as Investors in the
Prior Registration Agreement, despite the fact that one or more such persons
does not execute this Agreement, and any such non-executing person or entity
shall be deemed a party hereto and shall be deemed an Investor hereunder as if
such persons or entity had executed this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-11-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Second Amended and
Restated Registration Rights Agreement as of the date first written above.
YUPI INTERNET INC.
By: /s/ Oscar Coen
---------------------------------------------
Name: Oscar Coen
-------------------------------------------
Title: Chief Executive Officer
------------------------------------------
INTERPRISE TECHNOLOGY PARTNERS, L.P.
By: /s/ David R. Parker
---------------------------------------------
Name: David R. Parker
-------------------------------------------
Title: Managing Principal
-------------------------------------------
IFX ONLINE, INC.
By: /s/ Joel Edelstein
---------------------------------------------
Name: Joel Edelstein
-------------------------------------------
Title: President
------------------------------------------
SONY CORPORATION OF AMERICA
By: /s/
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
-12-
<PAGE>
PURCHASERS:
SELIGMAN COMMUNICATIONS AND
INFORMATION FUND, INC.
By: J. & W. Seligman & Co. Incorporated
Its Investment Advisor
By: /s/ Storm Boswick
---------------------------------------------
Name: Storm Boswick
-------------------------------------------
Title: Managing Director
------------------------------------------
SELIGMAN INVESTMENT OPPORTUNITIES
(MASTER) FUND-NTV PORTFOLIO
By: J. & W. Seligman & Co. Incorporated
Its Investment Advisor
By: /s/ Storm Boswick
---------------------------------------------
Name: Storm Boswick
-------------------------------------------
Title: Managing Director
------------------------------------------
SELIGMAN NEW TECHNOLOGIES FUND, INC.
By: J. & W. Seligman & Co. Incorporated
Its Investment Advisor
By: /s/ Storm Boswick
---------------------------------------------
Name: Storm Boswick
-------------------------------------------
Title: Managing Director
------------------------------------------
-13-
<PAGE>
ARCHERY VENTURE PARTNERS, LP
By: ARCHERY CAPITAL, LTD.,
Its General Partner
By: /s/ Erinch R. Ozada
---------------------------------------------
Name: Erinch R. Ozada
-------------------------------------------
Title: Chief Executive Officer
------------------------------------------
PORCELAIN PARTNERS, LP
By: /s/ David Leyrer
---------------------------------------------
David Leyrer, General Partner
NEXUS CAPITAL PARTNERS II, LP
By: /s/ David Leyrer
---------------------------------------------
David Leyrer, General Partner
COMCAST INTERACTIVE INVESTMENTS, INC.
By: /s/ Judie Dionglay
---------------------------------------------
Name: Judie Dionglay
-------------------------------------------
Title: Vice President
------------------------------------------
AMAN VENTURES L.L.C.
By: /s/ William J. Bell
---------------------------------------------
William J. Bell
General Partner
-14-
<PAGE>
LARCHWOOD HOLDINGS LTD.
By: /s/ Jonathan R. Hettinger
---------------------------------------------
Name: Jonathan R. Hettinger
-------------------------------------------
Title: Attorney-in-fact
------------------------------------------
CREDIT SUISSE FIRST BOSTON VENTURE FUND I, L.P.
By: QBB Management I, LLC
Its General Partner
By: /s/ Frank Quattrone
---------------------------------------------
Name: Frank Quattrone
-------------------------------------------
Title:
------------------------------------------
/S/ Andrew J. McKelvey
------------------------------------------------
Andrew J. McKelvey
WALLSTAR S.A.
By: /s/ Mirta Perez de Osinaga
---------------------------------------------
Name: Mirta Perez de Osinaga
Power of Attorney
BROOME STREET PARTNERS, LLC
By: /s/ Eugene Ruiz
---------------------------------------------
Name: EUGENE RUIZ
-------------------------------------------
Title: MANAGING PARTNER
------------------------------------------
-15-
<PAGE>
MATRIX TECHNOLOGY FUND, LLC
By: /s/ Rowan J. Farber
---------------------------------------------
Name: Rowan J. Farber
-------------------------------------------
Title:
------------------------------------------
GREY VENTURES INC.
By: /s/ Steven G. Felsher
---------------------------------------------
Name: Steven G. Felsher
-------------------------------------------
Title: Executive Vice President
------------------------------------------
GRANITE PRIVATE EQUITY II, LLC
By: /s/ Daren J. Wells
---------------------------------------------
Name: Daren J. Wells
-------------------------------------------
Title: Vice President
------------------------------------------
NEWS AMERICA INCORPORATED
By: /s/ Janet Nova
---------------------------------------------
Name: Janet Nova
-------------------------------------------
Title: Vice President
------------------------------------------
KISTLER ASSOCIATES
By: /s/ William Kistler
---------------------------------------------
Name: William Kistler
-------------------------------------------
Title: Managing Partner
------------------------------------------
-16-
<PAGE>
BANKAMERICA INVESTMENT CORPORATION
By: /S/ Jacques Gliksberg
---------------------------------------------
Name: Jacques Gliksberg
-------------------------------------------
Title: Managing Director
------------------------------------------
-17-
<PAGE>
EXHIBIT A TO
AMENDED AND RESTATED REGISTRATION AGREEMENT
SCHEDULE OF HOLDERS
Aman Ventures
10539 Bellagio Road
Los Angeles, CA 90077
Attn: Bill Bell
Telephone: (310) 476-4705
Andrew J. McKelvey
c/o Argent Asset Management
1633 Broadway
33rd Floor
New York, NY 10019
Attn: Brad Peters
Telephone: (212) 940-6940
Archery Venture Partners, LP
237 Park Avenue, Suite 900
New York, NY 10017
Attn: Bruce Smith
Telephone: (212) 808-7325
BankAmerica Investment Corporation
231 S. LaSalle - 12th Floor
Chicago, IL 60697
Attn: Adrienne Kaga
Telephone: (312) 828-2473
Broome Street Partners, LLC
c/o Morgan Stanley Dean Witter & Co.
1221 Avenue of the Americas, 4th Floor
New York, NY 10020
Attn: Brian Pfeifler
Telephone: (800) 419-2861 ext. 26115
A-1
<PAGE>
Comcast Interactive Investments, Inc.
1500 Market Street
Philadelphia, PA 19102
Attn: Louis Toth
Telephone: (215) 981-8446
Credit Suisse First Boston
240 Hanover Street
Palo Alto, CA 94304
Attn: Steve West
Telephone: (650) 614-5181
Granite Private Equity II, LLC
c/o Granite Associates
One Cablevision Center
Liberty, NY 12754
Attn: Daren Wells
Telephone: (914) 295-2739
Grey Ventures Inc.
777 3rd Avenue
New York, NY 10017
Attn: Lance Maerov
IFX Online, Inc.
17701 Biscayne Blvd. 3rd Floor
Aventura, FL 33160
Telephone: (305) 931-7270
Interprise Technology Partners, L.P.
c/o Miller Capital Management, Inc.
1001 Brickell Bay Drive
30th Floor
Miami, FL 33131
Attention: J.C. Campuzano
Telephone: (305) 374-6808
Kistler Associates
c/o Bessemer Trust Company
630 5th Avenue
New York, NY 10111
Telephone: (212) 708-9279
A-2
<PAGE>
Larchwood Holdings, Ltd.
c/o Fernando Montero/Denise Hernandez
Grand Bay Plaza
Suite 1101
2665 South Bay Shore Drive
Coconut Grove, FL 33133
Telephone: (305) 285-4107
News America Incorporated
1211 Avenue of the Americas
New York, NY 10036
Attn: Arthur M. Siskind
Telephone: (212) 852-7000
With a copy to:
News America Digital Media, Inc.
620 Avenue of the Americas
New York, NY 10011
Attn: Kathryn Fink
Telephone: (212) 462-5503
Nexus Capital Partners II, LP
160 Spear Street
San Francisco, CA 94105
Attn: Dave Leyrer
Telephone: (415) 247-7650
Porcelain Partners, LP
160 Spear Street
San Francisco, CA 94105
Attn: Dave Leyrer
Telephone: (415) 247-7650
Seligman Communications and
Information Fund, Inc.
100 Park Avenue
New York, NY 10017
Attn: Jim Curtis
Telephone: (212) 850-1615
A-3
<PAGE>
Seligman Investment Opportunities
(Master) Fund-NTV
Portfolio
100 Park Avenue
New York, NY 10017
Attn: Jim Curtis
Telephone: (212) 850-1615
Seligman New Technologies Fund, Inc.
100 Park Avenue
New York, NY 10017
Attn: Jim Curtis
Telephone: (212) 850-1615
Sony Corporation of America
c/o Sony Music Entertainment, Inc.
550 Madison Avenue
New York, New York 10022
Attn: Fred Ehrlich
Telephone: (212) 833-4568
Wallstar S.A.
c/o Zona Franca de Montevideo
Ruta 8 Km 17.500
Edificio 7, Oficina 102
Montevideo, 12200 Uruguay
Attn: Fernando M. Pertini
Telephone: 5411-4347-0440
A-4
EXHIBIT 10.05
LEASE - FACE PAGE
A) LEASE DATE October 11, 1999
B) BUILDING: 1688 Meridian Building
1688 Meridian Avenue
Miami Beach, Florida 33139
C) LANDLORD 1688 Partners Ltd.
D) ADDRESS OF LANDLORD 1688 Meridian Avenue
Miami Beach, Florida 33139
Attn: Management Office and
1111 Lincoln Road, Suite 800
Miami Beach, FL 33139
Attn: David Garfinkle
E) TENANT: Yupi Internet, Inc.
Fed. Id# 65-0796526
F) ADDRESS OF TENANT 1688 Meridian Avenue
Suite 902 and 10th Floor
Miami Beach, Florida 33139
Business #__________
G) TENANT'S LEGAL STRUCTURE: CORPORATION
State where entity organized: Florida
H) PREMISES: See EXHIBIT A Floor Plans
Suite #902 and 10th Floor, consisting
of approximately 14,971 square feet
I) PERMITTED USE OF PREMISES: General Office
J) LEASE TERM (yrs/mos): Seven (7) Years
(i) Commencement
Date: December 15, 1999
(ii) Rent Commencement
Date: December 15, 1999
(iii) Expiration Date: See Paragraph 5 of Lease
Initials: _________ _______
Landlord Tenant
<PAGE>
K) SECURITY DEPOSIT 200,000.00 Said Security Deposit shall be
("Deposit") payable as follows:
(i) $50,000 simultaneously with Tenant's
execution of this lease; and
(ii) $50,000 within forty-eight (48) hours
following issuance of building permit
for Tenant's Improvements; and
(iii) $50,000 within 48 hours following
issuance of certificate of Occupancy
or its equivalent for improvements to
Suite 902; and
(iv) $50,000 within 48 hours following
issuance of Certificate of Occupancy
or its equivalent for improvements to
10th Floor.
Provided and on the condition that Tenant is
not in default hereunder beyond the
applicable grace period, if any, and has
paid all Security Deposit installments
timely as set forth above, Tenant shall be
entitled to the return of a portion of said
Security Deposit in the sum of $30,000 per
year payable upon the expiration of each of
the first four (4) Lease Years for a total
of $120,000, with the balance of said
Security Deposit totaling $80,000 to be held
pursuant to the terms and conditions of this
Lease. Tenant shall have the right, upon 60
days prior written notice to Landlord, to
substitute the cash Security Deposit for an
unconditional irrevocable letter of credit
on terms, in form and drawn on a financial
institution acceptable to Landlord in its
sole but reasonable discretion.
L) PREPAID RENT $38,265.88 (inclusive of sales tax)
M) BASE RENT Year One: $431,164.80 Per Year $35,930.40
Per Month
Year Two: $448,411.39 Per Year $37,367.62
Per Month
Year Three: $466,347.85 Per Year $38,862.32
Per Month
Year Four: $485,001.76 Per Year $40,416.81
Per Month
Year Five: $504,401.83 Per Year $42,033.49
Per Month
Year Six: $524,577.90 Per Year $43,714.83
Per Month
Year Seven: $545,561.02 Per Year $45,463.42
Per Month
Initials: _________ _______
Landlord Tenant
-2-
<PAGE>
N) TENANT'S PROPORTIONATE SHARE 17.6%, based upon a fraction, the numerator
(Of operating expenses & taxes) of which is 14,971, the stipulated square
footage of the Premises and the denominator
of which is 85,000 the stipulated square
footage of the Building. (Subject to
adjustment as provided in Section R.)
O) NAMES & ADDRESSES OF Not Applicable
GUARANTOR(S)
P) BROKER: Abood & Associates, Inc. & Koniver Stern
Group
Q) PARKING Tenant shall have the right at all times to
lease and Landlord shall make available to
tenant for the term of this Lease, 15
parking spaces in the Building parking
facilities in such spaces designated by
Landlord. These spaces shall be designated
for Tenant's use only. The rate for these
spaces shall be $60.00 per space per month.
Landlord reserves the right to increase this
monthly rate upon sixty (60) days notice to
Tenant, provided that Tenant's rate shall
not increase more than five percent (5%)
annually on a cumulative basis.
Initials: _________ _______
Landlord Tenant
-3-
<PAGE>
R) OPTION TO EXPAND/RIGHT (a) Landlord agrees to provide Tenant with a
OF FIRST REFUSAL one-time option ("Option") to expand the
Premises to include Suite 201 and/or Suite
801 (collectively or individually "Expansion
Space"). Suite 201 is currently occupied by
a Tenant under a Lease which expires on
October 31, 2000. Suite 801 is currently
occupied by a Tenant under a Lease which
expires on April 30, 2001. In the event
Tenant elects to exercise the said
Option(s), Tenant shall provide Landlord
with written notice of such exercise on or
before June 30, 2000, as to Suite 201,
and/or on or before October 31, 2000 as to
Suite 801, time being of the essence, and in
such event, the Commencement Date and the
Rent Commencement Date for the Expansion
Space shall be the later of 30 days after
the existing tenant vacates or (i) December
1, 2000 as to Suite 201 and (iii) June 1,
2001 as to Suite 801, and the Lease shall
terminate as to each Expansion Space on the
Expiration Date herein, unless sooner
terminated as provided in the Lease. In the
event Tenant fails to timely exercise either
such Option in the manner provided above,
Tenant shall be deemed to have waived its
Option to expand the Premises as to such
Suite. In the event Tenant timely exercises
such Option(s), Tenant shall, on or before
five business days after receipt from
Landlord, execute an Addendum to this Lease,
adding the Expansion Space for which the
Option(s) is/are exercised, as a part of the
Premises leased hereunder. Such Expansion
Space shall be leased on the same terms and
conditions as are set forth herein, provided
that the initial Base Rent for Suite 201
shall equal $24.00 per square foot of
rentable space, herein stipulated to be
1,382 square feet and the initial Base Rent
for Suite 801 shall equal $28.50 per square
foot of rentable space, herein stipulated to
be 3,112 square feet. In addition to the
payment of all sales and use taxes thereon,
said Base Rent shall increase by an amount
equal to 4% per year, simultaneously with
the next and each ensuing increase in Base
Rent for the Premises. Further, in such
event, Tenant's Proportionate Share shall
increase based upon a fraction, the
numerator of which is the stipulated square
footage of the Premises inclusive of the
Expansion Space, (and Additional space, if
any) and the denominator of which is 85,000
square feet. The Expansion Space shall be
subject to all other terms and conditions of
the Lease in effect at the time of the
exercise of the Option(s), as if same were
originally included as part of the Premises.
Initials: _________ _______
Landlord Tenant
-4-
<PAGE>
b) Provided that Tenant is not in default
hereunder, Tenant shall have and is hereby
given a one-time Right of First Refusal (the
"Right") to lease any additional space on
the 9th floor of the Building if, as and
when any such space ("Additional Space")
becomes available. Upon any such Additional
Space becoming available, Landlord shall,
prior to offering same to third parties,
provide written notice of such availability
to Tenant, offering to lease such Additional
Space to Tenant upon the same terms and
conditions and at the rental rate then in
effect with respect to the Premises. Tenant
shall, within five (5) business days after
receipt of such written notice from
Landlord, notify Landlord in writing,
electing to lease the Additional Space upon
such terms and conditions. If Tenant, for
any reason, fails to deliver such written
notice to Landlord within said five-day
period, time being of the essence, it shall
be conclusively presumed that the Tenant has
waived and has elected not to exercise the
Right of First Refusal as to such Additional
Space. In the event Tenant exercises the
Right, Tenant Rent shall commence on the
Additional Space sixty (60) days from the
date of Tenant's acceptance of such space
and the Lease shall terminate as to such
Additional Space on the Expiration Date
herein, unless sooner terminated as provided
in the Lease. Tenant shall accept the
Premises in their "As Is" condition,
provided, however, Landlord shall provide
Tenant with a Tenant Improvement Allowance
not to exceed $10.00 per square foot. Tenant
shall be responsible to complete all Tenant
improvements. Landlord shall reimburse
Tenant upon completion of Tenant
Improvements which completion shall be
evident by a Certificate of Occupancy and
submission to Landlord of all documentation
reasonably requested, including, but not
limited to, a waiver and release of lien
upon final payment from all contractors,
subcontractors and materialmen, and a final
contractor's affidavit. All contractors,
architects and engineers shall be licensed
as such by the State of Florida and shall
have errors and omissions policies, in an
amount reasonably satisfactory to Landlord,
of which Landlord shall be named a third
party beneficiary. In the event Tenant
timely exercises the Right, Tenant shall, on
or before five business days after receipt
from Landlord, execute an Addendum to this
Lease, adding the Additional Space for which
the Right is exercised, as part of the
Premises leased hereunder. The Addendum
shall provide, inter alia, that the
Additional Space shall be leased on the same
terms and conditions as are set forth
herein, provided that the Base Rent shall be
equal to the then current per square foot
rent payable with respect to the Premises,
together with sales tax, Additional Rent and
all other sums due and payable as provided
in the Lease. Further, in such event,
Tenant's Proportionate Share shall increase
based upon a fraction, the numerator of
which is the square footage of the Premises
inclusive of the Additional Space (and
Expansion Space, if any), and the
denominator of which is 85,000 square feet.
In the event Tenant fails to exercise the
Right within the time and in the manner set
forth above, and/or otherwise fails to
execute the Addendum adding such Additional
Space as provided above, Tenant shall be
deemed to have waived its Right of First
Refusal as to such Additional Space, and
Landlord shall then have the right to lease
same to any third parties.
Initials: _________ _______
Landlord Tenant
-5-
<PAGE>
S) TENANT IMPROVEMENTS Landlord shall renovate in accordance with
the attached Exhibit A using building
standard materials except as denoted on the
attached Exhibit A. Any deviations from
Exhibit A shall be at the sole cost and
expense of Tenant. All changes shall be
evident by a change order signed by Tenant.
Tenant shall pay for such change orders
fifty percent (50%) upon acceptance of such
changes and fifty percent (50%) within ten
days of completion of work denoted on change
order and submission of invoice to Tenant
from Landlord.
T) NAMES OF AUTHORIZED
SIGNATORIES: --------------------------------------------
This is a legally binding document. Please read it thoroughly before you sign
it. The terms defined, dollar amounts specified and other items contained on
this FACE PAGE relate to various contents of the Lease and are an integral part
thereof. There are no agreements between the parties unless contained in writing
in this Lease.
Revised 10/1/99
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Initials: _________ _______
Landlord Tenant
<PAGE>
LEASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C>
1. Definitions.................................................................................................1
2. Parties.....................................................................................................1
3. Demised Premises............................................................................................1
4. Use.........................................................................................................1
5. Term........................................................................................................1
6. Base Rent...................................................................................................2
7. Additional Rent.............................................................................................3
8. Sales Tax...................................................................................................6
9. Security Deposit............................................................................................6
10. Completion of Improvements and Delivery of Possession....................................................7
11. Uses Prohibited..........................................................................................8
12. Rules and Regulations....................................................................................9
13. Assignments and Subletting...............................................................................9
14. Maintenance of Premises.................................................................................11
15. Alterations, Additions or Improvements..................................................................12
16. Destruction of Premises.................................................................................13
17. Entry and Inspection....................................................................................14
18. Indemnity and Liability.................................................................................14
19. Insurance...............................................................................................15
20. Service.................................................................................................16
21. Notices.................................................................................................17
22. Default.................................................................................................17
23. Attorneys' Fees and Costs...............................................................................19
24. Non-Waiver of Breach....................................................................................19
25. Subordination by Tenant.................................................................................19
26. Time....................................................................................................20
27. Transferability by Landlord.............................................................................20
28. Amendment of Lease......................................................................................20
29. Condemnation............................................................................................20
30. Intentionally Omitted...................................................................................21
31. Holding Over............................................................................................21
32. Additional Rent.........................................................................................21
33. Quiet Enjoyment.........................................................................................21
34. Prohibition of and Indemnity for Hazardous Materials....................................................21
35. Attornment..............................................................................................22
36. Estoppel Certificate....................................................................................22
37. Signage Identification..................................................................................22
38. Parking.................................................................................................22
39. Intentionally Omitted...................................................................................22
</TABLE>
Initials: _________ _______
Landlord Tenant
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
40. Brokerage...............................................................................................22
41. Recording...............................................................................................23
42. Confidentiality.........................................................................................23
43. Negation of Personal Liability..........................................................................23
44. Delay...................................................................................................24
45. Successors..............................................................................................24
46. Joint and Several Liability.............................................................................24
47. Captions and Paragraph Numbers..........................................................................24
48. Extended Meaning........................................................................................24
49. Partial Invalidity......................................................................................24
50. Governing Law...........................................................................................25
51. No Partnership..........................................................................................25
52. Radon Gas...............................................................................................25
53. Authority...............................................................................................25
54. Lease Validity..........................................................................................25
56. Intentionally Omitted...................................................................................25
57. Landlord Controlled Areas...............................................................................26
58. Occupancy Tax and Occupational Licenses.................................................................26
59. Cross Default...........................................................................................27
</TABLE>
Exhibit A Floor Plans
Exhibit B Construction Plans and Specifications
Exhibit C Rules and Regulations
Exhibit D Form of Subordination, Attornment and
Non-Disturbance Agreement
Initials: _________ _______
Landlord Tenant
-2-
<PAGE>
LEASE AGREEMENT
1. DEFINITIONS: When used in this Lease, the following terms shall have the
meaning set forth in this paragraph.
A. "Attorneys' Fees" shall mean all reasonable fees expended by
Landlord for the retention of attorneys at all TRIAL, TRIAL,
post-trial and appellate levels, and all reasonable costs
attendant thereto.
B. When used in Paragraphs 12, 14, 18 and 42 of this Lease,
"Tenant" shall mean and include, as and where the context
allows, Tenant and all of Tenant's officers, directors,
partners, employees, agents, contractors, licensees, guests,
customers, invitees, and all others over whom Tenant might
reasonably be expected to exercise control or for whom Tenant
is legally responsible.
C. "Gross Rent" shall mean the aggregate of Base Rent, Additional
Rent and other charges accruing under this Lease.
D. "Bad Check" shall mean a check from or for the benefit of
Tenant to Landlord that is returned as NSF or dishonored in
any manner.
2. PARTIES: This lease is made as of the Lease Date (as defined in Section A on
the FACE PAGE) between Landlord (as defined in Section C on the FACE PAGE) and
Tenant (as defined in Section E on FACEPAGE).
3. DEMISED PREMISES: Subject to the terms and provisions of this Lease. Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord the Premises (as
defined in Section H on the FACE PAGE) located in the Building (as defined in
Section B on the FACE PAGE). The exact location and dimensions of the Premises
within the Building are more particularly shown on the floor plans initialed by
the parties, attached to this Lease as EXHIBIT A, and hereby made a part hereof.
4. USE: The Premises shall be used for office space only and for no other
business or purpose whatsoever, without the prior written consent of Landlord.
Tenant shall exercise reasonable care in the use of the Premises and all other
portions of the Building. Tenant's use shall be further subject to the
provisions of PARAGRAPH 11 below.
5. TERM: The Term shall commence on the Commencement Date (as defined in Section
J on the FACE PAGE), and shall end (unless sooner terminated as provided herein)
at 11:59 p.m. Eastern Time on the date (the "EXPIRATION DATE") of the expiration
of the last of the number of years and months constituting the Lease Term (as
defined in Section J on the FACE PAGE) from the first day of the first (1ast)
full calendar month succeeding the Commencement Date, if the Commencement Date
is not the first day of a calendar month, or from the Commencement Date if such
date is the first day of a calendar month.
Initials: _________ _______
Landlord Tenant
<PAGE>
6. BASE RENT: A. As rental for the lease of the Premises, Tenant shall pay to
Landlord at the Address of Landlord (as defined in Section D on the FACE PAGE)
for each Lease Year, (a "Lease Year" shall be the twelve month period commencing
with the Commencement Date of this Lease and ending one year later; however, the
final Lease Year may contain less than twelve (12) months due to the expiration
or sooner termination of the term) the BASE RENT (as defined in Section M on the
FACE PAGE) (subject to escalation as described in PARAGRAPH 6 B BELOW) payable
in equal monthly installments, in advance, due on the first day of each calendar
month during the term of this Lease, free from all claims, demands or setoffs
against Landlord of any kind or character whatsoever. If the term of this Lease
shall begin or terminate on other than the first or last day respectively of a
calendar month, all rent and other charges accruing under this lease for such
portion of the partial calendar month shall be apportioned and paid on the basis
of a thirty day month. (i) Tenant shall be required to pay Landlord a late fee
of ten (10%) percent of the installment of Gross Rent then due, or $100.00,
whichever is greater, on any installment of Gross Rent, which is not received by
Landlord on or before the seventh (7th) day after its due date; provided that
for the first twelve (12) months of the Lease Term, Tenant shall be required to
pay Landlord a late fee of five (5%) percent for the first two such late
installments, or $100.00, whichever is greater, and provided further that the
said seven (7) day grace period, shall be extended to ten (10) days for the
first Lease Year only. (ii) In the event any installment of Gross Rent is not
received by Landlord on or before the fourteenth (14th) day after its due date,
Tenant shall be required to pay to Landlord a cumulative late fee of fifteen
(15%) percent of the installment of Gross Rent, or $200.00, whichever is
greater. All late charges shall be due immediately upon demand by Landlord
without setoff or defense. If any installment of Gross Rent remains overdue for
more than fifteen (15) days, in addition to the late fees, interest on such
installment at the maximum legal rate on the delinquent amount may be charged by
Landlord, such charge to be computed for the entire period for which the amount
is overdue after the fifteenth (15th) day past due. All late charges and
interest shall be due immediately upon demand by landlord without set-off or
defense.
B. In the event Tenant shall give Landlord in payment of the Gross Rent, a Bad
Check, Tenant shall pay to Landlord as compensation for Landlord's expenses in
connection with the handling of such check a fee in the amount of the greater of
$25.00 or 5% of the face amount of such check. Landlord shall have no obligation
to redeposit any Bad Check. In the event that, within any twelve (12) month
period during the term of this Lease, Tenant shall give to landlord more than
two (2) Bad Checks, Landlord shall have the option to require Tenant to pay all
subsequent payments of any and all sorts required under this Lease by means of
either cash or cashier's check drawn on a local branch of a Florida domiciled
bank.
Tenant's Base Annual Rent shall automatically increase as set forth in Section M
on the FACE PAGE without any need for Landlord to notify Tenant of such
increase. Failure of Landlord to notify Tenant of the new monthly Base Rent
installment amount shall not be deemed a waiver by Landlord of the increased
rental; the new monthly amount shall be payable, retroactive to the commencement
of the new Lease Year automatically.
-2-
Initials: _________ _______
Landlord Tenant
<PAGE>
7. ADDITIONAL RENT:
A. In the event that the cost to Landlord for the Operating Expenses of the
Building, as hereinafter defined, during any calendar year of the Lease Term
subsequent to the Base Year (herein defined as the year 2000) shall exceed the
cost to Landlord for the Operating Expenses of the Building during the Base
Year, Tenant shall pay to Landlord as Additional Rent Tenant's Proportional
Share (as such term is defined in Section N on the FACE PAGE) of the increase in
such costs for each calendar year, if any. The amount of such Additional Rent,
if any, due from Tenant shall be determined in accordance with the following
formula:
Proportionate Share X (Operating Expenses)-(Operating Expenses)=Additional Rent
(For Current Year) (For Base Year)
Such Additional Rent shall be prorated for any partial calendar year following
the commencement of the Lease Year.
The term "Operating Expenses" as used herein shall mean all expenses, costs and
disbursements of every kind and nature which Landlord shall pay or become
obligated to pay because of or in connection with the ownership, maintenance
and/or operation of the Building, (which shall include without further
reference, the parking facility) computed on the accrual basis, but shall not
include new capital improvements. By way of explanation and clarification, these
Operating Expenses shall include, without limitation, the following:
1. Wages and salaries of all employees engaged in operation and
maintenance of the Building, employer's social security taxes,
unemployment taxes or insurance, workers' compensation
premiums or taxes, and any other taxes which may be levied on
such wages and salaries, the cost of disability, medical and
hospitalization insurance, pension or retirement benefits, and
any other fringe benefits for such employees.
2. All supplies and materials used in the operation and
maintenance of the Building.
3. Cost of all utilities including water, sewer, electricity, gas
and fuel used by the Building and not charged directly to
another tenant.
4. Cost of customary building management, general and
administrative costs, janitorial services, trash and garbage
removal, security and guard services, painting, window
cleaning, landscaping and gardening, servicing and maintenance
of all systems and equipment, including, but not limited to,
elevators, plumbing, heating, air conditioning, ventilating,
lighting, electrical, security and fire alarms, fire pumps,
fire extinguishers and hose repair, cabinets, mail chutes and
staging, and damage caused by fire or other casualty not
otherwise recovered including the deductible and co-insurance
applicable to any insurance policies.
5. Cost of insurance for property, loss of rents, casualty and
other liability applicable to the Building and Landlord's
personal property used in connection therewith.
6. The amortized cost of any capital improvement which reduces
the Operating Expenses. In the event the Operating Expenses in
any year after the Base Year are reduced because of a capital
improvement, then the Operating Expenses for the
-3-
Initials: _________ _______
Landlord Tenant
<PAGE>
Base Year shall be reduced accordingly for the purpose of
determining Additional Rent as though such improvement or
automation was in effect during the Base Year. Landlord shall
notify Tenant after the end of the Base Year and each calendar
year thereafter during the term hereof, of the amount which
Landlord estimates (as evidenced by budgets prepared by or on
behalf of Landlord) shall be the amount of Tenant's
Proportionate Share of increases in Operating Expenses for the
then current calendar year and Tenant shall pay such sum in
advance to Landlord in equal monthly installments, during the
balance of said calendar year commencing on the first day of
the first month following Tenant's receipt of such
notification. Following the end of each calendar year after
the Base Year-Landlord shall submit to Tenant a statement
showing the actual amount which should have been paid by
Tenant with respect to increases in Operating Expenses for the
past calendar year, the amount thereon actually paid during
that year by Tenant and the amount of the resulting balance
due thereon, or overpayment thereof, as the case may be.
Within thirty (30) days after receipt by Tenant of said
statement, Tenant shall have the right, in person or by
Tenant's agent, at Landlord's office during reasonable office
hours, to inspect Landlord's books and records showing the
Operating Expenses for the Building for the calendar year
covered by said statement. Said statement shall become final
and conclusive between the parties, their successors and
assigns as to the matters set forth therein unless Landlord
receives written objections with respect thereto within said
thirty (30) days of Tenant's receipt of said statement. Any
balance shown to be due pursuant to said statement shall be
paid by Tenant to Landlord within thirty (30) days following
Tenant's receipt thereof and any overpayment shall be
immediately credited against Tenant's obligation to pay
expected Additional Rent in connection with anticipated
increases in Operating Expenses or, if by reason of any
termination of the Lease no such future obligation exists,
refunded to Tenant. Anything herein to the contrary
notwithstanding, Tenant shall not delay or withhold payment of
any balance shown to be due pursuant to a statement rendered
by Landlord to Tenant, pursuant to the terms hereof, because
of any objection which Tenant may raise with respect thereto.
Landlord shall promptly credit any overpayment found to be
owing to Tenant against Tenants Proportionate Share of
increases in Operating Expenses for the then current calendar
year (and future calendar years, if necessary) upon the
resolution of said objection or, if at the time of the
resolution of said objection the Lease Term has expired,
promptly refund to Tenant any overpayment found to be owing to
Tenant. Landlord agrees to maintain accounting books and
records reflecting Operating Expenses of the Building in
accordance with generally accepted accounting principles.
B. In the event that "Impositions" (as such term is hereinafter defined) against
the Building and/or the land on which it is located are increased during any
calendar year of the Lease Term subsequent to the Base Year over the amount of
said Impositions during the Base Year, then
-4-
Initials: _________ _______
Landlord Tenant
<PAGE>
Tenant shall pay to Landlord, as Additional Rent, Tenant's Proportionate Share
of the increases over the Base Year in such Impositions for each calendar year,
if any.
The term "Impositions" as used herein shall mean all impositions, tax
assessments (special or otherwise), water and sewer assessments and other
governmental liens or charges of any and every kind, nature and sort whatsoever,
ordinary and extraordinary, foreseen and unforeseen, and substitutes therefore,
including all taxes whatsoever (except only those taxes of the following
categories: any inheritance, estate, succession, transfer or gift taxes imposed
upon Landlord or any income taxes specifically payable by Landlord as a separate
tax paying entity without regard to Landlord's income sources arising from or
out of the Building and/or the land on which it is located) attributable in any
manner to the Building, the land on which the Building is located or the rents
(however the term may be defined) receivable therefrom, or any part thereof, or
any use thereon, or any facility located therein or used in conjunction
therewith or any charge or other payment required to be paid to any governmental
authority, whether or not any of the foregoing shall be designated "real estate
tax", "sales tax", "rental tax", "excise tax", "business tax", or designated in
any other manner.
Landlord shall notify Tenant, after the end of the Base Year and each
calendar year thereafter, of the amount which Landlord estimates (as evidenced
by budgets prepared by or on behalf of Landlord) shall be the amount of Tenant's
Proportionate Share of increases in Impositions for the then current calendar
year; and Tenant shall pay such sum to Landlord in equal monthly installments
during the balance of said calendar year, in advance on the first day of each
month commencing on the first day of the first month following Tenant's receipt
of such notification. Following the date on which Landlord receives a tax bill
or statement showing what the actual Impositions are with respect to each
calendar year, Landlord shall submit to Tenant a statement, together with a copy
of said bill or statement, showing the actual amount to be paid by Tenant in the
year in question with respect to increases in Impositions for such year, the
amount thereof theretofore paid by Tenant and the amount of the resulting
balance due thereon, or overpayment thereof, as the case may be. Any balance
shown to be due pursuant to said statement shall be spread over the remaining
months of the year and be paid by Tenant to Landlord or if after the close of
the calendar year within ten (10) days following Tenant's receipt thereof and
any overpayment shall be immediately credited against Tenant's obligation to pay
such Additional Rent in connection with increased Impositions in later years,
or, if no such future obligation exists, be promptly refunded to Tenant.
C. Additional Rent, due by reason of the provisions of either Subparagraph 7A or
Subparagraph 7B for the final year (in whole or in part) of this Lease, shall be
payable even though the amount thereof is not determinable until subsequent to
the termination of the Lease; the Operating Expenses and the Impositions for the
calendar year during which the Lease terminates shall be pro rated according to
that portion of said calendar year that this Lease was actually in effect.
Tenant expressly agrees that Landlord at Landlord's sole discretion, may apply
the Security Deposit specified in Paragraph 9 hereof, if any, in full or partial
satisfaction of any Additional Rent due for the final year (in whole or in part)
of this Lease by reason of the
-5-
Initials: _________ _______
Landlord Tenant
<PAGE>
provisions of Subparagraphs 7A or 7B. If said Security Deposit is greater than
the amount of such Additional Rent and there are no other sums or amounts owed
Landlord by Tenant by reason of any other terms, provisions, covenants or
conditions of this Lease, then Landlord shall refund the balance of said
Security Deposit to Tenant as provided in Paragraph 9 hereof. Nothing herein
contained shall be construed to relieve Tenant, or imply that Tenant is relieved
of the liability for or the obligation to pay any Additional Rent due for the
final year (in whole or in part) of this Lease by reason of the provisions of
Subparagraphs 7A or 7B if said Security Deposit is less than such Additional
Rent; nor shall Landlord be required to first apply said Security Deposit to
such Additional Rent if there are any other sums or amounts owed Landlord by
Tenant by reason of any of the terms, provisions, covenants, or conditions of
this Lease. If in any calendar year the increase in either the Operating
Expenses or the Impositions is negative, no Additional Rent is to be charged for
the respective item; but Additional Rent shall nevertheless be computed at the
Base Year's rate and adjusted thereafter.
D. It is the intention of the parties hereto to provide that Tenant shall pay in
advance of their due date Tenant's Proportionate Share of increases in Operating
Expenses and Impositions and to share in reduction only by category to the end
that an increase in Operating Expenses shall not be offset by a decrease in
Impositions and vice versa. In no event shall the Base Rental be reduced by
reason of decreases in Operating Expenses and/or Impositions. This paragraph
shall survive the termination of the Lease.
8. SALES TAX: All payments of Gross Rent shall be paid by Tenant together with
applicable Florida sales tax.
9. SECURITY DEPOSIT: Simultaneously with the execution of this Lease, Tenant
shall pay to landlord (1) the Security Deposit (as defined in Section K on the
FACE PAGE), to be held by Landlord without interest as a security deposit for
the payment by Tenant of the rents and all other payments herein agreed to be
paid by Tenant and for the full and faithful performance by Tenant of the terms
and conditions of this Lease, and (2) the Prepaid Rent (as defined in Section L
on the FACE PAGE) to be applied by Landlord toward the first monthly payment of
Base Rent. Landlord may, solely at Landlord's option, utilize any such part of
the Security Deposit as is necessary to cure any default of Tenant under this
Lease and in such event Tenant shall immediately replace such portions as may be
expended by Landlord. Such use by Landlord of all or a portion of the Security
Deposit shall not discharge any liability of Tenant under any of Tenant's
covenants under this Lease and Tenant shall remain liable for any amounts that
any such use shall be insufficient to pay. Landlord may exhaust any and all
rights and remedies against Tenant before resorting to the Security Deposit, and
nothing contained herein shall require or be deemed to require Landlord to
resort to the Security Deposit. Upon the expiration of this Lease (except
arising due to a default by Tenant), delivery of the Premises to Landlord in
their original condition, ordinary wear and tear excepted, and payment to
landlord of Tenant's Operating Expenses and Impositions for the final calendar
year of this Lease, then the Security Deposit shall be returned to Tenant. Upon
any conveyance of the Building by Landlord to a successor in title, the
successor shall become liable to Tenant for the return of the Security Deposit
and the
-6-
Initials: _________ _______
Landlord Tenant
<PAGE>
conveying party released for same. Landlord shall not be required to hold the
Security Deposit in any special account for the benefit of the Tenant. In the
event any installment of Gross Rent shall not be paid when due twice in any
twelve (12) month period (including the return of any of Tenant's Bad Checks),
the Landlord shall have the right, at the Landlord's discretion, to require the
Tenant to place with Landlord an additional security deposit (in excess of the
original Security Deposit), of up to two installments of then current Base Rent,
which sum shall become a part of the original Security Deposit
10. COMPLETION OF IMPROVEMENTS AND DELIVERY OF POSSESSION: Landlord agrees to
prepare the Premises for occupancy at Landlord's sole expense in good faith in
accordance with (i) Exhibit A, the floor plans and specifications therefor
initialed by Landlord and Tenant and attached hereto, (ii) Exhibit B, the
building standard materials specifications, and (iii) in a good and workmanlike
manner in accordance with construction standards for similar types of
construction in Miami-Dade County, Florida subject to Tenant delays and any
other cause beyond Landlord's reasonable control. Tenant shall name that person
or persons in Section Q on the FACE PAGE who is (are) authorized to execute on
behalf of Tenant any and all construction specifications, contracts and change
orders hereunder. Any change in such person(s) shall be made by written notice
by Tenant to Landlord pursuant to Section 21 hereof.
Prior to Tenant taking possession of the Premises, Landlord shall
afford Tenant the opportunity to perform a "walk-through" inspection of the
Premises with an agent of Landlord at which Landlord and Tenant shall prepare a
list of any defects in the improvements pointed out by Tenant and not meeting
the foregoing construction standards described in (i) through (iii) above
("Tenant's Punch List"). Landlord shall have a reasonable time to correct any
such defects; provided however, the existence of such defects shall not operate
to delay the Commencement Date of this Lease or reduce Tenant's obligations for
the payment of Base Rent or other charges hereunder.
While it is contemplated that the Commencement Date of this Lease shall
be as set forth on the FACE PAGE, in the event the Premises are not ready for
occupancy on such Commencement Date the Commencement Date shall be deemed to be
the date when all of the following conditions are satisfied: a) The Improvements
have been completed pursuant to Exhibits A and B (except for non-essential
Tenant Punch List items, which can and shall be completed within sixty (60) days
after the Commencement Date) and b) a final inspection report Certificate of
Occupancy or Completion, temporary or permanent, if either is applicable, has
been issued for the Premises.
Tenant shall not enter the Premises prior to the Commencement Date of
this Lease without the consent of Landlord and unless accompanied by an agent of
Landlord. Tenant shall not interfere with Landlord or any of Landlord's
contractors in completion of the Building or the Premises.
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Except for the matters set forth on Tenant's Punch List, the taking of
possession of the Premises by Tenant shall be conclusive evidence that the
Premises and Building are in good and satisfactory condition at the time
possession is taken. No representations except those contained herein have been
relied on by Tenant with respect to the condition, design, amenities or
completion of the Building or Premises. Tenant will make no claim against
Landlord on account of any representation of any kind, whether made by any
leasing agent, broker, officer, employee or other representative of Landlord or
which may be contained in any advertisement relating to the Building unless such
representation is specifically set forth in this Lease.
There shall be no delay in the commencement of the Term of this Lease
and/or payment of rent where Tenant fails to occupy the Premises when the same
are declared ready for occupancy as set forth above; or if Tenant shall have
failed to prepare the Tenant's Punch List with Landlord; or when Landlord shall
be delayed in substantially completing such Premises as a result of:
i. Tenant's failure to promptly furnish working drawings and
plans, if any are required; or
ii. Tenant's failure to promptly approve cost estimates upon
receipt thereof from Landlord, if any are required; or
iii. Tenant's failure to promptly select materials, finishes or
make decisions pertaining to lighting and/or electrical
installations; or
iv. Tenant's changes in plans (notwithstanding landlord's approval
of such plans) where such change in plans results in delay; or
v. Any other act or omission by Tenant or Tenant's agents, or
failure to promptly make other decisions necessary to the
preparation of the Premises for occupancy, where such act or
omission results in delay.
In no event shall Landlord be liable to Tenant for any damages of any
kind whatsoever for failure to deliver the Premises by the Commencement Date
stated in Section J on the FACE PAGE hereof so long as Landlord has made a good
faith effort to do so.
11. USES PROHIBITED: Tenant shall not do or permit anything to be done in or
about the Premises, nor bring nor keep anything therein which will in any way
affect the fire or other insurance upon the Building, or any of its contents. If
the Landlord's insurance premiums exceed the standard premium rates in part or
in whole because the nature of Tenant's operations results in extra hazardous
exposure, then Tenant shall, upon receipt of appropriate invoices from Landlord,
reimburse Landlord for such increase in premiums. Any such increase in premiums
shall be considered as Additional Rent due and shall be included in any lien for
rent. Tenant, at Tenant's sole expense, shall comply with any law, ordinance,
rule or regulation affecting the occupancy and use of the Building, which is
now, or may hereafter be enacted or promulgated by any public authority. Tenant
shall not obstruct or interfere with the rights of other tenants of the
Building, or injure or annoy them. Tenant shall not use, or allow the Premises
to be used, for any illegal purpose or purpose constituting a public or private
nuisance or for sleeping purposes, washing of clothes, or cooking, and nothing
shall be prepared, manufactured, or mixed in the Premises which would emit an
odor and/or fumes of any type into any part of the Building.
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<PAGE>
12. RULES AND REGULATIONS: The rules and regulations attached to this Lease as
EXHIBIT C, as well as such rules and regulations as may be hereafter adopted by
Landlord (upon delivery of a copy thereof to Tenant) for the safety, cleanliness
and operation of the Building and the preservation of good order therein and for
the most efficient use by all tenants and such tenants' agents, employees,
invitees and visitors of the automobile parking spaces provided by Landlord, are
expressly made a part of this Lease and Tenant agrees to comply with such rules
and regulations. No rules and regulations shall prohibit the reasonable use of
the Premises by Tenant for the purposes permitted by this Lease. The Landlord
shall not be responsible for any non-observance of such rules and regulations by
any other tenant of the Building.
13. ASSIGNMENTS AND SUBLETTING: A. Tenant shall not assign, transfer, mortgage,
pledge, hypothecate, or otherwise encumber or dispose of this Lease, or any
interest therein, nor shall Tenant permit the use of the Premises by any person
or persons other than Tenant, nor shall Tenant sublet the Premises, or any part
thereof, without the written consent of Landlord (all of which-foregoing actions
shall be deemed a "transfer" of this Lease). Landlord's consent may be granted
or withheld at landlord's sole discretion, as to any mortgage, pledge,
hypothecation, or any other encumbrance or transfer other than any assignment or
sub lease which is subject to the terms of this paragraph. Landlord's consent to
an assignment or sublease pursuant to this paragraph shall not be unreasonably
withheld as long as the proposed assignee or sublessee shall be a commercially
reasonable tenant and Tenant pays to Landlord fifty (50%) percent of all profits
(as defined herein) on any such sublease or assignment. Profits mean in the case
of a sublease the positive difference between the aggregate amount of Rent and
Additional Rent due to Landlord from Tenant under the Lease and the amount of
Rent and Additional Rent received from a subtenant (in the case of a sublease of
part of the space such amounts shall be calculated on a per square foot basis)
under any sublease less a reasonable brokerage commission, tenant improvements
and marketing, and in the case of an assignment the amount of consideration
received by Tenant from the assignor for the purchase of the remaining term of
the Lease, and if such amount has not been reasonably allocated in the
instrument by which assignee has been assigned Tenant's rights in the Lease, the
fair market value of what such consideration would be as determined by an
independent real estate appraiser appointed by Landlord, at Tenant's expense,
reasonably agreeable to Tenant. Any conveyance by operation of law shall be
deemed as a transfer for the purposes of this Lease.
B. Any sale of stock of Tenant other than a public sale made pursuant to and as
authorized by the applicable regulations of the Securities and Exchange
Commission in connection with Initial Public Offering (if a corporation),
assignment of partnership interest (if a partnership), assignment of beneficial
interest (if a trust), or other device which has the effect of transferring the
practical benefits of this Lease from the parties currently controlling Tenant,
shall be deemed a transfer of Tenant's rights requiring Landlord's consent as
herein provided. For the purposes of this paragraph, "control" shall be deemed
to be direct or beneficial ownership of 50% or more of the right, title or
interest in the entity.
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Landlord Tenant
<PAGE>
C. Any sublease or assignment to an entity controlled by or controlling or under
common control with Tenant shall be permitted at any time, provided that any
subsequent change of control of such assignee-entity shall be deemed an
unconsented to assignment for the purposes of this Lease, and an event of
default under this Lease. All of the foregoing transfers of the ownership
interest under this subparagraph C shall be deemed to be assignments for the
purposes of this paragraph. Consent to any assignment or subletting under this
paragraph shall not operate to release Tenant from its obligations hereunder,
nor operate as a waiver of the necessity for a consent to any subsequent
transfer, and the terms of such consent shall be binding upon any person holding
by, under or through Tenant.
D. If the Tenant desires at any time to transfer the Premises or any part
thereof, Tenant shall submit to Landlord at least sixty (60) days before the
effective date of the Transfer ("Proposed Effective Date"), in writing: (i) a
request for permission to Transfer setting forth the Proposed Effective Date,
which shall be no less than sixty (60) days after the receipt of that notice;
(it) the name, address, phone number, fax number, type of entity and state of
domicile of such entity of the proposed transferee; (iii) the type of business
to be conducted in the Premises after the Transfer; (iv) the terms and
conditions of the proposed Transfer; (v) a true and complete copy of all
proposed documentation pertaining to the proposed Transfer; (vi) current
financial statements (audited, if available) including, but not limited to,
profit and loss statements and balance sheets for the three year period ending
no later than sixty (60) days prior to the date of such notice, of Tenant and
the proposed transferee; and (vii) such additional information that Landlord may
reasonably request to make a reasoned judgment. Without in any way limiting
Landlord's right to refuse to give that consent for any other reason or reasons,
Landlord shall be deemed to have reasonably withheld its consent to any Transfer
if, in Landlord's reasonable opinion: (i) The proposed use of the Premises by
the transfer is not compatible with the operation of the Building or the desired
tenant mix of the Building, or would require increased services from Landlord;
(it) the financial net worth or financial profitability of a proposed transferee
(for a sub-tenant pro rated as to the percentage of the Premises to be sub
leased to such sub-tenant as compared to that of Tenant) is less than that of
Tenant at the time of the execution of the Lease with Tenant; (iii) the proposed
transferee is a governmental agency or an instrumentality of a governmental
agency; (iv) the proposed Transfer would cause a violation of another lease for
space in the Building or would give an occupant of the Building a right to
cancel its lease; (v) the proposed transfer use- of the Premises would involve
the introduction of Hazardous Material to the Premises; (vi) the proposed
transferee is a current tenant of the Building or an entity with which Landlord
or Landlord's agent is negotiating to lease space in the Building; (vii) the
proposed transferee is deemed uncreditworthy in the reasonable discretion of
Landlord; or (viii) the Tenant is in default under any of the terms of this
Lease as of the date Tenant notified Landlord of the proposed Transfer or as of
the Proposed Effective Date of the Transfer.
E. In the event Landlord rejects the proposed transfer, Landlord shall state the
reasons for such rejection. Notwithstanding anything contained herein to the
contrary, the acceptance by Landlord of any prospective transfer is contingent
upon both Tenant and the prospective transfer executing an affidavit, attaching
a true and complete copy of the sublease, assignment or other
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Landlord Tenant
<PAGE>
instrument by which the transfer is to be accomplished, and stating all terms of
the transfer including all consideration paid or to be paid under the transfer,
and the agreement of the assignee or sublessee to be bound by the terms and
conditions of this Lease. If this Lease is assigned or if the Premises or any
part thereof is sublet or occupied by anybody other than the Tenant by any other
form of transfer, voluntarily or involuntarily, whether by operation of law or
otherwise, Landlord may, after default by the Tenant under this Lease in the
case of a sublease and at any time (whether or not Tenant is in default under
this Lease) in the event of an assignment or other transfer, collect or accept
rent from the assignee, subtenant or occupant and apply the net amount collected
or accepted to the rent herein reserved, but such collection of acceptance shall
not be deemed a waiver of the covenants of Tenant under this Lease or the
acceptance of the assignee, subtenant or occupant as Tenant hereunder; nor shall
it be construed as or implied to be a release of Tenant from the further
observance and performance by Tenant of the terms, provisions, covenants and
conditions herein contained.
14. MAINTENANCE OF PREMISES: Tenant shall not commit nor allow any waste or
damage to be committed on any portion of the Building or Premises. As to any
repairs or replacements to the Premises required by the acts, whether of
commission or omission, of Tenant not repaired or replaced by Tenant at Tenant's
cost, Landlord may, but shall not be obligated to, make such repairs or
replacements and Tenant shall repay the cost thereof, plus a 15% administration
fee, as Additional Rent to Landlord upon demand, together with interest thereon
at the highest rate permitted by applicable law from the date of advancement to
repayment by Tenant.
Landlord shall maintain the Building in reasonably good order and
repair (excluding repairs to be made by Tenant) with such repairs, if any, to be
made in a reasonable period of time after Landlord becomes aware of the need for
any specific repair, including, without limitation, the public areas, the
parking areas, landscape areas, elevators, stairs, corridors, restrooms, the
base building HVAC, mechanical, plumbing, and electrical systems, and the
structure itself including the roof, foundations, exterior walls, and glass
exterior surfaces of the Premises and the Building, all structural members of
the Building and all underground utility lines serving the Building.
At its sole cost, Tenant shall maintain in good repair and tenantable
condition, subject to normal wear, tear, casualty to the extent covered by
Landlord's and/or Tenant's insurance and condemnation, that portion of the
Premises within the demising walls thereof, including any wall coverings and
paint on the interior side of the demising walls, below the ceiling slab and
above the floor slab, any tile, carpet or other floor covering installed
thereon, and including any systems or other equipment below the floor or above
the ceiling tile that was installed for Tenant, and Tenant's maintenance
obligation shall extend to all tenant improvements and contents within the
Premises. Tenant shall not be obligated to repair damage resulting from the
gross negligence of Landlord or its agents, contractors or employees.
15. ALTERATIONS, ADDITIONS OR IMPROVEMENTS: Tenant will not make nor allow to be
made any alterations or physical additions in or to the Premises without the
prior written consent of
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Landlord Tenant
<PAGE>
Landlord which shall not be unreasonably withheld. Unless otherwise provided by
written agreement, all such consented alterations, additions or improvements
shall be done either by, or under the direction of, Landlord, but at the sole
cost of Tenant, and shall upon installation become the property of Landlord and
shall remain upon and be surrendered with the Premises. The Landlord may i.)
alter, add to, subtract from, construct improvements on, re-arrange, and
construct additional facilities in, adjoining or proximate to the Building-,
ii.) relocate the facilities and improvements in or comprising the Building;
iii.) do such things on or in the Building as required to comply with any laws,
by-laws, regulations, orders or directives affecting the Building or any part
thereof, and iv.) do such things on or in the Building as the Landlord, in the
use of good business judgment, determines to be advisable. The Landlord shall
not be in breach of its covenants for quiet enjoyment or liable for any loss,
costs or damages, whether direct or indirect, incurred by the Tenant due to any
of the foregoing. Before undertaking any alterations or construction, Tenant
shall obtain and pay for a public liability insurance policy insuring Landlord
and Tenant against any liability which may arise on account of such proposed
alterations and construction work in limits of not less than $1,000,000.00 for
any one person, $1,000,000.00 for more than one person in any one accident and
$200,000.00 in property damage; and a workers' compensation policy in the
statutory limits; and a copy of such pre paid policies or a certificate of
evidence of insurance from the insurer of such insurance on Form ACORD 27 shall
be delivered to Landlord prior to the commencement of such proposed work, which
form shall include a clause requiring the insurer to give Landlord at least
thirty (30) days prior written notice of cancellation of any such policies.
Neither Tenant nor anyone claiming by, through or under Tenant, shall
have any right to file or place any mechanic's lien of any kind or nature
whatsoever on the property and notice is hereby given that no contractor,
sub-contractor or anyone else that may furnish any material, services or labor
to the property at anytime shall be or become entitled to any lien thereon
whatsoever. All Contracts of Tenant for the construction of any alteration,
addition or improvement including, but not limited to, the contracts of
subcontractors and materialmen, shall contain the agreement of the contractor,
subcontractor or materialman agreeing to look solely to the Tenant and Tenant's
interest in the property for payment and waiving any right to a lien on
Landlord's interest in the Building or the Premises. Such contracts shall also
contain a provision waiving any lien against Landlord's interest in the Building
or the Premises for extras or change orders. Such contracts shall also require
the contractor, subcontractor and materialman to provide in recordable form, a
waiver and release of lien upon final payment at the completion of construction
and a waiver and release of lien upon progress payment during the construction
thereof. If, notwithstanding the requirements of this Paragraph, any mechanic's
lien by any such contractor, subcontractor or materialman for Tenant is filed
during or after the construction, Tenant shall immediately upon notice thereof
pay such lien in full or transfer it to a bond acceptable to Landlord. Landlord
shall be advised, in writing, at least ten (10) days prior to the date that work
by or for Tenant is to commence or the date of anticipated commencement in order
to allow Landlord to post notices of nonresponsibility on the Premises. Tenant
agrees to allow such notices to remain posted in the Premises throughout the
construction period and to notify Landlord if such notices are damaged or
removed. The construction work shall be
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Landlord Tenant
<PAGE>
scheduled in such a manner so as to create the minimum disturbance to other
tenants. Any construction causing or resulting in unreasonable noise, dust or
other disturbance of tenants shall be scheduled and performed between the hours
of 7:00 p.m. and 7:00 a.m. No building or other materials, construction, tools
and equipment shall be stored in the Common Areas. All trash and construction
debris shall be promptly removed and deposited lawfully off the property, or, if
a dumpster has been approved for the deposit of trash and construction debris,
then said trash and construction debris shall be deposited into the approved
dumpster. No dumpster shall be brought on the Property unless the size and
location thereof has been approved by Landlord in writing.
16. DESTRUCTION OF PREMISES: If the Premises or the Building shall be destroyed
by fire or other cause, or be so damaged thereby that they are untenantable and
cannot be rendered tenantable within one hundred and fifty (150) days from the
date of such damage, considering the extent of the damage, this Lease may be
terminated by Landlord or Tenant by written notice given by the terminating
party to the other within sixty (60) days after the event causing such
untenantability in which event rent shall cease as of the date of such
untenantability and both par-ties shall be relieved of all further liability
hereunder accruing after the effective termination date. In the event that the
Premises shall be destroyed or so damaged as to be untenantable as a result of
fire or any other casualty required to be insured against by the Landlord
pursuant to this Lease or otherwise insured against by the Landlord and should
this Lease not be terminated as above provided, then rent shall abate for the
period of such untenantability, and the term of this Lease shall be extended by
the period of such untenantability. Landlord shall have the right, but not the
obligation, to render such Premises tenantable by repairs. Landlord agrees that,
within sixty (60) days after the aforesaid damage or destruction, it will
endeavor to notify Tenant with respect to whether Landlord intends to restore
the Premises, provided, however, that such notice shall not be binding upon
Landlord. If the damage or destruction is not sufficient to permit a termination
of the Lease as above provided, a proportionate reduction shall be made in the
rent herein reserved corresponding to the time during which, and applicable to
the portion of the Premises of which, Tenant shall be deprived of possession.
The reasonable decision of a licensed Florida architect or engineer hired by
Landlord and certified in writing to Landlord and Tenant shall be binding on the
parties as to: i.) whether the Premises or Building are rendered untenantable,
ii.) whether the Building or Premises can be rendered tenantable within one
hundred fifty (150) days, iii.) the percentage of the Premises rendered
untenantable and the resulting percentage by which rent and other charges
hereunder should abate during the period of untenantability, iv.) the date upon
which the Premises are restored to tenantability. Notwithstanding the foregoing,
if the Lease is not otherwise terminated as aforesaid, and the Premises can be
rendered tenantable, Landlord agrees to use reasonable efforts to substantially
complete such restoration within one hundred twenty (120) days from the date of
such damage.
17. ENTRY AND INSPECTION: Tenant will permit Landlord and its agents to enter
the Premises at all reasonable times for the purpose of inspecting the same, or
for the purpose of' protecting Landlord's reversions, or to make alterations,
repairs, or additions to the Premises, or to any other portion of the Building,
or for maintaining any service provided by Landlord to tenants in the Building,
or to exhibit the Premises at any time to a prospective purchaser or mortgagee
of the
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Landlord Tenant
<PAGE>
Building, or, within one hundred twenty (120) days prior to the expiration of
this Lease, to bring prospective tenants upon the Premises for inspection,
provided that Landlord shall not exercise this right in any manner which will
unreasonably interfere with Tenant's use of the Premises for the purposes herein
permitted. In furtherance of such rights, Landlord shall retain a key to the
Premises and Tenant shall not install any new locks to the Premises without the
prior written consent of Landlord and furnishing Landlord with a copy of such
key. No entry into the Premises by the Landlord pursuant to a right granted by
this Lease shall constitute a breach of any covenant for quiet enjoyment, or
(except where expressed by the Landlord in writing) shall constitute a retaking
of possession by Landlord or forfeiture of Tenant's rights hereunder.
18. INDEMNITY AND LIABILITY: Landlord shall not be liable to Tenant or to any
person, firm, corporation, or other business association claiming by, through or
under Tenant for any injury or damage that may result to any person or property
by or from any cause whatsoever (without limiting the generality of the
foregoing, whether caused by gas, fire, oil, electricity, bursting of pipes or
defective construction or maintenance) in, on or about the Premises, or any part
thereof, (save and except for Landlord's or its agents' gross negligence or
intentional misconduct), and Tenant covenants not to bring or abet any such
action. Tenant agrees to indemnify, defend and hold Landlord and its officers,
directors, agents and employees harmless from and against any and all claims,
liabilities, costs or expenses whatsoever (including reasonable Attorneys' Fees)
for any injury or damage to any person or property whatsoever arising out of use
or occupancy of the Premises, or being around the Premises, by Tenant, its
agents, contractors or employees or invitees, whether or not caused by the
negligence of Landlord or its agents, save and except for Landlord's gross
negligence or intentional misconduct.
Landlord shall not be liable to Tenant or to any person, firm, corporation, or
other business association claiming by, through or under Tenant (a) for failure
to furnish or for delay in furnishing any services provided for in this Lease
and no such failure or delay by Landlord shall be an actual or constructive
eviction of Tenant nor shall any such failure or delay operate or relieve Tenant
from the prompt and punctual performance of each and all of the covenants to be
performed herein by Tenant, (b) nor from any defects in the Premises or
Building; (c) nor from any defects in the cooling, electric, water, elevator or
other applicable apparatus or systems or water discharge from sprinkler systems
in the Building or water from the Premises or any part of the Building; nor (d)
for theft, mysterious disappearance or loss of any property of Tenant.
19. INSURANCE: The Tenant shall, throughout the term of this Lease (and any
other period when Tenant is in possession of the Premises), maintain at its sole
cost the following insurance (A) "All risks" property insurance including, but
not limited to, fire and lightening, extended coverage, vandalism and malicious
mischief naming the Tenant and the Landlord as insured parties, containing a
waiver of subrogation rights which the Tenant's insurers may have against the
Landlord and against those for whom the Landlord is in law responsible
including, without limitation, its directors, officers, agents and employees.
Such insurance shall insure (i) property owned by the Tenant or for which the
Tenant is legally liable located on or in the Building, including, leasehold
improvements, in an amount not less than the full replacement cost thereof ;
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Landlord Tenant
<PAGE>
and (ii) six months direct or indirect extra expense including prevention of
access to the Premises or to the Building. Such policies, except with respect to
Tenant's chattels and extra expenses insurance, shall provide that loss thereon
shall be adjusted and payable to the Landlord, with the proceeds to be held in
trust to be used for repair and replacement of the property so insured; (B)
Commercial general liability insurance with limits of not less than
$1,000,000.00 per occurrence, cross liability, shall name the Landlord and any
mortgagee of the Building ("Mortgagee") as additional insureds; (C) Workers'
compensation and employer's liability insurance in compliance with all
applicable legal requirements; (D) Before undertaking any alterations,
additions, improvements, or construction, Tenant shall obtain public liability
insurance and name Landlord as an additional insured insuring Tenant and
Landlord (and Landlord's designees) against any liability which may arise on
account of such proposed alterations, additions, improvements or construction on
an occurrence basis with a minimum single limit of $1,000,000 and Workers'
Compensation insurance in the statutory limits including a minimum of $1,000,000
employer's liability covering all persons employed by Tenant, directly or
indirectly, in connection with any construction or repair work performed by or
for Tenant; and (E) Any other form of insurance which the Landlord or the
Mortgagee, acting reasonably, requires in form, in amounts and for risks against
which a prudent tenant would insure.
All policies referred to above shall: (i) be taken out with insurers
licensed to do business in Florida rated by Best's Insurance Reports at least A
Minus X, and reasonably acceptable to the Landlord; (ii) be in a form reasonably
satisfactory to the Landlord; (iii) be non-contributing with, and shall apply
only as primary and not as excess to any other insurance available to the
Landlord or the Mortgagee; and (iv) contain an undertaking by the insurers to
notify the Landlord by registered or certified mail not less than 30 days prior
to any material change, cancellation or termination of the policy. Certificates
of evidence of insurance on the Landlord's standard form on Form ACORD 27,
together with satisfactory evidence of payment of the premiums thereon, or, if
required by the Mortgagee, copies of such insurance policies certified by an
authorized officer of Tenant's insurer as being complete and current, shall be
delivered to the Landlord shall be deposited with Landlord prior to the day
Tenant occupies the Premises, and thereafter, upon renewal of each policy of
insurance not less than thirty (30) days prior to the expiration of the term of
such coverage. If a) the Tenant fails to take out or to keep in force any
insurance referred to in this Paragraph 19, or should any such insurance not be
approved by either the Landlord or the Mortgagee, and b) the Tenant does not
commence and continue to diligently cure such default within 48 hours after the
receipt by Tenant of the written notice by the Landlord to the Tenant specifying
the nature of such default, then the Landlord has the right, without assuming
any obligation in connection therewith, to effect such insurance at the sole
cost of the Tenant and all outlays by the Landlord shall be paid by the Tenant
to the Landlord as Additional Rent together with interest thereon from the date
on which Landlord paid such cost to the date on which Tenant reimburses
Landlord, at the maximum rate permitted by law without prejudice to any other
rights or remedies of the Landlord under this Lease.
The Tenant shall not keep or use in the Premises any article which may
be prohibited by any fire or casualty insurance policy in force from time to
time covering the Premises or the
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Building. The Tenant will comply promptly with the requirements of any insurer
pertaining to the Premises or the Building. If: (i) the manner of Tenant's use
of the Premises; or (ii) any acts or omissions of the Tenant in the Building or
any part thereof, cause or result in any increase in premiums for the insurance
carried from time to time by the Landlord with respect to the Building, if
Landlord allows such act or omission to continue, the Tenant shall pay any such
increase in premium. In determining whether increased premiums are caused by or
result from the manner of Tenant's use or occupancy of the Premises, a schedule
issued by the organization computing the insurance rate on the Building showing
the various components of such rate, shall be conclusive evidence of the several
items and charges which make up such rate
20. SERVICE: Landlord shall furnish the following services as part of the
Operating Expenses to Tenant:
(A) Cleaning services, deemed by Landlord to be normal and usual
in a comparable building, on Monday through Friday, except
that shampooing of carpet as required by Tenant shall be at
Tenant's expense.
(B) Automatically operated elevator service, public stairs,
electrical current for lighting, incidentals, and normal
office use, and water at those points of supply provided for
general use of its tenants at all times and on all days
throughout the year.
(C) Air conditioning on Monday through Friday from 8:00 AM through
10:00 PM; Saturdays from 8:00 AM through 3:00 PM; Sundays and
holidays (other than Memorial Day, Fourth of July, Labor Day,
Thanksgiving Day, Christmas Day and New Year's Day, on which
holidays no air conditioning shall be required) from 8:00 AM
through 12:00 PM; provided that Landlord may in its sole
discretion provide air conditioning during other hours of
service. Landlord shall also furnish air conditioning at such
other times as are not provided for herein, provided Tenant
gives written request to Landlord before 2:00 p.m. on the
business day preceding the extra usage and if Tenant requires
air conditioning during such hours, Tenant shall be billed for
such service at the rate established by Landlord in its sole
discretion and said rate may be changed with thirty (30) days
prior written notice.
No electric current shall be used except that furnished or approved by Landlord,
nor shall electric cable or wiring be brought into the Leased Premises, except
upon the prior written consent and approval of Landlord, which consent shall not
be unreasonably withheld. Tenant shall use only office machines and equipment
that operate on the Building's standard electric circuits, but which in no event
shall overload the Building's standard electric circuits from which Tenant
obtains electric current. Any consumption of electric current in excess of that
considered by Landlord to be used, normal and customary for all tenants, or
which require special circuits or equipment (the installation of which shall be
at Tenant's expense after prior approval in writing by Landlord), shall be paid
for by Tenant as additional rent paid to Landlord in an amount to be determined
by Landlord based upon Landlord's estimated cost of such excess electric current
consumption or
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based upon the actual cost thereof if such excess electric current consumption
is separately metered, such separate submeter to be installed at Tenant's
expense.
Such services shall be provided as long as Tenant is not in default under any of
the terms, provisions, covenants, and conditions of this Lease, subject to
interruption caused by repairs, renewals, improvements, changes to services,
alterations, strikes, lock outs, labor controversies, inability to obtain fuel
or power, accidents, breakdowns, catastrophes, national or local emergencies,
acts of God and conditions and causes beyond the control of Landlord, and upon
such happening, no claim for damages or abatement of rent for failure to furnish
any such services shall be made by Tenant or allowed by Landlord.
21. NOTICES: All notices, consents or other instruments required or permitted to
be given under this Lease by either party to the other shall be given in writing
and shall be given by personal delivery or by registered or certified mail,
return receipt requested, or by overnight delivery service, postage prepaid,
sent to Landlord at the Address of Landlord (as defined in Section D on the FACE
PAGE) and to Tenant at the Premises unless otherwise stated in this Lease. Any
notice to be given to Tenant prior to the commencement or subsequent to Tenant's
occupancy under this Lease, if given by registered or certified mail or
overnight delivery service, as above provided, shall be sent to Tenant at the
address of Tenant (as defined in Section F on the FACE PAGE). Notice given by
personal delivery shall be effective as of the date of delivery; notice mailed
shall be effective as of the third day (not a Saturday, Sunday or U.S. Postal
Service legal holiday) next following the date of mailing; notice by overnight
delivery service shall be effective on the next business day following the date
of sending. Either party, from time to time, by notice pursuant to this
paragraph, may specify another address to which subsequent notice shall be sent.
22. DEFAULT: Tenant covenants and agrees that any of the following events shall
be a default under this Lease: (i) if any false or materially misleading
financial report or statement is furnished or made by or on behalf of Tenant or
any guarantor of any of Tenant's obligations hereunder; (ii) if Tenant or any
guarantor of any of Tenant's obligations hereunder shall fail to pay when due
and payable hereunder any installment of Rent or Additional Rent, and said
installment remains unpaid beyond the applicable grace or notice period; (iii)
if Tenant or any guarantor of any of Tenant's obligations hereunder shall fail
to perform or observe any covenant, condition or agreement to be performed or
observed by such party hereunder or under any guaranty agreement; (iv) if Tenant
or any guarantor of Tenant's obligations hereunder shall be in breach of or in
default in the payment and performance of any obligation owing to Landlord,
whether or not related to this Lease and howsoever arising, whether by operation
or law or otherwise, present or future, contracted for or acquired, and whether
joint, several, absolute, contingent, secured, unsecured, matured or unmatured;
or (v) if Tenant or any guarantor of any of Tenant's obligations hereunder shall
cease doing business as a going concern, make an assignment for the benefit of
creditors, generally not pay its debts as they become due, admit in writing its
inability to pay its debts as they become due, become insolvent (i.e. greater
liabilities than assets), or take any action looking to its dissolution or
liquidation; or (vi) if Tenant or any guarantor of Tenant's obligations should
file for relief, or have filed against them, an action under any provision of
any state or federal
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bankruptcy or insolvency law; or (vii) if Tenant shall abandon, vacate or remove
from the Premises the major portion of its goods, wares, equipment or
furnishings usually kept on said Premises, or shall cease doing business on said
Premises; or (viii) if Tenant's leasehold interest under this Lease shall be
sold under any execution or process of law.
In the event of any such default, Landlord may, at its option, elect
any of the following remedies:
(a) Re-take and recover possession of the Premises, terminate this
Lease, and retain Tenant's security deposit
(b) Re-take and recover possession of the Premises, without
terminating this Lease in which event Landlord may re-rent the
Premises as agent for and for the account of Tenant and
recover from Tenant the Tenant's security deposit, and the
difference between the rental herein specified and the rent
provided in such re-rental, less all of Landlord's costs of
rerenting.
(c) Permit the premises to remain vacant in which event Tenant
shall continue to be responsible for all rental and other
payments thereunder.
(d) Re-take and recover possession of the Premises, and accelerate
and collect all rent due hereunder for the balance of the
ten-n of this Lease.
(e) Take any other action as may be permitted under applicable
law.
All of the Landlord's remedies contained in this Lease shall be
cumulative and election by Landlord to take any one remedy shall not preclude
Landlord from taking any other remedy not by its nature absolutely incompatible
with any previously or contemporaneously elected remedy. No choice of any remedy
hereunder shall impair or affect Landlord's right to maintain summary
proceedings for the recovery of possession of the Premises in all cases provided
for by law. If the Term of this Lease shall be terminated under any of the
remedies provided hereunder, Landlord may immediately, or at any time
thereafter, re-enter or repossess the Premises and remove all persons and
property therefrom without being liable for trespass or damages. Landlord shall
have no liability for whatever property of Tenant or any other party is left on
the Premises and removed therefrom by Landlord as provided herein.
23. ATTORNEYS' FEES AND COSTS: a) Tenant shall pay to the Landlord all costs and
expenses, including reasonable Attorney's Fees, incurred by Landlord in any
action or proceeding to which Landlord may be a party by reason of any act or
omission of the Tenant which sums shall be deemed Additional Rent; b) If
Landlord incurs any costs or expenses including reasonable Attorneys' fees,
whether suit be brought or not, in enforcing any of the covenants and provisions
of this Lease, such costs and expenses, and attorneys' fees at all pre-trial,
trial, post-trial and appellate levels shall be deemed Additional Rent; c) all
such sums paid or incurred by Landlord, with interest at the highest rate
permitted by law, shall be paid by Tenant to Landlord as Additional Rent, upon
demand, within ten (10) days of the rendition by Landlord to Tenant of any bill
or statement therefore.
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24. NON-WAIVER OF BREACH. Landlord's failure to take or delay in taking
advantage of any default or breach of covenant on the part of the Tenant shall
not be construed as a waiver thereof, nor shall any custom or practice which may
grow between the parties in the course of administering this Lease be construed
to waive or to lessen the right of Landlord to insist upon the strict
performance by tenant of any term, covenant or condition hereof, or to exercise
any rights of Landlord on account of any such default. In no case will Landlord
be deemed to have waived any of Landlord's rights under this Lease, law or in
equity, unless Landlord delivers to Tenant a written waiver executed by an
officer of Landlord which expressly identifies the right being waived. A waiver
of a particular breach or default shall not be deemed to be a waiver of the same
or any other subsequent breach or default. The acceptance of rent hereunder
shall not be, or be construed to be, a waiver of any breach of any term,
covenant or condition of this Lease. The presentation of any rent or other
charge hereunder in the form of a check marked by Tenant to constitute a waiver
of any default shall not constitute such waiver even though endorsed and cashed
by Landlord unless Landlord expressly agrees to waive such default by separate
written instrument. No surrender of the Premises for the remainder of the term
hereof shall operate to release Tenant from liability hereunder.
25. SUBORDINATION BY TENANT. This Lease, and Tenant's rights hereunder, are
hereby made expressly subject and subordinate to any and all mortgages, ground
or underlying leases affecting the Premises which are currently in existence or
which may hereafter be created by Landlord, or its successors or assigns,
including any and all extensions and renewals, substitutions, and amendments
thereof, and to any and all advances made or to be made under same; provided,
however, that Landlord, Tenant and any such mortgagees and/or ground lessors
executes a Subordination, Attornment and Non-Disturbance Agreement substantially
in the form attached as Exhibit D hereto and made a part hereof (the "SNDA").
Tenant agrees to execute any instrument or instruments which the Landlord may
deem reasonably necessary or desirable to further evidence the foregoing
subordination, provided that all parties execute a Subordination, Attornment and
Non-Disturbance Agreement. Tenant hereby irrevocably appoints Landlord as
attorney-in-fact for Tenant with full power and authority to execute and deliver
in the name of Tenant any such instrument which appointment shall be deemed
coupled with an interest and irrevocable. Tenant further agrees to make such
reasonable modifications to this Lease (not increasing Tenant's obligations
hereunder) as may be requested by the holder of any such mortgage, ground or
underlying lease. Landlord represents that there is currently no ground lease
encumbering the Building and that the existing mortgage(s) is/are in good
standing and free from material default.
26. TIME: Time is of the essence of this Lease. Any time period herein specified
of five (5) days or less shall mean business days; any period in excess of five
(5) days shall mean calendar days.
27. TRANSFERABILITY BY LANDLORD: Landlord shall have the right to transfer and
assign, in whole or in part, all and every feature of its rights and obligations
hereunder as part of a conveyance of
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the Building and underlying property and upon such assignment of this Lease or
conveyance of the Building, the Landlord named herein shall be released from all
subsequent obligations or liabilities hereunder, and Landlord's successor in
interest shall become the new Landlord hereunder and responsible to Tenant for
all obligations of Landlord.
28. AMENDMENT OF LEASE: This lease may not be altered, changed, or amended,
except by an instrument in writing, signed by the party against whom enforcement
is sought. This Lease and any exhibits contain the entire agreement reached in
all previous negotiations between the parties hereto and there are no other
representations, agreements or understandings except as specifically set forth
herein. Tenant agrees that Tenant has not relied upon any statement,
representation, Prior written or contemporaneous oral promises, agreements or
warranties except such as are expressly set forth in writing in this Lease. Any
formally executed addendum to or modification of this Lease shall be expressly
deemed incorporated into this Lease by reference herein unless a contrary
intention is clearly stated therein.
29. CONDEMNATION: In the event all or any material part of the Building or
parking facilities shall be taken or condemned for any public or quasi-public
use or purpose, the Landlord may, at its option, terminate this Lease from the
time title to or right to possession of the Building shall vest in or be taken
for such public or quasi-public use or purpose. Tenant shall not be entitled to
receive any portion of any award made or paid to Landlord representing the
property or interest of Landlord taken or damaged and Tenant hereby expressly
waives and relinquishes any right or claim to any portion of any such award
regardless of whether any such award includes any value attributable to Tenant's
leasehold estate. However, Tenant shall have the right to claim and recover from
the condemning authority, but not from Landlord, such special and separate
damages as may be recoverable by Tenant independent of and without diminution of
Landlord's recovery. Except as set forth above, any non-material partial taking
shall be treated in the same manner as a casualty loss for which neither party
elects to terminate this Lease, as provided in Paragraph 16 hereof. Tenant
agrees to surrender the Premises at the termination of the tenancy herein
created in the same condition as received by Tenant, reasonable use and wear
thereof excepted. No act or omission by Landlord or Landlord's agents during the
term of the Lease shall be deemed an acceptance of a surrender of the Premises,
and no agreement to accept a surrender of the Premises shall be valid unless it
is in writing and executed by a duly authorized officer of Landlord. No receipt
of money by Landlord from Tenant after termination of the Lease or the service
of any notice of commencement of suit or final judgment for possession shall
reinstate, continue or extend the term of this Lease or affect any such notice,
demand, suit or judgment.
30. INTENTIONALLY OMITTED.
31. HOLDING OVER: In the case of holding over by Tenant after expiration or
termination of this Lease, Tenant shall pay for each month of such holdover
period double the amount of the Rent and Additional Rent and all other charges
Tenant was required to pay for the last month during the term of this Lease.
Tenant shall pay to Landlord as Additional Rent all damages that Landlord may
suffer on account of Tenant's failure to timely surrender to Landlord possession
of the Premises, and Tenant shall indemnify and hold Landlord harmless from and
against all claims
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<PAGE>
made (and all expenses incurred in connection therewith including, but not
limited to, Attorneys' Fees as provided for in paragraph 23 hereof) by any
succeeding tenant of said Premises against Landlord on account of delay of
Landlord in delivering possession of said Premises to said succeeding tenant to
the extent that such delay is caused by Tenant's failure to so surrender the
Premises in accordance with the terms of this Lease. No holding over by Tenant
after the term of this Lease shall operate to extend the Lease, except that any
holding over with the consent of Landlord in writing shall thereafter constitute
this Lease as a month to month tenancy.
32. ADDITIONAL RENT: All charges due from Tenant to Landlord hereunder, except
sales tax, shall be deemed Additional Rent and shall be paid (including sales
tax) without setoff or defense of any kind.
33. QUIET ENJOYMENT: Tenant shall and may peaceably have, hold and enjoy the
Premises subject to the terms, provisions, covenants and conditions of this
Lease and provided Tenant pays all of the rents and additional rents herein
provided and performs all the terms, provisions, conditions and covenants and
agreements herein contained on Tenant's part to be observed and performed.
34. PROHIBITION OF AND INDEMNITY FOR HAZARDOUS MATERIALS: Tenant hereby agrees
that Tenant will comply with the laws, rules and regulations of the
Environmental Protection Agency and its corresponding agencies of the State of
Florida, County of Miami-Dade and City of Miami Beach, and more specifically the
regulations as set forth in 40 CFR Part 261 or as may from time to time be
amended and will not generate, handle, store, use or cause to be used in any
manner whatsoever any hazardous materials as defined therein without the written
consent of any such agency and both the South Florida Water Management District
and Landlord. Tenant hereby agrees to indemnify, defend and hold the Landlord,
any mortgagee of Landlord, and Landlord's and mortgagee's successors and assigns
harmless from and against any cost, claim, damage, expense, or liability of any
kind whatsoever, including but not limited to Attorneys' Fees, arising out of
any act or omission of Tenant, its agents or any other person on the Premises
under color of authority of Tenant, giving rise to any hazardous materials,
waste, chemical pollution, or similar environmental hazard. The foregoing
indemnity shall survive the termination or expiration of this Lease, anything
else herein to the contrary notwithstanding.
35. ATTORNMENT. In the event of any foreclosure of any mortgage encumbering the
Building, or deed-in- lieu thereof, Landlord shall be released from all
liability hereunder and Tenant shall attorn to the purchaser upon any such
foreclosure or sale and recognize such purchaser as the Landlord under this
Lease.
36. ESTOPPEL CERTIFICATE: Within five (5) days after request therefor by
Landlord, Tenant shall deliver to Landlord, in a form satisfactory to Landlord,
a certificate certifying (i) the good standing in full force and effect and
absence of default under this Lease; (ii) the absence of set-offs to charges
hereunder; (iii) the validity and completeness of a copy of this Lease and all
amendments to be attached to the certificate; (iv) the amount of pre-paid rent;
(v) the amount of
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security deposit; (vi) the commencement and expiration dates hereof; (vii) the
dates and amounts of the last made and next due rental installments; and (viii)
such other matters as Landlord shall reasonably request.
37. SIGNAGE IDENTIFICATION: Tenant shall be permitted to display reasonable
signage within its lobbies and on its entry doors. Tenant shall be provided, at
Landlord's expense, reasonable space on the office building directory to
directory to display its name and the name of each officer in the Tenant's
office. Tenant will be permitted at its sole cost and expense, to have exclusive
exterior signage at or near the top of the Building, in a size, style and
location to be mutually agreed upon, subject to local codes, Landlord's
reasonable approval and the approval of all applicable governmental authorities.
38. PARKING: Tenant shall have no assigned parking, other than such parking as
set forth on the FACE PAGE hereof, if any, and shall, together with its agents
and employees, make use of not more than its Parking Allocation. Tenant agrees
to hold Landlord harmless for damage to or loss of any vehicles or personal
property left in or about any vehicles, that may occur while the vehicles are
parked in the parking areas of the Building.
39. INTENTIONALLY OMITTED.
40. BROKERAGE: Tenant represents and warrants that there are no brokers involved
in this Lease transaction except for the Broker (as defined in Section P on the
FACE PAGE) (if left blank, "none" shall be deemed inserted) to whom commission
shall be paid by Landlord -by separate agreement (if name inserted). Tenant
agrees to indemnify, defend and hold Landlord harmless from and against all
costs, claims, liabilities, expenses or damages of any kind whatsoever
(including, but not limited to, Attorneys' Fees) arising from any such brokerage
claim made by any one other than the above named broker (if name inserted).
41. RECORDING: Neither the Tenant nor anyone claiming under the Tenant shall
record this Lease or any memorandum hereof in any public records without the
prior written consent of the Landlord. In the event this Lease shall be recorded
by or at the direction of Tenant, such recording shall be deemed a default
hereunder.
42. CONFIDENTIALITY: Landlord and Tenant hereby agree that the terms and
conditions of this Lease are of a confidential nature. Tenant covenants that,
except in connection with a Private Placement or Initial Public Offering of its
stock in accordance with the applicable rules and regulations of the Securities
and Exchange Commission, it will not reveal either the terms, provisions or
conditions under which it occupies the Premises without the express written
consent of Landlord. This clause shall be binding on the Tenant and Tenant shall
use its best efforts to assure compliance herewith by Tenant's employees and
agents.
43. NEGATION OF PERSONAL LIABILITY. Notwithstanding anything to the contrary
herein contained, Tenant agrees that Landlord (and, in case Landlord is a joint
venture, partnership, tenancy in
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common, association or other form of joint ownership, the members and employees
of any such joint venture, partnership, tenancy-in-common, association or other
form of joint ownership) shall have absolutely no personal liability with
respect to any of the provisions of this Lease, or any obligation or liability
arising therefrom or in connection therewith. Tenant, and any party claiming
through or under Tenant, shall look solely to Landlord's equity in the Building
for the satisfaction of any remedies of Tenant against Landlord including,
without limitation, the collection of any judgment (or other judicial process)
requiring the payment of money by Landlord in the event of any default or breach
by Landlord with respect to any of the terms and provisions of this Lease to be
observed and/or performed by Landlord, subject, however, to the prior rights of
any holder of any mortgage covering all or part of the Premises or Building and
no other assets of Landlord or any principal or partner of Landlord shall be
subject to levy, execution or other judicial process for the satisfaction of
Tenant's claim and in the event Tenant obtains a judgment against Landlord, the
judgment docket shall be so noted. This Lease contains all agreements and
understandings between Landlord and Tenant on the use and occupancy of the
Premises and the relationship of Landlord and Tenant as landlord and tenant. Any
agreement of any nature, oral or written, between Landlord and Tenant,
including, but not limited to, any one based on custom, usage, acceptance or
waiver, purportedly entered into prior to or subsequent to the execution of this
Lease is null and void and of no affect whatsoever, unless such purported
agreement is specifically set forth in writing in this Lease or in a written
instrument executed by both Landlord and Tenant. This exculpation of liability
shall be absolute and without exception whatsoever. This paragraph shall inure
to the benefit to Landlord's successors and assigns and their respective
principals. Throughout the Term, Landlord shall, at its sole cost and expense,
keep the improvements which constitute the Building (including the portion of
the Building constituting the Demised Premises but specifically excluding Tenant
improvements and any and all furniture, fixtures, equipment, merchandise,
inventory, supplies, and other personal property in the Demised Premises owned
by Tenant) insured against loss or damage by fire or other insurable perils in
no less than the amount Landlord would normally maintain in connection with
buildings of like size, age and value ("Landlord's Insurance"). During the Term
hereof, Tenant shall pay to Landlord as Additional Rent hereunder an amount
equal to Tenant's Proportionate Share of any increase in premiums for Landlord's
Insurance over the amount of such premiums for the Base Year, as set forth in
Paragraph 7 of this Lease.
44. DELAY: Except as expressly provided in this Lease, whenever the Landlord or
Tenant is delayed in fulfillment of any obligation under this Lease, other than
the payment of Rent, by an unavoidable occurrence which is not the fault of the
party delayed in performing such obligation, then the time for fulfillment of
such obligation shall be extended during the period in which such circumstances
operate to delay the fulfillment of such obligation. Lack of money shall not be
deemed an excuse for delay.
45. SUCCESSORS: The rights and liabilities created by this Lease extend to and
bind the successors and assigns of the Landlord and the heirs, executors,
administrators and permitted successors and assigns of the Tenant, although this
shall not be construed as conferring upon the
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Tenant the right to assign this Lease or sublet the Premises or confer rights of
occupancy upon anyone other than Tenant.
46. JOINT AND SEVERAL LIABILITY: If there is at any time more than one Tenant or
more than one person constituting the Tenant, their covenants shall be
considered to be joint and several and shall apply to each and every one of
them.
47. CAPTIONS AND PARAGRAPH NUMBERS: The captions, paragraph numbers, article
numbers and table of contents appearing in his Lease are inserted only as a
matter of convenience and in no way affect the substance of this Lease.
48. EXTENDED MEANING:. The words "hereof", "hereto" and "hereunder" and similar
expressions used in this lease relate to the whole of this Lease and not only to
the provisions in which such expressions appear. This Lease shall be read with
all changes in number and gender as may be appropriate or required by the
context. This Lease has been fully reviewed and negotiated by each party and its
respective counsel and shall not be more strictly construed against either
party.
49. PARTIAL INVALIDITY: All of the provisions of this Lease are to be construed
as covenants even though not expressed as such. If any such provision is held or
rendered illegal or unenforceable it shall be considered separate and severable
from this Lease and the remaining provisions of this Lease shall remain in force
and bind the parties as though the illegal or unenforceable provision had never
been included in this Lease.
50. GOVERNING LAW: This Lease is made and entered into and shall be construed in
accordance with and governed by the laws of the State of Florida. Any litigation
arising under or with respect to this Lease shall be maintained in the Courts of
Miami-Dade County, Florida. Neither party shall interpose any defense that such
venue and jurisdiction is inconvenient
51. NO PARTNERSHIP: Nothing in this Lease creates any relationship between the
parties other than that of lessor and lessee and nothing in this Lease
constitutes the Landlord a partner of the Tenant or a joint venturer or member
of a common enterprise with the Tenant.
52. RADON GAS: Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal and
state guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit.
53. AUTHORITY: Tenant is a duly authorized and existing entity as identified in
Section G on the FACE PAGE under Tenant's Legal Structure and Tenant is
qualified to do business in the State of Florida. Tenant has full right and
authority to enter into this Lease, and each of the persons signing on Tenant's
behalf are authorized to do so. In addition, Tenant warrants that it is not
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necessary for any other person, firm, corporation or entity to join in the
execution of this Lease to make the Tenant's execution complete, appropriate and
binding.
54. LEASE VALIDITY: Notwithstanding anything to the contrary contained herein or
in this Lease, the submission of this Lease for examination and/or execution by
Tenant does not constitute a reservation of or option for the Premises for the
benefit of Tenant and the Lease and/or any Addendum shall have no force or
validity unless and until duly executed by Landlord and delivered by Landlord to
Tenant.
55. TRIAL BY JURY: TENANT AND LANDLORD HEREBY NFUTUALLY WAIVE ANY AND ALL RIGHT
TO A JURY TRIAL OF ANY ISSUE OR CONTROVERSY ARISING UNDER THIS LEASE. Tenant
further agrees that it shall not interpose any counterclaims in a summary
proceeding or in any action based upon non-payment of rent or any other
requirement of Tenant hereunder.
56. INTENTIONALLY OMITTED.
57. LANDLORD CONTROLLED AREAS: All automobile parking areas, driveways,
entrances and exits thereto, Common Areas, and other facilities furnished by
Landlord, including all parking areas, truck ways, loading areas, pedestrian
walkways and ramps, landscaped areas, stairways, corridors, and other areas and
improvements provided by Landlord for the general use, in common, of tenants,
their officers, agents, employees, servants, invitees, licensees, visitors,
patrons and customers shall be at all times subject to the exclusive control and
management of Landlord, and Landlord shall have the right from time to time to
establish, modify and enforce reasonable rules and regulations with respect to
all facilities and areas and improvements, to police same; from time to time
change the area, level and location and arrangement of parking areas and other
facilities hereinabove referred to; to restrict parking by and enforce parking
charges (by operation of meters or otherwise) to tenants, their officers,
agents, invitees, employees, servants, licensees, visitors, patrons and
customers, to close all or any portion of said areas or facilities to such
extent as may in the opinion of Landlord's counsel be legally sufficient to
prevent a dedication thereof or the accrual of any rights to any person or the
public therein, to close temporarily all or any portion of the public areas,
Common Areas or facilities, to discourage non-tenant parking, to charge a fee
for visitor and/or customer parking and to do and perform such other acts in and
to said areas and improvements as, in the sole judgment of Landlord, Landlord
shall determine to be advisable with a view to the improvement of the
convenience and use thereof by Tenants, their officers, agents, employees,
servants, invitees, visitors, patrons, licensees and customers. Landlord shall
operate and maintain the Common Areas and other facilities referred to in such
reasonable manner as Landlord shall determine from time to time. Without
limiting the scope of such discretion, Landlord shall have the full right and
authority to designate a manager of the parking facilities and/or Common Areas
and other facilities who shall have full authority to make and enforce
reasonable rules and regulations regarding the use of the same or to employ all
personnel and to make and enforce all rules and regulations pertaining to and
necessary for the proper operation and maintenance of the parking area and/or
Common Areas and other facilities. Reference in this
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paragraph to parking area and/or facilities shall in no way be construed as
giving Tenant hereunder any rights and/or privileges in connection with such
parking areas and/or facilities unless such rights and/or privileges are
expressly set forth in Paragraph 38 hereof.
58. OCCUPANCY TAX AND OCCUPATIONAL LICENSES: Tenant shall be responsible for and
shall pay before delinquency all municipal, county or state taxes and fees,
including, but not limited to, the occupational licenses or fees issued by the
governmental authorities having jurisdiction over the Building, assessed during
the Term of this Lease against any occupancy interest or personal property of
any kind, owned by or placed in, upon or about the Leased Premises by Tenant.
Prior to Tenant taking occupancy of the Premises, Tenant shall provide
Landlord with a copy of the Occupational License issued by the appropriate
governmental authorities having jurisdiction over the Building. Tenant shall
also be required to provide Landlord a copy of the annual renewal of the
Occupational License for all subsequent years of Tenant's occupancy. Tenant's
failure to provide Landlord with a copy of the Occupational License prior to
Tenant's stated date of occupancy, pursuant to this Lease, which failure shall
constitute a material default under the terms of this Lease, shall not relieve
Tenant of its obligation to pay rent as provided in this Lease. Tenant's failure
to provide Landlord with a copy of the annual renewal of the Occupational
License when requested by Landlord, will constitute a material default under the
terms of this Lease.
Prior to Tenant taking occupancy of the Premises, Tenant shall provide
Landlord with a copy of a Good Standing Certificate from the State of Florida
for Tenant's entity as set forth on the FACE PAGE, except only if Tenant is an
individual proprietorship. Tenant shall also be required to maintain such entity
in good standing in the State of Florida (and where applicable, in its actual
state of organization) at all times during the Term of this Lease. Tenant's
failure to provide Landlord with a copy of the Good Standing Certificate prior
to Tenant's stated date of occupancy, pursuant to this Lease, which failure
shall constitute a material default under the terms of this Lease, shall not
relieve Tenant of its obligation to pay rent as provided in this Lease. Upon
request from Landlord, Tenant shall provide Landlord with a copy of a Good
Standing Certificate from the State of Florida at least once per year after the
commencement of this Lease. Tenant's failure to provide Landlord with such
further copy of a Good Standing Certificate when requested by Landlord, shall
constitute a material default under the terms of this Lease.
59. CROSS DEFAULT: If the term of any lease, other than this Lease, made by
Tenant for any other space in the Building shall be terminated or terminable
after the making of this Lease because of any default by Tenant under such other
lease, such default shall, ipso facto constitute a default hereunder and empower
Landlord at Landlord's sole option, to terminate this Lease as herein provided
in the event of default.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease in
counterparts as of the day and year first above written, each of which
counterpart shall be considered an executed
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original. In making proof of this Lease it shall not be necessary to produce or
account for more than one counterpart
Witness: LANDLORD: 1688 Partners Ltd.
/s/ By: 1688 IEA, Inc. as General Partner:
- -------------------------------------
(As to Landlord)
/s/ /s/
- ------------------------------------- -------------------------------------
(As to Landlord) David Garfinkle as Vice President
Witness: TENANT: Yupi Internet, Inc., a Florida
corporation
/s/ By: /s/
- ------------------------------------- ------------------------------------
(As to Tenant) Authorized Signatory
/s/ Luis E. San Miguel
- ------------------------------------- -------------------------------------
(As to Tenant) Print Name and Office
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EXHIBIT B
TENANT STANDARDS
PARTITIONS:
o All partitions shall be constructed of 1/2" Gypsum Wall Board with paint
finish.
o All demising partitions shall be constructed of 5/8" type "X" fire rated
Gypsum Board with paint finish.
o All walls shall receive two coats of standard flat, off-white paint.
DOORS:
o Entrance doors shall be solid core doors.
o Interior tenant doors shall be hollow core paint grade doors - 3'0" x
7'0" with painted solid wood frames.
HARDWARE:
o Chrome finish commercial grade master keyed lock set at entrance doors
and passage set at all interior doors.
CEILINGS:
o Armstrong Cortega 2' x 4' white flat lay-In drop acoustical ceiling with
white grid throughout the tenant space.
FLOORING:
o 26 ounce Level Loop glued down onto the slab. Color to be selected by
tenant from Landlord's standard building selection.
ELECTRICAL:
o 2' x 4' Building Standard fluorescent fixture with prismatic lens.
Approximately one fixture per every 75 usf within the tenant space.
o One Building Standard toggle light switch for every office.
o One duplex receptacle - 20 amp/120 volt per every 120 usf.
o Exit / Emergency lighting as required by code.
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EXIHBIT C
RULES AND REGULATIONS
1. MOVING PERSONAL PROPERTY OF TENANTS. No furniture, freight or equipment
of any kind or nature shall be brought into or removed from the Building
or any demised premises without the prior written consent of Landlord.
All moving of the same by tenants into, within or out of the Building,
shall be done at such times and in such manner as Landlord shall
designate. Landlord shall have the right to prescribe the weight, size
and position of all safes and other heavy property brought into the
Building. As security for any damage done to the Building or the
Premises, by tenant or tenant's movers, contractors, vendors, lessors or
employees, in connection with any move into, within or out of the
Building, tenant shall deposit with Landlord a moving security deposit in
the amount of $500.00, which shall be deposited with Landlord (i) at the
time of execution of the lease for a new lease, (it) at least five (5)
days prior to moving out of the Building any furniture, freight or
equipment of tenant at the termination of the Lease Term, or (iii) at
least five (5) days prior to any move within the Building or moving in or
out of the Building during the term of the lease any furniture, freight
or equipment (by tenant or any lessor to tenant). Any claims against such
deposit shall be made by Landlord within ten (10) days after the
particular move into, within or out of the Building as to which such
deposit applies. The terms and conditions of Section 9 of the lease
regarding the Security Deposit shall apply to this deposit, provided,
however, if no claim has been made by Landlord to tenant within the
aforesaid ten (10) day period of time, or if a claim has been made by
Landlord for less than all of the deposit, the balance of the deposit
shall be delivered to tenant by Landlord within fifteen (15) days after
the respective move has taken place. If such moving security deposit is
not given to Landlord by such tenant within the appropriate time period,
Landlord may at its sole, but reasonable discretion, prevent any move by
tenant of any furniture, freight or equipment into, within or out of the
Building. All damage done to the Building by such moving or by
maintaining any such safe or heavy property shall be repaired at the
expense of the tenant. In the event a tenant engages the services of a
moving company, such tenant shall provide Landlord with a certificate on
Form ACORD 27 from such tenant's and such mover's respective insurance
carrier (which carrier(s) shall be reasonably satisfactory to Landlord)
naming Landlord as an additional insured and stating that such insurance
coverage shall not be terminated without at least fifteen (15) days prior
written notice having been given to Landlord at Landlord's address for
notice in the lease. The exercise of any of Landlord's rights under the
moving security deposit shall not diminish or be in lieu of Landlord's
other rights against tenant or others under this lease or at law or at
equity.
2. SHIPPING AND RECEIVING. No tenant shall receive or ship articles of any
kind except through facilities and designated doors and at hours
designated by the Landlord. Hand trucks, carryalls or similar appliances
shall only be used in the Building with the consent of
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<PAGE>
the Landlord and shall be equipped with rubber tires, slide guards and
such other safeguards as the Landlord requires.
3. PREVENTION OF DAMAGE TO BUILDING AND PREMISES. It shall be the duty of
every tenant to assist and cooperate with the Landlord in preventing
damage to the Building and any demised premises. If any tenant desires
telegraphic or telephonic connections, the Landlord may direct the
electricians as to where and how the wires are to be introduced. No
electric wires will be permitted which have not been authorized in
writing by the Landlord. No outside radio, television, or other antenna
shall be allowed on any part of the Building without prior authorization
in writing by the Landlord.
4. NUISANCE. All tenants will conduct their business, including supervision
of their agents, employees, invitees and visitors, so as not to create
any nuisance, annoyance, disturbance, excessive noise, odor or eyesore
within the Building, or on the surrounding property.
5. EXCLUSION OF PERSONS FROM BUILDING. Landlord reserves the right to
exclude or expel from the Building any person who, in the reasonable
judgment of Landlord, is under the influence of liquor or drugs, or who
shall in any manner do any act in violation of the rules and regulations
of the Building. Landlord may bar access to the Building to any tenant,
or any officer, employee, business invitee, contractor, agent or visitor
of any tenant, which person (i) habitually or frequently breaches the
terms and conditions of the Lease or these Rules and Regulations, or (ii)
damages or destroys any personal property in or of the Building or, (iii)
is violent or threatens violence to any person or property in or of the
Building, or (iv) is orally abusive to the Landlord or any other tenant,
or Landlord's or any other tenant's officers, employees, agents,
contractors or invitees.
6. COMPLIANCE WITH LAWS. All tenants will keep and maintain their demised
premises in a clean and healthful condition and comply with all laws,
ordinances, orders, rules and regulations of any State, Federal,
Municipal and other agencies or bodies having any jurisdiction thereof
including rules, orders and regulations of the Southeastern Underwriters
Association for the prevention of fires, with reference to use,
conditions or occupancy of the Building or their demised premises.
7. REPORTING ACCIDENTS. Tenants shall promptly report to Landlord any
accident of which they are aware involving personal injury or property
damage occurring within any demised premises or occurring within the
public areas of or surrounding the Building.
8. LOST OR STOLEN PROPERTY. Landlord shall not be liable for any lost or
stolen property taken from the Premises, Building or the Parking area.
All tenants shall take their own adequate precautions against loss or
theft of personal property belonging to them and their agents, employees
and invitees, as well as any other appropriate security precautions.
Although Landlord shall not be responsible for any such precautions, the
Landlord may from time to time adopt appropriate systems and procedures
for the security or safety of the
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<PAGE>
Building, any persons occupying, using or entering the same, or any
equipment, furnishings or contents thereof, and the tenant shall comply
with Landlord's reasonable requirements relative thereto.
9. LOCKS. No additional or replacement locks shall be placed on any door
without the written consent of Landlord. Landlord may require that
changes be done by Landlord, at tenant's expense, and that Landlord
retain a key to each lock installed for security and safety purposes.
10. KEYS. Upon expiration of any lease, keys must be returned to the Building
manager or the leasing office, and a receipt obtained by the tenant. In
the event any tenant fails to return keys, Landlord may retain $50.00 of
tenant's security deposit for necessary locksmith work and
administration.
11. PETS. No pets or animals (except for professionally trained and certified
seeing eye or hearing assistance guide dogs) are allowed in or around the
Building or any demised premises.
12. FIREARMS. No firearms of any kind shall be permitted in the Building or
any demised premises.
13. CANVASSING, SOLICITING, PEDDLING. Canvassing, soliciting, peddling or
distributing of any handbills or advertising matter in or about the
Building is prohibited.
14. VEHICLES. No bicycles, roller blades, skateboards or other type of
vehicle or recreational equipment shall be allowed in any part of the
exterior or interior areas of the building without prior written consent
of the Landlord.
15. SIGNS. No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed, printed or affixed by tenant on or to any part of
the outside of the Building or to any interior public areas, or in any
demised premises so as to be visible from the outside, without the prior
written consent of Landlord. Landlord shall have the right to remove any
such objectionable item without notice to and at the expense of the party
so placing such item.
16. DIRECTORY BOARD. The Directory of the Building will be provided
exclusively for the display of the name and location of tenants only.
Landlord reserves the right to exclude any other names therefrom.
17. HOUSEKEEPRNG. Tenants shall not place any debris, garbage, trash or
refuse or pen-nit same to be placed or left in or upon any part of the
Building or surrounding property, other than in the location provided by
the Landlord specifically for such purposes. Tenants shall
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Landlord Tenant
<PAGE>
not allow any undue accumulation of any debris, garbage, trash or refuse
in or outside of the Premises.
18. WATER FIXTURES. Tenants shall not use water or plumbing fixtures for any
purpose for which they are not intended, nor shall water be wasted by
tampering with such fixtures. Any cost or damage resulting from such
misuse by any tenant shall be paid for by said tenant.
19. PARKING. If the Landlord designates tenant parking areas in or about the
building, the tenants shall park their vehicles and shall cause their
respective employees and agents to park their vehicles only in such
designated parking areas. Each tenant shall furnish the Landlord, upon
request, with the current license numbers of all vehicles owned or used
by said tenant or its employees and agents and said tenant thereafter
shall notify the Landlord of any changes in such license numbers within
five (5) days after the occurrence of such change. Landlord may itself or
through any agent designated for such purpose, make, administer, and
enforce additional rules and regulations regarding parking by tenants and
by the employees and agents of tenants in the Building. No disabled
vehicles shall be left in the parking areas of the Building for more than
twenty-four (24) hours. Landlord shall use reasonable efforts to prevent
unauthorized use of the parking areas, but shall not be liable to any
tenant for any such unauthorized use nor does Landlord warrant that a
parking space shall, in every event, be available for each tenant or for
each employee and agent of each tenant, nor shall any portion of the
parking area be considered a portion of any tenant's demised premises.
Overnight parking, repairing or washing of vehicles in any of the parking
areas is prohibited. Landlord may designate a certain portion of the
parking areas as reserved for one or more specific tenants and/or the
invitees of such tenant. At no time shall any tenant or the employees or
agents of any tenant park in areas designated by Landlord as being
reserved for Valet Parking. Landlord shall have the right to place window
stickers on and/or tow any vehicles violating the Building Rules and
Regulations. Landlord shall not be responsible to any tenant, with
respect to any vehicle that has a window sticker placed upon its windows,
or for any vehicle that is towed from the Building, for any damage or
loss of any nature to any such vehicle which has been violating the
Building Rules and Regulations.
20. WINDOWS. Except for the proper use of blinds and drapes approved in
writing by Landlord, no tenant shall cover, obstruct or affix any object
or material to the windows of the Building or any demised premises that
might reflect or admit light into any part of the Building, including
without limiting the generality of the foregoing, the application of
solar films.
21. REPAIR, MAINTENANCE, ALTERATIONS AND IMPROVEMENTS. Each tenant shall
carry out such tenant's repairs, maintenance, alterations and
improvements in the Premises only during times agreed to in advance by
the Landlord and in a manner which will not interfere with the rights of
other tenants in the Building.
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22. PERSONAL USE OF PREMISES. The Premises shall not be used or permitted to
be used for residential, lodging or sleeping purposes or for the storage
of personal effects or property not required for business purposes.
23. OBSTRUCTIONS. Tenants shall not obstruct or place anything in or on the
sidewalks or driveways outside the Building or in the lobbies, corridors,
stairwells or other common areas of the Building, or use such locations
for any purpose except access to and exit from the Premises without the
Landlord's prior written consent. Landlord may remove at such tenant's
expense any such obstruction or thing caused or placed by that tenant
(and unauthorized by the Landlord) without notice or obligation to the
tenant.
24. EMPLOYEES AND INVITEES. In these Rules and Regulations, the term "tenant"
shall be deemed to include the officers, directors, employees, agents,
contractors, customers, invitees and licensees of such tenant and others
permitted by the tenant to use or occupy the Premises.
25. PEST CONTROL. In order to maintain satisfactory and uniform pest control
throughout the Building, the tenants shall engage for each tenant's own
Premises and at each tenant's sole cost, a qualified pest extermination
contractor either designated or approved by the Landlord, who shall
perform pest control and extermination services in the Premises at such
intervals as reasonably required or as may be directed by the Landlord.
26. LANDLORD NOT RESPONSIBLE FOR VIOLATIONS. Landlord is not responsible to
any tenant for the nonobservance or violation of the rules and
regulations by any other tenant.
27. MODIFICATION OF RULES AND REGULATIONS. Landlord reserves the right to
change these Rules and Regulations and to add such other and further
Rules and Regulations as in Landlord's judgment may, from time to time,
be needed for the safety, care and cleanliness of the Building and for
the preservation of good order therein, or for any cause, and when so
changed, such modification or new Rules and Regulations shall be deemed a
part hereof with the same effect as if written herein.
28. SMOKING: Smoking is permitted only in tenant's premises and outside of
the Building. There shall be no smoking of any nature in any part of the
Common Areas of the Building, including, but not limited to, stairwells,
exterior stairwell landings, hallways, elevators, bathrooms or the lobby.
29. BUILDING SECURITY TIMES: All people entering the Building after 5:00 p.m.
until 7:00 a.m. the following morning, Monday through Friday inclusive,
and all people entering the Building at any time on Saturdays, Sundays
and holidays, shall be required to sign in at the guard station in the
lobby.
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30. OUTSIDE CONTRACTUAL WORK. No party shall perform any work in or to any
leased premises or in or to the Building, including, but not limited to,
installation of telephones, telegraphic or security equipment, electrical
devices and attachments, and all installations affecting floors, walls,
windows, doors, ceilings, equipment or any other physical feature of the
Building, without having previously applied to Landlord for and having
received Landlord's written approval to perform such work.
31. JANITORIAL WORK: No party shall hinder the work of Landlord's janitorial
personnel. Janitorial work shall be done after business hours or whenever
offices are vacant. Windows, doors and fixtures may be cleaned at any
time. To avoid creating difficulties in the performance of such
janitorial work, each tenant shall provide adequate waste and rubbish
containers, cabinets, bookcases and the like to keep waste, rubbish and
other items of personal property off of the floors of such offices.
Tenants shall not leave any glasses, cups or other containers in their
offices containing any type of liquids. Tenants shall not leave any
crates or boxes which do not fit into tenants' waste and rubbish
containers in any of the hallways or other Common Areas of the Building;
but shall notify Landlord whenever such crates or boxes need to be
removed from the premises.
32. ACCESS FOR FURNITURE AND EQUIPMENT: Landlord cautions each tenant when
such tenants are purchasing furniture and equipment for their respective
offices to measure the elevators, doorways and stairwells of the Building
so that such furniture and equipment can easily fit through the same.
Landlord reserves the right to refuse to allow any furniture or equipment
into the Building that does not comply with the foregoing conditions.
33. NON PERMITIED MATIERALS: No party shall install or operate any HVAC
apparatus or carry on any mechanical operation or bring into the Building
or any leased premises any flammable liquids Or explosives without the
prior written approval of Landlord, which approval may be withheld in
Landlord's sole discretion.
34. RESTRICTED AREAS: No person may go upon the roof of the Building nor in
the electrical rooms or other areas of the Building which are solely for
the use of the Landlord or utility companies.
35. PHONE EQUIPMENT: No tenant is permitted to place any of tenant's
proprietary telecommunication equipment in any of the electrical or
telephone utility rooms or in any other location of the common areas of
the Building other than in such tenant's leased premises. In order to
avoid any problems with compliance with applicable insurance regulations
and building codes, any conduit required for the operation or
installation of any such proprietary telecommunication equipment shall be
manufactured of either metal or teflon and of no other material. Prior to
the installation of any telecommunications equipment or conduit for such
equipment in any portion of the premises of any tenant, such tenant shall
obtain the prior written consent of Landlord, which consent shall not be
unreasonably withheld.
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<PAGE>
EXHIBIT D
SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT
This Subordination, Non-Disturbance and Attornment Agreement ("Agreement") is
made as of the _____ day of _________1999, between Yupi Internet, Inc.
("Tenant") and Ocean Bank ("Lender").
RECITALS:
A. Lender is the owner and holder of a mortgage in Official Records Book ______
at Page __________ of the ____________________________ Public Records of
Miami-Dade County, Floridaencumbering property (the "Property") more
particularly described in Exhibit "A" hereto (the mortgage and all increases,
renewals, recastings, modifications, consolidations, participations,
replacements and /or extensions thereof are hereinafter collectively call the
"Mortgage").
B. The owner of the Property, 1688 Partners, Ltd. ("Landlord") and Tenant
entered into a lease dated as of _____________________, 1999, covering premises
of approximately 14,971 rentable square feet (the "Premises") within the
Property.
C. The Lease is subject and subordinate to the Mortgage, and Tenant wishes to
obtain from Lender assurances that tenant's possession of the Premises will not
be disturbed in certain circumstances, and Lender is willing to provided such
assurances to Tenant, upon and subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, FOR $10.00 and other valuable consideration exchanged between
Lender and Tenant, the receipt and sufficiency of such consideration being
hereby acknowledged, Lender and Tenant agree as follows:
1. Subordination. The Lease is and will remain subject and subordinate in all
respects to the Mortgage and all voluntary and involuntary advances made
thereunder, in accordance with the terms and conditions hereof.
2. Non-Disturbance Agreement. As long as Tenant is not in default beyond any
applicable grace period in the payment of rent, additional rent or other charges
or in the performance of any of the other terms or conditions of the Lease,
Tenant's rights under the Lease and its possession of the Premises will not be
interfered with or disturbed by Lender during the term of the Lease (including
any renewal or extension term) following acquisition of title to the Property
(a) by Lender or the purchaser at a foreclosure sale pursuant to any action or
proceeding to foreclose the Mortgage, or (b) by Lender pursuant to acceptance of
a deed in lieu of foreclosure or otherwise (in either case, a "Transfer of
Ownership").
3. Attornment Agreement. If a Transfer of Ownership occurs, Lender
and Tenant will be bound to each other, as landlord and tenant, respectively,
under all of the terms and conditions of the lease for the balance of the term
thereof (including any renewal or extension term), and Tenant hereby attorns to
Lender as its landlord, such attornment to be effective and self-operative,
without the execution of any other instruments on the part of either party
hereto, immediately
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<PAGE>
upon a Transfer of Ownership. As used in this Article and in the subsequent
provisions hereof, whenever the context allows the term "lender' will also
include a purchaser of the Property at a foreclosure sale.
4. Lender's Liability. Notwithstanding any other provision of this Agreement,
Lender will not in any way be: (a) liable for acts or omissions of any prior
landlord (including Landlord); (b) subject to offsets or defenses that Tenant
might have had against any prior landlord (including Landlord); (c) bound by
rent, additional rent or other charges that Tenant might have paid for more than
30 days in advance to any prior landlord (including Landlord); (d) bound by any
amendment or modification of the Lease made without Lender's prior written
consent (except to the extent that the Lease may specifically contemplate any
amendment or modification thereof); (e) responsible for money or other security
delivered to Landlord pursuant to the Lease but not subsequently received by
Lender; or (f) obligated to pay Tenant the "Construction Allowance" referred to
in the Lease, such payment obligation being personal to Landlord.
5. Condemnation Awards and Insurance Proceeds. Without limiting any other
provision of this Agreement, until a Transfer of Ownership occurs the provisions
of the Mortgage regarding Lender's rights in and to insurance proceeds and
awards or other compensation made for the taking by eminent domain (or
conveyance in lieu thereof) will be superior to and will govern and control
over, any contrary provision of the Lease. Notwithstanding anything contained in
the Lease that may require Landlord to repair or restore damage to the Premises
caused by fire or other casualty or by exercise of eminent domain, if a Transfer
of Ownership occurs Lender will have no Obligation for such repair or
restoration except as the same can reasonably be accomplished with the net
proceeds or net award or other compensation actually received by Lender with
respect to the Premises.
6. No Lease Modification or Claims. Tenant hereby confirms that the Lease has
not been modified or amended and is in full force and effect without any claims
of default, offset or deduction by Tenant.
7. Recognition of Mortgage and Collateral Assignment. To the extent that the
Lease entitles Tenant i notice of any mortgage affecting the Premises, this
Agreement constitutes such notice with respect to the Mortgage, and Tenant also
acknowledges Landlord's collateral assignment of the Lease, to Lender.
8. Notices. To be effective, any notice or other communication given pursuant to
this Agreement must be in writing and sent postpaid by United States registered
or certified mail with return receipt requested. Rejection or other refusal to
accept, or inability to deliver because of changed address of which no notice
has been given, will constitute receipt of the notice or other communication.
For purposes hereof, Lender's address is 780 N.W. 42d Avenue, Miami, Florida
33126 and Tenant's address is 1688 Meridian Avenue, Suite 1000, Miami Beach,
Florida 33139. At any time (s), each party may change its address for the
purposes hereof by giving the other party a change of address notice in the
manner stated above.
9. Entire Agreement, Etc. This Agreement (a) is to be construed and enforced in
accordance with the laws of the State of Florida (b) contains the entire
understanding of Lender and Tenant regarding matters dealt with therein (any
prior written or oral agreements between them as to such matters being
superseded hereby), (D can be modified or waived in whole or in part only by a
written instrument signed on behalf of the party against whom enforcement of the
modification
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or waiver is sought, and (d) will bind and inure to the benefit of the parties
hereto and their respective successors and assigns.
Witness: Lender: Ocean Bank
By:
- ------------------------------------- ----------------------------------
- ------------------------------------- -------------------------------------
Print Name
Print Office
--------------------------
Witness: Tenant: Yupi Internet, Inc., a Florida
corporation
By:
- ------------------------------------- ----------------------------------
- ------------------------------------- -------------------------------------
Print Name
Print Office
--------------------------
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Landlord Tenant
EXHIBIT 10.06
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") is made as of this 22nd, day of April
1999, by and between South Beach Tristar LLC, a Delaware Limited Liability
Company ("Landlord") and Yupi Internet Inc., a Florida corporation ("Tenant").
W I T N E S S E T H :
THAT FOR AND IN CONSIDERATION of the mutual covenants and agreements
herein contained, the parties herein covenant and agree as follows:
I. DEFINITIONS. As used herein, the following terms have the following
meanings:
(a) "Landlord's Address" means c/o The Continental Real Estate
Companies 2665 South Bayshore Drive Miami, Florida 33233 Attention: Ruben Macias
or such other address as may be designated in writing by Landlord from time to
time.
(b) "Tenant's Address" and "Premises" mean 830 Lincoln road, Miami
Beach, Florida 33139.
(c) "Term" means that period of time commencing on May 1, 1999 and
ending at midnight April 30, 2000.
(d) "Permitted Use" means the operation of Internet web sites.
(e) "Rental" shall mean 28,750.00 per month, inclusive of sales tax.
II. ACCEPTANCE OF THE PREMISES.
Tenant has examined the Premises and accepts the same in its present
"as is" condition. Landlord has no obligation to make any improvements or
otherwise maintain or repair the Premises.
III. RENTAL.
Rental shall be due and payable in advance on the first day of each
calendar month thereafter during the Term at Landlord's address at the time of
payment, without demand and without set-off or deduction. Any sum not timely
paid hereunder, shall accrue interest from its due date at the rate of 15% per
annum from the date due until paid.
There shall be no rental due hereunder for the period foe time
commencing May 1 and ending May 15, 1999. On or before May 1, 1999, Tenant shall
pay to Landlord the sum of $4,375.00 which shall be payment of the rental for
May 16-31, 1999.
IV. USE AND CARE OF PREMISE
A. Use of Premises.
The Premises may be used only for the Permitted Use and for no other
purpose without the prior written consent of Landlord, which consent shall not
be unreasonably withheld.
<PAGE>
B. Prohibited Use.
Tenant shall not permit any objectionable or unpleasant odors to
emanate from the Premises: nor place or permit any radio, television, loud
speaker or amplifier on the roof or outside the Premises of where the same? can
be heard from outside the Premises, nor place an antenna, awning or other
project on the exterior of the Premises without Landlord's prior written
consent. Tenant shall not use the Premises in any manner which requires
electrical service beyond the service now provided.
C. Care of Premises, Trash Removal and Deliveries.
Tenant shall at its expense keep the Premises in good and clean
condition, free from dirt, rubbish, insects and pests at all time, and shall
store all trash in locked and covered containers within the Premises, arranging
for the regular pickup of such trash and garbage at Tenant's expense. If no
designated and prescribed by Landlord. Tenant will store all trash within all
area outside of and adjacent to the Premises designated by Landlord for trash
pickup and removal, and only in receptacles of the size, design and color from
time to time prescribed by Landlord.
D. Permits and License.
Tenant shall procure, at its sole expense, any permits and license
required for the transaction of its business in the Premises.
E. Laws: Rules and Regulations.
Tenant shall comply with all laws, ordinances, orders, rules and
regulations of any state, federal, municipal and other agencies or bodies having
any jurisdiction thereof relating to the use, condition or occupancy of the
Premises.
F. Toxic Damage.
Tenant shall not cause or permit the disposal or the improper
transportation, generation, storage, treatment, or use in the Premises of any
"solid waste" or "hazardous waste" as such terms are defined by the Resource
Conservation and Recovery Act, 42 U.S.C. ss.6903, ss.1004, and 40 C.F.P. Part
261, as amended or superseded; or any "hazardous substances" as that term is
defined by Section 101(11) of the Comprehensive Environmental Response
Compensation and Liability Act, 12 U.S.C. ss.9601(11), as amended or superseded:
or any other flammable, noxious or toxic materials. Tenant agrees to indemnify
and hold the Landlord harmless from and against any all liability incurred by
Landlord on account of damage to person or property caused by any hazardous
waste, environmental contamination, or other similar waste emanating from the
Premises during the term hereof.
V. MAINTENANCE AND REPAIR OF PREMISES
A. Landlord's Repair Obligation.
Landlord shall keep in good repair the roof, foundation, structure, and
exterior wells; the utility lines and facilities outside the Premises except
that Landlord shall not be required to make
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any repairs occasioned by the negligence of Tenant, its agents, employees,
contractors, subtenants, licensees, concessionaires or customers, which repairs
shall be made by Tenant. Landlord shall have access to the Premises as necessary
or convenient to make repairs required by this Section.
B. Tenant's Repair Obligation.
Tenant shall, at its sole cost and expense, make all needed repairs and
replacements to the storefront, the windows, plate glass, doors, and the
interior of the Premises, and shall keep all plumbing units, electrical systems,
pipes and connections within the Premises in good repair and free from
obstruction. Tenant shall be responsible for the maintenance, repair and
replacement of the air conditioning, heating and ventilating system within and
exclusively serving? the Premises. Tenant shall furnish, maintain and replace
all electric light bulbs, and fluorescent lights within the Premises. If any
repairs and replacements required to be made by Tenant hereunder are not made
within twenty days after written notice to Tenant, Landlord may, at its option,
make such repairs without liability to Tenant for any loss or damage which may
result to its tock or business by reason of such repairs, except for any
negligence or willful misconduct by Landlord, it's employees, agents or invitees
and Tenant shall pay to Landlord as Additional Rental the cost of such repairs
plus ten (10%) of said cost to cover Landlord's overhead.
VI. Surrender of Premises.
At the expiration of this Lease. Tenant shall surrender the Premises in
good condition, except for reasonable wear and loss by fire or other casualty
the repair of which is stated herein to be the Landlord's responsibility, and
shall surrender all keys for the Premises to Landlord and shall inform Landlord
of all combinations of locks, safes and vaults, if any, in the Premises. All
non-movable alterations, additions, improvements, air-conditioning machinery,
compressors and equipment and fixtures (other than unattached, movable trade
fixtures, signs, inventory, decorative lighting and miscellaneous decor items
which may be made or installed by Landlord or Tenant upon the Premises shall
remain upon and be surrendered with the Premises and become the property of
Landlord at the termination of this lease.
IX. ALTERATIONS
A. Rights with Respect to Alterations.
Tenant shall not make any alterations, additions or improvements to
this interior or the exterior of the Premises.
B. Mechanic's Liens.
The interest of the Landlord in the Premises shall not be subject to
liens for improvements made by the Tenant. Should any such Lien be filed or
recorded, Tenants agrees to cause such lien to be released of record within ten
(10) days after the filing of such lien. If Tenant shall fail to cause such lien
to be so released, then, in addition to any other right or remedy of Landlord,
Landlord may obtain a release of such lien by obtaining a bond to cover the
amount claimed to be due without obligation to ascertain its validity, and the
amount so paid by Landlord, including reasonable attorneys' fees, shall be
immediately due and payable by Tenant to Landlord. Contractors and
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subcontractors shall be required to maintain casualty and liability insurance
and worker's compensation coverage as is reasonably adequate to protect fully
Landlord and Tenant.
X. RIGHT OF ACCESS
Landlord shall have the right to enter upon the Premises at any
reasonable time for the purpose of inspection, or of making repairs to the
premises, or of making repairs, alterations or additions to adjacent premises,
or of showing the Premises to prospective purchasers, lessees or lenders.
Landlord may place "For Rent" signs and the like on or about the Premises during
the entire term hereof. In the event of an emergency, Landlord may enter the
Premises without notice for the purpose of making repairs.
XI. SIGNS, DISPLAYS AND STORE FRONTS
A. Store Fronts.
Tenant shall not (a) make any changes to our paint the store front; (b)
install any exterior Lighting, decorations or paintings, or (c) erect, install
or place any signs, window or door loitering, placards, decorations or
advertising media of any type on the exterior of the Premises.
B. Signs.
Tenant will not affix any sign or other lettering on any part of the
outside of the Premises which are in violation of applicable laws, ordinances
and regulations or which have not been approved by Landlord. Tenant shall
maintain all such signs in good condition and repair at all times. Any signs
shall be prepared and installed at Tenant's sole cost and expense and shall be
removed by the Tenant at the expiration of the term hereof. Tenant shall repair
any damage caused by said removal.
Landlord shall be entitled to keep a "For Rent" sign in the window of
the Premises. 120 days prior to lease expiration.
XII. UTILITIES
A. Tenant's Obligation.
Tenant shall pay for all utilities used or consumed in or upon the
Demised Premises and all sewer charges which become due and payable with respect
to same.
B. Landlord Not Liable.
Except for the negligence of Landlord, its contractors, employees, or
agents, Landlord shall not be liable in any respect for damages to either person
or property for any interruption or failure whatsoever in utility services. Nor
shall such interruption or failure be construed as an eviction of Tenant, nor
work an abatement, reduction or set-off of rent, nor relieve Tenant from
fulfillment of any covenant or agreement hereof.
XIII. INDEMNITY AND INSURANCE
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A. Indemnity.
Except in the extent that Landlord was negligent, acted willfully,
Landlord shall not be liable to Tenant or to Tenant's successors, assigns,
officers, employees, agents, contractors, customers or visitors, or to any other
person or entity whomsoever, and Tenant hereby waives and agrees to indemnity,
hold harmless and defend Landlord against all claims against Landlord and/or
Landlord's directors, officers, members, employees, or agents for any loss of
life or injury to person or damage to or loss of property in or about the
Premises (a) caused wholly or in part by any act, omission or neglect of Tenant,
its officers, agents, employees, contractors, subtenants, licensees or
concessionaires, or of any other person entering the Premises under the express
or implied invitation of Tenant, (b) arising out of the occupancy or use by
Tenant of the Premises of any part thereof and the conduct of its business
therein, (c) arising out of any breach or default by Tenant in the performance
of these obligations hereunder, or (d) occurring in the Premises.
Except to the patent Tenant is liable therefor in accordance with the
preceding paragraph, Landlord agrees to indemnify, protect, defend and hold
harmless Tenant against all liabilities, costs and expenses (including but not
limited to reasonable attorneys' fees and court costs through appeals and
collection efforts resulting from or in connection with any occurrence and on
Landlord's Property outside of the Premises, except to the extent caused by the
negligence or willful misconduct of Tenant of its agents, employees or
licensees.
B. Insurance.
Tenant shall procure and maintain through the Term, at is expense, a
policy or policies of liability insurance, insuring Tenant and naming the
Landlord as a n additional insured, the limits of such policy or policies to be
in an amount not less than ONE MILLION ($1,000,000.00) DOLLARS in respect of
injuries to or death of any one person, and in an amount not less than ONE
MILLION ($1,000,000.00) DOLLARS in respect of any one accident or disaster, and
in an amount not less than FIFTY THOUSAND ($50,000.00) DOLLARS in respect of
property damaged or destroyed, or in such different amounts as Landlord in its
discretion may reasonably required from time to time. Tenant shall also procure
and maintain through the Term, with Landlord as an additional named insured as
its interest appears, plate glass insurance and casualty insurance, including
extended coverage sprinkler leakage, and coverage for fire and smoke damage on
all Tenant's leasehold improvements and personal property in or about the
Premises, in an amount of not less than ninety (90%) per cent of the replacement
cost. All such insurance shall be written by insurance companies licensed to the
business in the State of Florida. Such policies shall contain a written
obligation on the part of each insurance company to notify Landlord at least
thirty (30) days prior to cancellation. Evidence of renewals of policies shall
be promptly delivered to Landlord at least thirty (30) days prior to the
expiration of the respective policy terms.
C. Increased Rates as Additional Rental.
In the event Tenant shall use or suffer or permit any other firm or
person to use the Premises for any hazardous purposes or in any other manner
that will increase the rate of any policies of insurance of any kind at any time
carried by Landlord upon the Premises or the building containing same and the
fixtures and property therein, Tenant shall pay to Landlord, as additional
Rental, any such increase in rate. Tenant shall not use or suffer or permit any
firm or person to use the Premises
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in any manner that will violate, suspend, void or make inoperative any such
insurance policies. Tenant at Tenant's sole expense shall comply with all rules,
orders, regulations or requirements of the board of ___Fire?_________
underwriters, or any other similar body, having jurisdiction.
D. Waiver of Subrogation.
Each party, on behalf of itself and on behalf of anyone claiming under
or through? it by way of subrogation or otherwise waives all rights and causes
of action against the other party, and the officers, employees, agents and
invitees of the other party, for any liability arising out of any loss or damage
in or to the Premises, its contents caused by any peril normally covered under
all-risk policies issued in the geographic area in which the Premises is located
(whether or not such party actually carries such insurance policies.). However,
if one party's insurance carrier prohibits waiver of subrogation regardless of
premium, or if either party fails to obtain a waiver of subrogation endorsement,
then the other party's release and waiver shall become null and void, if being
understood that in this instance each waiver is given in consideration for the
other.
Each party covenants that from and after the date possession of the
Premises be delivered to Tenant its insurance policies will contain waiver of
subrogation endorsements, and that if such endorsements, for any reason
whatsoever, are about to become unavailable, it will give the other party not
less than thirty [30] days prior written notice of such impending
unavailability.
XIV. LIMITED LIABILITY
Landlord and Landlord's agents and employees shall not be liable to
Tenant or any other person or entity whomsoever for any loss of life or injury
to person or damage to property caused by bursting pipes or wiring, broken
glass; by the backing up of drains; by gas, water, steam, electricity or oil
leaking , ??? or flowing into the Premises; nor shall Landlord be liable to
Tenant or any other person or entity whomsoever for any loss or damage that may
be occasioned by or through the acts or omissions of other tenants of the
building containing the Premises or any other persons or entities whomsoever. To
the maximum extent permitted by law, Tenant agrees to use and occupy the
Premises at Tenant's own risk.
XV. DAMAGES BY CASUALTY
A. Notices to Landlord.
Tenant shall give immediate written notice to Landlord of any damages
caused to the Premises by fire or other casualty.
B. Landlord's Obligation to Repair and Reconstruct.
In the event that the Premises shall be damaged or destroyed by fire or
other casualty covered by Landlord's insurance and Landlord does not elect to
terminate this Lease as hereinafter provided, Landlord shall proceed with
reasonable diligence and at its sole cost and expense to rebuild and repair the
Premises. If Landlord does not elect to terminate this Lease, Landlord shall
proceed with reasonable diligence and at its sole cost and expense to rebuild
and repair the Premises. Landlord's obligation to rebuild and repair under this
Article shall not include any
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improvements to the Premises made by Tenant except to the extent Landlord's
insurance covers said improvements, provided that Landlord shall have no
obligation to maintain such insurance.
C. Tenant's Obligation to Repair and Reconstruct.
Tenant agrees that, promptly after Landlord's completion of such
repairs or rebuilding, Tenant will proceed with reasonable diligence and at its
sole cost and expense to rebuild, repair and restore its signs, fixtures,
equipment and the other improvements to the Premises made by Tenant.
XVI. EMINENT DOMAIN
If any part of the Premises should be taken for any public or
quasi-public use under any governmental law, ordinance or regulation or by right
of eminent domain or by private purchase in lieu thereof, this Lease shall
terminate effective on the date physical possession is taken by the condemning
authority.
XVII. ASSIGNMENT AND SUBLETTING
A. Landlord's Consent Required and Continuing Liability of
Tenant.
Tenant shall have no right to assign this Lease or any interest
therein, or sublet the Premises or any part thereof. For purposes hereof, a
transfer of more than 30% of the stock of the Tenant shall be a transfer in
violation hereof. Any attempted assignment or subletting by Tenant in violation
of the terms and covenants of this Section shall be void.
B. Effect of Transfer by Landlord.
In the event of the transfer by Landlord of its interest in this Lease
to a party which assumes Landlord's obligations under this Lease, Landlord shall
thereby be released from any further obligations hereunder, and Tenant agrees to
look solely to such successor in interest (or performance of such obligations.
XVIII. TAXES
Tenant shall be liable for all taxes levied against personal property
and trade? fixtures placed by Tenant in the Premises.
XIX. DEFAULT BY TENANT AND LANDLORD'S REMEDIES.
A. Event of Default Defined.
Any one or more of the following events shall constitute an "Event of
Default" by Tenant under this Lease:
1. Tenant shall fail to pay when due any payment or expenses due
hereunder.
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2. Tenant shall fail to comply with any term of this Lease, other
than the payment or monies due hereunder or expenses demanded
by Landlord, and shall not cure such failure within thirty
(30) days after written notice to Tenant, or such longer
period as may be reasonably necessary to effect a cure,
provided that Tenant has promptly commenced and is diligently
prosecuting same with reasonable prospects of success provided
that no cure period shall be allowed for a default which by
its nature is incapable of being cured after the fact).
3. Tenant or any guarantor under this Lease shall file a petition
under any section or chapter of the Bankruptcy Laws, as
amended, or under any similar law or statute of the Untied
States or any state thereof and such proceedings are not
discharged within sixty (60) days after the filing thereof, or
Tenant or any guarantor under the Lease shall be adjudged
bankrupt or insolvent in proceedings filed against Tenant or
any guarantor or Tenant's obligations under this Lease.
4. A receive or trustee shall be appointed for all of the
Premises or for all or substantially all of the assets of
Tenant.
5. Tenant shall do or permit to be done anything which creates a
lien upon the Premises and shall fail to obtain the timely
release or discharge.
6. This Lease or the estate of Tenant hereunder or any beneficial
interest in Tenant shall be transferred to any other person or
party except as allowed in this Lease.
7. The interest of Tenant in this Lease, the Premises or any part
of the Premises shall be levied on or under execution or by
other process of law directed against Tenant, or shall be
taken upon or subject to any attachment at the instance of any
creditor or claimant against Tenant and said attachment shall
not be discharged or disposed of within sixty (60) days after
the levy thereof.
8. The admission in writing by Tenant or any guarantor hereunder
of its inability to pay its debts when due.
9. Any material representation of Tenant shall prove to have been
intentionally false.
Any cure period provided by statute shall be deemed to run concurrently (rather
than sequentially) with any cure period provided for herein.
B. REMEDIES
Upon the occurrence of any such Event of Default, Landlord shall have
the option to pursue any one or more of the remedies available in law, in
equity, or under this Lease, without any notice or demand whatsoever, including
without limitation the following:
1. Landlord may terminate this Lease, in which event Tenant shall
immediately surrender the Premises in Landlord, and if Tenant
fails to do so, Landlord, without
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prejudice to any other remedy which Landlord may have for
possession, damages, or ??? in rental, may enter upon and take
possession of the Premises through legal process, Any property
of Tenant, or of anyone claiming under, by, or through Tenant,
which is left on the Premises more than fifteen days after
lease termination shall be conclusively deemed abandoned, and
Landlord may keep, use, remove, store, sell, destroy, discard,
or otherwise deal with it in Landlord's absolute discretion
without liability of any sort to Tenant or anyone claiming
under, by, or through Tenant.
2. Landlord may retain possession of the Premises and deal with
property left behind, as hereinabove provided, without
terminating this Lease.
Exercise by Landlord of any one or more remedies hereunder granted or otherwise
available shall not be deemed to be an acceptance of surrender of the Premises
by Tenant, whether by agreement or by operation of law, it being understood that
such surrender can be affected only b the written agreement of Landlord and
Tenant. No alterations of locks or other security devices and no removal of
other exercise of dominion by Landlord over the property of Tenant or others at
the Premises shall be deemed unauthorized or constitute a conversion provided
Landlord complies with applicable laws.
C. Damages Upon Termination.
In the event Landlord elects to terminate the Lease by reasons of an
Event of Default, then Tenant shall pay to Landlord in one lump sum the sum of
all unpaid Monthly Payments, and other indebtedness to Landlord accrued to date
of termination. IF such sum is not paid to Landlord on the termination date,
said sum shall bear interest at the rate of 15% per annum until paid.
D. Landlord's Right to Cure.
Except as may otherwise be provided in this Lease, if Tenant should
fail to make any payment or cure any default hereunder within the time herein
permitted, Landlord, without being under any obligation to do so and without
thereby waiving such default, may make such payment and/or remedy such other
default for the account of Tenant (and enter the Premises for such purpose), and
thereupon Tenant shall be obligated, and hereby agrees to pay all reasonable
attorneys' fees) incurred by Landlord in taking such remedial action.
XX. DEFAULT BY LANDLORD AND TENANT'S REMEDIES
A. Tenant's Remedies.
In the event of any default by Landlord, Tenant's remedy shall be an
action for damages, but prior to any such action Tenant will give Landlord
written notice specifying such default with particularity, and Landlord shall
have twenty (20) days (or such longer period as may be reasonably necessary in
the circumstances) in which to cure any such default. Until Landlord fails so to
cure any default under such notice, Tenant shall not have any remedy or cause of
action by reason thereof.
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B. Limitation on Right of Recovery Against Landlord.
Tenant acknowledges and agrees that the liability of Landlord under
this Lease shall be limited to its interest in the Premises and any judgments
rendered against Landlord shall be satisfied solely out of its interest in the
Premises. The provisions hereof shall insure to Landlord's successors and
assigns including any mortgagee. The foregoing provisions are not intended to
relieve Landlord from the performance of any of Landlord's obligation under this
Lease, but only in limit the personal liability of Landlord in case of recovery
of a judgment against Landlord.
XXI. HOLDING OVER
In the event Tenant remains in possession of the Premises after the
expiration of this Lease and without the execution of a new lease, it shall be
deemed to be occupying the Premises as a tenant from month to month at a monthly
rental equal in twice the Rental, and otherwise subject to all the conditions,
provisions and obligations of this Lease insofar as the same are applicable to a
month to month tenancy. In the event of any such holding over, Tenant shall
indemnify Landlord against all claims for damages by any other Leases to whom
Landlord may have leased all or any part of the Premises effective upon the
expiration or termination of this Lease or by any other person damaged by such
holding over.
XXII. SUBORDINATION
Tenant accepts this Lease subject and subordinate to any master lease,
ground lease, mortgage or other lien presently existing or hereafter created
upon the Premises, and of any renewals or extensions thereof, but Tenant agrees
that the holder of any such interest to this Lease. Tenant agrees to execute
such further instruments subordinating this Lease as Landlord may request. At
the request of any mortgagee, Tenant shall ??? to the purchase at a foreclosure
sale of that mortgage.
XXIII. NOTICES
Wherever any notice is required or permitted hereunder such notice
shall be in writing. Any notice, document or payment required or permitted to be
delivered hereunder shall be deemed to be given when actually received (or
refused). All such notices with respect to a failure of performance which may
give rise to a Default shall be sent by Untied States mail, postage prepaid,
Certified or Registered Mail, Return Receipt Requested, addressed to Tenant's
Mailing Address if to Tenant, or to Landlord's Address if to Landlord, or at
such other address as Landlord or Tenant may have hereafter specified by written
notice to the other. All other notices, consents or waivers required or
permitted to be given under this Lease shall be in writing and may be delivered
personally or by the method for default notices or may be given by United States
Express mail service, private overnight serves (e.g. Federal Express, Airborne),
telex, or telegram.
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XXIV. ESTOPPEL STATEMENTS
Each party agrees to execute, acknowledge and deliver to the other
party at any time within ten (10) days of the other party's request, a writing
ratifying this Lease and certifying: (a) the date that Tenant has entered into
occupancy of the Premises, (b) that this Lease is in full force and effect, and
has not been assigned, modified, supplemented or amended in any way (or if there
has been any assignment, modification, supplement or amendment, identifying the
same)k (c) that this Lease represents the entire agreement between Landlord and
Tenant as to the subject matter hereof (or if there has been any assignment,
modification, supplement or amendment, identifying the same); (d) the date of
commencement and expiration of the Term; (e) that all conditions under this
Lease to be performed by the other party have been satisfied (and if not, what
conditions remain unperformed); (f) that in the knowledge of the signer of such
writing no default exists in the performance or observance of any covenant or
condition in the Lease and there are not defenses or offsets against the
enforcement of this Lease by the other party (or specifying such default,
defense or offset of which the signer may have knowledge); (g) no rental has
been paid more than one month in advance of its due date under the Lease and not
other security has been deposited with Landlord; and (h) the date to which
rental has been paid under the Lease.
XXV. MISCELLANEOUS
A. Relationship of Landlord to Tenant.
Nothing herein contained shall be deemed or construed by the parties
hereto, nor by any third party, as creating the relationship of principal and
agent or of partnership or of joint venture between parties hereto, it being
understood and agreed that neither the method of computation of rental, nor any
other provisions contained herein, nor any acts of the parties, shall be deemed
to create any relationship between the parties hereto other than landlord and
tenant. Whenever herein the singular number I used, the same shall include the
plural, and words of any gender shall include each gender.
B. Captions.
The captions used herein are for convenience only and do not limit or
amplify the provisions hereof.
C. Waivers
For one or more waivers of any consents to any covenant, term or condition of
this Lease by another party shall be construed as a waiver or a subsequent of
the same covenant, term or condition. The consent or approval by either party to
or of any act by the other party requiring such consent or approval shall not be
deemed to waiver or render unnecessary consent to or approval or any subsequent
similar act.
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D. Delays.
Whenever a period of time is herein prescribed for action other than the payment
of money there shall be executed from the computation of any such period of time
any delays due to strikes, riots, acts of God, shortages of labor or material,
war governmental laws, regulations or restrictions, or any other causes of any
kind whatsoever which are beyond the reasonable control of such party. At any
time when there is outstanding a mortgage or similar security instrument
covering landlord's interest in the Premises. Tenant may not exercise any
remedies for default by Landlord hereunder unless and until the holder of the
indebtedness occurred by such mortgagee or similar security instrument shall
have received written notice of such default and the same period of time given
to Landlord for caring such default as given to Landlord shall thereafter have
lapsed.
E. Quiet Enjoyment.
Landlord agrees that if Tenant shall perform all of the covenants and agreements
herein required to be performed by Tenant, Tenant shall, subject to the terms of
this Lease, at all times during the continuance of this Lease, have the
peaceable and quiet enjoyment and possession of the Promises.
F. Entire Agreement and Resolution.
This Lease contains the entire agreement between the parties and no agreement
shall be effective to change, modify or terminate this Lease in whole or in part
unless such agreement is in writing and duly signed by the party against whom
enforcement of such change, modification or termination is sought. This Lease
shall not be effective or binding on Landlord or Tenant until fully executed by
both and delivered by each to the other. This Lease may be executed in
counterparts. Each counterpart shall be deemed to be the original hereof.
G. Broker.
Landlord and tenant represent to each other that each has not dealt with any
broker or finder in connection with this Lease who might be entitled to a
commission or finder's fee as a result of this Lease other than The Comras
company and The Kosiver Stern Group whose commissioner Landlord agrees to pay.
The Tenant agrees to hold the Landlord harmless from and against any cost,
damage or other liability suffered by Landlord in the event of any other broker
claiming a commission on account of the actions of the Tenant.
H. Governing Law.
The laws of the State of Florida shall govern the interpretation, validity,
performance and enforcement of this Lease.
I. Successors and Assigns.
The terms, provisions and covenants contained in this Lease shall inure to the
benefit of and be biding upon the parties hereto and their respective heirs,
successors in interest and legal representations except as otherwise herein
expressly provided.
J. Attorney's Fees.
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In the event of any action or proceeding on account of the terms of this Lease,
the prevailing party shall be entitled to recover all reasonable costs and
expenses, including the fees and expenses of its attorneys.
K. Invalid Provisions.
If any clause or provision of this Lease is illegal, invalid or unenforceable
under present or future laws effective during the Term, then and in that event,
it is the intention of the parties hereto that the remaining of this Lease shall
not be affected thereby; and it is also the intention of the parties that in
lieu of each clause of provision of this Lease that is illegal, invalid or
unenforceable, there shall be substituted a legal, valid and enforceable clause
or provision as similar to such illegal, invalid or unenforceable clause or
provision as maybe ???.
L. Authority to Enter into Lease
Tenant and the party or parties executing this Lease on behalf of Tenant
represent to Landlord that such party or parties are authorized to the so by
represent to landlord that such party or parties are authorized in the so by
requisite action of Tenant's board of directions, or partners, as the case may
be, and agree upon request to deliver to Landlord a resolution or similar
document to that effect. Landlord or any party or parties executing this Lease
on behalf of Landlord represent to Tenant that such party or parties are
authorized to do so.
M Corporate Tenants.
The persons executing this lease on behalf of Tenant hereby covenant and warrant
that Tenant is a duly constituted corporation qualified to do business in the
State of Florida, all Tenant's franchises and corporate taxes have been paid to
date; and all future forms, reports, fees and other documents necessary for
Tenant to comply with applicable laws will be filed by Tenant when due.
N. Security.
Landlord hereby acknowledges receipt from Tenant of the sum of TWENTY SIX
THOUSAND TWO HUNDRED AND FIFTY Dollars to be held by landlord without liability
for interest as security for the faithful performance by Tenant of all of the
terms and conditions of this Lease. In the event Tenant defaults under any of
the terms and conditions of this Lease Landlord may, at Landlord's option, apply
the above security, or as much thereof as may be necessary, to compensate
Landlord for any loss or damage sustained by Landlord due to such default on the
part of Tenant, and Tenant shall forthwith upon demand restore said security in
the original sum deposited. Upon expiration of this Lease, said security shall
be returned in full to Tenant, provided this Lease is in good standing and no
outstanding defaults exist hereunder.
O. No Liens or Encumbrances.
Tenant Agrees not to obtain any financing secured by Tenant's interests in the
Promises and not to encumber the Premises or Tenant's interest therein without
the prior written consent of Landlord, which consent may be withheld in
Landlord's sole discretion and to keep the Premises free from all liens and
encumbrance except liens and encumbrances created by landlord.
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P. Radon.
Radon is a naturally occurring radioactive gas that, when it has accumulated in
a building in sufficient quantities, may present health risks to persons who are
exposed to it over a period of time. Levels of radon that have exceeded federal
and state guidelines have been found in buildings in Florida. Additional
Information regarding radon and radon testing may be obtained through your
county health unit.
IN WITNESS WHEREOF the parties hereto have executed this Lease
Agreement as of the day and year first above written.
WITNESS South Beach TriStar LLC, a Delaware
Limited Liability Company
By: /s/ [ILLEGIBLE]
- --------------------------------- ----------------------------------------
Its: VICE PRESIDENT
---------------------------------------
- --------------------------------- Yupi Internet, Inc., a Florida corporation
- --------------------------------- By: /s/ OSCAR COEN
----------------------------------------
Its.: Chief Executive Officer
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- ---------------------------------
-14-
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT DATED ____________________, 1999 BY AND
BETWEEN SOUTH BEACH TRISTAR LLC, A DELAWARE LIABILITY COMPANY ("LANDLORD") AND
YUPI INTERNET INC., A FLORIDA CORPORATION ("TENANT")
The captioned Lease Agreement is hereby modified as follows:
1. Effective 6/19/1999 the following amendments to the captioned
Lease shall be effective:
A. "Premises shall mean 830 Lincoln Road, Miami Beach,
Florida 33139 together with that certain mezzanine
space containing approximately 1,173 square feet
which space is shown on Exhibit "A" hereto.
B. "Rental" shall mean $11,302.25 per month, inclusive
of sales tax.
C. The Leased Premises shall also include four (4)
parking spaces located in the rear of the building.
The rental for each space shall be $75.00 per moth,
for a total monthly parking space rental of $300.00
which shall be added to the rental due under the
Lease and shall be due and payable when the monthly
rental payments are due. At such time as the landlord
has completed the restriping of the parking lot, 4
spaces shall be designated as reserved for tenant.
2. Expect as hereinabove amended, all of the terms and conditions
of the captioned Lease are hereby, ratified, confirmed and
approved.
IN WITNESS WHEREOF, the undersigned have executed this Amendment this
____ day of ________________, 1999.
WITNESS South Beach TriStar LLC, a Delaware
Limited Liability Company
By:
- --------------------------------- ----------------------------------------
Its:
---------------------------------------
- --------------------------------- Yupi Internet, Inc., a Florida corporation
- --------------------------------- By: /s/ Oscar Coen
----------------------------------------
Its.: Chief Executive Officer
--------------------------------------
- ---------------------------------
-15-
<PAGE>
WITNESS South Beach TriStar LLC, a Delaware
Limited Liability Company
By:
- --------------------------------- ----------------------------------------
Its:
---------------------------------------
- --------------------------------- Yupi Internet, Inc., a Florida corporation
- --------------------------------- By:
----------------------------------------
Its.:
--------------------------------------
- ---------------------------------
-16-
EXHIBIT 10.08
UNSECURED PROMISSORY NOTE
$40,000 Miami Beach, Florida
April 28th, 1999
FOR VALUE RECEIVED, the undersigned promises to pay to the order of YUPI
INTERNET INC. and/or assigns, the principal sum of Forty Thousand dollars
($40,000) together with interest at the rate of eight percent (8%) per annum,
until maturity, said payment to be in one lump sum of principal and interest for
Forty three thousand two hundred dollars ($43,200), lawful money of the United
States of America is due on April 27th, 2001.
This note shall be prepayable in whole or in part at any time without penalty.
This note may not be assumed without the consent of YUPI INTERNET INC.
Each maker and endorser severally waives demand, protest and notice of maturity,
non-payment or protest and all requirements necessary to hold each of them
liable as makers and endorsers.
Each maker and endorser further agrees, jointly and severally, to pay all costs
of collection, including a reasonable attorney's fee in case the principal of
this note and the interest thereon is not paid at the maturity date, or in case
it becomes necessary to protect the security thereof, whether suit be brought or
not.
/S/ JACQUELINE O'BRIEN
- -------------------------
By Jacqueline O'Brien
EXHIBIT 10.09
UNSECURED PROMISSORY NOTE
$40,000 Miami Beach, Florida
April 28th, 1999
FOR VALUE RECEIVED, the undersigned promises to pay to the order of YUPI
INTERNET INC. and/or assigns, the principal sum of Forty Thousand dollars
($40,000) together with interest at the rate of eight percent (8%) per annum,
until maturity, said payment to be in one lump sum of principal and interest for
Forty three thousand two hundred dollars ($43,200), lawful money of the United
States of America is due on April 27th, 2001.
This note shall be prepayable in whole or in part at any time without penalty.
This note may not be assumed without the consent of YUPI INTERNET INC.
Each maker and endorser severally waives demand, protest and notice of maturity,
non-payment or protest and all requirements necessary to hold each of them
liable as makers and endorsers.
Each maker and endorser further agrees, jointly and severally, to pay all costs
of collection, including a reasonable attorney's fee in case the principal of
this note and the interest thereon is not paid at the maturity date, or in case
it becomes necessary to protect the security thereof, whether suit be brought or
not.
/S/ CARLOS CARDONA
- -------------------------
By Carlos Cardona
EXHIBIT 10.10
UNSECURED PROMISSORY NOTE
$40,000 Miami Beach, Florida
April 28th, 1999
FOR VALUE RECEIVED, the undersigned promises to pay to the order of YUPI
INTERNET INC. and/or assigns, the principal sum of Forty Thousand dollars
($40,000) together with interest at the rate of eight percent (8%) per annum,
until maturity, said payment to be in one lump sum of principal and interest for
Forty three thousand two hundred dollars ($43,200), lawful money of the United
States of America is due on April 27th, 2001.
This note shall be prepayable in whole or in part at any time without penalty.
This note may not be assumed without the consent of YUPI INTERNET INC.
Each maker and endorser severally waives demand, protest and notice of maturity,
non-payment or protest and all requirements necessary to hold each of them
liable as makers and endorsers.
Each maker and endorser further agrees, jointly and severally, to pay all costs
of collection, including a reasonable attorney's fee in case the principal of
this note and the interest thereon is not paid at the maturity date, or in case
it becomes necessary to protect the security thereof, whether suit be brought or
not.
/S/ MARLENA DELGADO
- -------------------------
By Marlena Delgado
EXHIBIT 10.11
UNSECURED PROMISSORY NOTE
$40,000 Miami Beach, Florida
April 28th, 1999
FOR VALUE RECEIVED, the undersigned promises to pay to the order of YUPI
INTERNET INC. and/or assigns, the principal sum of Forty Thousand dollars
($40,000) together with interest at the rate of eight percent (8%) per annum,
until maturity, said payment to be in one lump sum of principal and interest for
Forty three thousand two hundred dollars ($43,200), lawful money of the United
States of America is due on April 27th, 2001.
This note shall be prepayable in whole or in part at any time without penalty.
This note may not be assumed without the consent of YUPI INTERNET INC.
Each maker and endorser severally waives demand, protest and notice of maturity,
non-payment or protest and all requirements necessary to hold each of them
liable as makers and endorsers.
Each maker and endorser further agrees, jointly and severally, to pay all costs
of collection, including a reasonable attorney's fee in case the principal of
this note and the interest thereon is not paid at the maturity date, or in case
it becomes necessary to protect the security thereof, whether suit be brought or
not.
/S/ OSCAR COEN
- -------------------------
By Oscar Coen
EXHIBIT 10.12
UNSECURED PROMISSORY NOTE
$20,000 Miami Beach, Florida
October 27, 1999
FOR VALUE RECEIVED, the undersigned promises to pay to the order of YUPI
INTERNET INC. and/or assigns, the principal sum of Forty Thousand dollars
($20,000) together with interest at the rate of eight percent (8%) per annum,
until maturity, said payment to be in one lump sum of principal and interest for
Forty three thousand two hundred dollars ($21,600), lawful money of the United
States of America is due on October 26, 2000.
This note shall be repayable in whole or in part at any time without penalty.
This note may not be assumed without the consent of YUPI INTERNET INC.
Each maker and endorser severally waives demand, protest and notice of maturity,
non-payment or protest and all requirements necessary to hold each of them
liable as makers and endorsers.
Each maker and endorser further agrees, jointly and severally, to pay all costs
of collection, including a reasonable attorney's fee in case the principal of
this note and the interest thereon is not paid at the maturity date, or in case
it becomes necessary to protect the security thereof, whether suit be brought or
not.
/S/ RUDY VILA
- -------------------------
By Rudy Vila
EXHIBIT 10.13
UNSECURED PROMISSORY NOTE
$75,000 Miami Beach, Florida
November 24, 1999
FOR VALUE RECEIVED, the undersigned promises to pay to the order of YUPI
INTERNET INC. and/or assigns, the principal sum of Forty Thousand dollars
($75,000) together with interest at the rate of eight percent (8%) per annum,
until maturity, said payment to be in one lump sum of principal and interest for
Forty three thousand two hundred dollars ($81,000), lawful money of the United
States of America is due on November 24, 2000.
This note shall be repayable in whole or in part at any time without penalty.
This note may not be assumed without the consent of YUPI INTERNET INC.
Each maker and endorser severally waives demand, protest and notice of maturity,
non-payment or protest and all requirements necessary to hold each of them
liable as makers and endorsers.
Each maker and endorser further agrees, jointly and severally, to pay all costs
of collection, including a reasonable attorney's fee in case the principal of
this note and the interest thereon is not paid at the maturity date, or in case
it becomes necessary to protect the security thereof, whether suit be brought or
not.
/S/ VICTOR GUTIERREZ
- -------------------------
By Victor Gutierrez
EXHIBIT 10.14
UNSECURED PROMISSORY NOTE
$40,000 Miami Beach, Florida
November 24, 1999
FOR VALUE RECEIVED, the undersigned promises to pay to the order of YUPI
INTERNET INC. and/or assigns, the principal sum of Forty Thousand dollars
($40,000) together with interest at the rate of eight percent (8%) per annum,
until maturity, said payment to be in one lump sum of principal and interest for
Forty three thousand two hundred dollars ($43,200), lawful money of the United
States of America is due on November 24, 2000.
This note shall be repayable in whole or in part at any time without penalty.
This note may not be assumed without the consent of YUPI INTERNET INC.
Each maker and endorser severally waives demand, protest and notice of maturity,
non-payment or protest and all requirements necessary to hold each of them
liable as makers and endorsers.
Each maker and endorser further agrees, jointly and severally, to pay all costs
of collection, including a reasonable attorney's fee in case the principal of
this note and the interest thereon is not paid at the maturity date, or in case
it becomes necessary to protect the security thereof, whether suit be brought or
not.
/S/ GUSTAVO MORLES
- -------------------------
By Gustavo Morles
EXHIBIT 10.15
UNSECURED PROMISSORY NOTE
$40,000 Miami Beach, Florida
November 30, 1999
FOR VALUE RECEIVED, the undersigned promises to pay to the order of YUPI
INTERNET INC. and/or assigns, the principal sum of Forty Thousand dollars
($40,000) together with interest at the rate of eight percent (8%) per annum,
until maturity, said payment to be in one lump sum of principal and interest for
Forty three thousand two hundred dollars ($43,200), lawful money of the United
States of America is due on November 30, 2000.
This note shall be repayable in whole or in part at any time without penalty.
This note may not be assumed without the consent of YUPI INTERNET INC.
Each maker and endorser severally waives demand, protest and notice of maturity,
non-payment or protest and all requirements necessary to hold each of them
liable as makers and endorsers.
Each maker and endorser further agrees, jointly and severally, to pay all costs
of collection, including a reasonable attorney's fee in case the principal of
this note and the interest thereon is not paid at the maturity date, or in case
it becomes necessary to protect the security thereof, whether suit be brought or
not.
/S/ JOSE LUQUE
- -------------------------
By Jose Luque
EXHIBIT 10.16
UNSECURED PROMISSORY NOTE
$70,000 Miami Beach, Florida
November 30, 1999
FOR VALUE RECEIVED, the undersigned promises to pay to the order of YUPI
INTERNET INC. and/or assigns, the principal sum of Forty Thousand dollars
($70,000) together with interest at the rate of eight percent (8%) per annum,
until maturity, said payment to be in one lump sum of principal and interest for
Forty three thousand two hundred dollars ($75,600), lawful money of the United
States of America is due on November 30, 2000.
This note shall be repayable in whole or in part at any time without penalty.
This note may not be assumed without the consent of YUPI INTERNET INC.
Each maker and endorser severally waives demand, protest and notice of maturity,
non-payment or protest and all requirements necessary to hold each of them
liable as makers and endorsers.
Each maker and endorser further agrees, jointly and severally, to pay all costs
of collection, including a reasonable attorney's fee in case the principal of
this note and the interest thereon is not paid at the maturity date, or in case
it becomes necessary to protect the security thereof, whether suit be brought or
not.
/S/ RODOLFO VILA
- -------------------------
By Rodolfo Vila
EXHIBIT 10.17
UNSECURED PROMISSORY NOTE
$30,000 Miami Beach, Florida
December 23, 1999
FOR VALUE RECEIVED, the undersigned promises to pay to the order of YUPI
INTERNET, INC. and/or assigns, the principal sum of Thirty Thousand dollars
($30,000) together with interest at the rate of eight percent (8%) per annum,
until maturity, said payment to be in one lump sum of principal and interest and
interest for Thirty Two Thousand Four Hundred dollars ($32,400), lawful money of
the United States of America is due on December 23, 2000.
This note shall be repayable in whole or in part at any time without penalty.
This note may not be assumed without the consent of YUPI INTERNET INC.
Each maker and endorser severally waives demand, protest and notice of maturity,
non-payment or protest and all requirements necessary to hold each of them
liable as makers and endorsers.
Each maker and endorser further agrees, jointly and severally, to pay all costs
of collection, including a reasonable attorney's fee in case the principal of
this note and the interest thereon is not paid at the maturity date, or in case
it becomes necessary to protect the security thereof, whether suit be brought or
not.
/S/DAMARIS VALERO
- -------------------------
By Damaris Valero
EXHIBIT 21.01
SUBSIDIARIES
1. YUPI ACQUISITIONS, CORP.
2. YUPI INTERNET INTERNATIONAL, INC.
3. FLOWTOOLS E.U.
4. YUPI INTERNET DE ARGENTINA S.R.L.
5. LA COSA INTRACTIVE S.R.L.
6. YUPI DU BRASIL, S.R.L.
7. YUPI INTERNET COLOMBIA LTDA.
8. PROVEDURIA DE SERVICIOS PARA RED BOGOTA.COM LTDA.
9. SERVICIOS DE INTERNET YUPI CHILE LIMITADA.
10. YUPI INTERNET MEXICO, S.A. DE C.V.
11. YUPI INTERNET PERU, S.R.L.
12. YUPI INTERNET VENEZUELA, S.R.L.
13. YUPI INTERNET ESPANA, S.L.
EXHIBIT 23.03
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated January 7, 2000, relating to the financial statements of Yupi
Internet Inc., which appear in such Registration Statement. We also consent to
the reference to us under the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Miami, FL
January 17, 2000
EXHIBIT 23.04
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated July 27, 1999, relating to the financial statements of
Planificacion y Estrategia en Internet, S.L. and Illimited, S.L., which appear
in such Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
PricewaterhouseCoopers Auditores, S.L.
Madrid, Spain
January 17, 2000
EXHIBIT 23.05
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated August 23, 1999, relating to the financial statements of Proveedora
de Servicios para Red Bogota.com Ltda., which appear in such Registration
Statement. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.
Price Waterhouse
Bogota, Colombia
January 17, 2000
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