-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WUQMR3ywAvvxXMnrmJuJ3DLHZDzNpAmWXcnTORXlWSq2BvdDna4tKwapXgNGUWWj U5kriAwY209wL7QaOqdnew== 0000891554-99-001798.txt : 19990915 0000891554-99-001798.hdr.sgml : 19990915 ACCESSION NUMBER: 0000891554-99-001798 CONFORMED SUBMISSION TYPE: 10-12G PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19990914 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FINDWHAT COM CENTRAL INDEX KEY: 0001094808 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 880348835 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-12G SEC ACT: SEC FILE NUMBER: 000-27331 FILM NUMBER: 99711535 BUSINESS ADDRESS: STREET 1: 121 WEST 27TH STREET STREET 2: SUITE 903 CITY: NEW YORK STATE: NY ZIP: 10001 BUSINESS PHONE: 2126332660 MAIL ADDRESS: STREET 1: 121 WEST 27TH STREET STREET 2: SUITE 903 CITY: NEW YORK STATE: NY ZIP: 10001 10-12G 1 REGISTRATION OF SECURITIES ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM 10 GENERAL FORM FOR REGISTRATION OF SECURITIES UNDER SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 FINDWHAT.COM (Name of Registrant in its Charter) Nevada 88-0348835 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 121 West 27th Street, Suite 903, New York, New York 10001 (Address of Principal Executive Offices) (Zip Code) (212) 255-1500 (Issuer's Telephone Number) Securities to be registered pursuant to Section 12(b) of the Act: None Securities to be registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par value ----------------------------- (Title of Class) ================================================================================ An investment in our common stock involves significant risks which could result in a loss of your entire investment. Please review "Risk Factors" starting on page 7. Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This document contains forward-looking statements which reflect the views of management with respect to future events and financial performance. These forward-looking statements are subject to certain uncertainties and other factors that could cause actual results to differ materially from such statements. These uncertainties and other factors include, but are not limited to, the words "anticipates", "believes", "estimates", "expects", "plans", "projects", "targets" and similar expressions which identify forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date the statements were made. We are not obligated to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Item 1. Business. History We were organized under the laws of the State of Nevada under the name Collectibles America, Inc. in October 1995. We discontinued our business operations and transferred our assets to satisfy liabilities in 1997. In June 1999, we acquired all of the outstanding capital stock of BeFirst Internet Corporation, which was organized under the laws of the State of Delaware in March 1998. We changed our corporate name to BeFirst.com at the time of the acquisition. In September 1999, we changed our corporate name to FindWhat.com. Unless we state otherwise, all references to us in this registration statement describe the consolidated operations of FindWhat.com and our wholly-owned subsidiary, BeFirst Internet Corporation. Introduction We offer services designed to increase traffic flow to our clients' web sites on the Internet. We currently offer online advertisers our Be1st.com(SM) web site optimization service. We are also in the process of commercially launching our Pay For Position(SM) search service, FindWhat.com(SM). This search service contains a listing system which is designed to allow web site owners to pay for position on our FindWhat.com(SM) web site via an automated open bidding system and preferred search rankings. FindWhat.com(SM) is intended to enable Internet users to find relevant information without sorting through the pages of irrelevant information frequently displayed by other Internet search services. Our plan of operations includes increasing the promotional activities for our BeFirst.com service, devoting substantial resources to the launching of our FindWhat.com(SM) search service and further developing our proprietary software and related software programs. We recently acquired a database license from Inktomi, Inc. and are in the process of acquiring and leasing additional equipment, including T3 telephone lines and certain computer hardware. Our target market includes all companies which -2- maintain Internet web sites and which desire to increase the volume of motivated consumers to their web sites. Industry Overview Internet advertisers have historically relied on sites providing web directories or "search engines" to supply a "mass" audience for their web sites and advertising message. These search services enable consumers to search the Internet for a listing of web sites matching a descriptive phrase, topic or other term. Search services are among the most frequently used tools on the Internet. As a result, web sites providing search services offer advertisers significant exposure to the Internet audience. These web sites frequently offer advertisers the opportunity to target consumer interests based on keyword or topical search requests. Many web sites providing search capabilities have begun to focus their efforts on providing content and shopping opportunities for visitors. This business model has earned these web sites, now more commonly called "portals", higher advertising and e-commerce revenues. For the consumer seeking an array of services, the portals offer a valuable package of resources. However, for the visitor looking mainly for consumer information, products or services, the search process on a typical portal site can be cumbersome. We believe that there is increasing frustration and discontentment among consumers concerning the lack of comprehensive information regarding the sale of consumer products by existing Internet search services and that the growing inability of consumers to find relevant results for items they wish to purchase presents marketplace opportunities. We intend to tailor our array of services to improve the consumer search experience and more effectively link advertisers with their target consumers. We believe that the pay per visitor business model is becoming more important to online marketers and that corporate managers will seek out promotional alternatives or supplements to banner advertisements. As a result, companies seeking more effective ways to drive qualified traffic to their corporate web sites may increasingly include gaining higher placements on search engines in their strategy. Be1st.com(SM) Our Be1st.com(SM) service employs proprietary methodology and software tools to achieve improved rankings on major Internet search engines for our clients' web sites in response to search queries by the public. This service, known as web site "optimization," aims to improve each client's placement in the search results generated by an Internet search engine by optimizing search phrases and keywords that will increase the volume of traffic relevant to each client's business. Our BeFirst.com(SM) service currently derives revenue from two sources: o through set-up fees charged to new clients and o through click-through rates charged for the traffic the service generates for a client's web site. -3- Both the set-up fee and the click-through rate are negotiated and generally vary based on the client's industry, the frequency with which that category is searched and the value of the keywords chosen. The negotiated click-through rate is applied to the actual number of consumers clicking on the various search engine placements established by the Be1st.com(SM) service on behalf of a client. Each month, a client's bill is determined based upon the click-through rate and the number of consumer clicks received. The traffic for each Be1st.com(SM) service placement is tracked by Web Trends, a leading industry tracking software program, and is updated daily. We believe that the pay-for-results business model adds to the credibility of our Be1st.com(SM) service with target customers and reduces the obstacles in their purchase decision processes. We believe that our Be1st.com(SM) web site optimization service is unique, because each client's objectives are assessed on an individual basis, generating customized programs in an industry where standard "one size fits all" models prevail. Furthermore, our Be1st.com(SM) service seeks to optimize a client's site on up to 450 search engines, directories and online yellow pages, while other search optimization services limit their optimization techniques to a smaller number of search engines. Another advantage of our Be1st.com(SM) service is that it automates a substantial portion of the web optimization process, decreasing the time and cost associated with optimizing clients' sites. Our client list for the Be1st.com(SM) service has grown since last year. Clients of our Be1st.com(SM) service include eBay, World Wrestling Federation and TheStreet.com. FindWhat.com(SM) We have completed development and testing of FindWhat.com(SM), a new Internet search service designed to assist both consumers seeking to quickly access specific information and advertisers seeking to maximize their visibility and traffic. It is an outgrowth of our initial Be1st.com(SM) web site optimization service. We expect our new Pay-for-Position(SM) search service to generate revenue based on the number of consumer click-throughs resulting from an advertiser's listing on our FindWhat.com(SM) web site. The click-through rate will be determined by an auction among advertisers within the same category. We anticipate that the FindWhat.com(SM) search service will generate additional revenue from banner advertising to be placed on search result pages. Search results on the FindWhat.com(SM) search service will be rank-ordered through a competitive bidding process in which each advertiser's bid will represent the amount it will pay FindWhat.com(SM) for each consumer click-through. The advertiser with the highest bid will be listed first in the search results, with the remaining advertisers appearing in descending bid amount order. Since advertisers must pay for each click-through to their web site, we expect that they will select and bid only on those search words or phrases that are most relevant to their business offerings. Advertisers desiring placement within the same search categories will bid against one another for prime placement, with the winning bid being at least $.01 greater than the next highest bid. The bid rate refers to the price an advertiser will pay for each click-through on the category search result page. FindWhat.com(SM) clients will pay only for traffic generated by the listing placement. FindWhat.com(SM) will allow advertisers to target as many keywords as they wish with the resources they deem appropriate to attract customers. For example, a client may have 30 different search word placements, but decide -4- it needs to be ranked first for only 10 of these word searches, with the remaining 20 words having fifth place ranking. Although similar in some aspects to "pay-for-placement" search services, such as Goto.com(SM), an existing pay-for-placement search service which has demonstrated the need for this new kind of promotional tool, FindWhat.com(SM) is intended to improve on this search service model in certain ways. The FindWhat.com(SM) search service minimizes information and community-based services that can impede quick and easy searches and instead focuses on providing a search service for consumers that will return the most relevant results for each category. We intend for our web site to be user- and advertiser-friendly. We have recently entered into an agreement with Inktomi, a leading database information provider, to provide supplemental databases for the FindWhat.com(SM) search engine so that consumers will receive comprehensive search results in response to their search queries. Utilizing Inktomi's database, FindWhat.com(SM) can display search results in addition to the listings paid for by our clients. We have also entered into an agreement with the Michigan Internet Communication Association for Internet services which allow us to connect to the Internet with sufficient capacity and bandwidth so that our FindWhat.com(SM) web site can properly function and handle the anticipated increase in traffic to our web site. Growth Strategy We intend to utilize an off-line promotional campaign and a strategic marketing online program as separate parts of our overall marketing plan for growth. Advertisers will be able to position their sites on our FindWhat.com(SM) search service and enhance and optimize their rankings on other search engines through our Be1st.com(SM) service. Be1st.com(SM) To obtain advertising clients for our Befirst.com(SM) service, we utilize a sales force that uses direct phone and Internet selling to a target client list culled from the large number of advertisers placing banner advertising on the top search service web sites as well as smaller advertisers placing advertisements on more targeted web sites. We anticipate that we will hire additional sales staff in order to increase the direct queries made to potential clients. We also intend to retain additional personnel or hire third party contractors to assist in data entry and technical aspects of our service so that we may service an increased client base. FindWhat.com(SM) The advertisers who utilize our Be1st.com(SM) service are a source of potential clients for our FindWhat.com(SM) web site. Thus, our strategy to obtain clients for FindWhat.com(SM) includes extensive cross-marketing. In addition, we intend to create a consumer base to increase revenue from existing clients by generating more click-throughs to our clients' web sites and to attract new clients. We intend to create this base through promotion and strategic marketing programs. -5- We plan to link with other companies through a strategic marketing program as a promotional tool. Participating companies would agree to place either a general link (represented by our logo) or a search inquiry link on their web sites which would lead consumers to our web site. We intend to offer to pay these companies for click-throughs to our web site generated from these links or from revenue we earn as a result of such click-throughs. We believe we can place FindWhat.com(SM) links on high traffic, high profile, broadcast web sites. We intend to pay other web site owners sufficient fees to provide the necessary incentive for them to enter into link arrangements with us. We intend to aggressively utilize public relations, radio, local cable television in key markets, targeted e-mail, telemarketing and banners to promote FindWhat.com(SM). We have entered into agreements with Clear Channel Los Angeles and Los Angeles-based Star 98.7 FM, which will result in on-air and web site promotions for FindWhat.com(SM). Competition We compete with online services, other web sites and advertising networks, as well as with traditional off-line media such as television, radio and print for a share of advertisers' total advertising budgets as well as for consumers' attention. See "Risk Factors -- We Face Substantial and Increasing Competition." Facilities Our executive, administrative and sales offices are located in New York City. Our technical operations are located in Fort Myers, Florida. Employees We currently have 17 employees, including our executive officers. In addition, WPI Advertising, Inc., an affiliate of one of our executive officers, currently supplies us with certain services, including office space and additional staff support. Available Information Copies of this registration statement may be inspected, without charge, at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the New York Regional offices of the SEC located at 7 World Trade Center, New York, New York 10048. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0300. Copies of this material also should be available through the Internet by using the SEC's EDGAR Archive, the address of which is http://www.sec.gov. -6- RISK FACTORS Our business is subject to numerous risks, including the following: We have a limited operating history and have not yet commercialized our second main product. We began offering web site optimization marketing services through our Be1st.com(SM) service in August 1998. We are in the process of commercially launching FindWhat.com(SM), a new search service. We have a limited relevant operating history upon which to base an evaluation of our prospects. We will be subject to substantial risks, expenses and difficulties associated with creating a new business. In addition, the markets for Internet products and services are new and rapidly evolving and may subject us to further risks, expenses and uncertainties. We may fail to continue to develop and extend our services and brands, and may be unable to develop, maintain and increase the level of traffic to our web site and those of our customers. Internet vendors or the public may reject our services, and competitors may develop similar or superior services or products. The Internet may not achieve widespread acceptance as an advertising/marketing medium, and we may fail to sell our marketing services successfully. We may not be successful in addressing these and other risks. Our limited operating history and the uncertain nature of the markets we address make the prediction of future results of our operations difficult. Our operations may never generate significant revenues, and we may never achieve profitable operations. We may not successfully commercialize our FindWhat.com(SM) service. We are in the process of commercially launching our FindWhat.com(SM) search service. We may not be able to successfully commercialize our search service in a timely manner or at all. Unanticipated delays, expenses, technical problems and other difficulties could result in a substantial change in design or in a delay or abandonment of our proposed applications. Technical issues concerning our FindWhat.com(SM) search service may need to be resolved. Our success will depend on meeting our targeted performance objectives and the timely introduction of product and service enhancements into the marketplace. The inability to complete successful commercialization of our FindWhat.com(SM) search service would have a material adverse effect on us. Moreover, upon widespread commercial introduction, we may find that this program will not be able to satisfactorily perform all of the functions for which it is being designed or that it is not reliable or durable in extensive applications. We will require additional financing in the near future. Based on our currently proposed plans and assumptions, we believe that we will not require additional funds to implement our proposed operations over the next 12 months. We do intend, however, to seek additional financing as needed in the future in order to hire additional technical sales, management and marketing personnel and to expand our marketing and promotional capabilities. We may seek to obtain additional financing from a number of sources, including, possible sales of our equity or debt securities or loans from banks, our affiliates or other financial institutions. We do not have any arrangements with respect to, or sources of, additional financing, and we may not be able to sell any such securities or obtain any loans on terms and conditions acceptable to us or at all when we need it. Such funds, even if received, may not be sufficient for our purposes. If we fail to obtain additional financing -7- in the future, it would have a material adverse effect on our operations, possibly requiring postponing the implementation of our business plan. Any equity financing may involve substantial dilution of the interests of current stockholders. Any debt financing could subject us to the risks associated with leverage, including the possible risk of an inability to repay the debt as it comes due. We will need to continue to understand and keep pace with search engine technology. The success of our Be1st.com(SM) service depends on our ability to understand the technology of search engines. Providers of web directories, search and information services oppose Internet web site optimization services and seek to prevent such services from being effectively provided. Consequently, to the extent that the technology of search engines changes, we will be required to stay current with such new technologies in order to continue to be able to provide our Be1st.com(SM) service. We use internally developed proprietary systems for our Be1st.com(SM) service. If we are unable to modify our systems as necessary to accommodate changes in search engine algorithms or policies which effect optimization, the result could be unanticipated disruptions, slower retail response times, impaired quality of optimization, degradation in customer service and delays in reporting accurate financial information. These events could result in a material adverse effect on our business, operations and financial condition. We will need to keep pace with rapid technological change in the Internet search and advertising industries. In order to remain competitive, we will be required to continually enhance and improve the functionality and features of our existing Be1st.com(SM) service and FindWhat.com(SM) search engine. The Internet and the online advertising and promotion industries are rapidly changing. If our competitors introduce new products and services embodying new technologies, or if new industry standards and practices emerge, our existing services, technology and systems may become obsolete. Our future success will depend on our ability to license and internally develop leading technologies useful in our business; enhance our existing services; develop new services and technologies that address the increasingly sophisticated and varied needs of prospective consumers; and respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis. Developing our services and other proprietary technology entails significant technical and business risks, as well as substantial costs. We may use new technologies ineffectively, and we may fail to adapt our services, transaction-processing systems and network infrastructure to evolving user requirements or emerging industry standards. If we face material delays in introducing new services, products and enhancements, our users may forego the use of our services and select those of our competitors. The market for our services is uncertain and still evolving. Internet marketing and advertising, in general, and advertising through priority placement in an Internet search service, in particular, is at an early stage of development, is rapidly evolving and is characterized by an increasing number of market entrants. The demand and market acceptance for such recently introduced services is subject to a high level of uncertainty and risk. Most potential advertisers have only limited experience advertising on the Internet and have not devoted a significant portion of their -8- advertising expenditures to Internet advertising. The market for our existing and proposed services may not continue to develop and may not become sustainable. To date, we have marketed our Be1st.com(SM) service on a limited basis. We are now in the beginning stage of commercializing our FindWhat.com(SM) search service. Although we believe that our Be1st.com(SM) and FindWhat.com(SM) services offer a cost-effective advertising solution, our competitors and potential competitors may offer more cost-effective advertising solutions, which could damage our business. Although we believe that our FindWhat.com(SM) service will provide more relevant search results than those provided by traditional search methods, it may not achieve significant acceptance by consumers. Because our FindWhat.com(SM) service prioritizes search results based on advertising bids associated with keywords, rather than on algorithmic or other traditional search and retrieval technologies, consumers may perceive its results to be less objective than those provided by traditional search methods. If our Be1st.com(SM) and FindWhat.com(SM) services fail to achieve and maintain a critical mass of advertisers, and, with respect to FindWhat.com(SM), a critical mass of consumers, then our business revenues, our ability to establish other services and our operational and financial condition could be materially and adversely affected. We may have difficulty attracting and retaining qualified personnel. We will need to attract and retain highly qualified, technical and managerial personnel in order to implement our strategy. Competition for such personnel is intense, and we may be unable to locate and retain highly qualified technical and managerial personnel either currently or in the future. Technology companies generally have a higher employee turnover rate than non-technology companies due to intense competition to attract the most qualified technical personnel. If we are unable to attract and retain the necessary technical and managerial personnel, it would have a material and adverse effect on our business, results of operations and financial condition. Our FindWhat.com(SM) service depends upon identifying and establishing future online marketing participants. We have not yet commenced significant marketing activities relating to our services and have limited marketing experience and limited financial, personnel and other resources to undertake extensive marketing activities. Our future ability to generate revenue from our FindWhat.com(SM) web site will depend upon our ability to get advertisers and generate traffic to the site. Part of our strategy will be to obtain traffic from third-party sites that we anticipate will participate in our strategic marketing program. We expect that these third-party sites will provide their users with FindWhat.com(SM) search capabilities on their sites or direct their traffic to the FindWhat.com(SM) web site. We believe that obtaining and maintaining these relationships will be important to generate traffic to our FindWhat.com(SM) web site, facilitate broad market acceptance of its services and enhance its sales. We anticipate that the sources of consumer traffic to our FindWhat.com(SM) web site will fluctuate in any given month, but that we will typically depend upon one or a few of our strategic marketing program sources for a significant majority of traffic and searches conducted. We do not have any agreements in place with third party web site owners to participate in our strategic marketing program, which is still new and unproven. If we are unable to enter into and maintain agreements or arrangements which generate significant traffic to our FindWhat.com(SM) web site -9- on commercially acceptable terms and later expand our strategic marketing program, this significant aspect of our business will be damaged. We may not be able to obtain any strategic marketing agreements on commercially acceptable terms, or at all. Even if successfully obtained, future strategic marketing agreements may not result in significant revenues for us. We depend on our agreement with Inktomi to provide us with supplemental search data. In order to provide high quality search results in response to search queries by consumers, FindWhat.com(SM) will require supplemental search results to display in addition to the search results paid for by our clients. Supplemental search data is expected to constitute a very high percentage of the search results displayed by FindWhat.com(SM). We are currently relying upon one third-party supplier, Inktomi, as our sole source of supplemental search results displayed by FindWhat.com(SM). Pursuant to our agreement with Inktomi, we will be required to make minimum aggregate payments of $600,000 over the next three years for supplemental search results. If we fail to make any required payments, Inktomi could terminate its services, which would result in a material interruption of our operations until such time as we can obtain an alternative source for such services. Alternative sources may not be available, and any reliable third-party supplier will likely be a competitor. We face substantial and increasing competition. The market for Internet-based marketing services is relatively new, intensely competitive and rapidly changing. Since the advent of web site optimization and marketing services on the Internet, the number of marketing services competing for the attention of businesses and related spending have proliferated due to, among other reasons, the absence of substantial barriers to entry. This competition may continue to further intensify. Such increased competition may lead to reductions in market prices for search engine optimization marketing and sales. FindWhat.com(SM) may face increased pricing pressure for the sale of paid listings, advertisements and direct marketing opportunities, which could adversely affect our future business and operating results. Upon commercialization, FindWhat.com(SM) will compete with providers of Web directories, search and information services, all of whom offer advertising, including, among others: America Online, Inc. (AOL.com, NetFind and Netscape Netcenter), AskJeeves, Inc., CNET, Inc. (Snap), Excite, Inc. (including WebCrawler and Magellan), GoTo.com, LookSmart, Ltd., Compaq Computer Corp. (Alta Vista), Lycos, Inc. (including HotBot), Microsoft Corporation (LinkExchange, Inc. and msn.com), The Walt Disney Company/Infoseek Corporation (including the Go Network) and Yahoo! Inc. In addition, other companies may offer directly competing services in the future. Most providers of Web directories, search and information services offer additional features and content that we have elected not to offer. We also compete with traditional off-line media such as television, radio and print for a share of advertising budgets. Most of our current and potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than we do. These competitors may be able to respond more quickly to new or emerging technologies and changes in search engine requirements and to devote greater resources to the development, promotion and sale of their services than we can. Our competitors may have or obtain certain intellectual property rights which may interfere or prevent the use of our "pay for placement" business model. One such competitor, -10- GoTo.com, has advised us of a pending patent application with respect to this business model, but has refused to provide to us the details of its application. If a patent is issued to a competitor which interferes or prevents us from using the pay for placement business model, our business, operations and financial condition could be materially and adversely affected. In addition, we may be required to participate in litigation which we may not have the resources to fund or be required to incur litigation costs which may adversely affect our financial condition. A number of competitors within the search engine optimization industry offer alternative technologies to those we offer. We may not be able to compete successfully against our current or future competitors, either within the search engine and search engine optimization industry or otherwise. We depend on third-party hardware and software for various aspects of our business. We depend on third-party software to track performance and to invoice customers of our Be1st.com(SM) service. We expect to depend on third-party software to commercialize FindWhat.com(SM). We will be obligated to integrate any third-party technology we license in the future into our technology and services. Although we believe that several alternative sources for this software are available, any failure to obtain and maintain the rights to use such software would have a material adverse effect on our operations. We also are dependent upon third parties to provide our FindWhat.com(SM) search service with the necessary access to the Internet with sufficient capacity and bandwidth so that the search service can properly function and remain "online." We currently have a one-year contract with Michigan Internet Communications Association for such services. Any restrictions or interruption in our connection to the Internet may cause significant revenue loss. Our future success will depend on continued growth in the use of the Internet. Our future success will depend substantially upon continued growth in the use of the Internet to support the sale of our services and in the acceptance and volume of commerce transactions on the Internet. Traditional businesses will likely accept and adopt the Internet as a medium to conduct business only if the Internet provides these businesses with greater efficiencies and improvements. However, the number of Internet users may not continue to grow, and commerce over the Internet may not become more accepted or widespread. As this is a new and rapidly evolving industry, the ultimate demand and market acceptance for Internet-related services is subject to a high level of uncertainty. The Internet may not prove to be a viable commercial marketplace for a number of reasons, including lack of acceptable security technologies, lack of access and ease of use, congestion of traffic, inconsistent quality of service, lack of availability of cost-effective, high-speed service, potentially inadequate development of the necessary infrastructure, excessive governmental regulation, uncertainty regarding intellectual property ownership or timely development and commercialization of performance improvements, including high speed modems. Our future success will depend upon the continued development and maintenance of a viable Internet infrastructure. Our future success depends upon the continued development and maintenance of a viable Internet infrastructure to support the continued growth in the use of the Internet. The maintenance and improvement of this infrastructure will require timely development of products, such as high speed -11- modems and communications equipment, to continue to provide reliable Internet access and improved content. If the current Internet infrastructure is not able to support an increased number of users or the increased bandwidth requirements of users, the performance or reliability of the Internet, and therefore its popularity, may be adversely affected. The effectiveness of the Internet may decline due to delays in the development or adoption of new standards and protocols designed to support increased levels of activity. The infrastructure or products or services necessary to ensure the continued expansion of the Internet may not be developed. The Internet may not become a viable commercial medium for advertisers and marketers. If the necessary infrastructure, standards, protocols, products, services or facilities are not developed, or if the Internet does not become a viable commercial medium, our business, operations and financial condition could be materially and adversely affected. Current capacity constraints will require us to expand our network infrastructure and customer support capabilities. Our ability to provide high-quality customer service largely depends on the efficient and uninterrupted operation of our computer and communications systems in order to accommodate any significant increases in the numbers of consumers and advertisers using our services. We intend to expand our network infrastructure and customer support capabilities in anticipation of an expanded customer base. Such expansion will require us to make significant upfront expenditures for servers, routers, computer equipment and additional Internet and intranet work equipment and to increase bandwidth for Internet connectivity. In addition, we may be required to manage multiple relationships with various software and equipment vendors whose technologies may not be compatible, as well as relationships with other third parties to maintain and enhance our technology infrastructure. Any such expansion or enhancement will need to be completed without system disruptions. We presently are dependent upon third parties to provide the infrastructure we need to handle the anticipated traffic to our new search engine. Failure to expand our network infrastructure or customer service capabilities either internally or through third parties would materially adversely affect our business and operations. Our technical systems are vulnerable to interruption and damage. We currently do not have a disaster recovery plan in effect, nor do we have fully redundant systems for our services at an alternate site. A disaster could cause interruption of our services for an indeterminate length of time and severely damage our business and results of operations. Our primary network and computer systems are currently located at our technical operations facility in Fort Myers, Florida. We also have a back-up network in Detroit. Our systems and operations are vulnerable to damage or interruption from fire, floods, power loss, telecommunications failures, break-ins, sabotage and similar events. The occurrence of a natural disaster or unanticipated problems at our technical operations facility could cause interruptions or delays in our business, loss of data or render us unable to provide services to customers. Failure to provide data communications capacity we require, as a result of human error, natural disaster or other operational disruptions could cause interruptions in our service and web sites. The occurrence of any or all of these events could adversely affect our reputation, brand and business. -12- We may be unable to obtain the Internet domain names that we hope to use. The Internet domain name we are using for our search service web site is "FindWhat.com(SM)." This domain name will be an extremely important part of our business. We may desire or it may be necessary in the future to use other domain names in the United States and abroad. The acquisition and maintenance of domain names generally are regulated by governmental agencies and their designees. In the United States, the National Science Foundation has appointed Network Solutions, Inc. as the current exclusive registrar for the ".com," ".net" and ".org" generic top-level domains. The regulation of domain names in the United States and in foreign countries is subject to change in the near future. Future changes in the United States are expected to include a transition from the current system to a system that is controlled by a for-profit corporation and the creation of additional top-level domains. Governmental authorities in different countries may establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we may be unable to acquire or maintain desired and relevant domain names in all countries in which we will conduct business. The impact of potential Year 2000 difficulties on our operations is unclear. We believe that our internal software and hardware systems will function properly with respect to dates in the year 2000 and thereafter and have completed our internal information technology and non-information technology assessments. We do not expect to incur any significant costs in the future for year 2000 problems. We may experience unanticipated negative consequences from year 2000 problems, including material costs caused by undetected errors or defects in the technology we use in our internal systems. We have not inquired as to the year 2000 readiness of our customers, suppliers or vendors and are unable to determine what, if any, consequences their year 2000 failures would have on our operations, liquidity or financial condition. If our suppliers, vendors or customers experience any year 2000 problems, it could affect the revenues generated by our FindWhat.com(SM) search service. In most cases, we believe that we could find replacement vendors or suppliers which are year 2000 compliant without significant delay or expense. However, if substantially all of our suppliers and vendors prove not to be year 2000 compliant and if we experience difficulties in finding replacement suppliers and vendors, then our business could be materially adversely affected. If our customers, suppliers and vendors experience year 2000 problems, it could result in an interruption in, or a failure of, certain of our normal business activities or operations. We could also be required to incur substantial expenditures in order to adapt our services to changing technologies or to new protocols as a result of any realized year 2000-related programming errors. We may be unable to promote and maintain our brands. We believe that establishing and maintaining brand identity of our services is a critical aspect of attracting and expanding a large corporation client base and that the importance of brand recognition will increase due to the growing number of Internet search engine optimization marketing services and search engines. Promotion and enhancement of our brands will depend largely on our success in continuing to provide high quality service. If businesses do not perceive our existing services to be of high quality, or if we introduce new services or enter into new business ventures that are not favorably received by businesses, we will risk diluting our brand identities and decreasing their attractiveness to existing and potential customers. -13- In order to attract and retain customers and to promote and maintain brands in response to competitive pressures, we may find it necessary to substantially increase our financial commitment to creating and maintaining a distinct brand loyalty among our customers. If we incur excessive expenses in an attempt to improve our services or to promote and maintain our brands, our business, results of operations and financial condition could be materially affected. Our brand identity may also be diluted as a result of any inability to protect our service marks or domain names. Credit card fraud could cause us losses in the future. To date, we have not suffered losses as a result of orders placed with fraudulent credit card data. Under current credit card practices, a merchant is liable for fraudulent credit card transactions when that merchant does not obtain a cardholder's signature, as is the case with the transactions we process. We may not adequately control fraudulent credit card transactions in the future. The nature of our business exposes us to a variety of online security risks. We are potentially vulnerable to attempts by unauthorized computer users and "hackers" to penetrate our network security. If successful, such individuals could misappropriate proprietary information or cause interruptions in our online services. We may be required to expend significant capital and resources to protect against the threat of such security breaches or to alleviate problems caused by such breaches. In addition to security breaches, inadvertent transmission of computer viruses could expose us to risk of loss or litigation and possible liability. Continued concerns over the security of Internet transactions and the privacy of the users may also inhibit the growth of the Internet generally as a means of conducting commercial transactions, which may reduce our potential income. Government regulation of internet businesses such as ours may increase. We are not subject to direct regulation by any government agency, other than regulations applicable to businesses generally, and Internet businesses in particular. Few laws or regulations are currently directly applicable to access to or commerce on the Internet. However, the increasing popularity and use of the Internet have caused several laws or regulations to come under consideration by federal, state, local and foreign governmental authorities. In the future, laws may be adopted with respect to the Internet relating to such issues as user privacy, taxation, infringement, pricing and intellectual property ownership. Any new legislation or regulation, or a new interpretation of existing laws, could impact us in ways that are impossible to predict at present. Our intellectual property rights may not be protectable or of significant value in the future. Legal standards relating to the validity, enforceability and scope of protection of certain intellectual property rights in Internet-related industries are uncertain and still evolving. The steps we take to protect our intellectual property rights may not be adequate to protect our future intellectual property rights. Third parties may also infringe or misappropriate our copyrights, trademarks, service marks, trade dress and other proprietary rights. Any such infringement or misappropriation could have a material adverse effect on our business, operations and financial condition. -14- We regard substantial elements of our services as proprietary and attempt to protect them by relying on service mark, copyright and trade secret laws and contractual restrictions on disclosure of information we deem to be confidential. We have applied for service marks for "BeFirst(SM)", "Be1st(SM)" and "FindWhat.com(SM)" with the United States Patent and Trademark Office. We have been advised that a prior "intent-to-use" application has been filed by a third party for "BeFirst" and that we may not have the right to use or exclusively use the marks "BeFirst" or "Be1st." As a result, it may prove necessary or advisable to change the name of our web promotion service, which may entail additional expense and loss of goodwill. If other companies also claim the words "BeFirst", "Be1st" and "FindWhat.com", it could involve us in litigation or additional expense. We intend to apply for the registration of additional service marks. Effective service mark, copyright and trade secret protection may not be available in every country in which our service is distributed or made available through the Internet. In addition, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. We may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights, which may result in the dilution of the brand identity of our services. Our current and future business activities may infringe upon the proprietary rights of others, and other parties may assert infringement claims against us. Any such claims and resulting litigation could subject us to significant liability for damages and could result in the invalidation of our proprietary rights. Even if not meritorious, such claims could be time-consuming, expensive to defend and could result in the diversion of our management's time and attention. We depend on the efforts of our key personnel, several of whom do not work for us full-time. Our success is substantially dependent on the performance of our senior management and key technical personnel. In particular, our success depends substantially on the continued efforts of Craig A. Pisaris-Henderson, our Chief Technical Officer and Chairman of our board of directors, Robert D. Brahms, our Chief Executive Officer, and Courtney P. Jones, our President. We currently do not have key person life insurance on Messrs. Pisaris-Henderson, Brahms or Jones and may be unable to obtain such insurance in the near future due to high cost or other reasons. We also do not have written employment agreements with any of these key personnel. We believe that the loss of the services of any of our executive officers or other key employees could have a material adverse effect on our business, operations and financial condition. Each of Messrs. Brahms, Jones and Pisaris-Henderson are actively involved in the ownership, management and operation of other businesses, including other Internet businesses. They may have conflicts of interest in the allocation of their business time, and that may reduce the amount of time they can devote to our business and operations. -15- Our current members of management are also controlling stockholders. Craig A. Pisaris-Henderson, Robert D. Brahms and Courtney P. Jones collectively own over 50% of our outstanding common stock. Thus, our executive officers and directors will remain in a position to control all matters requiring approval of our stockholders, including the election of directors and proposed acquisitions. We must comply with the OTC Bulletin Board eligibility rule. In January of 1999, the SEC granted approval to the NASD OTC Bulletin Board eligibility Rule 6530 which requires a company listed on the OTC Bulletin Board to be a reporting company and current in its reports filed with the SEC. As a result of this rule change we have filed this registration statement in order to become a full reporting company and list our common stock on the OTC Bulletin Board. The SEC reporting requirements will add additional expenses to our operations, including the expense of filing this registration statement and preparing annual and quarterly reports. Because the SEC may not reach a position of no comment with regard to this registration statement prior to October 7, 1999, we may lose our listing on the OTC Bulletin Board, which may have an adverse impact upon the market for our common stock. In the event of this occurrence, we would anticipate trading on the OTC Bulletin Board soon after this registration statement is declared effective. We may not be able to maintain a liquid public market for our common stock. Our shares of common stock are currently quoted on the OTC Electronic Bulletin Board. However, prior to June 18, 1999, there was no significant or long-term established public trading market for our common stock. A regular and established market may not be maintained for our common stock, and there can also be no assurance as to the depth or liquidity of any market for our common stock or the prices at which holders may be able to sell our common stock. The market price of our common stock may be extremely volatile. The public market for our common stock has been established relatively recently. In addition, the trading prices of the securities of many Internet companies have fluctuated widely in recent months. The market price of our common stock will be influenced by many factors and may be subject to significant fluctuations in response to variations in our operating results, investor perceptions, supply and demand, interest rates, developments with regard to our activities, our future financial condition, changes in our management, general economic conditions and conditions specific to the industry. We may become subject to regulations associated with low priced securities. Prior to our acquisition of BeFirst Internet Corporation, our common stock frequently traded at a price below $5.00 per share. Trading in securities priced below $5.00 per share is subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, as amended, which require additional disclosure by broker-dealers in connection with any trades involving a stock defined as a "penny stock" (generally, any non-Nasdaq equity security that has a market price share of less than $5.00 per share). Such rules require the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated with it and impose various sales -16- practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally defined as an investor with a net worth in excess of $1,000,000 or annual income exceeding $200,000 individually or $300,000 together with a spouse). For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to the sale. The broker-dealer also must disclose the commissions payable to the broker-dealer, current bid and offer quotations for the penny stock and whether the broker-dealer is the sole market-maker with presumed control over the market. Such information must be provided to the customer orally or in writing before or with the written confirmation of trade sent to the customer. Monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. The additional burdens imposed upon broker-dealers by such requirements could discourage broker-dealers from effecting transactions in our common stock which could severely limit its market liquidity and the ability of holders of our common stock to sell it. Our charter documents limit the liability of our directors and officers. Our Articles of Incorporation include provisions, subject to certain exceptions, to limit, to the fullest extent permitted by Nevada General Corporation Law as in effect from time to time, the personal liability of our directors for monetary damages arising from a breach of their fiduciary duties as directors. Our Articles of Incorporation also include provisions to the effect that we will, to the maximum extent permitted from time to time under the law of the State of Nevada, indemnify any director or officer. In addition, our By-laws require us to indemnify any director, officer, employee or agent for acts which such person reasonably believes are not in violation of our corporate purposes as set forth in our Articles of Incorporation, to the fullest extent permitted by law. A significant portion of our common stock is eligible for immediate public trading. Of the 12,500,000 shares of our common stock outstanding, 2,500,000 shares are freely tradeable or immediately eligible for resale under Rule 144 promulgated pursuant to the Securities Act of 1933, as amended. Sales of substantial amounts of our common stock in the public market could adversely affect the market price of our common stock. Our Articles of Incorporation authorize us to issue additional shares of stock. We are authorized to issue up to 50,000,000 shares of common stock. Our board of directors has the ability to issue additional shares of common stock in the future for such consideration as the board of directors may consider sufficient without seeking shareholder approval. The issuance of additional common stock in the future will reduce the proportionate ownership and voting power of current stockholders. Our Articles of Incorporation also authorize us to issue up to 500,000 shares of preferred stock, the rights and preferences of which may be designated by the board of directors. Such designations may be made without shareholder approval. The designation and issuance of preferred stock in the future could create additional securities which would have dividend and liquidation preferences over the outstanding shares of common stock. These provisions could also impede a non-negotiated change in control. -17- We do not intend to pay future cash dividends. We currently do not anticipate paying cash dividends on our common stock at any time in the near future. Any decision to pay dividends will depend upon our profitability at the time, cash available and other factors. We may never pay cash dividends or distributions on our common stock. Item 2. Financial Information Selected Financial Data The following tables set forth selected historical financial data for FindWhat.com that reflect the acquisition of all of the outstanding capital stock of BeFirst Internet Corporation by us in June 1999. Since as a result of the acquisition, the stockholders of BeFirst acquired effective control of us, the accounting for the acquisition is identical to that resulting from a reverse acquisition, except that no goodwill is recorded. Under reverse acquisition accounting, our post-reverse acquisition historical financial statements are those of BeFirst. Accordingly, our financial statements included elsewhere herein are the audited historical financial statements of BeFirst as of December 31, 1998 and for the period from March 27, 1998 (the date of inception of BeFirst) through December 31, 1998. The financial data as of December 31, 1998 and for the period from March 27, 1998 through December 31, 1998 are derived from our audited financial statement included elsewhere herein. The interim financial data as of June 30, 1999 and for the periods from March 27, 1998 through December 31, 1998 and for the six months ended June 30, 1998 are derived from our unaudited financial statements included elsewhere herein and include, in the opinion of management, all necessary adjustments (consisting of normal and recurring accruals) for the fair presentation of such information. Interim results may not necessarily be indicative of our results of operations for a full year or any other future period. Also see Management's Discussion and Analysis of Financial Information and our financial statements included elsewhere herein.
Period From Period From March 27, 1998 March 27, 1998 Consolidated (Date of Inception) (Date of Inception) Six Months Ended To December 31, 1998 To June 30, 1998 June 30, 1999 -------------------- ----------------- ----------------- (unaudited) (unaudited) Statement of Operations Data Revenues $ 58,818 $ 1,500 $ 217,504 Cost of revenues 36,837 6,282 56,444 --------- --------- --------- Gross profit 21,981 (4,782) 161,060 Operating Expenses Selling, general and administrative 44,146 10,506 188,594 Stock option compensation 0 0 211,000 --------- --------- --------- Net Loss $ (22,165) $(15,228) $(238,534) ========= ========= =========
-18- As of June 30, As of December 31, 1999 1998 (unaudited) Balance Sheet Data ----------------- --------------- Cash and cash equivalents $ 6,702 $2,442,545 Total Assets 16,525 2,539,192 Total current liabilities 38,690 153,787 Stockholders' equity (deficit) (22,165) 2,385,405 Management's Discussion and Analysis of Financial Condition and Results of Operation Overview In June 1999, we acquired all of the outstanding common stock of BeFirst Internet Corporation, a Delaware corporation, in exchange for the issuance to the holders of the outstanding capital stock of BeFirst of 8,750,000 shares of our common stock. Such acquisition gives effect to the following transactions, each of which was deemed to have occurred simultaneously with the acquisition: o we cancelled 8,600,000 of our outstanding common stock contributed to us by certain stockholders and we effected a one-for-two reverse split of our own outstanding common stock, resulting in a decrease in our outstanding common stock to 2,500,000 shares; o we issued 1,250,000 post-split shares of our common stock in a private transaction for a price of $2.00 per share; o we changed our corporate name from Collectibles America, Inc. to BeFirst.com; and o the individual that had served as our sole officer and director prior to our acquisition of BeFirst resigned and was replaced by a board of directors consisting of the former holders of the outstanding capital stock of BeFirst. As a result of such transactions, BeFirst became a wholly-owned subsidiary of ours and the former holders of capital stock of BeFirst acquired effective control of us as the parent of BeFirst. In September 1999, we changed our corporate name to FindWhat.com. We were incorporated in October 1995. In 1997, we discontinued business operations and transferred our operating assets to creditors to satisfy outstanding liabilities. Therefore, the following discussion is a discussion of the business of BeFirst. BeFirst was incorporated in March 1998. BeFirst completed development of proprietary methodology and software tools designed to optimize our client's web sites and achieve improved ranking results in response to searches conducted by consumers on major Internet search sites, known as "search engines" or "portals", for search words and phrases selected by our clients within their respective business categories. We are also in the process of commercially launching our Internet web search service which is designed to assist consumers who search the Internet to locate desired providers of -19- information, products and services to quickly and easily locate relevant information and pass through our portal to the desired information. Our web site optimization service, which we market under the Be1st.com(SM) service mark, and our web site search service, which we market under the FindWhat.com(SM) service mark, are designed to increase traffic to our clients' web sites. Our Be1st.com(SM) service derives revenues from set-up fees charged to new clients and through click-through rates charged for traffic the service generates for a client's web site. Our search service is designed to generate revenues based on the number of consumer click-throughs resulting from a client's listing on our FindWhat.com(SM) web site. The click-through rate will be determined by an auction among clients in the same category. Clients desiring placement within a search category will bid against one another, with the winning bid being at least $.01 greater than the next highest bid. We anticipate that our search service will generate additional revenue from banner advertisements to be placed on search result pages. We began offering our Internet web site optimization service in August 1998 and we are in the process of commercially launching our FindWhat.com(SM) search service. We have not yet generated any significant revenues and do not expect to generate any significant revenues until after we commercially launch our Internet search service and the number of clients we service and the volume of click-throughs at our clients' web sites substantially increase. In order to significantly increase revenues we will be required to incur significant advertising and promotional expenses. In anticipation of an expansion of our operations, we have recently employed additional management personnel, including individuals to serve as our chief financial officer and director of sales. We intend to employ additional personnel in such areas as sales, technical support and finance. These actual and proposed increases in personnel will significantly increase our selling, general and administrative expenses. Our limited operating history and the uncertain nature of the markets we address or intend to address make prediction of our future results of operations difficult. Our operations may never generate significant revenues, and we may never achieve profitable operations. Results of Operations The following table sets forth our results of operations expressed as percentage of total revenues:
Period From March 27, 1998 Period From March 27, Six Months (Date of Inception) through 1998 (Date of Inception) Ended December 31, 1998 through June 30, 1998 June 30, 1999 ---------------------------- ------------------------ -------------- Revenues....................... 100% 100% 100% ==== ==== ==== Cost of Revenues............... 63% 419% 26% Operating expenses............. 75 700 184 Net loss....................... (38) (1019) (110)
-20- Comparison of Six Months Ended June 30, 1999 to the Period from March 27, 1998 (Date of Inception) to June 30, 1998; and Comparison of the Six Months Ended June 30, 1999 to the Period from Inception to December 31, 1998. Revenues. Revenues increased from $1,500 for the period from March 27, 1998 to June 30, 1998 to $217,504 for the six months ended June 30, 1999. In addition, revenues increased from $58,818 for the period from inception to December 31, 1998 to $217,504 for the six months ended June 30, 1999. We introduced our Be1st.com web site optimization service in August 1998. The increase in revenue is primarily due to the increase in the number of clients using our Be1st.com service, which increased from 25 as of December 31, 1998 to 105 as of June 30, 1999. Cost of Revenues. Cost of revenues consists primarily of sales representative commissions, domain registration expenses for clients and web site design expenses. Our cost of revenues increased from $6,282 for the period from inception to June 30, 1998 to $56,444 for the six months ended June 30, 1999. In addition, our cost of revenues increased from $36,837 for the period from inception to December 31, 1998 to $56,444 for the six months ended June 30, 1999. The increases were primarily attributable to increases in sales representative commissions and additional client domain registration fees required in connection with the expansion of our operations. Operating Expenses. The two components of our operating expenses are selling, general and administrative expenses and stock option compensation. Selling, general and administrative expenses consist primarily of advertising, salaries and related costs for general corporate functions, including professional fees and depreciation of computer equipment. Stock option compensation consists of a non-cash charge of $211,000 during the six months ended June 30, 1999 which was recognized for the excess of the fair market value of our common stock over the exercise price of options granted to non-employees. Operating expenses increased from $10,506 for the period from March 27, 1998 to June 30,1998 to $399,594 for the period ended June 30, 1999. In addition, operating expenses increased from $44,146 for the period from March 27, 1998 to December 31, 1998 to $399,594 for the six months ended June 30, 1999. Selling, general and administrative costs for the six months ended June 30, 1999 included $145,501 for advertising, professional fees and payroll. Increases in advertising and salaries (other than the non-cash charge) are the result of the expansion of our operation, the development of our FindWhat.com search service and increased sales efforts. We anticipate additional increases in advertising, payroll, professional fees and depreciation in the future. Also included in selling, general and administrative expenses for the periods ended December 31, 1998 and June 30, 1999 are $18,000 and $43,000, respectively for rent allocation, support and other administrative services provided by WPI Advertising, Inc. Net Loss. As a result, our net loss increased from $15,288 for the period from inception to June 30, 1998 to $238,534 for the six months ended June 30. 1999. In addition, our net loss increased from $22,165 for the period from inception to December 31, 1998 to $238,534 for the six months ended June 30, 1999. Liquidity and Capital Resources Through June 30, 1999, space and support services were provided to us by WPI Advertising, Inc. and Internet Services International, Inc., affiliates of certain of our officers and directors. Internet Services International, Inc., an -21- Our cash requirements during this period were financed primarily from operating cash flow and the net proceeds of a private placement of common stock. As of June 30, 1999, we had cash and cash equivalents of approximately $2,435,000, representing the net cash proceeds from the sale of 1,250,000 shares of our common stock in a private placement. For the six months ended June 30, 1999, operating activities provided net cash of approximately $21,500, due to cash flows from operating activities. Net cash used in investing activities was $20,837, reflecting purchase of equipment. We are using the net cash proceeds from the private placement of our common stock to purchase equipment, complete the development and launch of our Internet search service, and finance salaries and other general expenses in anticipation of an expansion in our customer base and activities. We currently anticipate that the net proceeds from our private placement, together with cash flow from operations, will be sufficient to finance our needs for working capital and capital expenditures over at least the next 12 months. Although we believe that there are sufficient funds to implement our proposed operations over the next 12 months, we intend to seek additional funds as needed in the future in order to finance additional technical, sales, management and marketing personnel and to expand our marketing and promotional capabilities. We cannot assume that we will be able to obtain any additional funds when required on commercially reasonable terms, or at all. Year 2000 Compliance Many currently installed computer systems and software products are coded to accept only two digit entries in the date code field. Beginning in the year 2000, these code fields will need to accept four digit entries to distinguish the year 2000 and 21st century dates from other 20th century dates. As a result, computer systems and/or software products used by many companies may need to be upgraded to solve this problem. We believe that our internal software and hardware systems will function properly with respect to dates in the year 2000 and thereafter and have completed our internal information technology and non-information technology assessments. We do not expect to incur any significant costs in the future for year 2000 problems. We may experience unanticipated negative consequences from year 2000 problems, including material costs, caused by undetected errors or defects in the technology used in our internal systems. We have not inquired as to the year 2000 readiness of our customers, suppliers or vendors and are unable to determine what, if any, consequences their year 2000 failures would have on our operations, liquidity or financial condition. If our suppliers, vendors or customers experienced any year 2000 problems, it could affect the revenues of our FindWhat.com(SM) services. In most cases, we believe that we could find replacement vendors or suppliers which are year 2000 compliant without significant delay or expense. However, if substantially all of our suppliers and vendors prove not to be year 2000 compliant and if we experience difficulties in finding replacement suppliers and vendors, then our business could be materially adversely affected. If our customers, suppliers and vendors experience year 2000 problems, it could result in an interruption in, or a failure of, certain of our normal business -22- activities or operations. We could also be required to incur substantial expenditures in order to adapt our services to changing technologies or to new protocols as a result of any realized year 2000-related programming errors. Item 3. Properties. We lease approximately 3,200 square feet of office space in Fort Myers, Florida for current annual rent of $28,000. The lease commenced September 1, 1999 and has a three-year term. Our sales activities are conducted out of the Manhattan offices of WPI Advertising, Inc., a business owned and operated by Robert D. Brahms, an executive officer and director of our company. WPI is providing us with office space and support services on a cost allocation basis. As our sales operations expand, we will determine whether to maintain our presence in the WPI offices or to seek alternate space in Manhattan. We believe that this space is sufficient for our current and anticipated sales activities. Item 4. Security Ownership of Certain Beneficial Owners and Management. The following table sets forth certain information as of August 26, 1999 with respect to the beneficial ownership of our common stock by the following individuals and groups: o each of our directors o each of our executive officers o each person whom we know beneficially owns five percent (5%) or more of our outstanding common stock o all directors and executive officers as a group
Percentage of Name and Address of Number of Shares Shares Beneficially Beneficial Owner Beneficially Owned Owned ---------------- ------------------ ------------------- Courtney P. Jones 2,413,688 19.1 Craig A. Pisaris-Henderson 2,418,688 19.1 Robert D. Brahms 2,350,658 18.6 Peter W. Miller 1,562,500 12.5 All directors and executive officers as a group (3 persons) 7,183,034 54.9
The address of Messrs. Jones, Pisaris-Henderson and Brahms is care of FindWhat.com, 121 West 27th Street, Suite 903, New York, New York 10001. The address of Mr. Peter Miller is care of Proskauer Rose LLP, 1545 Broadway, New York 10036, attention: Jack P. Jackson, Esq. -23- We believe that all of the persons named in the above table have sole voting and investment power over all shares they beneficially own. Each person in the table above is considered the beneficial owner of securities that he can acquire through the exercise of options, warrants or convertible securities within 60 days from the date of this registration statement. In calculating each beneficial owner's percentage ownership, we have assumed that options held by that person that are exercisable within 60 days from the date of this registration statement have been exercised. Messrs. Brahms, Jones and Pisaris-Henderson were granted options to purchase 122,667, 125,667 and 130,667 shares of common stock, respectively, at $2.20 per share pursuant to our 1999 Stock Option Plan. The applicable percentage ownership amounts in the above table are based on 12,500,000 shares of common stock outstanding as of August 26, 1999. Item 5. Directors and Executive Officers. The following table sets forth our directors and executive officers: Name Age Position ---- --- -------- Courtney P. Jones 40 Chairman of Board of Directors and a Director Craig A. Pisaris-Henderson 29 President, Chief Technology Officer, Secretary and a Director Robert D. Brahms 42 Chief Executive Officer, Treasurer and a Director Michael Schulman 43 Chief Financial Officer Courtney P. Jones has served as our Chairman and as one of our directors since we acquired BeFirst Internet Corporation in July 1999. Prior to that time, he served as the President and as a director of BeFirst since its inception in March 1998. He has served as President and a Director of V-Lite Video Corporation, a direct marketing production and distributing company, for more than the past five years. In 1993, Mr. Jones also created, wrote and produced the "Electronic Entrepreneur," a program for aspiring electronic retailers that was sold on television and radio. Mr. Jones attended the University of Missouri for four years before leaving to begin his radio career. Craig A. Pisaris-Henderson has served as our President, Secretary and Chief Technology Officer and as one of our directors since we acquired BeFirst in June 1999. Prior to that time he served as the Vice President and Secretary and a director of BeFirst since its inception in March 1998. He has served as President and a director of Internet Services International Inc. since April 1998, and as chief executive officer and a director of E-Troop.com, an Internet business since April 1998. From 1993 to April 1998, Mr. Pisaris-Henderson was employed by Henderson Enterprises, an Internet business, in sales and web site design. Robert D. Brahms has served as our Chief Executive Officer and Treasurer and as one of our directors since we acquired BeFirst in June 1999. Prior to that time he served as a Vice President and Treasurer and as a director of BeFirst since May 1998. Mr. Brahms has served as the President and director of WPI Advertising Inc. since it was founded in 1986. WPI is a general advertising firm and -24- sales representative of other advertising media, including print and Internet. Mr. Brahms is a graduate of the State University of New York. Michael Schulman has served as our Chief Financial Officer since July 1999. From 1996 to July 1999, he served as Vice President and Chief Financial Officer for IPO, LLC/Fashion Express Worldwide. From 1991 to 1996, Mr. Schulman served as Vice President and Chief Financial Officer of Gotham Apparel Corp. Mr. Schulman has BS and MBA degrees from St. John's University in New York City. Messrs. Brahms, Jones and Pisaris-Henderson are each actively involved in the ownership, management and operation of other businesses, including other Internet businesses. As such, they may have conflicts of interest in the allocation of business time which may have an adverse affect on our business and operations. Directors are elected for a period of one year and serve until the next annual meeting at which their successors are duly elected by the stockholders. Officers and other employees serve at the will of the board of directors. There are currently no arrangements or understandings regarding the length of time each director is to serve in such a capacity. We have no audit or compensation committees of our board of directors. Item 6. Executive Compensation. Commencing July 1, 1999, Robert D. Brahms, Courtney P. Jones and Craig A. Pisaris-Henderson are being compensated at a rate of $120,000 per year. From March 27, 1998 (the date of BeFirst's inception) through June 30, 1999, none of our executive officers received any compensation from us. Messrs. Brahms, Jones and Pisaris-Henderson have been granted incentive stock options to purchase 122,667, 125,667 and 130,667 shares of common stock, respectively, at an exercise price of $2.20 per share under our 1999 Stock Option Plan. Each option expires five years from its date of grant. Michael Schulman, the Company's Chief Financial Officer, was employed by us in July 1999 and is being compensated at a rate of $125,000 per year. In addition, Mr. Schulman was granted incentive stock options to purchase 20,000 shares of common stock pursuant to our 1999 Stock Option Plan at an exercise price of $2.00 per share. Such options expire five years from their date of grant. Directors' Compensation Directors do not receive any compensation for services rendered in such capacities. Stock Option Plan In June 1999, we adopted our 1999 Stock Option Plan, pursuant to which we may grant options to purchase up to 1,000,000 shares of common stock to our key employees, officers, directors, consultants and other agents and advisors. Awards under this Plan will consist of stock options (both non-qualified options and options intended to qualify as "incentive stock options" under Section 422 of the Internal Revenue Code of 1986, as amended), restricted stock awards, deferred stock awards, stock appreciation rights and other stock-based awards. -25- The Plan is administered by the board of directors, which may determine the persons to whom awards will be granted, the number of awards to be granted and the specific terms of each grant, including vesting, subject to the provisions of the Plan. The exercise price of incentive stock options may not be less than 100% of the fair market value of our common stock on the date of grant (110% of the fair market value in the case of a grantee holding more than 10% of our outstanding stock). The aggregate fair market value of shares for which qualified stock options are exercisable for the first time by such employee (10% shareholder) during any calendar year may not exceed $100,000. Non-qualified stock options granted under the Plan may be granted at a price determined by the board of directors, which may not be less than the fair market value of the common stock on the date of grant. The Plan also contains certain change in control provisions which could cause options and other awards to become immediately exercisable and restrictions and deferral limitations applicable to other awards to lapse in the event any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, including a "group" as defined in Section 13(d), but excluding certain stockholders of the Company, becomes the beneficial owners of more than 25% of the outstanding shares of common stock. To date, we have granted options to purchase up to 379,001 and 73,000 shares of common stock at $2.00 and $2.20 per share, respectively, to employees and options to purchase up to an additional 216,712 shares at $2.00 per share to non-employees. Item 7. Certain Relationships and Related Transactions. Our sales activities are conducted out of the Manhattan offices of WPI Advertising Inc., a business owned and operated by Robert D. Brahms, an executive officer and director of ours. As our sales operations expand, we will determine whether to maintain our presence in the WPI offices or to seek alternate space in Manhattan. From our inception in March 1998 through the date hereof, WPI has provided office space and support and administrative services to us. Through September 9, 1999, we have paid expenses to WPI of $70,980 and Internet Services International, Inc. of $8,172 for certain sales services, as well as for rent allocation and administrative costs. We believe that prior transactions with our officers, directors and principal stockholders were on terms that were no less favorable than we could have obtained from unaffiliated third parties. All future transactions between us and our officers, directors and stockholders beneficially owning 5% or more of our outstanding voting securities or their affiliates will be on terms no less favorable to us than we could obtain in arm's-length negotiations from unaffiliated third parties. Item 8. Legal Proceedings. We are not a party to any pending legal proceedings and are not aware of any threatened legal proceedings. -26- Item 9. Market Price of and Dividends on the Registrant's Common Equity and Related Shareholder Matters. Market Information. Our common stock has traded since June 17, 1999 on the NASD's OTC Bulletin Board under the symbol "FWHT." Prior to June 17, 1999, our common stock was listed under the symbol "CAMJ" and traded infrequently. For the period from June 17, 1999 to August 17, 1999, the high and low bid prices for our common stock as reported by the NASD Over the Counter Bulletin Board were $8.50 and $5.50, respectively. Such prices reflect inter-dealer quotations, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The number of record holders of our common stock was approximately 120 as of August 26, 1999. In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated), including an affiliate, who has beneficially owned shares for at least one year is entitled to sell, within any three month period, a number of shares that does not exceed the greater of (i) one percent of the shares outstanding, or (ii) the average weekly volume of trading in such shares for the four calendar weeks preceding such sale, subject to the filing of a Form 144 with respect to such sale and certain other limitations and restrictions. In addition, a person who is not deemed to have been one of our affiliates 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, would be entitled to sell such shares under Rule 144(k) without regard to the volume, manner of sale and other limitations described above. Dividend Policy. To date, we have not declared or paid any cash dividends on our common stock. The payment of dividends, if any, in the future is within the discretion of the board of directors and will depend upon our earnings, capital requirements and financial condition and other relevant factors. We presently intend to retain all earnings to finance our continued growth and the development of our business and do not expect to declare or pay any cash dividends in the foreseeable future. Item 10. Recent Sales of Unregistered Securities. In October 1997, we sold 12,000,000 shares of common stock to a former officer for a purchase price of $15,000. In June 1999, we cancelled 8,600,000 shares of common stock contributed to us by certain stockholders and then effected a 1-for-2 reverse stock split of the remaining outstanding shares of common stock. Following the reverse split, in June 1999, we completed a private offering of 1,250,000 shares of common stock to 39 purchasers for gross proceeds of $2,500,000 pursuant to Rule 506 of Regulation D under the Securities Act of 1933, as amended. In June 1999, we acquired all of the outstanding capital stock of BeFirst Internet Corporation in exchange for the issuance of 8,750,000 shares of common stock to the former shareholders of BeFirst Internet Corporation. -27- In June 1999, we issued options under our 1999 Stock Option Plan to purchase up to an aggregate of 668,713 shares of our common stock to certain employees and non-employees of the Company at exercise prices of $2.00 and $2.20 per share. Item 11. Description of Registrant's Securities to be Registered. Our authorized capital stock consists of 50,000,000 shares of common stock, $.001 par value per share, and 500,000 shares of preferred stock, $.001 par value per share. As of August 26, 1999, there were 12,500,000 shares of common stock outstanding, which as of that date were held of record by 120 holders. No shares of preferred stock are outstanding. Common Stock Holders of common stock are entitled to share equally in all dividends and distributions that the board of directors, in its discretion, declares from legally available funds. No holder of common stock has a preemptive right to subscribe for any securities. No shares of common stock are subject to redemption or convertible into other securities. Upon our liquidation, dissolution or winding up, and after payment of creditors and preferred stockholders, if any, our assets will be divided pro-rata on a share-for-share basis among the holders of common stock. All shares of common stock now outstanding are fully paid, validly issued and nonassessable. Each share of common stock is entitled to one vote on all matters for which shareholders are required or permitted to vote. Holders of common stock do not have cumulative voting rights. The holders of more than 50% of the combined shares voting for the election of directors may elect all of the directors, if they choose to do so. In that event, holders of the remaining shares of common stock will not be able to elect any members to the board of directors. Certain Provisions of Nevada Law Anti-Takeover Provisions. Nevada law provides that any agreement providing for the merger or consolidation for sale of all or substantially all of the assets of a corporation be approved by the owners of at least the majority of the outstanding shares of that corporation, unless a different vote is provided for in our Articles of Incorporation. Our Articles of Incorporation do not provide for a super-majority voting requirement in order to approve any such transactions. Nevada law also gives appraisal rights for certain types of mergers, plans of reorganization, or exchanges or sales of all or substantially all of the assets of a corporation. Under Nevada law, a stockholder does not have the right to dissent with respect to: (a) a sale of assets or reorganization, or (b) any plan of merger or any plan of exchange, if (i) the shares held by the stockholder are part of a class of shares which are listed on a national securities exchange or the NASDAQ National Market System, or are held of record by not less than 2,000 shareholders, and (ii) the stockholder is not required to accept for his shares any consideration other than shares of a corporation that, immediately after the effective time of the merger or exchange, will -28- be part of a class of shares which are listed on a national securities exchange or the NASDAQ National Market System, or are held of record by not less than 2,000 holders. Control Share Acquisition Provision. Under Nevada law, when a person has acquired or offers to acquire one-fifth, one-third, or a majority of the stock of a corporation, a stockholders' meeting must be held after delivery of an "offeror's" statement, at the offeror's expense, so that the stockholders of the corporation can vote on whether the owner(s) of the shares proposed to be acquired (the "control shares") can exercise voting rights. Except as otherwise provided in a corporation's Articles of Incorporation, the approval of the owner(s) of a majority of the outstanding stock not held by the offerors is required so that the stock held by the offerors will have voting rights. The control share acquisition provisions are applicable to any acquisition of a controlling interest, unless the articles of incorporation or by-laws of a corporation in effect on the tenth day following the acquisition of a controlling interest by an acquiring person provide that the control share acquisition provisions do not apply. We have not elected out of the control share acquisition provisions of Nevada law. Combination Moratorium Provision. Nevada law provides that a corporation may not engage in any "combinations," which is broadly defined to include mergers, sales and leases of assets, issuances of securities, and similar transactions with an "interested stockholder" (which is defined as the beneficial owner of 10% or more of the voting power of the corporation) and certain affiliates or their associates for three years after an interested stockholder's date of acquiring the shares, unless the combination or the purchase of the shares by the interested stockholder is approved by the board of directors by the date the interested stockholder acquires the shares. After the initial three-year period, any combination must still be approved by majority of the voting power not beneficially owned by the interested stockholder or the interested stockholders, affiliates or associates, unless the aggregate amount of cash and the market value of the consideration other than cash that could be received by stockholders as a result of the combination is at least equal to the highest of: (a) the highest bid per share of each class or series of shares, including the common shares, on the date of the announcement of the combination or on the date the interested stockholder acquired the shares; or (b) for holders of preferred stock, the highest liquidation value of the preferred stock. Other Provisions. Under Nevada law, the selection of a period for achieving corporate goals is the responsibility of the directors. In addition, the officers, in exercising their respective powers with a view to the interests of the corporation, may consider: (i) the interests of the corporation's employees, suppliers, creditors, and customers, (ii) the economy of the state and the nation, (iii) the interests of the economy and of society, and -29- (iv) the long-term, as well as short-term, interests of the corporation and its stockholders, including the possibility that those interests may be best served by the continued independence of the corporation. The directors also may resist any change or potential change of control of the corporation if the directors, by majority vote of a quorum, determine that a change or potential change is opposed to or not in the best interests of the corporation "upon consideration of the interest of the corporation's stockholders," or for one of the other reasons described above. The directors may also take action to protect the interests of the corporations' stockholders by adopting or executing plans that deny rights, privileges, powers, or authority to a holder of a specific number of shares or percentage of share ownership or voting power. Transfer Agent Our transfer agent and registrar is Interwest Transfer Co., Inc., 1981 East 4800 South, Salt Lake City, Utah 84117, telephone number (801) 272-9294. Dividend Policy We have not paid any dividends on common stock to date and do not anticipate paying dividends on common stock in the foreseeable future. We intend to follow a policy of retaining all earnings, if any, for the foreseeable future in order to finance the development and expansion of our business. Item 12. Indemnification of Directors and Officers. The General Corporation Law of Nevada limits the liability of our officers and directors for breaches of their fiduciary duties except in certain specified circumstances, and empowers us to indemnify our officers, directors, employees and others from liability in certain circumstances, such as where a person successfully defended himself or herself on the merits of an action or acted in good faith in a manner he or she reasonably believed to be in our best interests. Our Articles of Incorporation, with certain exceptions, limit any personal liability of a director or officer to us or our shareholders for monetary damages for the breach of such person's fiduciary duty. Therefore, an officer or director cannot be held liable for damages to us or our shareholders for gross negligence or lack of due care in carrying out his or her fiduciary duties as a director except in certain specified instances. Our by-laws provide for indemnification to the full extent permitted under law, which includes all liability, damages and costs or expenses arising from or in connection with service for, employment by, or other affiliation with us to the maximum extent and under all circumstances permitted by law. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to our directors, officers and controlling persons pursuant to these provisions or otherwise, we have 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. -30- Item 13. Financial Statements and Supplementary Data. INDEX TO FINANCIAL STATEMENTS Page ---- FindWhat.com Report of Independent Certified Public Accountants 32 Balance Sheets, December 31, 1998 and June 30, 1999 (unaudited) 33 Statements of Operations, from inception on March 27, 1998 through December 31, 1998, from inception through June 30, 1998 (unaudited) and for the six months ended June 30, 1999 (unaudited) 34 Statement of Stockholders' Equity (Deficit), from inception on March 27, 1998 through December 31, 1998, and for the six months ended June 30, 1999 (unaudited) 35 Statements of Cash Flows, from inception on March 27, 1998 through December 31, 1998, from inception on March 27, 1998 though June 30, 1998 (unaudited), and for the six months ended June 30, 1999 (unaudited) 36 Notes to Financial Statements 37-42 Collectibles America, Inc. - Unaudited Accountant's Disclaimer of Opinion 43 Unaudited Balance Sheet, June 16, 1999 44 Unaudited Statements of Operations, for the period ended June 16, 1999, for the period ended June 30, 1998, and from inception on October 25, 1995 through June 16, 1999 45 Unaudited Statement of Stockholders' Equity, from inception on October 25, 1995 through June 16, 1999 46 Unaudited Statements of Cash Flows, for the period ended June 16, 1999, for the period ended June 30, 1998, and from inception on October 25, 1995 through June 16, 1999 47 Notes to Unaudited Financial Statements 48-50 Collectibles America, Inc. Independent Auditors' Report 51 Balance Sheets, December 31, 1998 and 1997 52 Statements of Operations, for the years ended December 31, 1998 and 1997 and from inception on October 25, 1995 through December 31, 1998 53 Statement of Stockholders' Equity, from inception on October 25, 1995 through December 31, 1998 54 Statements of Cash Flows, for the years ended December 31, 1998 and 1997 and from inception on October 25, 1995 through December 31, 1998 55 Notes to Financial Statements 56-58 Collectibles America, Inc. Independent Auditors' Report 59 Balance Sheet, December 31, 1997 and 1996 60 Statement of Operations, for the years ended December 31, 1997 and 1996 and from inception on October 25, 1995 through December 31, 1997 61 Statement of Stockholders' Equity, from inception on October 25, 1995 through December 31, 1997 62 Statement of Cash Flows, for the years ended December 31, 1997 and 1996 and from inception on October 25, 1995 through December 31, 1997 63 Notes to Financial Statements 64-66 -31- REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors FindWhat.com We have audited the accompanying balance sheet of FindWhat.com as of December 31, 1998, and the related statements of operations, stockholders' equity (deficit) and cash flows for the period from March 27, 1998 (date of inception) through December 31, 1998. These financial statements are the responsibility of FindWhat.com's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of FindWhat.com as of December 31, 1998 and the results of its operations and its cash flows for the period from March 27, 1998 (date of inception) through December 31, 1998 in conformity with generally accepted accounting principles. GRANT THORNTON LLP New York, New York August 19, 1999 -32- FindWhat.com BALANCE SHEETS Consolidated December 31, June 30, 1998 1999 ------------ ------------ (unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 6,702 $ 2,442,545 Accounts receivable 8,463 78,421 Prepaid expenses 200 ----------- ----------- Total current assets 15,165 2,521,166 EQUIPMENT - NET 1,360 18,026 ----------- ----------- $ 16,525 $ 2,539,192 =========== =========== CURRENT LIABILITIES Accounts payable and accrued expenses $ 11,348 $ 92,473 Customer deposits 19,353 6,000 Due to related party 7,989 55,314 ----------- ----------- Total current liabilities 38,690 153,787 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY (Deficit) Preferred stock, $.001 par value; authorized, 500,000 shares; none issued and outstanding Common stock, no par value; authorized, issued and outstanding, 1,000 shares 1,000 Common stock, $.001 par value; authorized, 50,000,000 shares; issued and outstanding, 12,500,000 shares 12,500 Additional paid-in capital 9,000 2,643,604 Accumulated deficit (22,165) (260,699) ----------- ----------- (12,165) 2,395,405 Less stock subscription receivable (10,000) (10,000) ----------- ----------- (22,165) 2,385,405 ----------- ----------- $ 16,525 $ 2,539,192 =========== =========== The accompanying notes are an integral part of these statements. -33- FindWhat.com STATEMENTS OF OPERATIONS
Period from Period from March 27, March 27, Consolidated 1998 (date of 1998 (date of Six months inception) to inception) to ended December 31, June 30, June 30, 1998 1998 1999 ----------- ----------- ----------- (unaudited) Revenues $ 58,818 $ 1,500 $ 217,504 Cost of revenues 36,837 6,282 56,444 ----------- ----------- ----------- Gross profit 21,981 (4,782) 161,060 Operating expenses Selling, general and administrative 44,146 10,506 188,594 Stock option compensation 211,000 ----------- ----------- ----------- NET LOSS $ (22,165) $ (15,288) $ (238,534) =========== =========== =========== Loss per share - basic and diluted $ 0 $ 0 $ 0.03 =========== =========== =========== Weighted-average number of common shares outstanding 8,750,000 8,750,000 9,375,000 =========== =========== ===========
The accompanying notes are an integral part of these statements. -34- FindWhat.com STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (Note B) Period from March 27, 1998 (date of inception) to December 31, 1998 and for the six months ended June 30, 1999 (unaudited)
Common stock, Common stock, no par value $.001 par value Shares Amount Shares Amount ------------ ------------ ------------ ------------ Issuance of common stock 1,000 $ 1,000 Net loss ------------ ------------ Balance at December 31, 1998 1,000 1,000 Reclassification of no par value common stock into $.001 common stock (1,000) (1,000) 2,500,000 $ 2,500 Issuance of common stock in connection with private placement 1,250,000 1,250 Issuance of common stock, in connection with acquisition of BeFirst Internet Corporation 8,750,000 8,750 Stock option compensation Consolidated net loss, June 30, 1999 ------------ ------------ ------------ ------------ Consolidated balance at June 30, 1999 (unaudited) -- $ -- 12,500,000 $ 12,500 ============ ============ ============ ============ Additional Stock paid-in Accumulated subscription capital deficit receivable Total ------------ ------------ ------------ ------------ Issuance of common stock $ 9,000 $ (10,000) Net loss $ (22,165) $ (22,165) ------------ ------------ ------------ ------------ Balance at December 31, 1998 9,000 (22,165) (10,000) (22,165) Reclassification of no par value common stock into $.001 common stock (250) 1,250 Issuance of common stock in connection with private placement 2,432,604 2,433,854 Issuance of common stock, in connection with acquisition of BeFirst Internet Corporation (8,750) Stock option compensation 211,000 211,000 Consolidated net loss, June 30, 1999 (238,534) (238,534) ------------ ------------ ------------ ------------ Consolidated balance at June 30, 1999 (unaudited) $ 2,643,604 $ (260,699) $ (10,000) $ 2,385,405 ============ ============ ============ ============
The accompanying notes are an integral part of this statement. -35- FindWhat.com STATEMENTS OF CASH FLOWS
Period from Period from March 27, March 27, Consolidated 1998 (date of 1998 (date of Six months inception) to inception) to ended December 31, June 30, June 30, 1998 1998 1999 ----------- ----------- ----------- (unaudited) Cash flows from operating activities Net loss $ (22,165) $ (15,288) $ (238,534) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation 340 4,167 Stock option compensation 211,000 Changes in operating assets and liabilities Accounts receivable (8,463) (69,958) Other current assets (200) Accounts payable and accrued expenses 11,348 18,410 81,125 Customer deposits 19,353 6,995 (13,353) Due to related party 7,989 1,000 47,325 ----------- ----------- ----------- Net cash provided by operating activities 8,402 11,117 21,572 ----------- ----------- ----------- Cash flows from investing activities Purchase of equipment (1,700) (1,700) (20,833) ----------- ----------- ----------- Net cash used in investing activities (1,700) (1,700) (20,833) ----------- ----------- ----------- Cash flows from financing activities Gross proceeds from private placement 2,500,000 Payment of financing costs (64,896) ----------- Net cash provided by financing activities 2,435,104 ----------- ----------- ----------- INCREASE IN CASH AND EQUIVALENTS 6,702 9,417 2,435,843 Cash and cash equivalents at beginning of period 6,702 ----------- ----------- ----------- Cash and cash equivalents at end of period $ 6,702 $ 9,417 $ 2,442,545 =========== =========== =========== Supplemental noncash investing and financing activities Capital contributions for stock subscription $ 10,000 ===========
The accompanying notes are an integral part of these statements. -36- FindWhat.com NOTES TO FINANCIAL STATEMENTS December 31, 1998 (information relating to June 30, 1999 and 1998 is unaudited) NOTE A - NATURE OF BUSINESS BeFirst.com was organized under the laws of the State of Nevada and, beginning June 17, 1999, conducts its operations through its wholly-owned subsidiary, BeFirst Internet Corporation. In September 1999, the Company changed its name from BeFirst.com to FindWhat.com ("FindWhat" or the "Company"). FindWhat offers internet optimization tools to increase traffic flow to clients' web sites. The Company charges an initial set-up fee to enhance a client's web page using keywords and utilizes software that tracks click-through rates. The Company currently derives revenue from two sources: set-up fees charged to new clients and click-through rates charged for the traffic the service generates for a client's web site. The Company operates in one reportable business segment. NOTE B - BASIS OF PRESENTATION The consolidated financial statements include the accounts of FindWhat.com and its wholly-owned subsidiary, BeFirst Internet Corporation. On June 17, 1999, Collectibles America, Inc. ("Collectibles"), a nonoperating public company with immaterial net assets, acquired 100% of the outstanding common stock of BeFirst Internet Corporation, whose date of inception was March 27, 1998 (the "Acquisition"). The Acquisition resulted in the owners and management of BeFirst Internet Corporation having effective control of the combined entity. Concurrent with the Acquisition, Collectibles changed its name to BeFirst.com. In September 1999, BeFirst.com changed its name to FindWhat.com. Under generally accepted accounting principles, the Acquisition is considered to be a capital transaction in substance, rather than a business combination. That is, the Acquisition is equivalent to the issuance of stock by BeFirst Internet Corporation for the net monetary assets of FindWhat.com, accompanied by a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the Acquisition is identical to that resulting from a reverse acquisition, except that no goodwill is recorded. Under reverse takeover accounting, the post-reverse-acquisition comparative historical financial statements of the "legal acquirer" (FindWhat.com), are those of the "accounting acquirer" (BeFirst Internet Corporation). Accordingly, the financial statements of FindWhat.com as of December 31, 1998 and for the period from March 27, 1998 through December 31, 1998, are the historical financial statements of BeFirst Internet Corporation for the same period. The basic structure and terms of the Acquisition and related events, all of which are deemed to have occurred simultaneously on June 17, 1999, together with the applicable accounting effects, were as follows: -37- FindWhat.com NOTES TO FINANCIAL STATEMENTS (continued) December 31, 1998 (information relating to June 30, 1999 and 1998 is unaudited) NOTE B (continued) o FindWhat.com cancelled 8,600,000 unissued shares of common stock and effected a 2-to-1 reverse stock split of its outstanding shares of common stock, resulting in a decrease in the number of outstanding shares to 2,500,000. o FindWhat.com issued 1,250,000 post-split shares of common stock in a private placement for $2.00 per share in cash (see Note K). o FindWhat.com acquired all of the outstanding shares of common shares of common stock of BeFirst Internet Corporation in exchange for 8,750,000 post-split shares of FindWhat.com. The common stock exchanged, in addition to the existing FindWhat.com shares outstanding, collectively resulted in the recapitalization of the Company. Earnings per share ("EPS") calculations include the Company's change in capital structure for all periods presented. o The sole officer and director of FindWhat.com was replaced by a board of directors from BeFirst Internet Corporation. o The Company adopted a 1999 Stock Incentive Plan (see Note L) for employees. If the Acquisition had occurred at March 27, 1998 (date of inception of BeFirst Internet Corporation), the Company's loss for the period ended December 31, 1998 would have been $29,434, and the loss for the six-month period ended June 30, 1999 would have been $40,491. NOTE C - Unaudited Interim Results The accompanying consolidated balance sheet as of June 30, 1999, the consolidated statements of operations, cash flows and stockholders' equity for the six months ended June 30, 1999, and the statements of operations and cash flows for the period from March 27, 1998 to June 30, 1998, are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows as of and for the six months ended June 30, 1999 and for the period March 27, 1998 (inception) through June 30, 1998. The financial data and other information disclosed in these notes to the financial statements related to these periods are unaudited. The results for the six months ended June 30, 1999 are not necessarily indicative of the results to be expected for the year ending December 31, 1999. Intercompany balances and transactions have been eliminated in the June 1999 financial statements. -38- FindWhat.com NOTES TO FINANCIAL STATEMENTS (continued) December 31, 1998 (information relating to June 30, 1999 and 1998 is unaudited) NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. 2. Equipment Equipment is stated at cost. Depreciation is computed using the double-declining method over the estimated useful lives of five years. Depreciation expense consists of the depreciation of computer equipment. Accumulated depreciation was $340 at December 31, 1998 and $4,507 at June 30, 1999. 3. Revenues The Company currently derives revenues from two sources: through set-up fees charged to new clients and through click-through rates charged for the traffic the service generates to a client's web site. Revenue is recognized when the set-up services are completed and during the periods click-throughs are generated. 4. Use of Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 5. Basic and Diluted Loss Per Share Basic and diluted loss per share is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding during each period. Stock options have been excluded from the calculation of diluted loss per share as their effect would have been antidilutive. The issuance of 8,750,000 shares as described in Note B has been reflected as of March 27, 1998. -39- FindWhat.com NOTES TO FINANCIAL STATEMENTS (continued) December 31, 1998 (information relating to June 30, 1999 and 1998 is unaudited) NOTE E - ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consist of the following: December 31, June 30, 1998 1999 ----------- --------- (unaudited) Accounts payable $ 9,332 $ 6,998 Professional fees 871 40,510 Salaries and bonuses 1,145 44,965 ------- ------- $11,348 $92,473 ======= ======= NOTE F - RELATED PARTY TRANSACTIONS The Company shares space both in New York and Florida with WPI Advertising Inc. ("WPI") and Internet Solutions International ("ISI"), whose respective owners are also the shareholders and officers of the Company. Through June 30, 1999, the Company paid a 30% commission to WPI for sales generated by WPI. The commission covered sales costs as well as rent allocation and other administrative costs provided by WPI. These expenses for the period ended December 31, 1998 and June 30, 1999 were approximately $18,000 and $63,000 respectively, which are included in selling, general and administrative expenses. Beginning July 1, 1999, the Company hired its own sales staff and entered into a revised arrangement with WPI whereby an allocation of the above-mentioned rent and administrative expenses will be apportioned to the Company. In addition, in July 1999, the Company signed a lease (with an unrelated lessor) and will move its technical operations out of ISI's offices. The lease term is for three years at $34,800 annually. -40- FindWhat.com NOTES TO FINANCIAL STATEMENTS (continued) December 31, 1998 (information relating to June 30, 1999 and 1998 is unaudited) NOTE G - DUE TO RELATED PARTY Due to related party consists of the following: December 31, June 30, 1998 1999 ------------ -------- (unaudited) Commissions payable due to WPI $ 4,989 $37,914 Other payables due to WPI 17,400 Loan due to WPI 3,000 ------- ------- $ 7,989 $55,314 ======= ======= NOTE H - CUSTOMER DEPOSITS Customer deposits represents advances on account for future click-through sales. NOTE I - COMMITMENTS AND CONTINGENCIES Beginning August 1, 1999, the Company leased office space under the terms of an operating lease that expires in 2002. Future minimum payments under noncancellable operating leases consisted of the following at December 31, 1998: 1999 $11,700 2000 28,500 2001 30,300 2002 18,200 ------ $88,700 ======= -41- FindWhat.com NOTES TO FINANCIAL STATEMENTS (continued) December 31, 1998 (information relating to June 30, 1999 and 1998 is unaudited) NOTE J - CONCENTRATION OF FINANCIAL INSTRUMENTS The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and cash equivalents with EAB Bank. In general, such instruments exceeded the FDIC insurance limit of $100,000. The amount of funds as of June 30, 1999, in excess of this insurance coverage, was approximately $2,400,000. NOTE K - PRIVATE PLACEMENT In June 1999, a private placement to offer 1,250,000 shares of $.001 par value common stock at a price of $2.00 per share was completed by the Company. The proceeds from the offering are being used as follows: (a) upgrades to transactions processing systems; (b) the hiring of additional sales and technical personnel; (c) development of a new search engine, which is scheduled to be released in Fall 1999; and (d) purchase of additional computer hardware and software. As a result of the private placement, approximately $65,000 of legal costs were incurred, which are being reflected as a reduction to additional paid-in-capital. NOTE L - STOCK INCENTIVE PLAN In June 1999, the Board of Directors of the Company adopted the 1999 Stock Incentive Plan ("the Plan"). The total number of shares reserved and available for distribution to the Company's key employees, officers, directors, consultants and other agents and advisors under this Plan will be 1,000,000 shares. Awards under the Plan will consist of stock options (both qualified and non-qualified options), restricted stock awards, deferred stock awards and stock appreciation rights. On June 17, 1999, the Company granted 450,000 options under the terms of the Plan to its employees and 207,000 options to nonemployees, exercisable at $2.00 per share. Total expense recognized for stock options given to nonemployees amounted to approximately $211,000, which is included in the statement of operations for the six months ended June 30, 1999. NOTE M - SUBSEQUENT EVENT In August 1999, the Company acquired a database license from Inktomi, Inc. which will require minimum aggregate payments of $600,000 over the next three years. -42- ACCOUNTANT'S DISCLAIMER OF OPINION Board of Directors COLLECTIBLES AMERICA, INC. Salt Lake City, Utah The accompanying balance sheet of Collectibles America, Inc. as of June 16, 1999 and the related statements of operations, stockholders' equity and cash flows for the period ended June 16, 1999, for the period ended June 30, 1998, and from inception on October 25, 1995 through June 16, 1999 were not audited by us and, accordingly, we do not express an opinion on them. PRITCHETT, SILER & HARDY, P.C. August 13, 1999 Salt Lake City, Utah -43- COLLECTIBLES AMERICA, INC. [A Development Stage Company] UNAUDITED BALANCE SHEET ASSETS June 16, 1999 -------- CURRENT ASSETS: Cash $ -- -------- Total Current Assets -- -------- $ -- -------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ -- -------- Total Current Liabilities -- ======== STOCKHOLDERS' EQUITY: Common stock, $.001 par value, 25,000,000 shares authorized, 13,600,000 shares issued and outstanding at June 16, 1999 13,600 Capital in excess of par value 73,000 Deficit accumulated during the development stage (86,600) -------- Total Stockholders' Equity -- -------- $ -- ======== The accompanying notes are an integral part of these unaudited financial statements. -44- COLLECTIBLES AMERICA, INC. [A Development Stage Company] UNAUDITED STATEMENTS OF OPERATIONS For the For the From Inception Period Ended Period Ended on October 25, June 16, June 30, 1995 Through -------- -------- June 16, 1999 1998 1999 -------- -------- -------- REVENUES $ -- $ -- $ -- COST OF GOODS SOLD -- -- -- -------- -------- -------- GROSS PROFIT -- -- -- -------- -------- -------- EXPENSES: General and administrative expenses 12,957 120 15,195 -------- -------- -------- LOSS BEFORE INCOME TAXES (12,957) (120) (15,195) CURRENT TAX EXPENSE -- -- -- DEFERRED TAX EXPENSE -- -- -- -------- -------- -------- LOSS FROM CONTINUING OPERATIONS (12,957) (120) (15,195) DISCONTINUED OPERATIONS: Loss from operations of discontinued line of business -- -- (71,405) -------- -------- -------- NET LOSS $(12,957) $ (120) $(86,600) -------- -------- -------- LOSS PER COMMON SHARE: Continuing operations $ (.00) $ (.00) $ (.00) Discontinued operations (.00) (.00) (.01) -------- -------- -------- Net Income (.00) (.00) (.01) ======== ======== ======== The accompanying notes are an integral part of these unaudited financial statements. -45- COLLECTIBLES AMERICA, INC. [A Development Stage Company] UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY FROM THE DATE OF INCEPTION ON OCTOBER 25, 1995 THROUGH JUNE 16, 1999
Deficit Accumulated Common Stock Capital in During the ------------------------- Excess of Development Shares Amount Par Value Stage ---------- ---------- ---------- ---------- BALANCE, October 25, 1995 -- $ -- $ -- $ -- Issuance of common stock upon initial Organization for cash at $.0125 per Share, October, 1995 1,200,000 1,200 13,800 -- Issuance of common stock, for cash Pursuant to public offering, December, 1995 at $.25 per Share, less offering costs of $43,400 400,000 400 56,200 -- Net loss for the period ended December 31, 1995 -- -- -- (2,851) ---------- ---------- ---------- ---------- BALANCE, December 31, 1995 1,600,000 1,600 70,000 (2,851) Net loss for the year ended December 31, 1996 -- -- -- (66,300) ---------- ---------- ---------- ---------- BALANCE, December 31, 1996 1,600,000 1,600 70,000 (69,151) Issuance of common stock for cash October 14, 1997 at $.00125 per share 12,000,000 12,000 3,000 -- Net loss for the year ended December 31, 1997 -- -- -- (2,588) ---------- ---------- ---------- ---------- BALANCE, December 31, 1997 13,600,000 13,600 73,000 (71,739) Net loss for the year ended December 31, 1998 -- -- -- (1,904) ---------- ---------- ---------- ---------- BALANCE, December 31, 1998 13,600,000 13,600 73,000 (73,643) Net loss for the period ended June 16, 1999 -- -- -- (12,957) ---------- ---------- ---------- ---------- BALANCE, June 16, 1999 13,600,000 $ 13,600 $ 73,000 $ (86,600) ========== ========== ========== ==========
The accompanying notes are an integral part of these unaudited financial statements. -46- COLLECTIBLES AMERICA, INC. [A Development Stage Company] STATEMENTS OF CASH FLOWS
For the For the From Inception Period Ended Period Ended on October 25, June 16, June 30, 1995 Through --------- --------- June 16, 1999 1998 1999 --------- --------- --------- Cash Flows used by Operating Activities: Net income (loss) $ (12,957) $ (120) $ (86,600) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Non-cash expenses -- -- 2,844 Depreciation -- -- -- Amortization 72 20 195 Change in assets and liabilities: (Decrease) in accounts payable -- -- -- (Decrease) in accrued liabilities -- -- -- --------- --------- --------- Net Cash Flows Used by Operating Activities (12,885) (100) (83,561) --------- --------- --------- Cash Flows used by Investing Activities: Additions of property and equipment -- -- (2,844) Payment of organization costs -- -- (195) --------- --------- --------- Net Cash Used by Investing Activities -- -- (3,039) --------- --------- --------- Cash Flows provided by Financing Activities: Proceeds from stock issuance -- -- 130,000 Payment of stock offering costs -- -- (43,400) --------- --------- --------- Net Cash Provided by Financing Activities -- -- 86,600 --------- --------- --------- Net Increase (Decrease) in Cash (12,885) (100) -- Cash at Beginning of Period 12,885 15,000 -- --------- --------- --------- Cash at End of Period $ -- $ 14,900 $ -- --------- --------- --------- Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ -- $ -- $ -- Income taxes $ -- $ -- $ -- Supplemental Schedule of Noncash Investing and Financing Activities: For the period ended June 16, 1999: None
The accompanying notes are an integral part of these unaudited financial statements. -47- COLLECTIBLES AMERICA, INC. [A Development Stage Company] NOTES TO UNAUDITED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization - Collectibles America, Inc. (the Company) was organized under the laws of the State of Nevada on October 25, 1995 and has elected a fiscal year end of December 31. The Company has not been successful in establishing ongoing operations and is considered a development stage company as defined in SFAS No. 7. The Company was formed to engage in the business of acquiring and marketing collectible items such as trading cards and autographed memorabilia from athletes and celebrities. During 1997 the Company discontinued the marketing of collectibles, and is presently considering other business opportunities. The Company has, at the present time, not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors. Organization Costs - The Company was amortizing its organization costs, which reflect amounts expended to organize the Company, over sixty [60] months using the straight line method. During the period ended June 16, 1999, the Company adopted Statement of Position 98-5 and amortized the remaining $72. Loss Per Share - The computation of loss per share is based on the weighted average number of shares outstanding during the period presented in accordance with FASB 128 "Earnings Per Share". [See Note 5] Statement of Cash Flows - For purposes of the statement of cash flows, the Company considers all highly liquid debt investments purchased with a maturity of three months or less to be cash equivalents. Accounting Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimated. Recently Enacted Accounting Standards - SFAS No. 130, "Reporting Comprehensive Income", SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", SFAS No. 132, "Employer's Disclosure about Pensions and Other Postretirement Benefits", SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", and SFAS No. 134, "Accounting for Mortgage-Backed Securities..." were recently issued. SFAS No. 130, 131, 132, 133 and 134 have no current applicability to the Company or their effect on the financial statements would not have been significant. NOTE 2 - DISCONTINUED OPERATIONS During 1997, the Company abandoned and discontinued its collectibles marketing operations. The Company's property and equipment were transferred to a former officer of the company in satisfaction of consulting fees, and the remaining assets were used to satisfy, in full, remaining liabilities. The total revenues generated by the discontinued operations amounted to $0 and $120,744 during the years ended 1997 and 1996 respectively. The Company currently has no on-going operations. At the point in time when the Company discontinued its operations, there were 1,600,000 shares of common stock issued and outstanding. The discontinued operations have been segregated on the Statements of Operations. -48- COLLECTIBLES AMERICA, INC. [A Development Stage Company] NOTES TO UNAUDITED FINANCIAL STATEMENTS NOTE 3 - CAPITAL STOCK Change in Control - During October, 1997, an individual purchased 12,000,000 shares of common stock of the Company giving him an 88% controlling interest in the company. Total proceeds from the sale of stock amounted to $15,000 or $.00125 per share. The former officers and directors resigned and the individual was elected as the new president and board member. Public Stock Offering - During December, 1995, the Company completed a public stock offering of 400,000 shares of common stock. Total proceeds raised amounted to $100,000 and offering costs of $43,400 were offset against the proceeds. The offering was believed to be exempt from registration with the Securities and Exchange Commission under Rule 504 of Regulation D. Initial Organization - In connection with its organization the Company issued 1,200,000 shares of common stock during October, 1995, to its initial shareholders for $15,000 ($.0125 per share). NOTE 4 - RELATED PARTY TRANSACTIONS Management Compensation - During the period ended June 16, 1999, the Company did not pay any regular salary or compensation to its officers and directors. However, during October, 1997, fixed assets with a book value of $2,078 were transferred to a former officer of the Company in settlement of consulting fees. Office Space - During the period ended June 16, 1999, the Company did not have a need to rent office space. An officer/shareholder of the Company is allowing the Company to use his office as a mailing address, as needed, at no expense to the Company. NOTE 5 - LOSS PER SHARE The following data shows the amounts used in computing loss per share for the periods presented:
For the For the From Inception Period Ended Period Ended on October 25, June 16, June 30, 1995 Through ----------- ----------- June 16, 1999 1998 1999 ----------- ----------- ------------ Loss from continuing operations available to common shareholders (numerator) $(12,957) $(120) $(15,195) ----------- ----------- ------------ Loss from discontinued operations available to common shareholders (numerator) - - (71,405) ----------- ----------- ------------ Weighted average number of common shares outstanding used in loss per share for the period (denominator) 13,600,000 13,600,000 7,242,384 ----------- ----------- ------------
-49- COLLECTIBLES AMERICA, INC. [A Development Stage Company] NOTES TO UNAUDITED FINANCIAL STATEMENTS NOTE 6 - INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB 109 requires the Company to provide a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carryforwards. At June 16, 1999, the Company has available unused operating loss carryforwards of approximately $86,600, which may be applied against future taxable income and which expire in various years through 2019. The amount of the net operating loss carryforward which can be utilized by the Company will be subject to annual limitations due to the substantial change in ownership which has occurred in the Company. The amount of and ultimate realization of the benefits from the operating loss carryforwards for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company, and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the loss carryforwards the Company has established a valuation allowance equal to the tax effect of the loss carryforwards and, therefore, no deferred tax asset has been recognized for the loss carryforwards. The net deferred tax asset is approximately $29,000 as of June 16, 1999, with an offsetting valuation allowance at June 30, 1999 of the same amount. The change in the valuation allowance for the period ended June 16, 1999 is approximately $4,000. NOTE 7 - SUBSEQUENT EVENTS Business Acquisition - Subsequent to the date of these financial statements, the Company completed an acquisition of all the issued and outstanding shares of common stock of BeFirst Internet Corporation (" BeFirst"), a Delaware corporation, in a stock-for-stock exchange. The Company proposes to issue 8,750,000 shares of post-split common stock in the exchange. Upon completion of the exchange, the Company further proposes to issue 1,250,000 additional shares of post-split common stock in a limited offering at a proposed price of $2.00 per share for cash. In the event the acquisition is completed, the current shareholders of the Company would only own approximately 20% of the combined enterprise after the exchange and the limited offering. The current officers and directors of the Company would resign and the shareholders of BeFirst would gain control (approximately 70%) of the Company. Ultimate consummation of the acquisition is subject to various terms including the signing of a Definitive Agreement. -50- INDEPENDENT AUDITORS' REPORT Board of Directors COLLECTIBLES AMERICA, INC. Salt Lake City, Utah We have audited the accompanying balance sheets of Collectibles America, Inc. [A Development Stage Company] at December 31, 1998 and 1997, and the related statements of operations, stockholders' equity and cash flows for the years ended December 31, 1998 and 1997 and from inception on October 25, 1995 through December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Collectibles America, Inc. for the period from inception on October 25, 1995 through December 31, 1996 were audited by other auditors whose report dated April 14, 1997, expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements audited by us present fairly, in all material respects, the financial position of Collectibles America, Inc. as of December 31, 1998 and 1997, and the results of its operations and its cash flows for the years ended December 31, 1998 and 1997 and for the period from inception through December 31, 1998, in conformity with generally accepted accounting principles. March 4, 1999 Salt Lake City, Utah -51- COLLECTIBLES AMERICA, INC. [A Development Stage Company] BALANCE SHEETS ASSETS December 31, -------------------- 1998 1997 -------- -------- CURRENT ASSETS: Cash $ 12,885 $ 15,000 -------- -------- Total Current Assets 12,885 15,000 ORGANIZATION COSTS, net 72 111 -------- -------- Total Assets $ 12,957 $ 15,111 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accrued liabilities $ -- $ 250 -------- -------- Total Current Liabilities -- 250 -------- -------- STOCKHOLDERS' EQUITY: Common stock, $.001 par value, 25,000,000 shares authorized, 13,600,000 shares issued and outstanding at December 31, 1998 and 1997 13,600 13,600 Capital in excess of par value 73,000 73,000 Deficit accumulated during the development stage (73,643) (71,739) -------- -------- Total Stockholders' Equity 12,957 14,861 -------- -------- $ 12,957 $ 15,111 ======== ======== The accompanying notes are an integral part of these financial statements. -52- COLLECTIBLES AMERICA, INC. [A Development Stage Company] STATEMENTS OF OPERATIONS
From Inception on October 25, December 31, 1995 Through ----------------------------- December 31, 1998 1997 1998 -------- -------- -------- REVENUES $ -- $ -- $ -- COST OF GOODS SOLD -- -- -- -------- -------- -------- GROSS PROFIT -- -- -- -------- -------- -------- EXPENSES: General and administrative expenses 1,904 289 2,238 -------- -------- -------- LOSS BEFORE INCOME TAXES (1,904) (289) (2,238) CURRENT TAX EXPENSE -- -- -- DEFERRED TAX EXPENSE -- -- -- -------- -------- -------- LOSS FROM CONTINUING OPERATIONS (1,904) (289) (2,238) DISCONTINUED OPERATIONS: Loss from operations of discontinued Line of business -- (2,299) (71,405) -------- -------- -------- NET LOSS $ (1,904) $ (2,588) $(73,643) -------- -------- -------- LOSS PER COMMON SHARE: Continuing operations $ (.00) $ (.00) $ (.00) Discontinued operations (.00) (.00) (.01) -------- -------- -------- Net Income (.00) (.00) (.01) ======== ======== ========
The accompanying notes are an integral part of these financial statements. -53- COLLECTIBLES AMERICA, INC. [A Development Stage Company] STATEMENT OF STOCKHOLDERS' EQUITY FROM THE DATE OF INCEPTION ON OCTOBER 25, 1995 THROUGH DECEMBER 31, 1998
Deficit Accumulated Common Stock Capital in During the ----------------------------- Excess of Development Shares Amount Par Value Stage ---------- ---------- ---------- ---------- BALANCE, October 25, 1995 -- $ -- $ -- $ -- Issuance of common stock upon initial Organization for cash at $.0125 per Share, October, 1995 1,200,000 1,200 13,800 -- Issuance of common stock, for cash Pursuant to public offering, December, 1995 at $.25 per Share, less offering costs of $43,400 400,000 400 56,200 -- Net loss for the period ended December 31, 1995 -- -- -- (2,851) ---------- ---------- ---------- ---------- BALANCE, December 31, 1995 1,600,000 1,600 70,000 (2,851) Net loss for the year ended December 31, 1996 -- -- -- (66,300) ---------- ---------- ---------- ---------- BALANCE, December 31, 1996 1,600,000 1,600 70,000 (69,151) Issuance of common stock for cash October 14, 1997 at $.00125 per share 12,000,000 12,000 3,000 -- Net loss for the year ended December 31, 1997 -- -- -- (2,588) ---------- ---------- ---------- ---------- BALANCE, December 31, 1997 13,600,000 13,600 73,000 (71,739) Net loss for the year ended December 31, 1998 -- -- -- (1,904) ---------- ---------- ---------- ---------- BALANCE, December 31, 1998 13,600,000 $ 13,600 $ 73,000 $ (73,643) ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. -54- COLLECTIBLES AMERICA, INC. [A Development Stage Company] STATEMENTS OF CASH FLOWS
From Inception For the Years Ended on October 25, December 31, 1995 Through ------------------------ December 31, 1998 1997 1998 --------- --------- --------- Cash Flows used by Operating Activities: Net income (loss) $ (1,904) $ (2,588) $ (73,643) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Non-cash expenses -- 2,844 2,844 Depreciation -- (539) -- Amortization 39 39 123 Change in assets and liabilities: (Decrease) in accounts payable (250) -- -- (Decrease) in accrued liabilities -- (178) -- --------- --------- --------- Net Cash Flows Used by Operating Activities (2,115) (422) (70,676) --------- --------- --------- Cash Flows used by Investing Activities: Additions of property and equipment -- -- (2,844) Payment of organization costs -- -- (195) --------- --------- --------- Net Cash Used by Investing Activities -- -- (3,039) --------- --------- --------- Cash Flows provided by Financing Activities: Proceeds from stock issuance -- 15,000 130,000 Payment of stock offering costs -- -- (43,400) --------- --------- --------- Net Cash Provided by Financing Activities -- 15,000 86,600 --------- --------- --------- Net Increase (Decrease) in Cash (2,115) 14,578 12,885 Cash at Beginning of Period 15,000 422 -- --------- --------- --------- Cash at End of Period $ 12,885 $ 15,000 $ 12,885 ========= ========= ========= Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ -- $ -- $ -- Income taxes $ -- $ -- $ -- Supplemental Schedule of Noncash Investing and Financing Activities: For the period ended December 31, 1998: None
The accompanying notes are an integral part of these financial statements. -55- COLLECTIBLES AMERICA, INC. [A Development Stage Company] NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization - The Company was organized under the laws of the State of Nevada on October 25, 1995 and has elected a fiscal year end of December 31. The Company has not been successful in establishing ongoing operations and is considered a development stage company as defined in SFAS No. 7. The Company was formed to engage in the business of acquiring and marketing collectible items such as trading cards and autographed memorabilia from athletes and celebrities. During 1997 the Company discontinued the marketing of collectibles, and is presently considering other business opportunities. The Company has, at the present time, not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors. Organization Costs - The Company is amortizing its organization costs, which reflect amounts expended to organize the Company, over sixty [60] months using the straight line method. Amortization expense was $39 and $39 for the periods ended December 31, 1998 and 1997. Loss Per Share - The computation of loss per share is based on the weighted average number of shares outstanding during the period presented in accordance with FASB 128 "Earnings Per Share". [See Note 5] Statement of Cash Flows - For purposes of the statement of cash flows, the Company considers all highly liquid debt investments purchased with a maturity of three months or less to be cash equivalents. Accounting Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimated. Recently Enacted Accounting Standards - SFAS No. 130, "Reporting Comprehensive Income", SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", SFAS No. 132, "Employer's Disclosure about Pensions and Other Postretirement Benefits", SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", and SFAS No. 134, "Accounting for Mortgage-Backed Securities..." were recently issued. SFAS No. 130, 131, 132, 133 and 134 have no current applicability to the Company or their effect on the financial statements would not have been significant. NOTE 2 - DISCONTINUED OPERATIONS During 1997, the Company abandoned and discontinued its collectibles marketing operations. The Company's property and equipment were transferred to a former officer of the company in satisfaction of consulting fees, and the remaining assets were used to satisfy, in full, remaining liabilities. The total revenues generated by the discontinued operations amounted to $0 and $120,744 during 1997 and 1996 respectively. The Company currently has no on-going operations. At the point in time when the Company discontinued its operations, there were 1,600,000 shares of common stock issued and outstanding. The discontinued operations have been segregated on the Statements of Operations. -56- COLLECTIBLES AMERICA, INC. [A Development Stage Company] NOTES TO FINANCIAL STATEMENTS NOTE 3 - CAPITAL STOCK Change in Control - During October, 1997, an individual purchased 12,000,000 shares of common stock of the Company giving him an 88% controlling interest in the company. Total proceeds from the sale of stock amounted to $15,000 or $.00125 per share. The former officers and directors resigned and the individual was elected as the new president and board member. Public Stock Offering - During December, 1995, the Company completed a public stock offering of 400,000 shares of common stock. Total proceeds raised amounted to $100,000 and offering costs of $43,400 were offset against the proceeds. The offering was believed to be exempt from registration with the Securities and Exchange Commission under Rule 504 of Regulation D. Initial Organization - In connection with its organization the Company issued 1,200,000 shares of common stock during October, 1995, to its initial shareholders for $15,000 ($.0125 per share). NOTE 4 - RELATED PARTY TRANSACTIONS Management Compensation - During the years ended December 31, 1998 and 1997, the Company did not pay any regular salary or compensation to its officers and directors. However, during October, 1997, fixed assets with a book value of $2,078 were transferred to a former officer of the Company in settlement of consulting fees. Office Space - During the years ended December 31, 1998 and 1997, the Company did not have a need to rent office space. An officer/shareholder of the Company is allowing the Company to use his office as a mailing address, as needed, at no expense to the Company. NOTE 5 - LOSS PER SHARE The following data shows the amounts used in computing loss per share for the periods presented:
For the From Inception Year Ended on October 25, December 31, 1995 Through ------------------------------ December 31, 1998 1997 1998 ------------ ------------ ------------ Loss from continuing operations available to common shareholders (numerator) $ (1,904) $ (289) $ (2,238) ------------ ------------ ------------ Loss from discontinued operations available to common shareholders (numerator) -- (2,299) (71,405) ------------ ------------ ------------ Weighted average number of common shares outstanding used in loss per share for the period (denominator) 13,600,000 4,164,384 6,170,937 ------------ ------------ ------------
-57- COLLECTIBLES AMERICA, INC. [A Development Stage Company] NOTES TO FINANCIAL STATEMENTS NOTE 6 - INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB 109 requires the Company to provide a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carryforwards. At December 31, 1998, the Company has available unused operating loss carryforwards of approximately $73,600, which may be applied against future taxable income and which expire in various years from 2010 to 2018. The amount of the net operating loss carryforward which can be utilized by the Company will be subject to annual limitations due to the substantial change in ownership which has occurred in the Company. The amount of and ultimate realization of the benefits from the operating loss carryforwards for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company, and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the loss carryforwards the Company has established a valuation allowance equal to the amount of the loss carryforwards and, therefore, no deferred tax asset has been recognized for the loss carryforwards. The net deferred tax asset is approximately $25,000 as of December 31, 1998, with an offsetting valuation allowance at December 31, 1998 of the same amount. The change in the valuation allowance for 1998 is approximately $1,000. -58- INDEPENDENT AUDITORS' REPORT Board of Directors COLLECTIBLES AMERICA, INC. Salt Lake City, Utah We have audited the accompanying balance sheet of Collectibles America, Inc. [A Development Stage Company] at December 31, 1997, and the related statements of operations, stockholders' equity and cash flows for the year ended December 31, 1997 and from inception on October 25, 1995 through December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Collectibles America, Inc. as of December 31, 1996 and for the period from inception on October 25, 1995 through December 31, 1996 were audited by other auditors whose report dated April 14, 1997, expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements audited by us present fairly, in all material respects, the financial position of Collectibles America, Inc. as of December 31, 1997, and the results of its operations and its cash flows for the year ended December 31, 1997 and for the period from inception through December 31, 1997, in conformity with generally accepted accounting principles. April 17, 1998 Salt Lake City, Utah -59- COLLECTIBLES AMERICA, INC. [A Development Stage Company] BALANCE SHEET ASSETS December 31, -------------------- 1997 1996 -------- -------- CURRENT ASSETS: Cash $ 15,000 $ 422 -------- -------- Total Current Assets 15,000 422 PROPERTY AND EQUIPMENT, net -- 2,305 ORGANIZATION COSTS, net 111 150 -------- -------- $ 15,111 $ 2,877 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accrued liabilities $ 250 $ 428 -------- -------- Total Current Liabilities 250 428 -------- -------- STOCKHOLDERS' EQUITY: Common stock, $.001 par value, 25,000,000 shares authorized, 13,600,000 and 1,600,000 shares issued and outstanding at December 31, 1997 and 1996 13,600 1,600 Capital in excess of par value 73,000 70,000 Deficit accumulated during the development stage (71,739) (69,151) -------- -------- Total Stockholders' Equity 14,861 2,449 -------- -------- $ 15,111 $ 2,877 ======== ======== The accompanying notes are an integral part of this financial statement. -60- COLLECTIBLES AMERICA, INC. [A Development Stage Company] STATEMENT OF OPERATIONS From Inception on October 25, December 31, 1995 Through -------------------- December 31, 1997 1996 1997 -------- -------- -------- REVENUES $ -- $ -- $ -- COST OF GOODS SOLD -- -- -- -------- -------- -------- GROSS PROFIT -- -- -- -------- -------- -------- EXPENSES: General and administrative expenses (289) (39) (334) -------- -------- -------- LOSS BEFORE INCOME TAXES (289) (39) (334) CURRENT TAX EXPENSE -- -- -- DEFERRED TAX EXPENSE -- -- -- -------- -------- -------- LOSS FROM CONTINUING OPERATIONS (289) (39) (334) DISCONTINUED OPERATIONS: Loss from operations of discontinued operation (2,299) (66,261) (71,405) Loss on disposal of discontinued operation -- -- -- -------- -------- -------- NET LOSS (2,588) $(66,300) $(71,739) -------- -------- -------- LOSS PER COMMON SHARE: Continuing operations $ (.00) $ (.00) $ (.00) Discontinued operations (.00) (.04) (.03) -------- -------- -------- Net Income (.00) (.04) (.03) ======== ======== ======== The accompanying notes are an integral part of this financial statement. -61- COLLECTIBLES AMERICA, INC. [A Development Stage Company] STATEMENT OF STOCKHOLDERS' EQUITY FROM THE DATE OF INCEPTION ON OCTOBER 25, 1995 THROUGH DECEMBER 31, 1997
Deficit Accumulated Common Stock Capital in During the ----------------------------- Excess of Development Shares Amount Par Value Stage ---------- ---------- ---------- ---------- BALANCE, October 25, 1995 -- $ -- $ -- $ -- Issuance of common stock, for cash October 25, 1995 at $.071875 per share less offering costs of $43,400 1,600,000 1,600 70,000 -- Net loss for the period ended December 31, 1995 -- -- -- (2,851) ---------- ---------- ---------- ---------- BALANCE, December 31, 1995 1,600,000 1,600 70,000 (2,851) Net loss for the year ended December 31, 1996 -- -- -- (66,300) ---------- ---------- ---------- ---------- BALANCE, December 31, 1996 1,600,000 1,600 70,000 (69,151) Issuance of common stock for cash October 14, 1997 at $.00125 per share 12,000,000 12,000 3,000 -- Net loss for the year ended December 31, 1997 -- -- -- (2,588) ---------- ---------- ---------- ---------- BALANCE, December 31, 1997 13,600,000 $ 13,600 $ 73,000 $ (71,739) ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. -62- COLLECTIBLES AMERICA, INC. [A Development Stage Company] STATEMENT OF CASH FLOWS
From Inception For the Years Ended on October 25, December 31, 1995 Through ----------------------------- December 31, 1997 1996 1997 --------- --------- --------- Cash Flows used by Operating Activities: Net income (loss) $ (2,588) $ (66,300) $ (71,739) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Non-cash expenses 2,844 -- 2,844 Depreciation (539) 539 -- Amortization 39 39 84 Change in assets and liabilities: Increase (decrease) in accounts payable -- -- -- Accrued liabilities (178) 233 250 --------- --------- --------- Net Cash Flows Used by Operating Activities (422) (65,489) (68,561) --------- --------- --------- Cash Flows used by Investing Activities: Additions of property and equipment -- (2,844) (2,844) Payment of organization costs -- -- (195) --------- --------- --------- Net Cash Used by Investing Activities -- (2,844) (3,039) --------- --------- --------- Cash Flows provided by Financing Activities: Proceeds from stock issuance 15,000 -- 130,000 Payment of stock offering costs -- -- (43,400) --------- --------- --------- Net Cash Provided by Financing Activities 15,000 -- 86,600 --------- --------- --------- Net Increase (Decrease) in Cash 14,578 (68,333) 15,000 Cash at Beginning of Period 422 68,755 -- --------- --------- --------- Cash at End of Period $ 15,000 $ 422 $ 15,000 ========= ========= ========= Supplemental Disclosures of Cash Flow information: Cash paid during the period for: Interest $ -- $ -- $ -- Income taxes $ -- $ -- $ -- Supplemental schedule of Noncash Investing and Financing Activities: For the period ended December 31, 1997: None
The accompanying notes are an integral part of this financial statement. -63- COLLECTIBLES AMERICA, INC. [A Development Stage Company] NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization - The Company was organized under the laws of the State of Nevada on October 25, 1995 and has elected a fiscal year end of December 31. The Company has not been successful in establishing ongoing operations and is considered a development stage company as defined in SFAS No. 7. The Company was formed to engage in the business of acquiring and marketing collectible items such as trading cards and autographed memorabilia from athletes and celebrities. During 1997 the Company discontinued the marketing of collectibles, and is presently considering other business opportunities. The Company has, at the present time, not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors. Property and Equipment - Property and equipment are stated at cost. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized, upon being placed in service. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed for financial statement purposes on a straight-line basis over the estimated useful lives of the assets. For federal income tax purposes, depreciation is computed under the modified accelerated cost recovery system. [See Note 3] Organization Costs - The Company is amortizing its organization costs, which reflect amounts expended to organize the Company, over sixty [60] months using the straight line method. Amortization expense was $39 and $39 for the periods ended December 31, 1997 and 1996. Loss Per Share - The computation of loss per share is based on the weighted average number of shares outstanding during the period presented in accordance with FASB 128 "Earnings Per Share". [See Note 7] Statement of Cash Flows - For purposes of the statement of cash flows, the Company considers all highly liquid debt investments purchased with a maturity of three months or less to be cash equivalents. Accounting Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimated. NOTE 2 - DISCONTINUED OPERATIONS During 1997 the Company abandoned and discontinued its collectibles marketing operations. The Company's property and equipment were transferred to a former officer of the company in satisfaction of consulting fees, and the remaining assets were used to satisfy, in full, remaining liabilities. The total revenues generated by the discontinued operations amounted to $0 and $120,744 during 1997 and 1996 respectively. The Company currently has no on-going operations. At the point in time when the Company discontinued its operations, there were 1,600,000 shares of common stock issued and outstanding. The discontinued operations have been segregated on the Statements of Operations. -64- COLLECTIBLES AMERICA, INC. [A Development Stage Company] NOTES TO FINANCIAL STATEMENTS NOTE 3 - PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31, 1997 and 1996: 1997 1996 ------- ------ Equipment $ -- $2,844 ------- ------ Less Accumulated Depreciation -- (539) ------- ------ $ -- $2,305 ======= ====== Depreciation expense for the periods ended December 31, 1997 and 1996 amounted to $227 and $539. NOTE 4 - CAPITAL STOCK Common Stock - During October 1997, the Company issued 12,000,000 shares of its previously authorized, but unissued common stock. Total proceeds from the sale of stock amounted to $15,000 or $.0125 per share. NOTE 5 - CHANGE IN CONTROL During October, 1997, an individual purchased 12,000,000 shares of common stock of the Company [See Note 4] giving him an 89% controlling interest in the company. The former officers and directors resigned and the individual was elected as the new president and board member. NOTE 6 - RELATED PARTY TRANSACTIONS Management Compensation - The Company has not paid any regular salary or compensation to its officers and directors. However, during October, 1997, fixed assets with a book value of $2,078 were transferred to a former officer of the Company in settlement of consulting fees. Office Space - The Company has not had a need to rent office space. An officer/shareholder of the Company is allowing the Company to use his office as a mailing address, as needed, at no expense to the Company. -65- COLLECTIBLES AMERICA, INC. [A Development Stage Company] NOTES TO FINANCIAL STATEMENTS NOTE 7 - LOSS PER SHARE The following data shows the amounts used in computing loss per share for the periods ended December 31, 1997 and 1996: 1997 1996 --------- --------- Loss from continuing operations available to common shareholders (numerator) $(289) $(39) --------- --------- Loss from discontinued operations available to common shareholders (numerator) (2,299) (66,261) --------- --------- Weighted average number of common shares outstanding used in loss per share for the period (denominator) 4,164,384 1,600,000 ========= ========= NOTE 8 - INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB 109 requires the Company to provide a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carryforwards. At December 31, 1997, the Company has available unused operating loss carryforwards of approximately $71,500, which may be applied against future taxable income and which expire in various years from 2010 to 2012. The amount of the net operating loss carryforward which can be utilized by the Company will be subject to annual limitations due to the substantial change in ownership which has occurred in the Company. The amount of and ultimate realization of the benefits from the operating loss carryforwards for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company, and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the loss carryforwards the Company has established a valuation allowance equal to the amount of the loss carryforwards and, therefore, no deferred tax asset has been recognized for the loss carryforwards. The net deferred tax asset is approximately $24,000 as of December 31, 1997, with an offsetting valuation allowance at December 31, 1997 of the same amount. The change in the valuation allowance for 1997 is approximately $800. -66- Item 14. Changes in and Disagreements with Accountants. In August 1999, our board of directors retained Grant Thornton LLP as our independent accountants and dismissed Pritchett, Siler & Hardy, P.C., the accountants for Collectibles America, Inc., and Levine, Levine & Meyrowitz, CPAs, P.C., the accountants for BeFirst Internet Corporation. During the periods Pritchett, Siler & Hardy, P.C. and Levine, Levine & Meyrowitz, CPAs, P.C. were retained, there were no disagreements with the former auditors on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which would have caused them to make reference to the subject matter in connection with their reports. No accountants report prepared by the former auditors on our financial statements for either of the past two years contained an adverse opinion or disclaimer of opinion or was modified as to uncertainty, audit scope or accounting principles. Prior to engaging Grant Thornton LLP, neither we nor anyone acting on our behalf consulted with Grant Thornton LLP regarding the application of accounting principles to any specific transaction or the type of audit opinion that might be rendered on our financial statements. Item 15. Financial Statements and Exhibits. Number Exhibit a) Financial Statements FindWhat.com-Audited Financial Statements as of December 31, 1998 and June 30, 1999. Collectibles America, Inc. - Unaudited Financial Statements as of June 16, 1999 and June 30, 1998 Collectibles America, Inc. - Audited Financial Statements as of December 31, 1998 and 1997 Collectibles America, Inc. - Audited Financial Statements as of December 31, 1997 and 1996 b) Exhibits 2.1 Agreement and Plan of Reorganization dated June 17, 1999 by and among BeFirst Internet Corporation, Collectibles America, Inc. and Mick Jardine. 3.1 Articles of Incorporation of FindWhat.com, as amended. 3.2 By-laws of FindWhat.com 10.1 Portal Services Agreement dated June 18, 1999 between Inktomi Corporation and BeFirst Internet Corporation. 10.2 Lease Agreement by and between Cambridge Management Associates and BeFirst Internet Corporation. 10.3 Agreement dated August 18, 1999 between Michigan Internet Communication Association and BeFirst.com Inc. -67- 10.4 BeFirst 1999 Stock Incentive Plan 10.5 Form of Incentive Stock Option Agreement 10.6 Form of Non-Qualified Stock Option Agreement 27.1 Financial Data Schedule -68- SIGNATURES In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. FINDWHAT.COM Date: September 14, 1999 By: /s/ Robert D. Brahms --------------------------------- Robert D. Brahms, Chief Executive Officer -69- EX-2.1 2 AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION BETWEEN COLLECTIBLES AMERICA, INC. AND BEFIRST INTERNET CORPORATION TABLE OF CONTENTS 1. Plan of Reorganization.................................................1 2. Exchange of Shares.....................................................1 3. Pre-Closing Events.....................................................2 4. Exchange of Securities.................................................2 5. Other Events Occurring at Closing......................................3 6. Delivery of Shares.....................................................3 7. Representations of BeFirst Stockholders................................3 8. Representations of BeFirst.............................................4 9. Representations of CAI and Jardine.....................................5 10. Closing................................................................7 11. Conditions Precedent to the Obligations of BeFirst.....................7 12. Conditions Precedent to the Obligations of CAI ........................9 13. Indemnification.......................................................10 14. Nature and Survival of Representations................................10 15. Documents at Closing..................................................10 16. Finder's Fees.........................................................11 17. Miscellaneous.........................................................12 Signature Page................................................................13 Exhibit A - BeFirst Stockholder Schedule Exhibit B - Amendment to Articles of Incorporation Exhibit C - Investment Letter (i) AGREEMENT AND PLAN OF REORGANIZATION This Agreement and Plan of Reorganization (hereinafter the "Agreement") is entered into effective as of this ___ day of ___________, 1999, by and among Collectibles America, Inc., a Nevada corporation (hereinafter "CAI"); Mick Jardine, the principal shareholder of CAI (hereinafter "Jardine"); BeFirst Internet Corporation, a Delaware corporation (hereinafter "BeFirst"), and the owners of all the outstanding shares of common stock of BeFirst (hereinafter the "BeFirst Stockholders"). RECITALS: WHEREAS, the BeFirst Stockholders own all of the issued and outstanding common stock of BeFirst which comprises 1,000 shares (the "BeFirst Common Stock"). CAI desires to acquire the BeFirst Common Stock solely in exchange for voting common stock of CAI, making BeFirst a wholly-owned subsidiary of CAI; and WHEREAS, the BeFirst Stockholders (as set forth on the attached Exhibit "A") desire to acquire voting common stock of CAI in exchange for the BeFirst Common Stock, as more fully set forth herein. NOW THEREFORE, for the mutual consideration set out herein and other good and valuable consideration, the legal sufficiency of which is hereby acknowledged, the parties agree as follows: AGREEMENT 1. Plan of Reorganization. It is hereby agreed that all of the BeFirst Common Stock shall be acquired by CAI in exchange solely for CAI common voting stock (the "CAI Shares"). It is the intention of the parties hereto that all of the issued and outstanding shares of capital stock of BeFirst shall be acquired by CAI in exchange solely for CAI common voting stock and that this entire transaction qualify as a corporate reorganization under Section 368(a)(1)(B) and/or Section 351 of the Internal Revenue Code of 1986, as amended, and related or other applicable sections thereunder. 2. Exchange of Shares. CAI and BeFirst Stockholders agree that on the Closing Date or at the Closing as hereinafter defined, the BeFirst Common Stock shall be delivered to CAI in exchange for the CAI Shares, after giving effect to a 2 to 1 reverse stock split (the "CAI Reverse Stock Split") as to all presently outstanding shares of CAI common stock, as follows: (a) At Closing, CAI shall, subject to the conditions set forth herein, issue an aggregate of 8,750,000 shares of CAI common stock (after giving effect to the CAI Reverse Stock Split) for immediate delivery to the BeFirst Stockholders in exchange for the CAI Shares. (b) Each BeFirst Stockholder shall execute this Agreement or a written consent to the exchange of their BeFirst Common Stock for CAI Shares. (c) Unless otherwise agreed by CAI and BeFirst this transaction shall close only in the event CAI is able to acquire at least 80% of the outstanding BeFirst Common Stock; however, it is the intent of the parties to have CAI acquire all of the BeFirst Common Stock. 3. Pre-Closing Events. The Closing is subject to the completion of the following: (a) CAI shall have authorized 50,000,000 shares of $.001 par value common stock and 500,000 shares of $.001 par value preferred stock. The preferred stock shall be subject to issuance in such series and with such rights, preferences and designations as determined in the sole discretion of the board of directors. (b) Jardine shall have contributed 8,600,000 shares of CAI Common Stock to CAI for cancellation, leaving 5,000,000 shares issued and outstanding prior to the CAI Reverse Stock Split. (c) CAI shall effectuate the CAI Reverse Stock Split at or about the time of Closing, and shall have 2,500,000 shares of its common stock issued and outstanding and no other shares of capital stock issued or outstanding not taking into effect the shares to be issued under this Agreement. (d) CAI shall demonstrate to the reasonable satisfaction of BeFirst that it has no material assets and no liabilities contingent or fixed other than the proceeds of the CAI Financing as described herein. 4. Exchange of Securities. As of the Closing Date each of the following shall occur: (a) All shares of BeFirst Common Stock issued and outstanding immediately prior to the Closing Date shall be exchanged for the CAI Shares (up to an aggregate amount of 8,750,000 CAI Shares to be delivered at Closing). All such outstanding shares of BeFirst Common Stock shall be deemed, after Closing, to be owned by CAI. The holders of such certificates previously evidencing shares of BeFirst Common Stock outstanding immediately prior to the Closing Date shall cease to have any rights with respect to such shares of BeFirst Common Stock except as otherwise provided herein or by law; (b) Any shares of BeFirst Common Stock held in the treasury of BeFirst immediately prior to the Closing Date shall automatically be canceled and extinguished without any conversion thereof and no payment shall be made with respect thereto; 2 (c) The 2,500,000 shares of CAI common stock previously issued and outstanding prior to the Closing, after giving effect to the CAI Reverse Split, will remain outstanding. 5. Other Events Occurring at Closing. At Closing, the following shall be accomplished: (a) CAI shall file an amendment to its Articles of Incorporation with the Secretary of State of the State of Nevada in substantially the form attached hereto as Exhibit "B" effecting an amendment to its Articles of Incorporation to (i) reflect a name change to a new name as selected by BeFirst and, (ii) to change the authorized capitalization of CAI to 50,000,000 shares of $.001 par value common stock and 500,000 shares of $.001 par value preferred stock, as set forth in the attached Exhibit "B". (b) The resignation of the existing CAI officer and director and appointment of new officers and directors as directed by BeFirst. (c) CAI shall have completed a private offering under Regulation D, Rule 506, as promulgated by the Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as amended, of 1,250,000 shares of its common stock at $2.00 per share. The gross proceeds of this offering (the "CAI Financing") shall be $2,500,000, which amount, less agreed upon costs, shall be delivered to the control of new management of CAI at Closing in good funds or shall be represented by the conversion of previous loans to BeFirst arranged for by CAI. The CAI Financing shall have been completed in compliance with all applicable state and federal securities laws and the securities sold shall be delivered at Closing to the investors in the CAI Financing. Persons who have made bridge loans to BeFirst pursuant to arrangements made by CAI, shall be given the opportunity to convert the principal of said loans to the purchase of shares in the private offering prior to Closing upon the same terms as other investors in the private offering. (d) CAI shall adopt a Stock Option Plan at Closing to include up to 1,000,000 shares of its common stock. The Plan shall include "incentive" stock options under Section 422 of the Internal Revenue Code of 1986, as amended and other options and similar rights. CAI shall grant options under said plan to employees and others, at Closing, exercisable at $2.00 per share, as designated by BeFirst subject to the reasonable approval of CAI. 6. Delivery of Shares. On or as soon as practicable after the Closing Date, BeFirst will use its best efforts to cause the BeFirst Stockholders to surrender certificates for cancellation representing their shares of BeFirst Common Stock, against delivery of certificates representing the CAI Shares for which the shares of BeFirst Common Stock are to be exchanged at Closing. 7. Representations of BeFirst Stockholders. Each BeFirst Stockholder hereby represents and warrants each only as to its own BeFirst Common Stock, effective this date and 3 the Closing Date as follows: (a) Except as may be set forth in Exhibit "A", the BeFirst Common Stock is free from claims, liens, or other encumbrances, and at the Closing Date said BeFirst Stockholder will have good title and the unqualified right to transfer and dispose of such BeFirst Common Stock. (b) Said BeFirst Stockholder is the sole owner of the issued and outstanding BeFirst Common Stock as set forth in Exhibit "A"; (c) Said BeFirst Stockholder has no present intent to sell or dispose of the CAI Shares and is not under a binding obligation, formal commitment, or existing plan to sell or otherwise dispose of the CAI Shares. 8. Representations of BeFirst. BeFirst hereby represents and warrants as follows, which warranties and representations shall also be true as of the Closing Date: (a) Except as noted on Exhibit "A", the BeFirst Stockholders listed on the attached Exhibit "A" are the sole owners of record and beneficially of the issued and outstanding common stock of BeFirst. (b) BeFirst has no outstanding or authorized capital stock, warrants, options or convertible securities other than as described in the BeFirst Financial Statements or in Exhibit "A", attached hereto. (c) The unaudited financial statements as of and for the period ended December 31, 1998, which have been delivered to CAI (hereinafter referred to as the "BeFirst Financial Statements") are complete and accurate in all material respects and fairly present the financial condition of BeFirst as of the date thereof and the results of its operations for the period covered. There are no material liabilities or obligations, either fixed or contingent, not disclosed in the BeFirst Financial Statements or notes thereto which are required to be disclosed therein; BeFirst has no contracts or obligations in the ordinary course of business which constitute liens or other liabilities which materially alter the financial condition of BeFirst as reflected in the BeFirst Financial Statements. BeFirst has good title to all assets shown on the BeFirst Financial Statements subject only to dispositions and other transactions in the ordinary course of business, the disclosures set forth therein and liens and encumbrances of record. The BeFirst Financial Statements have been prepared in accordance with generally accepted accounting principles consistently applied (except as may be indicated therein or in the notes thereto). (d) Since the date of the BeFirst Financial Statements, there have not been any material adverse changes in the financial position of BeFirst except changes arising in the ordinary course of business, which changes will in no event materially and adversely affect the financial position of BeFirst. 4 (e) BeFirst is not a party to any material pending litigation or, to its best knowledge, any governmental investigation or proceeding, not reflected in the BeFirst Financial Statements, and to its best knowledge, no material litigation, claims, assessments or any governmental proceedings are threatened against BeFirst. (f) BeFirst is in good standing in its jurisdiction of incorporation, and is in good standing and duly qualified to do business in each jurisdiction where required to be so qualified except where the failure to so qualify would have no material negative impact on BeFirst. (g) BeFirst has (or, by the Closing Date, will have filed) all material tax, governmental and/or related forms and reports (or extensions thereof) due or required to be filed and has (or will have) paid or made adequate provisions for all taxes or assessments which have become due as of the Closing Date. (h) BeFirst has not materially breached any material agreement to which it is a party. BeFirst has previously given CAI copies or access thereto of all material contracts, commitments and/or agreements to which BeFirst is a party including all relationships or dealings with related parties or affiliates. (i) BeFirst has no subsidiary corporations except as described in writing to CAI. (j) BeFirst has made all material corporate financial records, minute books, and other corporate documents and records available for review to present management of CAI prior to the Closing Date, during reasonable business hours and on reasonable notice. (k) The execution of this Agreement does not materially violate or breach any material agreement or contract to which BeFirst is a party and has been duly authorized by all appropriate and necessary corporate action under Delaware of other applicable law and BeFirst, to the extent required, has obtained all necessary approvals or consents required by any agreement to which BeFirst is a party. (l) All disclosure information regarding BeFirst which is to be set forth in disclosure documents of CAI or otherwise delivered to CAI by BeFirst for use in connection with the transaction (the "Acquisition") described herein is true, complete and accurate in all material respects. 9. Representations of CAI and Jardine. CAI, and Jardine to the best of his knowledge, hereby jointly and severally represent and warrant as follows, each of which representations and warranties shall continue to be true as of the Closing Date: (a) As of the Closing Date, the CAI Shares, to be issued and delivered to the BeFirst Stockholders hereunder will, when so issued and delivered, constitute, duly authorized, validly 5 and legally issued shares of CAI common stock, fully-paid and nonassessable. CAI shall have completed its reverse stock split wherein each holder of CAI Shares shall have received one share of the CAI Shares for each two CAI Shares previously held. The total number of CAI Shares outstanding shall be 2,500,000 without giving effect to shares issued in the CAI Financing. No shares of CAI's preferred stock, $0.001 par value, to be authorized at Closing, shall be outstanding. (b) At Closing, all of the issued and outstanding common stock of CAI, including shares issued in the CAI Financing, shall be duly authorized, validly issued, fully-paid and nonassessable and shall have been issued in compliance with all applicable corporate and securities laws. (c) CAI has the corporate power to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the board of directors of CAI. The execution and performance of this Agreement will not constitute a material breach of any agreement, indenture, mortgage, license or other instrument or document to which CAI is a party and will not violate any judgment, decree, order, writ, rule, statute, or regulation applicable to CAI or its properties. The execution and performance of this Agreement will not violate or conflict with any provision of the Articles of Incorporation or by-laws of CAI. (d) CAI has delivered to BeFirst a true and complete copy of its audited financial statements for the years ended December 31, 1996, 1997, and 1998, (the "CAI Financial Statements"). The CAI Financial Statements are complete, accurate in all material respects and fairly present the financial condition of CAI as of the dates thereof and the results of its operations for the periods then ended. There are no material liabilities or obligations either fixed or contingent not reflected therein. The CAI Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as may be indicated therein or in the notes thereto). (e) Since December 31, 1998, there have not been any material adverse changes in the financial condition of CAI except with regard to disbursements to pay reasonable and ordinary expenses in connection with maintaining its corporate status and pursuing the matters contemplated in this Agreement. Prior to Closing, all accounts payable and other liabilities of CAI shall be paid and satisfied in full and CAI shall have no liabilities either contingent or fixed. (f) Neither Jardine nor CAI is a party to or the subject of any pending litigation, claims, or governmental investigation or proceeding not reflected in the CAI Financial Statements or otherwise disclosed herein, and there are no lawsuits, claims, assessments, investigations, or similar matters, to the best knowledge of Jardine, threatened or contemplated against or affecting CAI, its management or its properties or Jardine. 6 (g) CAI is duly organized, validly existing and in good standing under the laws of the State of Nevada; has the corporate power to own its property and to carry on its business as now being conducted and is duly qualified to do business in any jurisdiction where so required except where the failure to so qualify would have no material negative impact on it. (h) CAI has filed all federal, state, county and local income, excise, property and other tax, governmental and/or related returns, forms, or reports, which are due or required to be filed by it prior to the date hereof, except where the failure to do so would have no material adverse impact on CAI, and has paid or made adequate provision in the CAI Financial Statements for the payment of all taxes, fees, or assessments which have or may become due pursuant to such returns or pursuant to any assessments received. CAI is not delinquent or obligated for any tax, penalty, interest, delinquency or charge. (i) There are no existing options, calls, warrants, preemptive rights, registration rights or commitments of any character relating to the issued or unissued capital stock or other securities of CAI, except as contemplated in this Agreement. (j) The corporate financial records, minute books, and other documents and records of CAI have been made available to BeFirst prior to the Closing and shall be delivered to new management of CAI at Closing. (k) CAI has not breached, nor is there any pending, or to the knowledge of management, any threatened claim that CAI has breached, any of the terms or conditions of any agreements, contracts or commitments to which it is a party or by which it or its assets are is bound. The execution and performance hereof will not violate any provisions of applicable law or any agreement to which CAI is subject. CAI hereby represents that it has no business operations or material assets and it is not a party to any material contract or commitment other than appointment documents with its transfer agent, and that it has disclosed to BeFirst all relationships or dealings with related parties or affiliates. (l) CAI common stock is currently approved for quotation on the OTC Bulletin Board under the symbol "CAMJ" and there are no stop orders in effect with respect thereto and CAI has made all filings currently required to maintain its listing. (m) All information regarding CAI which has been provided to BeFirst or otherwise disclosed in connection with the transactions contemplated herein, is true, complete and accurate in all material respects. CAI and Jardine specifically disclaim any responsibility regarding disclosures as to BeFirst, its business or its financial condition. 10. Closing. The Closing of the transactions contemplated herein shall take place on such date (the "Closing") as mutually determined by the parties hereto when all conditions precedent have been met and all required documents have been delivered, which Closing is 7 expected to take place on or about June____ , 1999, but no later than June____ , 1999, unless extended by mutual consent of all parties hereto. The "Closing Date" of the transactions described herein (the "Acquisition"), shall be that date on which all conditions set forth herein have been met and the CAI Shares are issued in exchange for the BeFirst Common Stock. 11. Conditions Precedent to the Obligations of BeFirst. All obligations of BeFirst under this Agreement are subject to the fulfillment, prior to or as of the Closing and/or the Closing Date, as indicated below, of each of the following conditions: (a) The representations and warranties by or on behalf of Jardine and CAI contained in this Agreement or in any certificate or document delivered pursuant to the provisions hereof shall be true in all material respects at and as of the Closing and Closing Date as though such representations and warranties were made at and as of such time. (b) CAI shall have performed and complied with all covenants, agreements, and conditions set forth in, and shall have executed and delivered all documents required by this Agreement to be performed or complied with or executed and delivered by it prior to or at the Closing. (c) On or before the Closing, the board of directors, and shareholders representing a majority interest the outstanding common stock of CAI, shall have approved in accordance with applicable state corporation law the execution and delivery of this Agreement and the consummation of the transactions contemplated herein. (d) On or before the Closing Date, CAI shall have delivered to BeFirst certified copies of resolutions of the board of directors and shareholders of CAI approving and authorizing the execution, delivery and performance of this Agreement and authorizing all of the necessary and proper action to enable CAI to comply with the terms of this Agreement including the election of BeFirst's nominees to the Board of Directors of CAI and all matters outlined herein. (e) The Acquisition shall be permitted by applicable law and CAI shall have sufficient shares of its capital stock authorized to complete the Acquisition. (f) At Closing, the existing sole officer and director of CAI shall have resigned in writing from all positions as director and officer of CAI effective upon the election and appointment of the BeFirst nominees. (g) At the Closing, all instruments and documents delivered to BeFirst and BeFirst Stockholders pursuant to the provisions hereof shall be reasonably satisfactory to legal counsel for BeFirst. (h) The shares of restricted CAI capital stock to be issued to BeFirst Stockholders and 8 in the CAI Financing at Closing will be validly issued, nonassessable and fully-paid under Nevada corporation law and will be issued in compliance with all federal, state and applicable corporation and securities laws. (i) BeFirst and BeFirst Stockholders shall have received the advice of their tax advisor, if deemed necessary by them, as to all tax aspects of the Acquisition. (j) BeFirst shall have received all necessary and required approvals and consents from required parties and its shareholders. (k) CAI shall have completed the CAI Financing. (l) At the Closing, CAI shall have delivered to BeFirst an opinion of its counsel dated as of the Closing to the effect that: (i) CAI is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (ii) This Agreement has been duly authorized, executed and delivered by CAI and is a valid and binding obligation of CAI enforceable in accordance with its terms; (iii) CAI through its board of directors and stockholders has taken all corporate action necessary for performance under this Agreement; (iv) The documents executed and delivered by CAI to BeFirst and BeFirst Stockholders hereunder are valid and binding in accordance with their terms and vest in BeFirst Stockholders, as the case may be, all right, title and interest in and to the CAI Shares to be issued pursuant to the terms hereof, and the CAI Shares when issued will be duly and validly issued, fully-paid and nonassessable; (v) CAI has the corporate power to execute, deliver and perform under this Agreement; (vi) Legal counsel for CAI is not aware of any liabilities, claims or lawsuits involving CAI; 12. Conditions Precedent to the Obligations of CAI. All obligations of CAI under this Agreement are subject to the fulfillment, prior to or at the Closing, of each of the following conditions: (a) The representations and warranties by BeFirst and BeFirst Stockholders contained in this Agreement or in any certificate or document delivered pursuant to the provisions hereof 9 shall be true in all material respects at and as of the Closing as though such representations and warranties were made at and as of such time. (b) BeFirst shall have performed and complied with, in all material respects, all covenants, agreements, and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing; (c) BeFirst shall deliver on behalf of the BeFirst Stockholders a letter commonly known as an "Investment Letter," signed by each of said shareholders, in substantially the form attached hereto as Exhibit "C", acknowledging that the CAI Shares are being acquired for investment purposes. (d) BeFirst shall deliver an opinion of its legal counsel to the effect that: 10 (i) BeFirst is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and is duly qualified to do business in any jurisdiction where so required except where the failure to so qualify would have no material adverse impact on BeFirst; (ii) This Agreement has been duly authorized, executed and delivered by BeFirst. (iii) The documents executed and delivered by BeFirst and BeFirst Stockholders to CAI hereunder are valid and binding in accordance with their terms and vest in CAI all right, title and interest in and to the BeFirst Common Stock, which stock is duly and validly issued, fully-paid and nonassessable. 13. Indemnification. For a period of one year from the Closing, CAI and Jardine agree to jointly and severally indemnify and hold harmless BeFirst, and BeFirst agrees to indemnify and hold harmless CAI, at all times after the date of this Agreement against and in respect of any liability, damage or deficiency, all actions, suits, proceedings, demands, assessments, judgments, costs and expenses including attorney's fees incident to any of the foregoing, resulting from any misrepresentations made by an indemnifying party to an indemnified party, an indemnifying party's breach of covenant or warranty or an indemnifying party's nonfulfillment of any agreement hereunder, or from any misrepresentation in or omission from any certificate furnished or to be furnished hereunder. 14. Nature and Survival of Representations. All representations, warranties and covenants made by any party in this Agreement shall survive the Closing and the consummation of the transactions contemplated hereby for one year from the Closing. All of the parties hereto are executing and carrying out the provisions of this Agreement in reliance solely on the representations, warranties and covenants and agreements contained in this Agreement and not upon any investigation upon which it might have made or any representation, warranty, agreement, promise or information, written or oral, made by the other party or any other person other than as specifically set forth herein. 15. Documents at Closing. At the Closing, the following documents shall be delivered: (a) BeFirst will deliver, or will cause to be delivered, to CAI the following: (i) a certificate executed by the President and Secretary of BeFirst to the effect that all representations and warranties made by BeFirst under this Agreement are true and correct as of the Closing, the same as though originally given to CAI on said date; (ii) a certificate from the jurisdiction of incorporation of BeFirst dated at or about the Closing to the effect that BeFirst is in good standing under the laws of said 11 jurisdiction; (iii) Investment Letters in the form attached hereto as Exhibit "C" executed by each BeFirst Stockholder; (iv) such other instruments, documents and certificates, if any, as are required to be delivered pursuant to the provisions of this Agreement; (v) certified copies of resolutions adopted by the shareholders and directors of BeFirst authorizing this transaction; and (vi) all other items, the delivery of which is a condition precedent to the obligations of CAI as set forth herein. (vii) the legal opinion required by Section 12(d) hereof. (b) CAI will deliver or cause to be delivered to BeFirst: (i) stock certificates representing the CAI Shares to be issued as a part of the stock exchange as described herein; (ii) a certificate of the President of CAI, to the effect that all representations and warranties of CAI made under this Agreement are true and correct as of the Closing, the same as though originally given to BeFirst on said date; (iii) certified copies of resolutions adopted by CAI's board of directors and CAI's Stockholders authorizing the Acquisition and all related matters described herein; (iv) certificate from the jurisdiction of incorporation of CAI dated at or about the Closing Date that CAI is in good standing under the laws of said state; (v) opinion of CAI's counsel as described in Section 11(l) above; (vi) good funds representing the net proceeds of the CAI Financing; (vii) resignation of the existing officer and director of CAI; (viii) all corporate and financial records of CAI; and (ix) all other items, the delivery of which is a condition precedent to the obligations of BeFirst, as set forth in Section 12 hereof. 12 16. Finder's Fees. CAI represents and warrants to BeFirst, and BeFirst represents and warrants to CAI that neither of them, or any party acting on their behalf, has incurred any liabilities, either express or implied, to any "broker" of "finder" or similar person in connection with this Agreement or any of the transactions contemplated hereby other than arrangements, if any, disclosed to BeFirst by CAI to compensate any person who introduced the parties, which obligation shall be the sole responsibility of CAI. In this regard, CAI, on the one hand, and BeFirst on the other hand, will indemnify and hold the other harmless from any claim, loss, cost or expense whatsoever (including reasonable fees and disbursements of counsel) from or relating to any such express or implied liability other than as disclosed herein. 17. Miscellaneous. (a) Further Assurances. At any time, and from time to time, after the Closing Date, each party will execute such additional instruments and take such action as may be reasonably requested by the other party to confirm or perfect title to any property transferred hereunder or otherwise to carry out the intent and purposes of this Agreement. (b) Waiver. Any failure on the part of any party hereto to comply with any of its obligations, agreements or conditions hereunder may be waived in writing by the party to whom such compliance is owed. (c) Amendment. This Agreement may be amended only in writing as agreed to by all parties hereto. (d) Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been given if delivered in person or sent by prepaid first class registered or certified mail, return receipt requested. (e) Headings. The section and subsection headings in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (f) Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (g) Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Nevada. (h) Binding Effect. This Agreement shall be binding upon the parties hereto and inure to the benefit of the parties, their respective heirs, administrators, executors, successors and assigns. 13 (i) Entire Agreement. This Agreement and the attached Exhibits constitute the entire agreement of the parties covering everything agreed upon or understood in the transaction. There are no oral promises, conditions, representations, understandings, interpretations or terms of any kind as conditions or inducements to the execution hereof. (j) Time. Time is of the essence. (k) Severability. If any part of this Agreement is deemed to be unenforceable the balance of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written. COLLECTIBLES AMERICA, INC. By: /s/ Mick Jardine ------------------------------------- Mick Jardine, President and Secretary /s/ Mick Jardine ----------------------------------------- Mick Jardine, individually BEFIRST INTERNET CORPORATION By: /s/ Craig Pisaris Henderson By: /s/ Craig Pisaris Henderson ----------------------------- ------------------------------------- Secretary President SHAREHOLDERS OF BEFIRST INTERNET CORPORATION /s/ Robert Brahms ----------------------------------------- Robert D. Brahms /s/ Courtney Jones ----------------------------------------- Courtney Phillips Jones /s/ Craig Pisaris Henderson ----------------------------------------- Craig A. Pisaris-Henderson 14 /s/ Tony Garcia ----------------------------------------- Tony Garcia /s/ Christopher Whitaker ----------------------------------------- Christopher Knight Whitaker /s/ Peter Miller ----------------------------------------- Peter Miller 15 EX-3.1 3 ARTICLES OF INCORPORATION Articles of Incorporation of Collectibles America, Inc. A Nevada Corportion The undersigned natural person, being more than eighteen (18) years of age, do hereby establish a corporation under Nevada Revised Statute 70.010 et seq., and adopt the following Articles of Incorporation. ARTCLE I NAME The name of the corporation shall be "Collectibles America, Inc." ARTICLE II REGISTERED OFFICE The registered agent shall be James S. Kent, 4180 South Pecos, Suite 180, Las Vegas, Nevada, 89121. The corporation may also maintain an office or offices at such other place or places, either within or without the State of Nevada as may be determined, from time to time, by the Board of Directors. ARTICLE III PURPOSE The purpose for which the corporation is organized is to own and manage sports collectibles items stores, including the purchase of such stores which may already be in existence, purchase of such stores which may already be in existence, purchase and sale of inventory of sports items, the purchase and sale of sports collectibles, exclusive agreements with atheletes/celebrities, and any related business activity not forbidden by law or these Articles of Incorporation. ARTICLE IV SHARES OF STOCK Section 1. Authorized Shares. The aggregate number of shares which the corporation shall have the authority to issue shall consist of 25,000,000 shares of common stock with one-tenth of a cent ($0.001) par value. Said Incorporator as set forth in Article VI below shall be the owner of all of the shares of common stock. ARTICLE V DIRECTORS A. The business and affairs of the corporation shall be managed by the Board of Directors. B. There shall be no fewer than one (1) director, and there shall be no fewer directors than the number of shareholders. C. The names and addresses of the Directors constituting the first Board of Directors shall be: James S. Kent 4180 S. Pecos, Suite 180 Las Vegas, NV 89121 ARTICLE VI INCORPORATORS The name and address of the incorporators signing the Articles of Incorporation shall be as follows: James S. Kent 4180 S. Pecos, Suite 180 Las Vegas, NV 89121 ARTICLE VII DIRECTORS' AND OFFICERS' LIABILITY No director of officer of the corporation shall be personally liable to the corporation or its stockholders for damages for breach of fiduciary duty as a director or officer. However, this article does not eliminate or limit the liability of the director or officer for: (a) Acts or omissions which involve intentional misconduct, fraud, or knowing violation of law; or (b) The payment of dividends in violation of NRS 78.300. IN WITNESS WHEREOF, the undersigned have hereunto executed these Articles of Incorporation on this 25th day of October, 1995. /s/ James S. Kent - ----------------- JAMES S. KENT Incorporator ACKNOWLEDGMENT STATE OF NEVADA ) ) ss: COUNTY OF CLARK ) On this 25th day of October, 1995, before me the undersigned Notary Public in and for said County and State, personally appeared JAMES S. KENT, known to me to be the person described in and who executed the foregoing Articles of Incorporation, and who acknowledged to me that he executed the same freely and voluntarily and for the uses and purposes therein mentioned. WITNESS my hand and official seal. /s/ Kathy Gentry - ----------------- NOTARY PUBLI CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF COLLECTIBLES AMERICA, INC. Pursuant to the applicable provisions of the Nevada Business Corporations Act, Collectibles America, Inc. (the "Corporation") adopts the following Articles of Amendment to its Articles of Incorporation: FIRST: The present name of the Corporation is Collectibles America, Inc.. SECOND: The following amendments to its Articles of Incorporation were adopted by the board of directors and by majority consent of shareholders of the Corporation in the manner prescribed by applicable law. (1) The Article entitled ARTICLE I - NAME, is amended to read as follows: ARTICLE I - NAME The name of the corporation shall be: BeFirst.com (2) The Article entitled ARTICLE IV - STOCK, is amended to read as follows: ARTICLE IV - STOCK Common. The aggregate number of common shares which this Corporation shall have authority to issue is 50,000,000 shares of Common Stock having a par value of $.001 per share. All common stock of the Corporation shall be of the same class, common, and shall have the same rights and preferences. Fully-paid common stock of this Corporation shall not be liable to any further call or assessment. Preferred. The Corporation shall be authorized to issue 500,000 shares of Preferred Stock having a par value of $.001 per share and with such rights, preferences and designations determined by the board of directors. THIRD: The Corporation has effectuated, effective with the commencement of business on June 18, 1999, a 2 for 1 reverse stock split as to its shares of common stock outstanding as of the opening of business on June 17, 1999, which decreases the outstanding shares as of that date from 5,000,000 shares to 2,500,000 shares. The reverse split shall not change the number of shares of Common Stock authorized for issuance by the Corporation. FOURTH: The number of shares of the Corporation outstanding and entitled to vote at the time of the adoption of said amendment was 13,600,000. FIFTH: The number of shares voted for such amendments was 13,440,000 (98%) and no shares were voted against such amendment. DATED this 17th day of June, 1999. COLLECTIBLES AMERICA, INC. By: /s/ Mick Jardine --------------------------------- Mick Jardine, President/Secretary VERIFICATION STATE OF UTAH ) : ss. COUNTY OF SALT LAKE ) The undersigned being first duly sworn, deposes and states: that the undersigned is the President of Collectibles America, Inc., that the undersigned has read the Certificate of Amendment and knows the contents thereof and that the same contains a truthful statement of the Amendment duly adopted by the board of directors and stockholders of the Corporation. /s/ Mick Jardine --------------------------- Mick Jardine STATE OF UTAH ) : ss. COUNTY OF SALT LAKE ) Before me the undersigned Notary Public in and for the said County and State, personally appeared the President and Secretary of Collectibles America, Inc., a Nevada corporation, and signed the foregoing Articles of Amendment as his own free and voluntary acts and deeds pursuant to a corporate resolution for the uses and purposes set forth. IN WITNESS WHEREOF, I have set my hand and seal this 17th day of June, 1999. /s/ Thomas G. Kimble --------------------------- NOTARY PUBLIC Notary Seal CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION OF BeFirst.com Pursuant to the applicable provisions of the Nevada Business Corporations Act, BeFirst.com (the "Corporation") adopts the following Certificate of Amendment to Articles of Incorporation: FIRST: The name of the Corporation is BeFirst.com. SECOND: The following amendment to the Articles of Incorporation was adopted by the Board of Directors and by the majority consent of Stockholders of the Corporation in lieu of a meeting: "ARTICLE I - NAME The name of the corporation shall be FindWhat.com." DATED: September 1, 1999 BeFirst.com By: /s/ Craig Pisaris-Henderson ------------------------------ Name: Craig Pisaris-Henderson Title: President & Secretary STATE OF FLORIDA ) : COUNTY OF LEE ) This instrument was acknowledged before me on September 1, 1999, by Craig Pisaris-Henderson, as President, as designated to sign this certificate of BeFirst.com. /s/ Sandra E. Noble ------------------- NOTARY PUBLIC EX-3.2 4 BY-LAWS BY-LAWS OF FINDWHAT.COM ARTICLE I STOCKHOLDERS Section 1.01 Annual Meeting. The annual meeting of the stockholders shall be held at such date and time as shall be designated by the board of directors and stated in the notice of the meeting or in a duly-executed waiver of notice thereof. If the corporation shall fail to provide notice of the annual meeting of the stockholders as set forth above, the annual meeting of the stockholders of the corporation shall be held during the month of November or December of each year as determined by the Board of Directors, for the purpose of electing directors of the corporation to serve during the ensuing year and for the transaction of such other business as may properly come before the meeting. If the election of the directors is not held on the day designated herein for any annual meeting of the stockholders, or at any adjournment thereof, the President shall cause the election to be held at a special meeting of the stockholders as soon thereafter as is convenient. Section 1.02 Special Meetings. Special meetings of the stockholders may be called by the President or the Board of Directors and shall be called by the President at the written request of the holders of not less than 51% of the issued and outstanding shares of capital stock of the corporation. All business lawfully to be transacted by the stockholders may be transacted at any special meeting at any adjournment thereof. However, no business shall be acted upon at a special meeting, except that referred to in the notice calling the meeting, unless all of the outstanding capital stock of the corporation is represented either in person or by proxy. Where all of the capital stock is represented, any lawful business may be transacted and the meeting shall be valid for all purposes. Section 1.03 Place of Meetings. Any meeting of the stockholders of the corporation may be held at its principal office in the State of Nevada or such other place in or out of the United States as the Board of Directors may designate. A waiver of notice signed by the stockholders entitled to vote may designate any place for the holding of such meeting. Section 1.04 Notice of Meetings. (a) The Secretary shall sign and deliver to all stockholders of record written or printed notice of any meeting at least ten (10) days, but not more than sixty (60) days, before the date of such meeting; which notice shall state the place, date and time of the meeting, the general nature of the business to be transacted, and, in the case of any meeting at which directors are to be elected, the names of nominees, if any, to be presented for election. (b) In the case of any meeting, any proper business may be presented for action, except that the following items shall be valid only if the general nature of the proposal is stated in the notice or written waiver of notice: (1) Action with respect to any contract or transaction between the corporation and one or more of its directors or another firm, association, or corporation in which one or more of its directors has a material financial interest; (2) Adoption of amendments to the Articles of Incorporation; or (3) Action with respect to the merger, consolidation, reorganization, partial or complete liquidation, or dissolution of the corporation. (c) The notice shall be personally delivered or mailed by first class mail to each stockholder of record at the last known address thereof, as the same appears on the books of the corporation, and the giving of such notice shall be deemed delivered the date the same is deposited in the United States mail, postage prepaid. If the address of any stockholder does not appear upon the books of the corporation, it will be sufficient to address any notice to such stockholder at the principal office of the corporation. (d) The written certificate of the person calling any meeting, duly sworn, setting forth the substance of the notice, the time and place the notice was mailed or personally delivered to the several stockholders, and the addresses to which the notice was mailed shall be prima facie evidence of the manner and fact of giving such notice. Section 1.05 Waiver of Notice. If all of the stockholders of the corporation shall waive notice of a meeting, no notice shall be required, and, whenever all of the stockholders shall meet in person or by proxy, such meeting shall be valid for all purposes without call or notice, and at such meeting any corporate action may be taken. Section 1.06 Determination of Stockholders of Record. (e) The Board of Directors may at any time fix a future date as a record date for the determination of the stockholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution -2- or allotment of any rights or entitled to exercise any rights in respect of any other lawful action. The record date so fixed shall not be more than sixty (60) days prior to the date of such meeting nor more than sixty (60) days prior to any other action. When a record date is so fixed, only stockholders of record on that date are entitled to notice of and to vote at the meeting or to receive the dividend, distribution or allotment of rights, or to exercise their rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date. (f) If no record date is fixed by the Board of Directors, then (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining stockholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which written consent is given; and (3) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto, or the sixtieth (60th) day prior to the date of such other action, whichever is later. Section 1.07 Quorum: Adjourned Meetings. (g) At any meeting of the stockholders, a majority of the issued and outstanding shares of the corporation represented in person or by proxy, shall constitute a quorum. (h) If less than a majority of the issued and outstanding shares are represented, a majority of shares so represented may adjourn from time to time at the meeting, until holders of the amount of stock required to constitute a quorum shall be in attendance. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted as originally called. When a stockholders' meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, unless the adjournment is for more than ten (10) days in which event notice thereof shall be given. Section 1.08 Voting. (i) Each stockholder of record, such stockholder's duly authorized proxy or attorney-in-fact shall be entitled to one (1) vote for each share of stock standing registered in such stockholder's name on the books of the corporation on the record date. -3- (j) Except as otherwise provided herein, all votes with respect to shares standing in the name of an individual on the record date (included pledged shares) shall be cast only by that individual or such individual's duly authorized proxy or attorney-in-fact. With respect to shares held by a representative of the estate of a deceased stockholder, guardian, conservator, custodian or trustee, votes may be cast by such holder upon proof of capacity, even though the shares do not stand in the name of such holder. In the case of shares under the control of a receiver, the receiver may cast votes carried by such shares even though the shares do not stand in the name of the receiver provided that the order of the court of competent jurisdiction which appoints the receiver contains the authority to cast votes carried by such shares. If shares stand in the name of a minor, votes may be cast only by the duly-appointed guardian of the estate of such minor if such guardian has provided the corporation with written notice and proof of such appointment. (k) With respect to shares standing in the name of a corporation on the record date, votes may be cast by such officer or agents as the by-laws of such corporation prescribe or, in the absence of an applicable by-law provision, by such person as may be appointed by resolution of the Board of Directors of such corporation. In the event no person is so appointed, such votes of the corporation may be cast by any person (including the officer making the authorization) authorized to do so by the Chairman of the Board of Directors, President or any Vice President of such corporation. (l) Notwithstanding anything to the contrary herein contained, no votes may be cast by shares owned by this corporation or its subsidiaries, if any. If shares are held by this corporation or its subsidiaries, if any, in a fiduciary capacity, no votes shall be cast with respect thereto on any matter except to the extent that the beneficial owner thereof possesses and exercises either a right to vote or to give the corporation holding the same binding instructions on how to vote. (m) With respect to shares standing in the name of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, husband and wife as community property, tenants by the entirety, voting trustees, persons entitled to vote under a stockholder voting agreement or otherwise and shares held by two or more persons (including proxy holders) having the same fiduciary relationship respect in the same shares, votes may be cast in the following manner: (1) If only one such person votes, the votes of such person binds all. (2) If more than one person casts votes, the act of the majority so voting binds all. -4- (3) If more than one person casts votes, but the vote is evenly split on a particular matter, the votes shall be deemed cast proportionately as split. (n) Any holder of shares entitled to vote on any matter may cast a portion of the votes in favor of such matter and refrain from casting the remaining votes or cast the same against the proposal, except in the case of elections of directors. If such holder entitled to vote fails to specify the number of affirmative votes, it will be conclusively presumed that the holder is casting affirmative votes with respect to all shares held. (o) If a quorum is present, the affirmative vote of holders of a majority of the shares represented at the meeting and entitled to vote on any matter shall be the act of the stockholders, unless a vote of greater number or voting by classes is required by the laws of the State of Nevada, the Articles of Incorporation and these By-Laws. Section 1.09 Proxies. At any meeting of stockholders, any holder of shares entitled to vote may authorize another person or persons to vote by proxy with respect to the shares held by an instrument in writing and subscribed to by the holder of such shares entitled to vote. No proxy shall be valid after the expiration of six (6) months from the date of execution thereof, unless coupled with an interest or unless otherwise specified in the proxy. In no event shall the term of a proxy exceed seven (7) years from the date of its execution. Every proxy shall continue in full force and effect until its expiration or revocation. Revocation may be effected by filing an instrument revoking the same or a duly-executed proxy bearing a later date with the Secretary of the corporation. Section 1.10 Order of Business. At the annual stockholders meeting, the regular order of business shall be as follows: (1) Determination of stockholders present and existence of quorum; (2) Reading and approval of the minutes of the previous meeting or meetings; (3) Reports of the Board of Directors, the President, treasurer and Secretary of the corporation, in the order named; (4) Reports of committee; (5) Election of directors; (6) Unfinished business; -5- (7) New business; (8) Adjournment. Section 1.11 Absentees Consent to Meetings. Transactions of any meeting of the stockholders are as valid as though had at a meeting duly-held after regular call and notice if a quorum is present, either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy (and those who, although present, either object at the beginning of the meeting to the transaction of any business because the meeting has not been lawfully called or convened or expressly object at the meeting to the consideration of matters not included in the notice which are legally required to be included therein) , signs a written waiver of notice and/or consent to the holding of the meeting or an approval of the minutes thereof. All such waivers, consents, and approvals shall be filed with the corporate records and made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice if such objection is expressly made at the beginning. Neither the business to be transacted at nor the purpose of any regular or special meeting of stockholders need be specified in any written waiver of notice, except as otherwise provided in Section 1.04 (b) of these By-Laws. Section 1.12 Action Without Meeting. Any action which may be taken by the vote of the stockholders at a meeting may be taken without a meeting if consented to by the holders of a majority of the shares entitled to vote or such greater proportion as may be required by the laws of the State of Nevada, the Articles of Incorporation, or these ByLaws. whenever action is taken by written consent, a meeting of stockholders needs not be called or noticed. ARTICLE II DIRECTORS Section 2.01 Number, Tenure and Qualification. Except as otherwise provided herein, the Board of Directors of the corporation shall consist of at least one (1) but no more than nine (9) persons, who shall be elected at the annual meeting of the stockholders of the corporation and who shall hold office for one (1) year or until their successors are elected and qualify. Section 2.02 Resignation. Any director may resign effective upon giving written notice to the chairman of the Board -6- of Directors, the President, or the Secretary of the corporation, unless the notice specifies a later time for effectiveness of such resignation. If the Board of Directors accepts the resignation of a director tendered to take effect at a future date, the Board or the stockholders may elect a successor to take office when the resignation becomes effective. Section 2.03 Reduction in Number. No reduction of the number of directors shall have the effect of removing any director prior to the expiration of his term of office. Section 2.04 Removal. (a) The Board of Directors or the stockholders of the corporation, by a majority vote, may declare vacant the office of a director who has been declared incompetent by an order of a court of competent jurisdiction or convicted of a felony. Section 2.05 Vacancies. (a) A vacancy in the Board of Directors because of death, resignation, removal, change in number of directors, or otherwise may be filled by the stockholders at any regular or special meeting or any adjourned meeting thereof or the remaining director(s) by the affirmative vote of a majority thereof. A Board of Directors consisting of less than the maximum number authorized in Section 2.01 of ARTICLE II constitutes vacancies on the Board of Directors for purposes of this paragraph and may be filled as set forth above including by the election of a majority of the remaining directors. Each successor so elected shall hold office until the next annual meeting of stockholders or until a successor shall have been duly-elected and qualified. (b) If, after the filling of any vacancy by the directors, the directors then in office who have been elected by the stockholders shall constitute less than a majority of the directors then in office, any holder or holders of an aggregate of five percent (5%) or more of the total number of shares entitled to vote may call a special meeting of stockholders to be held to elect the entire Board of Directors. The term of office of any director shall terminate upon such election of a successor. Section 2.06 Regular Meetings. Immediately following the adjournment of, and at the same place as, the annual meeting of the stockholders, the Board of Directors, including directors newly elected, shall hold its annual meeting without notice, other than this provision, to elect officers of the corporation and to transact such further business as may be necessary or appropriate. The Board of Directors may provide by resolution the place, date and hour for holding additional regular meetings. -7- Section 2.07 Special Meetings. Special meetings of the Board of Directors may be called by the chairman and shall be called by the chairman upon the request of any two (2) directors or the President of the corporation. Section 2.08 Place of Meetings. Any meeting of the directors of the corporation may be held at its principal office in the State of Nevada, or at such other place in or out of the United States as the Board of Directors may designate. A waiver or notice signed by the directors may designate any place for the holding of such meeting. Section 2.09 Notice of Meetings. Except as otherwise provided in section 2.06, the chairman shall deliver to all directors written or printed notice of any special meeting, at least three (3) days before the date of such meeting, by delivery of such notice personally or mailing such notice first class mail, or by telegram. If mailed, the notice shall be deemed delivered two (2) business days following the date the same is deposited in the United States mail, postage prepaid. Any director may waive notice of any meeting, and the attendance of a director at a meeting shall constitute a waiver of notice of such meeting, unless such attendance is for the express purpose of objecting to the transaction of business threat because the meeting is not properly called or convened. Section 2.10 Quorum: Adjourned Meetings. (a) A majority of the Board of Directors in office shall constitute a quorum. (b) At any meeting of the Board of Directors where a quorum is not present, a majority of those present may adjourn, from time to time, until a quorum is present, and no notice of such adjournment shall be required. At any adjourned meeting where a quorum is present, any business may be transacted which could have been transacted at the meeting originally called. Section 2.11 Action Without Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if a written consent thereto is signed by all of the members of the Board of Directors or of such committee. Such written consent or consents shall be filed with the minutes of the proceedings of the Board of Directors or committee. Such action by written consent shall have the same force and effect as the unanimous vote of the Board of Directors or committee. Section 2.12 Telephonic Meetings. Meetings of the Board of Directors may be held through the use of a conference telephone or similar communications equipment so long as all members participating in such meeting can hear one another at the -8- time of such meeting. Participation in such a meeting constitutes presence in person at such meeting. Section 2.13 Board Decisions. The affirmative vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 2.14 Powers and Duties. (a) Except as otherwise provided in the Articles of Incorporation or the laws of the State of Nevada, the Board of Directors is invested with the complete and unrestrained authority to manage the affairs of the corporation, and is authorized to exercise for such purpose as the general agent of the corporation, its entire corporate authority in such manner as it sees fit. The Board of Directors may delegate any of its authority to manage, control or conduct the current business of the corporation to any standing or special committee or to any officer or agent and to appoint any persons to be agents of the corporation with such powers, including the power to sub-delegate, and upon such terms as may be deemed fit. (b) The Board of Directors shall present to the stockholders at annual meetings of the stockholders, and when called for by a majority vote of the stockholders at a special meeting of the stockholders, a full and clear statement of the condition of the corporation, and shall, at request, furnish each of the stockholders with a true copy thereof. (c) The Board of Directors, in its discretion, may submit any contract or act for approval or ratification at any annual meeting of the stockholders or any special meeting properly called for the purpose of considering any such contract or act, provided a quorum is present. The contract or act shall be valid and binding upon the corporation and upon all the stockholders thereof, if approved and ratified by the affirmative vote of a majority of the stockholders at such meeting. (d) In furtherance and not in limitation of the powers conferred by the laws of the State of Nevada, the Board of Directors is expressly authorized and empowered to issue stock of the Corporation for money, property, services rendered, labor performed, cash advanced, acquisitions for other corporations or for any other assets of value in accordance with the action of the Board of Directors without vote or consent of the stockholders and the judgment of the Board of Directors as to the value received and in return therefore shall be conclusive and said stock, when issued, shall be fully-paid and non-assessable. Section 2.15 Compensation. The directors shall be allowed and paid all necessary expenses incurred in attending any meetings of the Board, but shall not receive any compensation for -9- their services as directors until such time as the corporation is able to declare and pay dividends on its capital stock. Section 2.16 Board Officers. (a) At its annual meeting, the Board of Directors shall elect, from among its members, a chairman to preside at the meetings of the Board of Directors. The Board of Directors may also elect such other board officers and for such term as it may, from time to time, determine advisable. (b) Any vacancy in any board office because of death, resignation, removal or otherwise may be filled by the Board of Directors for the unexpired portion of the term of such office. Section 2.17 Order of Business. The order of business at any meeting of the Board of Directors shall be as follows: (1) Determination of members present and existence of quorum; (2) Reading and approval of the minutes of any previous meeting or meetings; (3) Reports of officers and committeemen; (4) Election of officers; (5) Unfinished business; (6) New business; (7) Adjournment. ARTICLE III OFFICERS Section 3.01 Election. The Board of Directors, at its first meeting following the annual meeting of stockholders, shall elect a President, a Secretary, a Chief Financial Officer and a Treasurer to hold office for one (1) year next coming and until their successors are elected and qualify. Any person may hold two or more offices. The Board of Directors may, from time to time, by resolution, appoint one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and transfer agents of the corporation as it may deem advisable; prescribe their duties; and fix their compensation. Section 3.02 Removal; Resignation. Any officer or agent elected or appointed by the Board of Directors may be removed by it whenever, in its judgment, the best interest of the -10- corporation would be served thereby. Any officer may resign at any time upon written notice to the corporation without prejudice to the rights, if any, of the corporation under any contract to which the resigning officer is a party. Section 3.03 Vacancies. Any vacancy in any office because of death, resignation, removal, or otherwise may be filled by the Board of Directors for the unexpired portion of the term of such office. Section 3.04 President. The President shall be the general manager and executive officer of the corporation, subject to the supervision and control of the Board of Directors, and shall direct the corporate affairs, with full power to execute all resolutions and orders of the Board of Directors not especially entrusted to some other officer of the corporation. The President shall preside at all meetings of the stockholders and shall sign the certificates of stock issued by the corporation, and shall perform such other duties as shall be prescribed by the Board of Directors. Unless otherwise ordered by the Board of Directors, the President shall have full power and authority on behalf of the corporation to attend and to act and to vote at any meetings of the stockholders of any corporation in which the corporation may hold stock and, at any such meetings, shall possess and may exercise any and all rights and powers incident to the ownership of such stock. The Board of Directors, by resolution from time to time, may confer like powers on any person or persons in place of the President to represent the corporation for these purposes. Section 3.05 Vice President. The Board of Directors may elect one or more Vice Presidents who shall be vested with all the powers and perform all the duties of the President whenever the President is absent or unable to act, including the signing of the certificates of stock issued by the corporation, and the Vice President shall perform such other duties as shall be prescribed by the Board of Directors. Section 3.06 Secretary. The Secretary shall keep the minutes of all meetings of the stockholders and the Board of Directors in books provided for that purpose. The Secretary shall attend to the giving and service of all notices of the corporation, may sign with the President in the name of the corporation all contracts authorized by the Board of Directors or appropriate committee, shall have the custody of the corporate seal, shall affix the corporate seal to all certificates of stock duly issued by the corporation, shall have charge of stock certificate books, transfer books and stock ledgers, and such other books and papers as the Board of Directors or appropriate committee may direct, and shall, in general perform all duties incident to the office of the Secretary. All corporate books kept -11- by the Secretary shall be open for examination by any director at any reasonable time. Section 3.07 Assistant Secretary. The Board of Directors may appoint an Assistant Secretary who shall have such powers and perform such duties as may be prescribed for him by the Secretary of the corporation or by the Board of Directors. Section 3.08 Chief Financial Officer. The Chief Financial Officer shall be the chief financial officer of the corporation, subject to the supervision and control of the Board of Directors, and shall have custody of all the funds and securities of the corporation. When necessary or proper, the Chief Financial Officer shall endorse on behalf of the corporation for collection checks, notes and other obligations, and shall deposit all monies to the credit of the corporation in such bank or banks or other depository as the Board of Directors may designate, and shall sign all receipts and vouchers for payments made by the corporation. Unless otherwise specified by the Board of Directors, the Chief Financial Officer shall sign with the President all bills of exchange and promissory notes of the corporation, shall also have the care and custody of the stocks, bonds, certificates, vouchers, evidence of debts, securities and such other property belonging to the corporation as the Board of Directors shall designate, and shall sign all papers required by law, by these By-laws or by the Board of Directors to be signed by the treasurer. The Chief Financial Officer shall enter regularly in the books of the corporation, to be kept for that purpose, full and accurate accounts of all monies received and paid on account of the corporation and whenever required by the Board of Directors, the treasurer shall render a statement of any or all accounts. The Chief Financial Officer shall at all reasonable times exhibit the books of account to any directors of the corporation and shall perform all acts incident to the position of Chief Financial Officer subject to the control of the Board of Directors. The Chief Financial Officer shall, if required by the Board of Directors, give a bond to the corporation in such sum and with such security as shall be approved by the Board of Directors for the faithful performance of all the duties of the Chief Financial Officer and for restoration to the corporation in the event of the Chief Financial Officer's death, resignation, retirement, or removal from office, of all books, records, papers, vouchers, money and other property belonging to the corporation. The expense of such bond shall be borne by the corporation. Section 3.09 Treasurer. The Board of Directors shall appoint a Treasurer who shall have such powers and perform such duties as may be prescribed by the Chief Financial Officer of the corporation or by the Board of Directors, and the Board of Directors may require the Treasurer to give a bond to the corporation in such sum and with such security as it may approve, for the faithful performance of the duties of Treasurer, and for -12- the restoration to the corporation, in the event of the Treasurer's death, resignation, retirement or removal from office, of all books, records, papers, vouchers, money and other property belonging to the corporation. The expense of such bond shall be borne by the corporation. Section 3.10 Assistant Treasurer. The Board of Directors may appoint an Assistant Treasurer who shall have such powers and perform such duties as may be prescribed for him by the Chief Financial Officer of the corporation or by the Board of Directors. ARTICLE IV CAPITAL STOCK Section 4.01 Issuance. Shares of capital stock of the corporation shall be issued in such manner and at such times and upon such conditions as shall be prescribed by the Board of Directors. Section 4.02 Certificates. Ownership in the corporation shall be evidenced by certificates for shares of stock in such form as shall be prescribed by the Board of Directors, shall be under the seal of the corporation and shall be signed by the President or the Vice President and also by the Secretary or an Assistant Secretary. Each certificate shall contain the name of the record holder, the number, designation, if any, class or series of shares represented, a statement of summary of any applicable rights, preferences, privileges, or restrictions thereon, and a statement that the shares are assessable, if applicable. All certificates shall be consecutively numbered. The name and address of the stockholder, the number of shares, and the date of issue shall be entered on the stock transfer books of the corporation. Section 4.03 Surrender: Lost or Destroyed Certificates. All certificates surrendered to the corporation, except those representing shares of treasury stock, shall be canceled and no new certificates shall be issued until the former certificate for a like number of shares shall have been canceled, except that in case of a lost, stolen, destroyed or mutilated certificate, a new one may be issued therefor. However, any stockholder applying for the issuance of a stock certificate in lieu of one alleged to have been lost, stolen, destroyed or mutilated shall, prior to the issuance of a replacement, provide the corporation with his, her or its affidavit of the facts surrounding the loss, theft, destruction or mutilation and an indemnity bond in an amount and upon such terms as the treasurer, or the Board of Directors, shall require. In no case shall the bond be in amount less than twice the current market value of the stock and it shall indemnify the corporation against any loss, -13- damage, cost or inconvenience arising as a consequence of the issuance of a replacement certificate. Section 4.04 Replacement Certificate. When the Articles of Incorporation are amended in any way affecting the statements contained in the certificates for outstanding shares of capital stock of the corporation or it becomes desirable for any reason, including, without limitation, the merger or consolidation of the corporation with another corporation or the reorganization of the corporation, to cancel any outstanding certificate for shares and issue a new certificate therefor conforming to the rights of the holder, the Board of Directors may order any holders of outstanding certificates for shares to surrender and exchange the same for new certificates within a reasonable time to be fixed by the Board of Directors. The order may provide that a holder of any certificate(s) ordered to be surrendered shall not be entitled to vote, receive dividends or exercise any other rights of stockholders until the holder has complied with the order provided that such order operates to suspend such rights only after notice and until compliance. Section 4.05 Transfer of Shares. No transfer of stock shall be valid as against the corporation except on surrender and cancellation by the certificate therefor, accompanied by an assignment or transfer by the registered owner made either in person or under assignment. Whenever any transfer shall be expressly made for collateral security and not absolutely, the collateral nature of the transfer shall be reflected in the entry of transfer on the books of the corporation. Section 4.06 Transfer Agent. The Board of Directors may appoint one or more transfer agents and registrars of transfer and may require all certificates for shares of stock to bear the signature of such transfer agent and such registrar of transfer. Section 4.07 Stock Transfer Books. The stock transfer books shall be closed for a period of ten (10) days prior to all meetings of the stockholders and shall be closed for the payment of dividends as provided in Article V hereof and during such periods as, from time to time, may be fixed by the Board of Directors, and, during such periods, no stock shall be transferable. Section 4.08 Miscellaneous. The Board of Directors shall have the power and authority to make such rules and regulations not inconsistent herewith as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the corporation. -14- ARTICLE V DIVIDENDS Section 5.01 Dividends may be declared, subject to the provisions of the laws of the State of Nevada and the Articles of Incorporation, by the Board of Directors at any regular or special meeting and may be paid in cash, property, shares of corporate stock, or any other medium. The Board of Directors may fix in advance a record date, as provided in Section 1.06 of these By-laws, prior to the dividend payment for the purpose of determining stockholders entitled to receive payment of any dividend. The Board of Directors may close the stock transfer books for such purpose for a period of not more than ten (10) days prior to the payment date of such dividend. ARTICLE VI OFFICES; RECORDS; REPORTS; SEAL AND FINANCIAL MATTERS Section 6.01 Principal Office. The principal office of the corporation in the State of Nevada shall be located at the office of the corporation's resident agent, and the corporation may have an office in any other state or territory as the Board of Directors may designate. Section 6.02 Records. A duplicate of the stock transfer books and a certified copy of the By-laws, Articles of Incorporation, any amendments thereto, and the minutes of the proceedings of the stockholders, the Board of Directors, and committees of the Board of Directors shall be kept at the principal office of the corporation for the inspection of all who have the right to see the same and for the transfer of stock. All other books of the corporation shall be kept at such places as may be prescribed by the Board of Directors. Section 6.03 Financial Report on Request. Any stockholder or stockholders holding at least five percent (5%) of the outstanding shares of any class of stock may make a written request for an income statement of the corporation for the three (3) month, six (6) month, or nine (9) month period of the current fiscal year ended more than thirty (30) days prior to the date of the request and a balance sheet of the corporation as of the end of such period. In addition, if no annual report for the last fiscal year has been sent to stockholders, such stockholder or stockholders may make a request for a balance sheet as of the end of such fiscal year and an income statement and statement of changes in financial position for such fiscal year. The statement shall be delivered or mailed to the person making the request within thirty (30) days thereafter. A copy of the statements shall be kept on file in the principal office of the corporation for twelve (12) months, and such copies shall be exhibited at all reasonable times to any stockholder demanding an examination of them or a copy shall be mailed to each stockholder. Upon request by any stockholder, there shall be mailed to the stockholder a copy of the last annual, semiannual or quarterly income statement which it has prepared and a balance sheet as of the end of the -15- period. The financial statements referred to in this Section 6.03 shall be accompanied by the report thereon, if any, of any independent accountants engaged by the corporation or the certificate of an authorized officer of the corporation that such financial statements were prepared without audit from the books and records of the corporation. Section 6.04 Right of Inspection. (a) The accounting books and records and minutes of proceedings of the stockholders and the Board of Directors and committees of the Board of Directors shall be open to inspection upon the written demand of any stockholder or holder of a voting trust certificate at any reasonable time during usual business hours for a purpose reasonably related to such holder's interest as a stockholder or as the holder of such voting trust certificate. This right of inspection shall extend to the records of the subsidiaries, if any, of the corporation. Such inspection may be made in person or by agent or attorney, and the right of inspection includes the right to copy and make extracts. (b) Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation and/or its subsidiary corporations. Such inspection may be made in person or by agent or attorney, and the right of inspection includes the right to copy and make extracts. Section 6.05 Corporate Seal. The Board of Directors may, by resolution, authorize a seal, and the seal may be used by causing it, or a facsimile, to be impressed or affixed or reproduced or otherwise. Except when otherwise specifically provided herein, any officer of the corporation shall have the authority to affix the seal to any document requiring it. Section 6.06 Fiscal Year. The fiscal year-end of the corporation shall be the calendar year or such other term as may be fixed by resolution of the Board of Directors. Section 6.07 Reserves. The Board of Directors may create, by resolution, out of the earned surplus of the corporation such reserves as the directors may, from time to time, in their discretion, think proper to provide for contingencies, or to equalize dividends or to repair or maintain any property of the corporation, or for such other purpose as the Board of Directors may deem beneficial to the corporation, and the directors may modify or abolish any such reserves in the manner in which they were created. -16- ARTICLE VII INDEMNIFICATION Section 7.01 Indemnification. The corporation shall, unless prohibited by Nevada Law, indemnify any person (an "Indemnitee") who is or was involved in any manner (including, without limitation, as a party or a witness) or is threatened to be so involved in any threatened, pending or completed action suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative, including without limitation, any action, suit or proceeding brought by or in the right of the corporation to procure a judgment in its favor (collectively, a "Proceeding") by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise, against all Expenses and Liabilities actually and reasonably incurred by him in connection with such Proceeding. The right to indemnification conferred in this Article shall be presumed to have been relied upon by the directors, officers, employees and agents of the corporation and shall be enforceable as a contract right and inure to the benefit of heirs, executors and administrators of such individuals. Section 7.02 Indemnification Contracts. The Board of Directors is authorized on behalf of the corporation, to enter into, deliver and perform agreements or other arrangements to provide any Indemnitee with specific rights of indemnification in addition to the rights provided hereunder to the fullest extent permitted by Nevada Law. Such agreements or arrangements may provide (i) that the Expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding, must be paid by the corporation as they are incurred and in advance of the final disposition of any such action, suit or proceeding provided that, if required by Nevada Law at the time of such advance, the officer or director provides an undertaking to repay such amounts if it is ultimately determined by a court of competent jurisdiction that such individual is not entitled to be indemnified against such expenses, (iii) that the Indemnitee shall be presumed to be entitled to indemnification under this Article or such agreement or arrangement and the corporation shall have the burden of proof to overcome that presumption, (iii) for procedures to be followed by the corporation and the Indemnitee in making any determination of entitlement to indemnification or for appeals therefrom and (iv) for insurance or such other Financial Arrangements described in Paragraph 7.02 of this Article, all as may be deemed appropriate by the Board of Directors at the time of execution of such agreement or arrangement. Section 7.03 Insurance and Financial Arrangements. The corporation may, unless prohibited by Nevada Law, purchase and maintain insurance or make other financial arrangements ("Financial Arrangements") on behalf of any Indemnitee for any liability asserted against him and liability and expenses -17- incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the corporation has the authority to indemnify him against such liability and expenses. Such other Financial Arrangements may include (i) the creation of a trust fund, (ii) the establishment of a program of self-insurance, (iii) the securing of the corporation's obligation of indemnification by granting a security interest or other lien on any assets of the corporation, or (iv) the establishment of a letter of credit, guaranty or surety. Section 7.04 Definitions. For purposes of this Article: Expenses. The word "Expenses" shall be broadly construed and, without limitation, means (i) all direct and indirect costs incurred, paid or accrued, (ii) all attorneys' fees, retainers, court costs, transcripts, fees of experts, witness fees, travel expenses, food and lodging expenses while traveling, duplicating costs, printing and binding costs, telephone charges, postage, delivery service, freight or other transportation fees and expenses, (iii) all other disbursements and out-of-pocket expenses, (iv) amounts paid in settlement, to the extent permitted by Nevada Law, and (v) reasonable compensation for time spent by the Indemnitee for which he is otherwise not compensated by the corporation or any third party, actually and reasonably incurred in connection with either the appearance at or investigation, defense, settlement or appeal of a Proceeding or establishing or enforcing a right to indemnification under any agreement or arrangement, this Article, the Nevada Law or otherwise; provided, however, that "Expenses" shall not include any judgments or fines or excise taxes or penalties imposed under the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or other excise taxes or penalties. Liabilities. "Liabilities" means liabilities of any type whatsoever, including, but not limited to, judgments or fines, ERISA or other excise taxes and penalties, and amounts paid in settlement. Nevada Law. "Nevada Law" means Chapter 78 of the Nevada Revised Statutes as amended and in effect from time to time or any successor or other statutes of Nevada having similar import and effect. This Article. "This Article" means Paragraphs 7.01 through 7.04 of these bylaws or any portion of them. Power of Stockholders. Paragraphs 7.01 through 7.04, including this Paragraph, of these Bylaws may be amended by the stockholders only by vote of the holders of sixty-six and two-thirds percent (66 2/3%) of the entire number of shares of -18- each class, voting separately, of the outstanding capital stock of the corporation (even though the right of any class to vote is otherwise restricted or denied); provided, however, no amendment or repeal of this Article shall adversely affect any right of any Indemnitee existing at the time such amendment or repeal becomes effective. Power of Directors. Paragraphs 7.01 through 7.04 and this Paragraph of these Bylaws may be amended or repealed by the Board of Directors only by vote of eighty percent (80%) of the total number of Directors and the holders of sixty-six and two-thirds percent (66 2/3) of the entire number of shares of each class, voting separately, of the outstanding capital stock of the corporation (even though the right of any class to vote is otherwise restricted or denied); provided, however, no amendment or repeal of this Article shall adversely affect any right of any Indemnitee existing at the time such amendment or repeal becomes effective. ARTICLE VIII BY-LAWS Section 8.1 Amendment. Amendments and changes of these By-Laws may be made at any regular or special meeting of the Board of Directors by a vote of not less than all of the entire Board, or may be made by a vote of, or a consent in writing signed by the holders of a majority of the issued and outstanding capital stock. Section 8.2 Additional By-Laws. Additional by-laws not inconsistent herewith may be adopted by the Board of Directors at any meeting of the Board of Directors at which a quorum is present by an affirmative vote of a majority of the directors present or by the unanimous consent of the Board of Directors in accordance with Section 2.11 of these By-laws -19- EX-10.1 5 PORTAL SERVICES AGREEMENT PORTAL SERVICES AGREEMENT This Portal Services Agreement (this "Agreement") is entered into as of June 18, 1999 (the "Effective Date"), by and between Inktomi Corporation, a Delaware corporation with its principal place of business at 1900 South Norfolk Street, Suite 310, San Mateo, California, 94403 ("Inktomi") and BeFirst Internet Corporation, a Delaware corporation, with its principal place of business at 121 West 27th Street, Suite 903, New York, New York 10001 ("Customer"). RECITALS A. Inktomi utilizes its technology to provide a variety of services including without limitation those described on exhibits to this Agreement. B. Customer desires to retain Inktomi to provide certain of Inktomi's services to Customer in accordance with the terms and conditions of this Agreement. NOW THEREFORE, Inktomi and Customer agree as follows: AGREEMENT In consideration of the foregoing and the mutual promises contained herein the parties agree as follows: 1. Definitions. For purposes of this Agreement, in addition to the other terms defined elsewhere in this Agreement. the following terms shall have the meanings set forth below: 1.1. "Intellectual Property Rights" means any and all rights existing from time to time under patent law, copyright law, semiconductor chip protection law, moral rights law, trade secret law, trademark law, unfair competition law, publicity rights law, privacy rights law, and any and all other proprietary rights, and any and all applications, renewals, extensions and restorations thereof, now or hereafter in force and effect worldwide. 1.2. "Inktomi Icon" means an icon to be provided by Inktomi from time to time that indicates that Inktomi's technology is being used. 1.3. "Inktomi Technology" means the computer software, technology and/or documentation which is supplied by Inktomi for use in or in connection with delivery of a Service, including without limitation all source code and object code therefor and all algorithms, ideas and Intellectual Property Rights therein. The definition of "Inktomi Technology" shall include any supplemented definition set forth in an Exhibit for a Service. 1.4. "Services" means the various services to be provided by Inktomi for Customer under this Agreement, as more fully described on the Exhibits attached to this Agreement. 1.5. "Site" means a Web site and/or sites established and maintained by Customer or other authorized entity (to the extent permitted) through which end-users may access a Service as set forth in the Exhibit for such Service. 1.6."Term" shall have the meaning indicated in Section 9. 1.7. "Web" means the World Wide Web, containing, inter alia, pages written in hypertext markup language (HTML) and/or any similar successor technology. 1.8. "Web page" means a document on the Internet which may be viewed in its entirety without leaving the applicable distinct URL address. 1.9. "Web site" means a collection of inter-related Web pages. 2. Provision of Services. 2.1. Services. Subject to the terms and conditions of this Agreement, Inktomi shall provide each Service substantially in accordance with the functionality specifications, performance criteria and limitations specified in the Exhibit applicable to such Service. 2.2. Additional Services. Upon request, and provided that Customer is current with service fees due under this Agreement, Inktomi may provide Customer additional services in addition to the Services set forth in the applicable Exhibit. Such additional service shall be mutually agreed upon by the parties and shall be set forth, in Inktomi's reasonable discretion, on a written work authorization or an additional Exhibit to this Agreement which in either case has been executed by both parties. Such additional service, if provided pursuant to: (i) a written work authorization shall be provided at Inktomi's then applicable consulting rates and charges, and shall be deemed rendered pursuant to and in accordance with the terms of this Agreement; or (ii) an additional Exhibit shall be provided in accordance with the rates, charges, terms and conditions of such Exhibit and the terms of this Agreement. Any work authorizations issued under this Agreement shall be sequentially numbered. 2.3. End-User Support. Inktomi, shall provide technical support for a Service to the extent set forth in the Exhibit applicable to such Service. Except as set forth in such Exhibit, Customer, at its own expense, shall provide all support of the Site. 2.4. Nonexclusive Services. Customer understands that Inktomi will provide the Services on a nonexclusive basis. Customer acknowledges that Inktomi has customized and provided, and will continue to customize and provide, its software and technology to other parties for use in connection with a variety of applications, including, without limitation, search engine, e-commerce and communication applications. Nothing in this Agreement be deemed to limit or restrict Inktomi from customizing and providing its software and technology to other parties for any purpose or in any, way, affect the rights granted to such other parties. Inktomi reserves the right to notify other customers of the signing of this Agreement, but agrees not to provide such notice earlier than two (2) weeks before a public announcement by Customer of its business relationship with Inktomi or two (2) weeks before commercial launch of a Service provided by Inktomi under this Agreement. whichever is later. Customer may not make any public announcement involving Inktomi without Inktomi approval. 3. Intellectual Property Licenses/Ownership. 3.1. Trademark Licenses. Inktomi hereby grants Customer a nontransferable, nonexclusive license to display the Inktomi Icon solely as required in order to comply with its attribution obligations for each Service. Customer hereby grants to Inktomi a nontransferable, nonexclusive license under Customer's trademarks during the Term to advertise that Customer is using Inktomi's services. Promptly following the Effective Date, each party will provide to the other party its trademark usage guidelines, as such guidelines may be amended from time to time. All uses of trademarks as set forth -2- above shall be in accordance with such guidelines. For uses outside of such guidelines, a party will submit all materials of any kind containing the other party's nonconforming trademarks to the other party before release to the public for inspection, and such other party will have the right to approve or disapprove such material prior to its distribution. Except as set forth in this Section, nothing in this Agreement shall grant or shall be deemed to grant to one party any right, title or interest in or to the other party's trademarks. All use of Customer trademarks by Inktomi shall inure to the benefit of Customer, and all use of Inktomi trademarks by Customer shall inure to the benefit of Inktomi. At no time during or after the Term shall one party challenge or assist others to challenge the trademarks of the other party (except to the extent such restriction is prohibited by applicable law) or the registration thereof or attempt to register any trademarks, marks or trade names confusingly similar to those of the other party. 3.2. Inktomi Technology. As between Customer and Inktomi, Customer acknowledges that Inktomi owns all right, title and interest in and to the Inktomi Technology (except for any software licensed by third parties to Inktomi), and that Customer shall not acquire any right, title, and interest in or to the Inktomi Technology, except as expressly set forth in this Agreement. Customer shall not modify, adapt, translate, prepare derivative works from, decompile, reverse engineer, disassemble or otherwise attempt to derive source code from any Inktomi Technology, except and only to the extent that such activity is expressly permitted by applicable law notwithstanding this limitation. Customer will not remove, obscure, or alter Inktomi's copyright notice, trademarks, or other proprietary rights notices affixed to or contained within any Inktomi software or documentation. 4. Warranties and Disclaimer. Each party agrees as follows: 4.1. Inktomi Warranties. Inktomi warrants that: (i) it has full power and authority to enter into this Agreement: and (ii) it has not previously and will not grant any rights in the Inktomi Technology to any third party that are inconsistent with the rights granted to Customer hereunder, and (iii) throughout the Term, each Service provided for Customer and the Inktomi Technology provided in connection with each such Service shall be free of material errors and defects and shall perform substantially in accordance with the performance criteria set forth on the applicable Exhibit for such Service. Inktomi does not warrant that the Services will meet all of Customer's requirements or that performance of the Services will be uninterrupted or error-free. INKTOMI MAKES NO OTHER WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR USE, AND NONINFRINGEMENT. IN PARTICULAR, INKTOMI MAKES NO WARRANTIES WHATSOEVER REGARDING THE NATURE OF THE MATERIAL CONTAINED IN THE DATABASE AND TO THE MAXIMUM EXTENT PERMITTED BY LAW DISCLAIMS ANY RESPONSIBILITY OR LIABILITY FOR SUCH MATERIAL. 4.2. Inktomi Obligations. Inktomi's sole obligation under the foregoing warranties is to use reasonable efforts to correct any portion of the Inktomi Technology or its business practices that does not meet the foregoing warranties within a reasonable period of time, and if Inktomi fails to do so, then Customer shall have the right to immediately terminate this Agreement and receive as a sole remedy a refund of all amounts advanced by Customer for the Agreement following the date of such termination. 4.3. Customer Warranties. Customer warrants that: (i) it has full power and authority to enter into this Agreement: (ii) it will seek all necessary governmental approvals required to effectuate this Agreement; and (iii) it shall perform the online services provided by Customer through the Site in accordance with all federal. state and local laws, including all professional registration requirements -3- related thereto. CUSTOMER MAKES NO OTHER WARRANTIES OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR USE, AND NONINFRINGEMENT. 5. Payments. 5.1. Fees. Customer shall pay Inktomi fees for each of the Services in accordance with the applicable Exhibit. 5.2. Records. To the extent applicable for each Service and solely to the extent each party has obligations to make payments to the other party in connection with such Service each party shall: (i) maintain all records relevant to calculating service fees and/or revenues for a Service for a two (2) year period following the year in which any payments pertaining to such service fees and/or revenues were due; and (ii) have the right to examine the other party's records from time to time but no more than once every six (6) months to determine the correctness of any payment made under this Agreement. Such examination shall be conducted at reasonable times during the audited party's normal business hours and upon at least ten (10) business days' advance notice and in a manner so as not to interfere unreasonably with the conduct of the audited party's business. If any such examination indicates that the audited party has underpaid by more than five percent (5%) of the aggregate payments due for the period subject to such examination, the audited party shall reimburse the other party for reasonable costs of such examination. 5.3. Taxes. Customer shall be responsible for all sales taxes, use taxes, withholding taxes, value added taxes and any other similar taxes imposed by any federal, state, provincial or local governmental entity on the transactions contemplated by this Agreement, excluding taxes based upon Inktomi's net income. When Inktomi has the legal obligation to pay or collect such taxes, the appropriate amount shall be invoiced to and paid by Customer unless Customer provides Inktomi with a valid tax exemption certificate authorized by the appropriate taxing authority. 5.4. Payment. All fees quoted and payments made hereunder shall be in U.S. Dollars. Customer shall pay all amounts due under this Agreement to Inktomi at the address indicated at the address indicated at the beginning of this Agreement or such other location as Inktomi designated in writing. 6. Confidentiality. 6.1. Definition of Confidential Information. All information and documents disclosed or produced by either party in the course of this Agreement which are disclosed in written form and identified by a marking thereon as proprietary, or oral information which is defined at the time of disclosure and confirmed in writing within ten (10) business days of its disclosure, shall be deemed the "Confidential Information" of the disclosing party. Notwithstanding the above, the parties agree that any information (in any form, whether in tangible or Intangible) relating to the Inktomi Technology is considered Confidential Information of Inktomi. 6.2. Treatment of Confidential Information. Each party agrees to protect the other party's Confidential Information in the same manner as such party protects its own Confidential Information of substantially similar proprietary value, but in no case less than with reasonable care. Each party agrees that it will use the Confidential Information of the other party only for the purposes of this -4- Agreement and that it will not divulge, transfer, sell, license, lease, or otherwise disclose or release any such information or documents to third parties, with the exception of: (1) its employees or subcontractors who require access to such for purposes of carrying out such party's obligation hereunder; and (ii) persons who are employed as auditors by a public accounting firm or by a federal or state agency. Each party will use reasonable efforts to advise any person obtaining Confidential Information that such information is, proprietary and to obtain a written agreement obligating such person to maintain the confidentiality of any Confidential Information belonging to the party or its suppliers. 6.3. No Other Confidential Information. Neither party shall have any obligation under this Section 6 for information of the other party which the receiving party can substantiate with documentary evidence that has been or is: (1) developed by the receiving party independently and without the benefit of information disclosed hereunder by the disclosing party; (ii) lawfully obtained by the receiving party from a third party without restriction and without breach of this Agreement; (iii) publicly available without breach of this Agreement; or (iv) known to the receiving party prior to its receipt from the disclosing party. 7. Indemnification. 7.1. Inktomi Indemnification. With regard to each Service, Inktomi shall indemnify Customer solely as set forth on the applicable Exhibit for such Service. 7.2. Customer Indemnification. Customer shall defend and/or settle, and pay damages awarded pursuant to, any third party claim brought against Inktomi: (i) related to the services provided by Customer through the Site or representations, claims or statements pertaining thereto, and (ii) which, if true, would constitute a breach of any warranty, representation or covenant made by Customer under Section 4.3; provided, that, Inktomi promptly notifies Customer in writing of any such claim and promptly tenders the control of the defense and settlement of any such claim to Customer at Customer's expense and with Customer's choice of counsel. Inktomi shall cooperate with Customer, at Customer's expense, in defending or settling such claim and Inktomi may join in defense with counsel of its choice at its own expense. Customer shall not reimburse Inktomi for any expenses incurred by Inktomi without the prior written approval of Customer. 8. Limitation of Liability. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT WILL THE TOTAL LIABILITY OF INKTOMI AND ITS LICENSORS AND SUPPLIERS ARISING OUT OF THIS AGREEMENT EXCEED THE NET AMOUNT INKTOMI HAS ACTUALLY RECEIVED FROM CUSTOMER UNDER THIS AGREEMENT OVER THE PREVIOUS TWELVE (12) MONTHS. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, INKTOMI AND ITS LICENSORS AND SUPPLIERS SHALL NOT BE LIABLE FOR ANY LOST PROFITS OR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, OR FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING DAMAGES FOR LOST DATA, HOWEVER CAUSED AND UNDER ANY THEORY OF LIABILITY, INCLUDING BUT NOT LIMITED TO CONTRACT, PRODUCTS LIABILITY, STRICT LIABILITY AND NEGLIGENCE, AND WHETHER OR NOT IT WAS OR SHOULD HAVE BEEN AWARE OR ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. -5- 9. Term and Termination. 9.1. Term. The term of this Agreement (the "Term") shall commence on the Effective Date and shall continue in force until the expiration or termination of the last Service. 9.2. Termination for Breach. Either party may suspend performance of and/or terminate this Agreement if the other party materially breaches any term or condition of this Agreement and fails to cure such breach within thirty (30) days after receiving written notice of the breach. 9.3. Termination due to Insolvency. Either party may suspend performance and/or terminate this Agreement if the other party becomes insolvent or makes any assignment for the benefit of creditors or similar transfer evidencing insolvency, or suffers or permits the commencement of any form of insolvency or receivership proceeding, or has any petition under bankruptcy law filed against it, which petition is not dismissed within sixty (60) days of such filing, or has a trustee or receiver appointed for its business or assets or any party thereof. 9.4. Effect of Termination. Upon the termination of this Agreement for any reason: (i) all license rights granted under this Agreement shall terminate; (ii) Customer shall immediately pay to Inktomi all amounts due and outstanding as of the date of such termination; and (iii) each party shall return to the other party, or destroy and certify the destruction of, all Confidential Information of the other party. 9.5. Survival. In the event of any termination or expiration of this Agreement for any reason, Sections 1, 3, 4, 5.2, 6, 7 (to the extent designated to survive in the applicable Exhibit), 8, 9, 10 and 11 shall survive termination or expiration of this Agreement. Neither party shall be liable to the other party for damages or equitable remedies of any sort resulting solely from terminating this Agreement in accordance with its terms. 9.6. Remedies. Each party acknowledges that its breach of the confidentiality or service/license restrictions contained herein may cause irreparable harm to the other party, the extent of which would be difficult to ascertain. Accordingly, each party agrees that, in addition to any other remedies to which the other party may be legally entitled, such party shall have the right to seek immediately injunctive relief in the event of a breach of such sections by the other party or any of its officers, employees, consultants or other agents. 10. Miscellaneous. 10.1. Understanding. Each party acknowledges that it has read this Agreement. understands it and agrees to be bound by it. Each party acknowledges that such party has not been induced to enter into such agreements by any representations or statements, oral or written, not expressly contained herein or expressly incorporated by reference. 10.2. Notice. Any notice required for or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated: (i) by personal delivery, when delivered personally: (ii) by overnight courier upon written verification of receipt; (iii) by telecopy or facsimile transmission when confirmed by telecopier or facsimile transmission report, or (iv) by certified or registered mail, return receipt requested, upon verification of receipt. All notices must be sent to the addresses first described above or to such other address that the receiving party may have provided for the purpose of notice in accordance with this Section. -6- 10.3. Assignment. Neither party may assign its rights or delegate its obligations under this Agreement without the other party's prior written consent, except to the surviving entity in a merger or consolidation in which it participates or to a purchaser of all or substantially all of its assets, so long as such surviving entity or purchaser shall expressly assume in writing the performance of all of the terms of this Agreement. 10.4. No Third Party Beneficiaries. All rights and obligations of the parties hereunder are personal to them. This Agreement is not intended to benefit, nor shall it be deemed to give rise to, any rights in any third party. 10.5. Governing Law. This Agreement will be governed and construed, to the extent applicable, in accordance with United States law, and otherwise, in accordance with California law, without regard to conflict of law principles. Except for claims relating to a breach of confidentiality under Section 6 or involving Intellectual Property Rights, any dispute or claim arising out of or in connection with this Agreement shall be finally settled by binding arbitration in San Mateo County, California under the Commercial Rules of the American Arbitration Association by one arbitrator appointed in accordance with said rules. Judgment on the award rendered by the arbitrator may be entered in any court having Jurisdiction thereof. In connection with any litigation between the parties hereto arising out of or relating to this Agreement, each party hereto irrevocably consents to the exclusive jurisdiction and venue in the federal and state courts located in San Francisco and/or San Mateo County. 10.6. Independent Contractors. The parties are independent contractors. Neither party shall be deemed to be an employee, agent, partner or legal representative of the other for any purpose and neither shall have any right, power or authority to create any obligation or responsibility on behalf of the other. 10.7. Force Majeure. Neither party shall be liable hereunder by reason of any failure or delay in the performance of its obligations hereunder (except for the payment of money) on account of strikes, shortages, riots, insurrection, fires, flood, storm, explosions, earthquakes, telecommunications outages, acts of God, war, governmental action, or any other cause which is beyond the reasonable control of such party. 10.8. Compliance with Law. Each party shall be responsible for compliance with all applicable laws, rules and regulations, if any, related to the performance of its obligations under this Agreement. 10.9. Waiver. The failure of either party to require performance by the other party of any provision shall not affect the full right to require such performance at any time thereafter; nor shall the waiver by either party of a breach of any provision hereof be taken or held to be a waiver of the provision itself. 10.10. Conflicts. In the event of a conflict between the terms of this Agreement and an Exhibit attached hereto, the terms of the Exhibit shall prevail. 10.11. Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be contrary to law, such provision shall be changed and interpreted so as to best accomplish the objectives of the original provision to the fullest extent allowed by law and the remaining provisions of this Agreement shall remain in full force and effect. -7- 10.12. Headings. The section headings appearing in this Agreement are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or extent of such paragraph, or in any way affect such agreements. 10.13. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which will be considered an original, but all of which together will constitute one and the same instrument. 10.14. Entire Agreement. This Agreement, Exhibits, Attachments and Schedules hereto, constitute the entire agreement between the parties with respect to the subject matter hereof. This Agreement supersedes, and the terms of this Agreement govern, any other prior or collateral agreements with respect to the subject matter hereof. Any amendments to this Agreement must be in writing and executed by an officer of the parties. IN WITNESS WHEREOF, the parties have caused this Portal Services Agreement to be signed by their duly authorized representatives. BeFirst Internet Corporation INKTOMI CORPORATION By: /s/ Craig Pisaris Henderson By: /s/ Jerry Kennelly ------------------------------- -------------------- Name: Craig A. Pisaris Henderson Name: Jerry Kennelly ----------------------------- ------------------- Title: President Title: CFO ---------------------------- ------------------ -8- EXHIBIT A-I TO THE PORTAL SERVICES AGREEMENT For BeFirst Internet Corporation ("Customer") GENERAL SEARCH SERVICES Customer's Site or Sites ("Site") shall be designated as follows: This Exhibit to the Portal Services Agreement (this "Exhibit"), in conjunction with the terms of the Portal Services Agreement (the "Agreement") shall constitute the terms and conditions pursuant to which Inktomi shall provide General Search Services to the Site set forth above: 1. Definitions. In addition to any terms defined in this Exhibit, the following terms shall have the meanings set forth below. Any other terms not otherwise defined in this Exhibit shall have the meanings prescribed to them in the Agreement. 1.1. "Affiliate" means with respect to any person or entity, any other person or entity directly or indirectly controlling or controlled by or under direct or indirect common control with such person or entity. "Control" means the possession of beneficial ownership of more than 50% of the stock or other similar interest entitled to vote for election of the Board of Directors or similar managing authority. 1.2. "Database" means Inktomi's full text index database of Web pages accessible by end users of the Site at any given time. The Database includes the "General Search Database." 1.3. "Search Database" is the database maintained as part of the General Search Services described on Attachment A to this Exhibit. 1.4. "General Search Services" means the Internet Search Engine services to be provided by Inktomi for Customer under this Exhibit, as more fully described on Attachment A to this Exhibit. 1.5. "Inktomi Data Protocol" means the written specification on how an Interface communicates and interacts with the Inktomi Search Engine. 1.6. "Inktomi Search Engine" means Inktomi's current Search Engine as of the Effective Date as the same may be: (i) updated as provided on Schedule 1 to the Agreement; and (ii) otherwise updated, upgraded, modified, changed, or enhanced by lnktomi from time to time at its sole discretion. The Inktomi Search Engine does not and will not include features, options and modules developed and customized specifically for third parties and provided to such third parties on an exclusive basis, or features, options, modules and future products which Inktomi licenses or provides separately. 1.7. "Inktomi Technology" means the lnktomi Search Engine, the Inktomi Data Protocol, the Interface Construction Tools and all other computer software, technology and/or documentation which is supplied by Inktomi for use in or in connection with delivery of the General Search Services, including, without limitation, all source code and object code therefor and all algorithms, ideas and Intellectual Property Rights therein. A1-1 1.8. "Interface" means the editorial and graphical content and design of the Web pages served to end users of the Site, including without limitation all Search Pages, Results Pages, instruction pages, frequently asked questions pages and any Site end user terms and guidelines. 1.9. "Interface Construction Tools" means all software tools, if any, in object code form, provided by Inktomi to assist Customer to build the Interface to the Inktomi Search Engine, including without limitation Inktomi's application server currently known as Forge. 1.10. "Results Pages" means all Web pages displaying search results presented to endusers directly as a result of accessing the query mechanisms of the Inktomi Search Engine. 1.11. "Results Set" means a set of results consisting of between zero and one hundred records presented in response to a search query. 1.12. "Search Engine" means computer software which crawls the Internet, downloads and analyzes text and other data, sorts and organizes the data, creates an index of accessible data, and after receiving a particular search request (in the form of a word query), locates material accessible in the database, and presents the results of the search. 1.13. "Search Pages" means all Web pages which enable end users of the Site to initiate and send search queries to the Inktomi Search Engine. 1.14. "Usage Data" means the demographic, psychographic, statistical and other end user data generated by operation of the lnktomi Search Engine in connection with the search services provided by Customer to end users of the Site, including without limitation all end user "click through" information, but excluding Web usage data generated by the Database. 2. Provision of General Search Services: Site Implementation. 2.1. General Search Services and Site Implementation. Subject to the terms and conditions of this Exhibit and the Agreement, Inktomi shall provide the General Search Services to Customer for use in the Site, such services to be provided substantially in accordance with the functionality specifications, performance criteria and limitations specified on Attachment A to this Exhibit. Inktomi, at its own expense, shall provide all data transmission capacity (bandwidth), diskstorage, server capacity and other hardware and software required to run the lnktomi Search Engine and maintain the Database. Customer, at its own expense, shall create the Interface to the Inktomi Search Engine for the Site, and shall provide all disk storage, server capacity and other hardware and software required to run and maintain the Site and the Interface, and to serve advertisements on the Interface. Inktomi shall provide reasonable assistance (through telephone, e-mail, the Web, or fax) to Customer during regular business hours regarding development of the Interface and integration of the same with the Inktomi Search Engine. Customer, at its own expense, shall provide all data transmission capacity (bandwidth) required to connect to and receive information from the Inktomi Search Engine. Customer may only utilize the General Search Services in conjunction with search services provided by Customer to end users of the Site, and Customer shall have no right to provide, distribute, resell or provide services based on the General Search Services or any information (including Results Sets) generated therefrom to any other third party. Customer may not cache Results Sets or any other information obtained from the Inktomi databases without the prior written consent of Inktomi, which will not be unreasonably withheld or delayed; and if Customer wishes to begin such caching, Inktomi and Customer will First agree on appropriate Customer reporting requirements to ensure proper accounting of payments hereunder. A1-2 2.2. Test Cluster. During the development period for the Interface, Customer shall only have access through the Inktomi Data Protocol to a non-production version of the Inktomi Search Engine (the "Test Cluster"). Upon completion of the Interface and all desired testing against the Test Cluster, Customer shall present the Interface to Inktomi for review and testing against the production version of the Inktomi Search Engine. Inktomi shall promptly notify Customer of any problems or issues discovered by Inktomi regarding the Interface. Once cleared by Inktomi, Inktomi shall provide access to Customer to the production version of the Inktomi Search Engine. Customer may run reasonable tests against the Test Cluster and the production version of the Inktomi Search Engine, provided however that Customer may not conduct any load testing (prior to commercial launch of its search service) without the prior consent of Inktomi. Load testing as used herein means the generation and delivery of more than five queries per second. There shall no service fee payable by Customer for searches run against the Test Cluster. 2.3. Delivery of Materials. Promptly following execution of this Exhibit, Inktomi shall provide the Inktomi Data Protocol and the Interface Construction Tools to Customer, which Customer may use solely in strict compliance with the terms of Section 4. 2.4. Technical Support. Inktomi, at its own expense, shall provide second level technical support services to Customer regarding the operation of the Inktomi Search Engine. Such support services will be provided as set forth on Schedule 1 of the Agreement. 3. Customer Obligations. 3.1. Technical Support. Except as set forth in Section 2.4, Customer at its own expense shall provide all support including, without limitation, first level Customer Support services to end-users of the Site. 3.2. Attribution. All Search Pages and Results Pages shall conspicuously display an icon to be provided by Inktomi (the "Inktomi Icon") that indicates that Inktomi's technology is being used. The Inktomi Icon shall measure at least 41 x 126 pixels and shall provide a link to a page of Inktomi's choice on Inktomi's Web site located at www.Inktomi.com. The placement of the Inktomi Icon on the Web page shall be at Customer's discretion. 4. Intellectual Property Licenses/Ownership. 4.1. Inktomi Data Protocol. Inktomi grants to Customer a nontransferable, nonexclusive license during the Term (as defined below) to use the Inktomi Data Protocol and the Interface Construction Tools solely to create and maintain the Interface to the Inktomi Search Engine for the Site. The license granted hereunder shall include the right to use the Interface Construction Tool or to develop an Interface to the Inktomi Search Engine for to Sites of Service Recipients. 4.2. Interface. As between Inktomi and Customer, Inktomi acknowledges that Customer owns all right, title and interest, including without limitation all Intellectual Property Rights, in and to the Interface (except for any software licensed by third parties to Customer and except for editorial content regarding the use and functionality of the Inktomi Search Engine provided by Inktomi to Customer for incorporation into the Site, which content shall be and remain Inktomi Technology), and that Inktomi shall not acquire any right, title or interest in or to the Interface, except as expressly set forth in this Exhibit or the Agreement. A1-3 4.3. Usage Data. The Usage Data belongs to Customer, provided however that lnktomi shall have the right, during the term of this Agreement, to use and redistribute the Usage Data solely for the purpose of billing Customer for the queries and for ascertaining trends and demographic preferences which can be used for targeting certain marketing campaigns at end users. 5. Payment. 5.1. Service Fees. Customer shall pay Inktomi service fees in the amount and on terms specified on Schedule 2 of the Agreement. 5.2. Records. For purposes of fulfilling its obligations under Section 5.2 of the Agreement, Customer shall keep complete and accurate records pertaining to the number of Results Sets served during the applicable period. 6. Indemnification. Inktomi shall defend and/or settle, and pay damages awarded pursuant to any third party claim brought against Customer alleging the software comprising the Inktomi Search Engine improperly includes any third party copyrighted subject matter, third party patented subject matter or third party trade secrets, provided that Customer promptly notifies Inktomi in writing of any such claim and promptly tenders the control of the defense and settlement of any such claim to Inktomi at Inktomi's expense and with Inktomi's choice of counsel. Customer shall cooperate with Inktomi, at Inktomi's expense, in defending or settling such claim and Customer may join in defense with counsel of its choice at its own expense. Inktomi shall not reimburse Customer for any expenses incurred by Customer without the prior written approval of Inktomi. The indemnification obligation set forth in this Section 6 shall terminate upon the expiration or termination of the General Search Services provided pursuant to this Exhibit. 7. Term. The term of this Exhibit (the "Term") shall commence upon the Effective Date and shall continue in force for a period of three (3) years, thereafter unless otherwise terminated in accordance with the terms of the Agreement. IN WITNESS WHEREOF, the parties have caused this Exhibit to the Agreement to be signed by their duly authorized representatives. BeFirst Internet Corporation INKTOMI CORPORATION By: /s/ Craig Pisaris Henderson By: /s/ Jerry Kennelly ----------------------------- --------------------- Name: Craig A. Pisaris Henderson Name: Jerry Kennelly --------------------------- ------------------- Title: President Title: CFO -------------------------- ------------------ A1-4 ATTACHMENT A TO EXHIBIT A-1 GENERAL SEARCH SERVICES Capitalized terms not otherwise defined in this Attachment shall have the meanings prescribed to them in the corresponding Exhibit to which this Attachment is attached or the Portal Services Agreement to which such Exhibit and Attachment are attached. General Search Services Inktomi will use the Inktomi Search Engine and its own editorial discretion to crawl the Internet, download and analyze text and other data, sort and organize the data, create an index of accessible data, and, after receiving a particular search request from an end user (in the form of a word query), locate material accessible in the General Search Database, and present the results of the search to the end user. Inktomi will serve end user search queries out of one or more of its search engine data centers at Inktomi's discretion. The functionality specifications and performance criteria applicable to such services are as follows: Functionality Specifications: lnktomi will operate the lnktomi Search Engine so as to enable end users of the Site to run queries against the General Search Database with the following functionality: o Ability to search by keyword, file type, domain (up to three levels), document title, modification dates, document contents, depth and metaword o Ability to search by full text and phrase, and search with Boolean operators (including AND, NOT and OR). Default search, barring user modification at query time by the end user, will be AND. o Search on included object, covering the following objects: Acrobat, Java applets, active x controls, audio, plugins, Flash, form, frame, image, script, Shockwave, table, video and vrml o Search on included file type, by file extension o Search on specific script language, covering Javascript and Vbscript o Limit search to words in the HTML "title" field o Grammatical stemming o Search by language o Case sensitivity support o Pornography filtration o Ability to selectively control the size of each Results Set (0-10 records, 11-20 records, 21-30 records, 31-50 records, 51-75 records, 76-100 records) Performance Criteria o Size of Database - Minimum 54 million documents for all queries and a minimum of 110 million documents that may be accessed for up to 20% of daily queries AA1-1 o Database Freshness - Objective is minimum 13 updates per year (approximately every 4 weeks, may vary depending on operational circumstances) o Uptime/Downtime - Minimum 99% uptime (1% downtime) over monthly windows. Downtime = any 1 minute period in which Inktomi Search Engine processes no requests. o Query/Response Speed - Average speed <= 750 milliseconds Reports Once a month, Inktomi will provide standard crawl and uptime reports to Customer for the General Search Services. Production Schedule Customer will begin work on constructing the Interface, and Inktomi will begin work on tuning its Search Engine to provide the services set forth herein promptly, upon execution of the Exhibit. Both parties will use commercially reasonable efforts so that the General Search Services are available to Customer for use in the Site within thirty (30) days following the Effective Date. AA1-2 SCHEDULE 1 TO THE PORTAL SERVICES AGREEMENT SUPPORT GUIDELINES FOR GENERAL SEARCH Definitions. (a) Hours of Operation. Inktomi will provide Customer with 7 x 24 support as set forth herein. (b) Problem. Any error, bug, or malfunction that makes any feature of the Inktomi Search Engine perform unpredictably or to otherwise become intermittently unavailable, or that causes the Inktomi Search Engine to have a material degradation in response time performance. (c) Severe Problem. Any error, bug, or malfunction that causes the Inktomi Search Engine to become inaccessible to Customer and its Site end users, or that causes any feature of the Inktomi Search Engine to become continuously unavailable. (d) Enhancement Request. A request by Customer to incorporate a new feature or enhance an existing feature of the Inktomi Search Engine. (e) Fix. A correction, fix, alteration or workaround that solves a Problem or a Severe Problem. 1. Contact points. (a) Customer Technical Support Personnel. Customer will designate no more than three Customer employees as qualified to contact lnktomi for technical support. (b) Inktomi Technical Support Personnel. Inktomi will ensure that its Technical Support Personnel are adequately trained to provide technical support to Customer. Inktomi will provide Customer with a web interface or an email address (the "Support Address"), as well as an email pager address (the "Support Page") for contacting the Inktomi Technical Support Personnel no later than one week prior to the Launch Date. Inktomi will also provide Customer with contact information for executive escalation personnel no later than one week prior to the Launch Date. Inktomi may change its designated Technical Support Personnel and executive escalation personnel at its discretion with reasonable notice to Customer. 2. Support procedures. (a) All Problems reported by Customer Technical Support Personnel to Inktomi must be submitted via web site or email to the Support Address. (b) If Customer believes it is reporting a Severe Problem, Customer will accompany its email request with a page via the Support Pager. S1-1 (c) Upon receiving a report from Customer, Inktomi will determine whether the request is a Problem, a Severe Problem, or an Enhancement Request. Inktomi will respond to the request and use reasonable commercial efforts to provide a Fix as described in the support table set forth below. (d) Inktomi will use commercially reasonable efforts to inform Customer Technical Support Personnel of Fixes. 3. Support levels. (a) Customer will provide technical support to end users of the Sites who email or otherwise contact Customer directly with questions about the Sites. Customer will use its commercially reasonable efforts to Fix any Problems without escalation to Inktomi. (b) Inktomi will provide the following technical support solely to Customer Technical Support Personnel:
============================================================================================================================= Target response Receipt of email Type of email Time from email Target Fix Time and request request receipt Reporting - ----------------------------------------------------------------------------------------------------------------------------- During business hours Problem Within one business Commercially or other times day reasonable best efforts with weekly status reports to Customer - ----------------------------------------------------------------------------------------------------------------------------- During the hours Severe Problem Within two hours Commercially between 6:00 a.m. reasonable best and 9:00 p.m. Pacific efforts with daily time status reports to Customer - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- During other times Severe Problem Within four hours Commercially reasonable best efforts with daily status reports to Customer - ----------------------------------------------------------------------------------------------------------------------------- During business hours Enhancement Requests Within five business At Inktomi's or other times days discretion =============================================================================================================================
S1-2 (c) In the event Inktomi does not respond to Customer within the target response time from email receipt set forth above, then Customer may contact the following Inktomi executive escalation personnel in order: Steve Crusenberry - Search Engine Technical Operations Troy Toman - Director of Partner Services Alex Edelstein - General Manager, Search Business Unit Dick Pierce - Vice President Marketing Dave Peterschmidt - CEO S1-3 SCHEDULE 2 TO THE PORTAL SERVICES AGREEMENT SERVICE FEES 1. Information Service Fee. Customer shall pay Inktomi a base information services fee of $50,000 per year. For the first year under the Agreement, the base information services fee shall be paid as follows: 1/4 of the fee shall be paid within thirty (30) days of execution of the Agreement and 1/4 of the fee shall be paid on the last day of each full calendar quarter thereafter. For subsequent years, the base information services fee shall be paid in equal monthly installments on the last day of each month. 2. Per Search Query Service Fee. In addition to the information service fees set forth above, Customer shall pay Inktomi monthly per-query service fees based on the total number of Results Sets served during the month for search queries. These fees equal: (A) the total number of Results Sets served during the month divided by the total number of days in such month ("Average Daily Results Sets Served"). (B) multiplied and added in accordance with the following graduated schedule For the first 500,000 Average Daily Results Sets Served $.0034 per Results Sets Served For the next 500,000 Average Daily Results Sets Served $.0032 per Results Sets Served For all Average Daily Results Sets Served over 1 million $.0030 per Results Sets Served (C) multiplied by the total number of days in such month. (D) The Average Daily Result Set shall consist of 20 results per set. The total per-query service fees payable by Customer shall not be less than $130,000 for the first Year of the Term: $150,000 for the second Year of the Term; and $170,000 for the third year of the Term. For the first year under the Agreement, this minimum shall be paid as follows: 1/4 of the annual minimum fee shall be paid within seven (7) days of execution of the Agreement and 1/4 of the fee shall be paid on the last day of each full calendar quarter thereafter. For subsequent years, the annual per-query minimums shall be paid in equal monthly installments on the last day of each month. All such minimum payments shall be credited against monthly per-query service fees otherwise due and payable. 3. All Services. The service fees set forth above are for General Search Services provided by Inktomi as such Services are contemplated in the applicable Exhibit. The total aggregate annual minimum fees due to Inktomi as set forth above, shall be $180,000 for the first year of the Term, $200,000 for the second year of the Term; and $220,000 for the third year of the Term. S1-4 EX-10.2 6 LEASE AGREEMENT LEASE AGREEMENT 1. PARTIES: This Lease Agreement (hereinafter referred to as the "Lease) is made this ____ day of _____________, 1999, by and between CAMBRIDGE MANAGEMENT ASSOCIATES, A NEW JERSEY GENERAL PARTNERSHIP (hereinafter referred to as "Landlord") and BE FIRST INTERNET CORPORATION (hereinafter referred to as the "Lessee"), duly organized and existing under the laws of the State of Florida. 2. PREMISES: Landlord, for and in consideration of the rent to be paid and the covenants to be performed by Lessee, as hereinafter set forth, does hereby lease, demise and let unto Lessee that portion of the building known as Westlinks III, 12751 Westlinks Drive, Ft. Myers, FL, (hereinafter referred to as the "Building") consisting of 3,200 square feet of rentable area as determined by typical BOMA standards and as outlined on the diagram attached hereto and marked as Exhibit "A", known as Unit 3, (hereinafter referred to as the "Premises"). 3. TERM: The term of this Lease shall be for a period of three (3) years and two (2) months commencing on August 1, 1999 or when premesis are "substantially completed" as defined below (hereinafter referred to as the "Commencement Date"), and terminating on September 30, 2002 (hereinafter referred to as the "Termination Date"). If the Commencement date is other than August 1, 1999, then Landlord and Lessee shall confirm the Commencement Date and Termination Date in writing within fifteen (15) days of the Premises being ready for occupancy, which shall thereafter be considered to be binding upon both Landlord and Lessee. 4. LANDLORD CONSTRUCTION: Landlord will, at its own expense, cause the Premises to be completed in the manner set forth in Exhibit "A", and the same will be ready for occupancy on the Commencement Date. The Premises shall be deemed ready for occupancy when the work being performed therein is substantially completed. The term "substantially completed" shall be construed to mean the issuance of a Certificate of Occupancy by the appropriate governmental authority and such completion as shall enable Lessee to reasonably and conveniently use and occupy the Premises for the conduct of its ordinary business, even though minor details, decorations and mechanical adjustments (hereinafter referred to as "Punch List Items") remain to be completed by the Landlord. 5. RENT: (a) Minimum Rent: (1) From the Commencement Date for a period of two (2) months, Lessee shall occupy the Premises free of Minimum Rent. (2) From two (2) months after the Commencement Date for a period of one (1) year, Lessee shall pay to Landlord as yearly rent the sum of Twenty-Eight Thousand Dollars and No Cents ($28,000.00), payable in advance, without setoff or deduction, except as otherwise provided by law, on the first business day of each calendar month in equal monthly installments of Two Thousand Three Hundred Thirty-Three Dollars and Thirty-Four Cents ($2,333.34), triple net as set forth below. The first installment of rental shall be payable at the time of occupancy under this Lease. (3) From fourteen (14) months after the Commencement Date for a period of one (1) year, Lessee shall pay to Landlord as yearly rent the sum of Twenty-Nine Thousand Six Hundred Dollars and No Cents ($29,600.00), payable in advance, without setoff or deduction, except as otherwise provided by law, on the first business day of each calendar month in equal monthly installments of Two Thousand Four Hundred Sixty-Six Dollars and Sixty-Seven Cents ($2,466.67), triple net as set forth below. (4) From twenty-six (26) months after the Commencement Date for a period of one (1) year, Lessee shall pay to Landlord as yearly rent the sum of Thirty-One Thousand Two Hundred Dollars and No Cents ($31,200.00), payable in advance, without setoff or deduction, except as otherwise provided by law, on the first business day of each calendar month in equal monthly installments of Two Thousand Six Hundred Dollars and No Cents ($2,600.00), triple net as set forth below. In the event the term of this Lease commences on a day other than the first business day of a calendar month, Lessee shall pay to Landlord, on or before the Commencement Date of the term, a pro-rata portion of the monthly installment of rent, such pro-rata portion to be based on the number of days remaining in such partial month after the Commencement Date of the term. All Minimum Rent and Additional Rent including Maintenance and Operation Expenses shall be subject to Florida state sales tax. (b) Additional Rent: Whenever, under the term of this Lease, any sum of money is required to be paid by Lessee in addition to the rental herein reserved and said additional amount so to be paid is not designated as "additional rent", then said amount shall, nevertheless, at the option of Landlord if not paid when due, be deemed "additional rent" and shall be collectible as such with any installment of rent thereafter falling due hereunder. Nothing herein contained shall be deemed to suspend or delay the payment of any sum at the time the same becomes due and payable hereunder or shall limit any other remedy of Landlord. (c) Place of Payment of Rent and Additional Rent: All payments of rent and additional rent shall be paid when due without demand at the office of Cambridge Management Associates, 840 N. Lenola Road - Unit 1, Moorestown, NJ 08057, or at such -2- other place as Landlord may from time to time direct in writing. All checks shall be made payable to CAMBRIDGE MANAGEMENT ASSOCIATES. (d) Security Deposit: Landlord acknowledges receipt upon the execution hereof from the Lessee the sum of Two Thousand Dollars and No Cents ($2,000.00), to be held as collateral security for the payment of any rentals and other sums of money payable by Lessee under this Lease, and for the faithful performance of all other covenants and agreements of Lessee hereunder; the amount of said security deposit is to be repaid to lessee within thirty (30) days after the termination of this Lease and any renewal thereof, provided Lessee shall have made all such payments and performed all such covenants and agreements as provided for herein and provided Lessee has not defaulted under the terms and conditions of this Lease. Upon any default of Lessee hereunder, all or part of said security deposit may, at the Landlord's sole option, be applied on account of such default, and thereafter, Lessee shall promptly restore the resulting deficiency in said security deposit, and said security deposit shall be deemed to be the property of Landlord. 6. PEACEFUL POSSESSION: The Landlord covenants that the Lessee, on paying the said rental and performing the covenants and conditions in this Lease contained, shall and may peaceably and quietly have, hold and enjoy the demised Premises for the term aforesaid. Landlord agrees that the adjacent space will not be leased to any lessee that will unreasonably interfere with Lessee's ability to conduct its business. 7. SERVICES: (a) Utility Services: Landlord shall, at its expense, provide a heating, cooling and ventilating system (hereinafter referred to as the "HVAC System") sufficient to maintain the Premises in accordance with the standards and specifications identified in Exhibit "B". Landlord shall furnish Lessee with an electrical system having the minimum required capacity identified in Exhibit "B" and Landlord shall also furnish hot and cold water and sewer for normal office needs. Landlord shall install, at its expense an electric meter to the demises Premises. Lessee shall clean the Premises at its expense and shall pay for all electricity, gas, sewer charges and water consumed by Lessee on the Premises, such payments to be made directly to suppliers thereof. (b) Other Services: Landlord will provide the following services to the Premises and Building: fire monitoring, window cleaning, landscaping and landscape maintenance and maintenance to the common areas described in Paragraph 11. The cost of those services shall be included in Paragraph 8 hereof -3- 8. OPERATION AND MAINTENANCE COSTS AND ADDITIONAL RENT: (a) The costs and expenses of the operation and maintenance of the Building (hereinafter referred to as "Operation and Maintenance Costs") shall include, without limitation, the direct and actual cost and expense to Landlord of the following items: (1) All wages, salaries and fees of all employees and agents directly engaged in the management, operation, repair, replacement, maintenance and security of the Building, including taxes, insurance and all other employee benefits relating thereto; (2) All common utilities to the Building including, but not limited to, water and sewer, electric and irrigation sprinkler use; (3) All supplies and materials used in the management, leasing, operation, repair, replacement, maintenance and security of the Building; (4) All maintenance and service agreements on equipment including, without limitation, HVAC, alarm service and window cleaning for the Building; (5) All fire (with all risk coverage) and other casualty and public liability insurance for the Building and Landlord's personal property and fixtures used in connection therewith; (6) All "real estate taxes" which, for the purposes of this Article, shall mean all real property taxes and personal property taxes, charges and assessments which are levied, assessed upon or imposed by any governmental authority during any calendar year of the term hereof with respect to the Building and the land on which the Building is located and any improvements, including, but not limited to the GSD Assessment, fixtures and equipment and all other property of Landlord, real or personal, located in the Building and used in connection with the operation of the Building and any tax which shall be levied or assessed in addition to or in lieu of such real or personal property taxes and any license fees, tax measured by or imposed upon rents, or other tax or charge upon Landlord's business of leasing the Building. All such real estate taxes shall be allocated based on the maximum discount amount. In the event that the tax statement from the taxing authority does not allocate assessments with respect to the Building and assessments relating to any other improvements located upon the land upon which the Building is situated, Landlord shall make a reasonable determination of the proper allocation of such assessment based, to the extent possible, upon records of the assessor. Landlord shall have the right to institute a tax appeal on behalf of all -4- lessees of the Building, the cost of said appeal shall be borne pro-rata by Lessee; (7) All repairs, replacements and general maintenance of the Building, including, but not limited to, HVAC equipment, roof maintenance and the upkeep of the lawn, grounds, shrubbery and landscaping, along with paving maintenance; (8) All service or maintenance contracts with independent contractors for the operation, repair, replacement, maintenance or security of the Building; (9) All other costs and expenses necessarily and reasonably incurred by Landlord in the proper operation and maintenance of the Building, provided, however, that the following shall be excluded from the term "Operation and Maintenance Costs" (i) expenses for any capital improvements made to Land or Building, except those capital expenses for improvements which result in savings of labor or other costs or which may be required by governmental authority shall be included and the cost of such improvements amortized over the useful life of the improvements; (ii) expenses for repairs or other work occasioned by fire, wind storm or other insured casualty; (iii) expenses incurred in leasing or procuring new lessees (e.g. for lease commissions, advertising expenses and expenses of renovating space for new lessees); (iv) legal expenses in enforcing the term of any lease; (v) interest or amortization payments on any mortgage or mortgages; (vi) depreciation; and (vii) Landlord's administrative expense and amounts chargeable to other lessees. (b) During each calendar year or portion thereof included in the original term of this Lease and any renewal thereof, Lessee shall pay Landlord as additional rent, Lessee's percentage of all Operation and Maintenance Costs. "Percentages" shall be defined as the ratio that the gross square feet of the Premises bears to the gross square feet of the rentable area in the Building, which "percentage" is agreed to be 10% (3,200/29,340). It is understood that Landlord shall cause such services described in Paragraph 8(a) above to be performed for the Building and that Landlord shall receive bills from such employees and contractors for work specifically performed on the Building, which bills shall represent a proper allocation of any work done for the Building as compared with other work that such employees or contractors may perform for any properties owned by Landlord in the areas adjacent to and surrounding the Building. Lessee shall have the right to review all such bills and calculations of Landlord as to any allocations thereof Nothing herein shall be construed to require Lessee to pay expenses incurred for repair and/or replacement of items warranted by Landlord in this Lease. -5- (c) During December of each calendar year, or as soon thereafter as practicable, Landlord shall give Lessee written notice of its estimate of any amounts payable under Subparagraph 8(b) above for the ensuing calendar year on or before the first day of each month during the calendar year, Lessee shall pay to Landlord one-twelfth (1/12) of such estimated amounts, provided that if such notice is not given in December, Lessee shall continue to pay on the basis of the then applicable rental until the month after such notice is given. If any time or times it appears to Landlord that the amounts payable under Subparagraph 8(b) above for the current calendar year will vary from its estimate by more than five percent (5%), Landlord shall, by notice to Lessee, revise its estimate for such year, and subsequent payments by Lessee for such year will be based upon such revised estimate. (d) Within ninety (90) days after the close of each calendar year, or as soon after such ninety (90) day period as practicable, Landlord shall deliver to Lessee a statement of the adjustments to be made pursuant to Subparagraph 8(b) above. If, on the basis of such statement, Lessee owes an amount that is less than the estimated payments for such calendar years previously made by Lessee, Landlord shall refund such excess to Lessee within thirty (30) days. If on the basis of such statement, Lessee owes an amount that is more than the estimated payments for such calendar year previously made by Lessee, Lessee shall pay the deficiency to Landlord within thirty (30) days after delivery of statement. In no event, however, shall the monthly rent paid by Lessee be less than the Minimum Rent set forth in Paragraph 5 hereof Lessee shall have the right to review all documentation substantiating any increases including, but not limited to, real estate tax bills, insurance bills and common utility charges. (e) The additional rent due under the terms and conditions of this Paragraph shall, except as provided for by law, be payable by Lessee without any setoff or deduction and shall be prorated as aforesaid during the first and last calendar years of the Lease term or any renewal thereof (f) In the event Landlord constructs additional improvements at the Building which increases the assessment or gross square footage during the term of this Lease, Lessee's percentage of Operation and Maintenance Costs shall be equitably adjusted. (g) Notwithstanding anything in the above to the contrary, annual increases in Operation and Maintenance Costs shall be limited to 5%. Landlord's failure to increase the Operation and Maintenance Costs for one (1) year shall not be deemed to be a waiver of its rights to said increase. All rights shall be cumulative, for example: if Landlord does not increase Operation and Maintenance Costs in year two, they will have the -6- right to increase the Operation and Maintenance Costs by 10% in year three. 9. LATE PAYMENT: In the event that the Minimum Rent and Operation and Maintenance Costs shall not be paid when due or any payments required to be paid by Lessee under the provisions hereof are not paid within ten (10) days after notice from Landlord, Lessee shall, upon demand, pay a late charge to Landlord in the amount of six percent (6%) of the overdue amount and such late charge shall be deemed "rent" for all purposes under this Lease. 10. USE OF PREMISES: (a) LESSEE MAY NOT UTILIZE OR STORE ANY HAZARDOUS MATERIALS ON THE PREMISES, unless, prior to the commencement of this Lease, Lessee presents to Landlord a notarized affidavit stating Lessee's SIC number together with a detailed list of all hazardous materials to be used or stored on the Premises and, provided further, that Lessee is not in violation of Paragraph 20(a) and/or 20(b). Lessee shall use and occupy the Premises for general office space. Lessee represents and warrants that Lessee's SIC (Standard Industrial Classification) number is . as designated in the Standard Classification Manual prepared by the Office of Management and Budget. Lessee shall not use or occupy the Premises for any other purpose or business without prior written consent of the Landlord. (b) HAZARDOUS MATERIALS: The term "Hazardous Materials", as used in this Lease, shall include, without limitation, flammables, explosives, radioactive materials, asbestos, polychlorinated biphenyls (PCBS), chemicals known to cause cancer or reproductive toxicity, pollutants, contaminates, hazardous wastes, toxic substances or related materials, petroleum and petroleum products and substances declared to be hazardous or toxic under any law or regulation now or hereafter enacted or promulgated by any governmental authority. I. Lessee Restorations: Lessee shall not cause or permit to occur: (a) any violation of any federal, state or local law, ordinance or regulation now or hereafter enacted, related to environmental conditions on, under or about the Premises or arising from Lessee's use or occupancy of the Premises, including, but not limited to, soil and ground water conditions; or (b) the use, generation, release, manufacture, refining, production, processing, storage or disposal of any Hazardous Material without Landlord's prior written consent, which consent may be withdrawn, conditioned or modified by Landlord in its sole and absolute discretion in order to insure compliance with all applicable Laws (hereinafter defined), as such Laws may be enacted or amended from time to time. -7- II. Environmental Cleanup: (a) Lessee shall, at Lessee's own expense, comply with all laws regulating the use, generation, storage, transportation or disposal of Hazardous Materials (the "Law"); (b) Lessee shall, at Lessee's own expense, make all submissions to, provide all information required by and comply with all requirements of all governmental authorities (the "Authorities") under the Laws; (c) should any Authority or any third party demand a cleanup plan be prepared or undertaken because of any deposit, spill, discharge or other release of Hazardous Materials that occurs during the term of this Lease and which are caused by Lessee, its employees, agents or invitees, at or from the Premises or which arises at any time from Lessee's actions or inactions, Lessee shall at Lessee's own expense, prepare and submit the required plans and all related bonds and other financial assurances and Lessee shall carry out all such cleanup plans; (d) Lessee shall promptly provide all information regarding the use, generation, storage, transportation or disposal of Hazardous Materials required by Landlord. If Lessee fails to fulfill any duty imposed under this Paragraph 10(b) within thirty (30) days following its request, Landlord may proceed with such efforts and in such case, Lessee shall cooperate with Landlord in order to prepare all documents Landlord deems necessary or appropriate to determine the applicability of the Laws to the Premises and Lessee's use thereof and for compliance therewith, and Lessee shall execute all documents promptly upon Landlord's request and any expenses incurred by Landlord shall be payable by Lessee as Additional Rent. No such action by Landlord and no attempt made by Landlord to mitigate damages under any Law shall constitute a waiver of any Lessee's obligations under this Paragraph 10(b); and (e) Lessee's obligations and liabilities under Paragraph 10(b) shall survive the expiration of this Lease, III. Notwithstanding the above, Lessee shall not be responsible for any deposit, spill, discharge or other release of Hazardous Material caused by a third party that is not an employee, agent or invitee of Lessee. 11. COMMON AREAS: All parking areas, driveways, alleys, public corridors, fire escapes and other areas, facilities and improvements provided by Landlord for the general use in common of Lessee and other lessees, their employees, agents, invitees and licensees, shall at all times be 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 such areas, facilities and improvements. Landlord warrants that adequate parking and unimpeded access to the Building and Premises will be maintained during the lease term. 12. SIGNS: Lessee shall not display, inscribe, print, paint, maintain or affix on any place in or about the Premises or the Property any sign, notice, legend, direction, figure or -8- advertisement, except on the doors of the Premises and Building Directory and then only such name(s) and matter and in such color, size, style, place and materials as shall first have been approved in writing by Landlord, such approval not to be unreasonably withheld. Landlord agrees that all lessees in the Building shall be subject to the same restrictions. 13. ALTERATIONS AND IMPROVEMENTS, REMOVAL: (a) Lessee shall not make any major alterations, improvements or additions to the Premises or attach any fixtures or equipment thereto without the Landlord's prior written consent, which approval shall not be unreasonably withheld. All alterations, interior decorations, improvements or additions made to the Premises or the attachment of any fixtures or equipment thereto shall be performed at Lessee's sole cost and expense by Landlord or, at Landlord's sole option, by Lessee. All alterations, improvements, additions or fixtures, whether installed before or after the execution of this Lease, shall remain upon the Premises at the expiration or sooner termination of this Lease and become the property of Landlord, unless Landlord shall, prior to the termination of this Lease, have given written notice to Lessee to remove the same. In the event that Landlord requests such removal and Lessee fails to remove same and repair any damage caused thereby on or before said expiration date, Lessee agrees to reimburse and pay Landlord for the cost of removing same and repairing any damage to the Premises caused by said removal, except for damage caused by negligence of Landlord, or its agents, workmen or employees. (b) In doing any such work of installation, removal, alteration or relocation, Lessee shall use due care to cause as little damage or injury as possible to the Premises or the Building and to repair all damage or injury that may occur to the Premises or the Building in connection with such work. Lessee agrees in doing any such work in or about the Premises to use its best efforts to engage only such labor as will not conflict with or cause strikes or other labor disturbances among the building service employees of the Landlord. Any contractors employed by Lessee for such installations shall carry workman's compensation insurance, public liability insurance and property damage insurance in amounts, form and content and with companies satisfactory to Landlord. Prior to the commencement by Lessee of any work as set forth in this Paragraph, Lessee must obtain, at its sole cost and expense, all necessary permits, authorizations and licenses required by the various government authorities having Jurisdiction over the Premises. 14. MECHANIC'S LIEN: Lessee shall agree not to allow any Mechanic's Lien to be filed against the Premises for any construction of other work on or about the Premises performed or to be performed at Lessee's request. Notwithstanding the foregoing, if any mechanic's or other lien shall be filed against -9- the Premises or the Building purporting to be for labor or materials furnished or to be furnished at the request of Lessee, then Lessee shall, at its own expense, cause such lien to be discharged or stayed of record by payment, bond or otherwise, within thirty (30) days after filing thereof. If Lessee shall fail to commence actions to cause such lien to be discharged or stayed by payment, bond or otherwise within thirty (30) days after filing thereof. Lessee shall indemnify and hold Landlord harmless against any and all claims, costs, damages, liabilities and expenses (including attorney's fees) which may be brought or imposed against or incurred by Landlord by reason of any such lien or its discharge. 15. CONDITION OF PREMISES: Lessee acknowledges and agrees that, except as expressly set forth in this Lease, there have been no representations or warranties made by or on behalf of Landlord with respect to the Premises or the Building. Landlord warrants that: (i) it is the fee simple owner of the Premises and has the full right and authority to enter into this Lease; and (ii) existing locaL state and federal laws, statutes, ordinances and regulations permit Lessee to use the Premises for the intended uses. The taking of possession of the Premises by Lessee shall conclusively establish that the Premises and the Building were at such time in satisfactory condition, order and repair, subject to any Punch List Items to be provided to Landlord by Lessee in writing within ten (10) days of taking possession. 16. ASSIGNMENT AND SUBLETTING: (a) Subject to the terms of this Paragraph, Lessee shall have the right to assign or hypothecate this Lease. A corporate Lessee may, without consent of the Landlord, assign this Lease to its parent subsidiary or purchaser of substantially all of Lessee's assets, provided that the assignee assumes, in full, the obligations under this Lease. (b) If, at any time or from time to time during the term of this Lease, Lessee desires to assign the Lease or to sublet all or part of the Premises, Lessee shall give notice to Landlord of such intent. Landlord shall have the option, exercisable by notice given to Lessee within twenty (20) days after receipt of Lessee's notice, of re-acquiring the portion of the Premises proposed to be assigned or sublet and terminating the Lease with respect thereto. If the Landlord does not exercise such option, Lessee shall, upon obtaining written consent of Landlord, which consent shall not be unreasonably withheld, be free to assign the Lease or sublet such space to a third party subject to the following conditions: (1) In Landlord's sole option, the Sublessee or Assignee is financially responsible and that the use of the demised Premises by Sublessee or Assignee is the same or similar to that of the Lessee; -10- (2) Landlord may exercise its option set forth above at any time prior to the execution of a sublease agreement to which Landlord has given its consent in writing; (3) No sublease shall be valid and no Sublessee shall take possession of the premises subleased until an executed counterpart of such sublease has been delivered to Landlord; (4) No Sublessee shall have a night to further sublet, and (5) Any sums or other economic consideration received by Lessee as a result of such subletting (except rental or other payments received which are attributable to the amortization of the cost of leasehold improvements, other than building standard lessee improvements made to the sublet portion of the Premises by Lessee for Sublessee), whether denominated rentals under the Sublease or otherwise, which exceed in the aggregate the total sums which Lessee is obligated to pay Landlord under this Lease (pro-rated to reflect obligations allocable to that portion of the Premises subject to such sublease) shall be divided equally with Landlord as additional rent under this Lease without affecting or reducing any other obligation of Lessee hereunder. (c) Regardless of Landlord's consent, no subletting or assignment shall release Lessee of Lessee's obligations or alter the primary liability of Lessee to pay the rental and to perform all other obligations to be performed by Lessee hereunder. The acceptance of rental by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof In the event of default by any assignee of Lessee or any successor of Lessee in the performance of any of the terms hereof, Landlord may proceed directly against Lessee without the necessity of exhausting remedies against such assignee or successor. Landlord may consent to subsequent assignment or subletting of this Lease or amendments or modifications to this Lease with assignees of Lessee provided that Landlord notifies Lessee or any successor of Lessee and obtains its or their consents thereto, and such action shall not relieve Lessee of liability under this Lease. 17. ACCESS TO PREMISES: Landlord, its employees and agents shall have the right, upon receipt of written approval from Lessee to enter the Premises at any time in case of an emergency for the purpose of examining or inspecting the same, showing the same to mortgagees or lessees of the Building, as Landlord may deem necessary or desirable, provided, however, Landlord shall proceed in a manner to minimize the disruption of Lessee's business. 18. REPAIRS: -11- (a) Landlord shall keep the exterior, foundations, structure, roof, all common areas (including parking and driveway), HVAC, plumbing and electrical systems located on the exterior of the building in good order and repair, subject to the reimbursement as Operation and Maintenance Costs pursuant to Paragraph 8, provided, however, that Lessee shall maintain the plumbing, heating, air conditioning and electrical systems which are physically located within the confines of the Premises, provided that the systems are properly installed and operating at the time of possession by Lessee. Lessee shall replace/repair all broken glass, door windows, that is caused by Lessee, its employees, agents or invitees. (b) Except as Landlord is obligated for repairs as provided hereinabove, Lessee shall make, at its sole cost and expense, all repairs necessary to maintain the Premises and shall keep the Premises and the fixtures therein in neat and orderly condition. If Lessee refuses or neglects to make such repairs or fails to diligently prosecute the same to completion after written notice from Landlord of the need therefor, Landlord may make such repairs at the expense of Lessee and such expense, along with a ten percent (10%) service charge, shall be collectible as additional rent. (c) Except as results from the negligent acts or omissions of Landlord, Landlord shall not be liable by reason of any injury to or interference with Lessee's business arising from the making of any repairs, alterations, additions or improvements to the Premises or Building or to any appurtenances or equipment therein. Landlord shall interfere as little as reasonably practicable with the conduct of Lessee's business. There shall be no abatement of rent because of such repairs, alterations, additions or improvements. (d) In the event of an emergency, Landlord may enter the Premises to make any and all repairs necessary to preserve and protect the Premises, and the costs and expense of such repairs shall be paid as provided in this Lease. 19. INDEMNIFICATION AND LIABILITY INSURANCE: (a) Except for the negligence or intentional acts of Landlord, Lessee shall indemnify, hold harmless and defend Landlord from and against any and all costs, expenses (including reasonable counsel fees), liabilities, losses, damages, suits, actions, fines, penalties, claims or demands of any kind connected with, and Landlord shall not be liable to Lessee on account of (i) any failure by Lessee to perform any of the agreements, terms, covenants or conditions of this Lease required to be performed by Lessee; (ii) any failure by Lessee to comply with any statutes, ordinances, regulations or orders of any governmental authority; or (111) any accident, death, or personal injury or damage to or losses or theft of property which shall -12- occur in or about the Premises occasioned wholly or in part by reason of any act or omission of Lessee, its agents, contractors or employees. (b) During the term of this Lease or any renewal thereof, Lessee shall obtain and promptly pay all premiums for general public liability insurance against claims for personal injury, death or property damage occurring upon, in or about the Premises, with minimum limits of $1,000,000.00 on account of bodily injuries to or death of one person and $1,000,000.00 on account of bodily injuries to or death of more than one person as a result of any one accident or disaster, and $100,000.00 on account of damage to property (or in an amount of not less than $1,000,000.00 combined single limit for bodily injury and property damage), and all such policies and renewals thereof shall name the Landlord as additional insured. All policies of insurance shall provide that: (i) no material change or cancellation of said policies shall be made without ten (10) days prior written notice to Landlord and Lessee; (ii) any loss shall be payable notwithstanding any intentional act or negligence of Lessee or Landlord which might otherwise result in the forfeiture of said insurance; and (iii) the insurance company issuing the same shall have no right of subrogation against Landlord, their agents, servants and/or employees. On or before the Commencement Date of the term of this Lease and thereafter, not less than fifteen (15) days prior to the expiration dates of said policy or policies, Lessee shall provide copies of policies or certificates of insurance evidencing coverage required by this Lease. All the insurance required under this Lease shall be issued by insurance companies authorized to do business in the State of Florida with a financial rating of at least an "A+" as rated in the most recent edition of Best's Insurance Reports and in business for the past five (5) years. The aforesaid insurance limits may be reasonably increased from time to time by Landlord. (c) Lessee and Landlord, respectively, hereby release each other from any and all liability or responsibility to the other for all claims or anyone claiming by, through or under it or them by way of subrogation or otherwise for any loss or damage to property covered by the Florida Standard Form of Fire Insurance Policy with extended coverage endorsement, whether or not such insurance is maintained by the other party. (d) Landlord agrees to maintain adequate fire and extended coverage including liability insurance on the Building during the term of this Lease and said policy shall provide that the insurance company issuing the same shall have no fight of subrogation against Lessee. In the event that Landlord's insurance premium is increased as a result of providing this coverage, Lessee shall be responsible to pay the additional premium. -13- (e) Except if caused by Landlord, its employees, agents or invitees and to the extent permitted by law, Lessee shall indemnify Landlord and save it harmless and, at Landlord's option, defend it from and against any and all claims, actions, damages, liabilities and expenses, including attorney's and other professional fees, in connection with loss of life, personal injury and/or damage to property arising from or out of the occupancy or use by Lessee of the Premises or any part thereof or any other part of the Building, occasioned wholly or in part by any act or omission of Lessee, its officers, agents, employees, invitees or licensees. (f) Except if caused by Landlord, its employees, agents or invitees or failure of Landlord to diligently proceed to correct cause, Lessee agrees that there shall be no rent abatement if Lessee is unable to use the Premises for any reason whatsoever, including the lack of utilities and/or damage to the Premises. Lessee agrees to purchase and maintain adequate insurance, including business interruption insurance to cover all such occurrences and the insurance company agrees to waive any rights of subrogation against Landlord, their agents, servants and/or employees. 20. NEGATIVE COVENANTS OF LESSEE: (a) Lessee agrees that it will not do or suffer to be done, any act, matter or thing objectionable to the fire insurance companies whereby the fire insurance or any other insurance now in force or hereafter to be placed on the Premises or Building, shall become void or suspended or whereby the same shall be rated as a more hazardous risk than at the date when Lessee receives possession hereunder. In case of a breach of this covenant, in addition to all other remedies of Landlord hereunder, Lessee agrees to pay to Landlord, as additional rent, any and all increases in premiums on insurance carried by Landlord on the Premises or any part thereof, or on the Building of which the Premises may be a part, caused in any way by the occupancy of Lessee. (b) Lessee will not store or discharge any toxic, radioactive or other hazardous substances or wastes on or adjacent to the Premises or utilize the Premises or any adjacent lands for the generation, manufacture, refining, transportation, treatment, storage, handling or disposal of any such substances or wastes in violation of ISRA or any other laws, rules, regulations or procedures of any federal or state environmental regulatory body or agency. 21. FIRE OR OTHER CASUALTY: (a) If the Premises are damaged by fire or other casualty, the damages shall be repaired by and at the expense of Landlord to at least as good condition as that which existed -14- immediately prior to such damage. Landlord agrees to repair such damage within a reasonable period of time after receipt from Lessee of written notice of such damage, subject to any delays caused by acts of God, labor strikes or other events beyond Landlord's control. Unless caused by Lessee, its agents, employees or invitees, Minimum Rent shall abate for the period of time in excess of thirty (30) days that Lessee is unable to use the Premises. Landlord shall not be liable for any inconvenience or annoyance to Lessee or injury to the business of Lessee in any way from such damage or the repair thereof Lessee acknowledges notice that: (i) Landlord shall not obtain insurance of any kind on Lessee's furniture or furnishings, equipment, fixtures, alterations, improvements and additions; (ii) it is Lessee's obligation to obtain such insurance at Lessee's sole cost and expense; and (iii) Landlord shall not be obligated to repair any damage thereto or replace the same. (b) If the Premises, in the reasonable opinion of Landlord, are: (i) rendered substantially untenantable by reason of such fire or other casualty; or (ii) twenty percent (20%) or more of the Premises is damaged by said fire or other casualty and less than six (6) months would remain in the Lease term or any renewal thereof upon completion of the repairs or reconstruction, Landlord shall have the right, to be exercised by notice in writing delivered to Lessee within thirty (30) days from and after said occurrence, to elect not to reconstruct the Premises, and in such event this Lease and the tenancy hereby created shall cease as of the date of said occurrence, the rent to be adjusted as of said date. (c) If more than fifty percent (50%) of the Building shall be substantially damaged by fire or other casualty, regardless of whether or not the Premises were damaged by such occurrence, Landlord shall have the right, to be exercised by notice in writing delivered to Lessee within thirty (30) days from and after said occurrence, to terminate this Lease, and in such event this Lease and the tenancy hereby created shall cease as of the date of said termination, unless terminated as of the date of said occurrence in accordance with Paragraph 21 (b) hereof, the rent to be adjusted as of the date of such termination. (d) If the Premises are substantially damaged in that Landlord is unable to restore the Premises for Lessee's occupancy within 180 days, Lessee shall have the option, to be exercised by notice in writing delivered to Landlord within thirty (30) days after said occurrence, to elect to terminate this Lease, and in such event this Lease and the tenancy hereby created shall cease as of the date of said termination. 22. SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT: This Lease is subject and subordinate to any first mortgages now or thereafter affecting or covering the Premises and all or any part -15- of the Building. Notwithstanding the aforesaid subordination, in the event of the foreclosure of any such mortgage; (a) this Lease shall not terminate; and (b) the peaceful possession of Lessee shall not be disturbed, provided that Lessee is not in default under any of the terms and conditions of this Lease. Lessee agrees to attorn to and to recognize the mortgagee or the purchaser at foreclosure sale as Lessee's landlord for the balance of the term of this Lease. Lessee hereby agrees, however, that such mortgagee or the purchaser at foreclosure sale shall not be: (i) liable for any act or omission of Landlord; (ii) subject to any offsets or defenses which Lessee might have against Landlord; (iii) bound by any rent or additional rent which Lessee may have paid to Landlord for more than the current month; or (iv) bound by any amendment or modification of this Lease made without its consent. The aforesaid subordination, non-disturbance and attornment provisions shall be self-operative, however, Lessee agrees to promptly execute any other agreement submitted by Landlord in confirmation or acknowledgment of same. 23. CONDEMNATION: (a) If the whole of the Premises shall be condemned or taken either permanently or temporarily for any public or quasi-public use or purpose under any statute or by right of eminent domain or by private purchase in lieu thereof, then, in that event, the term of this Lease shall cease and terminate from the date when possession is taken thereunder pursuant to such proceeding or purchase. The rent shall be adjusted as of the time of such termination and any rent paid for a period thereafter shall be refunded. In the event only a portion of the Premises or a portion of the Building containing same shall be so taken (even though the Premises may not have been affected by the taking of some other portion of the Building containing same), Landlord may elect to terminate this Lease from the date when possession is taken thereunder pursuant to such proceeding or purchase or Landlord may elect to repair and restore, at its own expense, the portion not taken, and thereafter rent shall be reduced proportionately to the portion of the Premises taken. (b) In the event of any total or partial taking of the Premises or the Building, Landlord shall be entitled to receive the entire award in any such proceeding, and Lessee hereby assigns any and all right, title and interest of Lessee now or hereafter arising in or to any such award or any part thereof and hereby waives all rights against Landlord and the condemning authority, except that Lessee shall have the right to claim and prove in any such proceeding and to receive any award which may be made to Lessee, if any, specifically for damages for loss of good will, movable trade fixtures, equipment and moving expenses. (c) To the extent that the provisions (a) and (b) conflict with Florida law, Florida law will apply. -16- 24. ESTOPPEL CERTIFICATE: Lessee shall, at any time and from time to time within ten (10) days after written request by Landlord, deliver to Landlord a statement in writing duly executed by Lessee, certifying: (i) that this Lease is in full force and effect without modification or amendment (or, if there have been any modifications or amendments, that this Lease is in full force and effect as modified as amended and setting forth the modifications and amendments); (ii) the dates to which annual basic rental and additional rent have been paid; and (iii) that to the knowledge of Lessee, no default exists under this Lease or specifying each such default; it being the intention and agreement of Landlord and Lessee that any such statement by Lessee may be relied upon a prospective purchaser or a prospective or current mortgagee of the Building or by others in any matter affecting the Premises. 25. DEFAULT: The occurrence of any of the following shall constitute a material default and breach of this Lease by Lessee: (a) A failure by Lessee to pay, when due, any installment of rent hereunder or any such other sum herein required to be paid by Lessee where such failure continues for ten (10) days after written notice thereof from Landlord to Lessee; (b) A failure by Lessee to observe and perform any other provisions or covenants of this Lease to be observed or performed by Lessee, where such failure continues for thirty (30) days after written notice thereof from Landlord to Lessee, provided, however, that if the nature of the default is such that the same cannot reasonably be cured within such thirty (30) day period, commence such cure and thereafter diligently prosecute the same to completion; (c) The filing of a petition by or against Lessee for adjudication as a bankrupt or insolvent or for its reorganization or for the appointment pursuant to any locaL state or federal bankruptcy or insolvency law of a receiver or trustee of Lessee's property; or an assignment by Lessee for the benefit of creditors; or the taking possession of the property of Lessee by any local, state or federal possession of the property of Lessee by any local, state or federal governmental officer or agency or court-appointed official for the dissolution or liquidation of Lessee or for the operating, either temporarily or permanently, of Lessee's business, provided, however, that if any such action is commenced against Lessee, the same shall not constitute a default if Lessee causes the same to be dismissed within sixty (60) days after the filing of same, 26. REMEDIES: Upon the occurrence of any such event of default as set forth above, Landlord shall notify Lessee in writing which shall include a specific description of the default, a reference to the specific provision of the Lease and -17- shall be provided a reasonable time within which the Lessee can cure a default. In the event Lessee falls to cure, Landlord may; (a) Landlord may cure for the account of Lessee any such default of Lessee and immediately recover as additional rent any expenditures made, including reasonable attorney's fees and costs of suit and the amount of any obligations incurred in connection therewith, plus interest at prime plus two percent (2%) per annum from the date of any such expenditure, (b) Subject to Landlord's obligation to mitigate its damages, Landlord may accelerate all rent and additional rent due for the balance of the term of this Lease and declare the same to be immediately due and payable; (c) Subject to Landlord's obligation to mitigate its damages, in determining the amount of any future payment due to Landlord on account of increase in Operation and Maintenance Costs, Landlord may make such determination based upon the amount of Operation and Maintenance Costs for the Premises that are subject to this Lease for the full year immediately prior to such default. If the Premises had Operation and Maintenance Costs for less than one (1) full year prior to default, Landlord may make such determination based upon the average monthly Operation and Maintenance Costs for the less than one (1) year period; (d) Landlord, at its option, may serve notice upon Lessee that this Lease and the then unexpired term hereof shall cease and expire and become absolutely void on the date specified in such notice, without any right on the part of Lessee to save the forfeiture by payment of any sum and, thereupon and at the expiration of the time limit of such notice, this Lease and the term hereof granted, as well as the fight, title and interest of Lessee hereunder, shall wholly cease and expire and become void in the same manner and with the same force and effect (except as to Lessee's liability) as if the date fixed in such notice were the date herein established for expiration of the term of the Lease. Thereupon, Lessee shall immediately quit and surrender to Landlord the Premises, and Landlord may enter into and repossess the Premises by summary proceedings, detainer, ejectment or otherwise, and remove all occupants thereof and property therein, at Landlord's option, without being liable to indictment, prosecution or liability and obligations under this Lease, whether or not the Premises shall relet; except as otherwise provided by law; (e) Landlord may, at any time after the occurrence of any event of default, re-enter and repossess the Premises and any part thereof and any attempt in its own name, as agent for Lessee if the Lease not be terminated or on its own behalf if the Lease be terminated, to relet all or any part of such Premises for and upon such terms and to such person, firms or corporations and for such period or periods as Landlord, in its sole discretion, shall -18- determine, including the term beyond the termination of this Lease; and Landlord shall not be required to accept any lessee offered by Lessee or observe any instruction given by Lessee about such re-letting. Landlord must use its best efforts to mitigate damages in connection with any re-letting. For the purpose of such re-letting, Landlord may decorate or make repairs, changes, alterations or additions in or to the Premises to the extent deemed desirable or convenient by Landlord; and the cost of such decoration, repairs, changes, alterations or additions shall be charged to and be payable by Lessee as additional rent hereunder, as well as any reasonable brokerage and legal fees expended by Landlord; and any sums collected by Landlord from any new lessee obtained on account of Lessee shall be credited against the balance of rent due hereunder as aforesaid. Lessee shall pay to Landlord monthly on the days when the rent would have been payable under this Lease, the amount due hereunder, less the amount obtained by Landlord from such new lessee; (f) Landlord shall have the right of injunction, in the event of a breach or threatened breach by Lessee of any of the agreements, conditions, covenants or terms hereof to restrain the same and the fight to invoke any remedy allowed by law or in equity, whether or not other remedies, indemnity or reimbursements are herein provided. The fights and remedies given to Landlord in this Lease are distinct, separate and cumulative remedies and any one of them, whether or not exercised by Landlord, shall be deemed to be in exclusion of any of the others; (g) In an action by Landlord to collect unpaid amounts owed by Lessee (whether accelerated or otherwise) or any action brought against Landlord by Lessee, the prevailing party shall be entitled to receive reasonable attorney's fees and costs. 27. REQUIREMENTS OF STRICT PERFORMANCE: Except as otherwise provided by law, the failure or delay on the part of either party to enforce or exercise at any time any of the provisions, fights or remedies in this Lease shall in no way be construed to be a waiver thereof, nor in any way affect the validity of this Lease or any part hereof, or the right of the party to thereafter enforce each and every such provision, right or remedy. No waiver of any breach of this Lease shall be held to be a waiver of any other or subsequent breach. The receipt by Landlord of rent at a time when the rent is in default under this Lease shall not be construed as a waiver of such default. The receipt by Landlord of a lesser amount than the rent due shall not be construed to be other than a payment on account of the rent then due, nor shall any statement of Lessee's check or any letter accompanying Lessee's check be deemed an accord and satisfaction, and Landlord may accept such payment without prejudice to Landlord's fight to recover the balance of the rent due or to pursue any other remedies provided in this Lease. No act or thing done by Landlord -19- or Landlord's agents or employees during the term of this Lease shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept such a surrender shall be valid unless in writing and signed by Landlord. 28. SURRENDER OF PREMISES - HOLDING OVER: (a) Unless extended by renewal, this Lease shall terminate and Lessee shall deliver up and surrender possession of the Premises on the last day of the term hereof and Lessee waives the fight to any notice of termination of this Lease. Lessee shall provide Landlord with its forwarding address; (b) Lessee covenants that, upon the expiration or sooner termination of this Lease, unless extended by renewal, it shall deliver up and surrender possession of the Premises in the same condition as of the commencement of the Lease, reasonable wear and tear excepted, in which Lessee has agreed to keep the same during the continuance of this Lease and in accordance with the terms thereof, (c) Upon the failure of Lessee to surrender possession of the Premises upon the expiration or sooner termination of this Lease, unless extended by renewal, Lessee shall pay to Landlord, as liquidated damages, an amount equal to twice the rent and additional rent required to be paid under this Lease as applied to any period in which Lessee shall remain in possession after the expiration or sooner termination of this Lease. 29. NOTICES: All notices, consents, requests, instructions, approvals and/or communications provided herein shall be validly given, made or served if in writing and delivered personally as proved by receipt signed by an authorized representative or receipt by an express mail company or delivery service signed by an authorized representative or by registered or certified mail, proved by an executed return receipt, postage paid, signed by an authorized representative addressed as follows: To Landlord: CAMBRIDGE MANAGEMENT ASSOCIATES 840 N. Lenola Road - Unit I Moorestown, NJ 08057 With a copy to: R. Scott Price, Esq. PRICE, PASSIDOMO & SIKET Gray Oaks Building 2640 Golden Gate Parkway - Suite 315 Naples, FL 33942 -20- To Lessee at: BE FIRST INTERNET CORPORATION 12751 Westlinks Drive - Unit 3 Ft. Myers, FL 33913 With a copy to: Mr. Robert Brahms BE FIRST INTERNET CORPORATION 121 W. 27th Street - Suite 903 New York, NY 10001 30. WARRANTIES OF LESSEE AND AGENT: Each party warrants to the other that they dealt and negotiated solely and only with the other party for the Lease and with no other broker, firm, company or person except CB Richard Ellis and ReMax Realty Group . Each party (for good and valuable consideration) shall indemnify and hold the other harmless from and against any and all claims, suits, proceedings, damages, obligations, liabilities, counsel fees, costs, losses, expenses, orders and judgments imposed upon, incurred by or asserted against the other party by reason of the falsity or error of its own aforesaid warranty. Landlord shall be solely responsible for all commissions due to CB Richard Ellis and ReMax Realty Group. 31. FORCE MAJEURE: Landlord shall be excused for the period of any delay in the performance of any obligations hereunder when prevented from so doing because of causes beyond Landlord's control, which shall include, without limitation, all labor disputes, inability to obtain any materials or services, civil commotion or acts of God. 32. LANDLORD'S OBLIGATIONS: Landlord's obligations hereunder shall be binding upon Landlord only for a period of time that Landlord is in ownership of the Premises and, upon termination of that ownership, Lessee, except as to any obligations which have then matured, shall look solely to Landlord's successor in interest in the Premises for the satisfaction of each and every obligation of Landlord hereunder. 33. LANDLORD'S LIABILITY: (a) Provided not caused by Landlord, its employees, agents or invitees or failure of Landlord to diligently proceed to correct cause, Landlord shall incur no liability to Lessee in the event that any utility becomes unavailable from any source of supply or for any other reason; (b) Lessee waives any rights of claim against Landlord on account of any loss or damage to Lessee's property, the Premises or its contents, including, but not limited to: (i) loss caused by the condition of the Premises or Building, the -21- condition or operation of or defects in any equipment, machinery or utility systems located therein or the act or omission of any person or persons, except loss caused solely and directly by or due to the gross negligence or intentional acts of Landlord, its authorized employees or agents; (il) theft, mysterious disappearance or loss of any property of the Premises or Building; and (ill) any interference or disturbance by third parties, including, without limitation, other lessees; (c) Provided not caused by Landlord, its employees, agents or invitees or failure of Landlord to diligently proceed to correct cause, Landlord shall not be in default hereunder or liable for any damages directly or indirectly resulting from, nor shall the rent herein reserved be abated by reason of (i) the installation, use or interruption of use of any equipment in connection with the furnishings of any of the foregoing services; (ii) failure to furnish or delay in furnishing any such services; or (iii) the limitation, curtailment, rationing or restriction on use of water, electricity, gas or any other form of energy serving the Premises or the Building; (d) Provided not caused by Landlord, its employees, agents or invitees or failure of Landlord to diligently proceed to correct cause, Landlord shall not be responsible or liable to Lessee, or to those claiming by, through or under Lessee, for any loss or damage which may be occasioned by or through the acts or omissions of persons occupying any other part of the Building, or for any loss or damage resulting to Lessee, or those claiming by, through or under Lessee, or its or their property, from the breaking, bursting, stoppage or leaking of electrical cable and wires, or water, gas, sewer or steam pipes. To the maximum extent permitted by law, Lessee agrees to use and occupy the Premises, and to use such other portions of the Building as Lessee is herein given the right to use, at Lessee's own risk. 34. SUCCESSORS: The prospective rights and obligations provided in this Lease shall inure to the benefit of the parties hereto, their legal representatives, heirs, successors and assigns, provided, however, that no rights shall inure to the benefit of any successors of Lessee unless Landlord's written consent for the transfer to such successor has first been obtained as provided for in Paragraph 16 hereof 35. GOVERNING LAWS: This Lease shall be construed, governed and enforced in accordance with the laws of the State of Florida. 36. SEVERABILITY: If any provision of this Lease shall be held to be invalid, void or unenforceable, the remaining provisions hereof shall in no way be affected or impaired and such remaining provisions shall remain in full force and effect. 37. CAPTIONS: Any headings preceding the text of several paragraphs and subparagraphs hereof are inserted solely for the -22- convenience of reference and shall not constitute a part of this Lease, nor shall they affect its meaning, construction or effect. 38. GENDER: As used in this Lease, the word "person" shall mean and include, where appropriate, an individual, corporation, partnership or other entity; the plural shall be substituted for the singular and the singular for the plural, where appropriate; and words of any gender shall mean to include any other gender. 39. EXECUTION: This Lease shall become effective when it has been signed by a duly authorized officer or representative of each of the parties and delivered to the other party. 40. EXHIBITS: Attached to this Lease and made a part hereof are Exhibits "A", "B" and "C". 41. ENTIRE AGREEMENT: This Lease, including Exhibits and any Rider hereto, contains all the agreements, conditions, understanding, representations and warranties made between the parties hereto with respect to the subject matter hereof and may not be modified orally or in any manner other than by an agreement in writing signed by both parties hereto or their respective in interest. 42. CORPORATE AUTHORITY: (a) If Lessee is a corporation, each individual executing this Lease on behalf of said corporation represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation in accordance with the duly adopted resolution of the Board of Directors of said corporation or in accordance with the by-laws of said corporation and that this Lease is binding upon said corporation in accordance with its items. (b) The individual executing this Lease on behalf of this Partnership represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said Partnership in accordance with the Partnership Agreement and that this Lease is binding upon said Partnership in accordance with its items. 43. RULES AND REGULATIONS: Lessee and Lessee's visitors shall comply with the Rules and Regulations, with respect to the Real Property, which are set forth in Exhibit "C" annexed to this Lease and expressly made a part hereof Landlord shall have the right to make reasonable amendments thereto from time to time for the safety, care and cleanliness of the Real Property, the preservation of good order therein and the general convenience of all the lessees and Lessee shall comply with such amended Rules and Regulations, after twenty (20) days written notice from Landlord. All such amendments shall apply to all lessees in the Building and will not materially interfere with the use and -23- enjoyment of the Premises by Lessee. No amendment to the rules and regulations shall contradict or limit the fights granted to the Lessee or reduce or waive the Landlord's duties to the Lessee. The Lease terms will always take precedence over any conflicting rules and regulations and amendments thereto. 44. BUILDING AND COMMON AREA PROVISIONS: Landlord represents and warrants that the Premises, Building and Common Area currently comply with all applicable federal, state, county and other law and recorded covenants and restrictions and Landlord has the duty to assure that the Building and Common Area continue to comply with all applicable federal, state, county and other law and recorded covenants and restrictions, including the duty to comply with present and future ADA requirements. 45. OPTION TO RENEW: Provided Lessee is not then in default hereunder, Lessee has the option to renew this Lease for a further period of five (5) years (hereinafter referred to as "First Option") commencing on October 1, 2002 and terminating on September 30, 2007. The minimum rent payable during the first year of such extended term shall be the total of a) $31,200.00 plus b) an amount computed by multiplying the percentage increase of CPI as provided by the Southeast Regional Office of the Bureau of Labor Statistics for All Items for South All Urban Consumers for March 1, 1999 over the same index for February 28, 2001, times the sum of $31,200.00. The aforesaid percentage increase shall be determined by first obtaining the difference, if any, between the former and latter indices, and then dividing such difference by the latter index. Such rental shall be payable in equal, consecutive monthly installments. In no event shall such minimum rent be less than $31,200.00. In the event the Consumer Price Index is discontinued, it is agreed that the index taking its place shall be used. The Minimum Rent shall be adjusted annually after the first year of the First Option by the CPI. The said option may be exercised to extend the term hereon one (1) time only. Except as expressly provided in this Clause, upon Lessee's exercise of this option, all of the terms and conditions of this Lease shall apply during the extended term. Lessee shall exercise this option by giving Landlord written notice of its intention to do so by certified mail, return receipt requested, on or before 46. FIRST RIGHT OF REFUSAL FOR ADJACENT SPACE: Provided that Lessee is not in default of any of the terms of this Lease, Lessee shall have the first right of refusal to lease the adjacent space known as Unit 2 or Unit 4. Prior to entering into a Lease with a third party, Landlord will provide Lessee with written notice of its intent to lease the adjacent premises and Lessee shall have the option, to be exercised within ten (10) days of receipt of notice from Landlord, to lease the premises according to the same terms and conditions. In the event that -24- Lessee does not exercise this option within the ten (10) day period, this right of refusal shall expire and Landlord shall be free to enter into an agreement to lease the adjacent space to the third party. 47. RIGHT OF SETOFF/LANDLORD DEFAULT: In the event that Landlord defaults on its obligations to maintain or make repairs to the Premises, where such default continues after thirty (30) days written notice, Lessee shall have the right to proceed to correct, repair or maintain and shall deduct the cost from the Minimum Rent due hereunder. 48. RIGHT TO RELOCATE: Provided that Lessee is not in default of this Lease, Lessee shall have the night to terminate this Lease in the event that it enters into a separate agreement to lease larger space in another building owned by Landlord or its affiliates. The new Lease must be for a minimum of three (3) years. IN WITNESS WHEREOF, the parties have duly executed this Lease in counterparts the day and year first above written. WITNESS: LANDLORD: /s/ John McGarvey - ------------------------ --------------------------------- John S. McGarvey, Managing Partner CAMBRIDGE MANAGEMENT ASSOCIATES Date: 7/6/99 --------------------------- ATTEST: LESSEE: /s/ Robert Brahms - ------------------------ --------------------------------- BE FIRST INTERNET CORP., Lessee By: Robert Brahms Title: CEO Date: 6/30/99 --------------------------- -25- EX-10.3 7 CONTRACT [LOGO FOR MICA.NET] Contract August 17, 1999 This agreement between the Michigan Internet Communication Association (MICA) and Befirst.com Inc. (Customer) is a one-year contract for Internet Services as described below for a twelve-month period beginning on the date of installation of service. Price below is for Internet service only and does not include telephone company circuit fees. Invoices for Internet service will be sent quarterly in advance of services rendered. Customer agrees to pay invoices on or before the due date. Equipment and installation fees as quoted separately must be paid in advance of installation of service.
MICA.net Customer Start-up Billed Location Location Description Installation Per/ Month Quarterly Costs Charge - ----------------------------------------------------------------------------------------------------------------- Southfield, MI Southfield, MI DS3 Hub Service @ (base cost) 9 $ 16,000. $ 48,000 Mbps-- 40 Mbps burst Southfield, MI Startup fee: Hardware-- 100 MB $31,000. + Fast Ethernet Router Interface/ $10,000. + Router Processor Interface brd., $14,000. + Watchguard Firewall, DLT Tape $7,000. + Dry. Resiliency IP software Total $51,000.00
Additional bandwidth above the initial 9 Mbps base cost, in 1 Mbps increments will be billed at an additional $600.00 extra per month. By signing below, client agrees to the terms and conditions of the Client Service agreement on the reverse side of this document. /s/ Norman J. Estigoy 8-18-99 /s/ Craig Pisaris- /s/ Courtney - --------------------------------------- Henderson Jones Norman J. Estigoy Date ----------------------------------- CEO Customer Signature Date Michigan Internet Craig A. Pisaris / Courtney -Henderson Jones ----------------------------------- Print Name President-CFO / Chairman ----------------------------------- Title BeFirst.com, Inc. ----------------------------------- Company Name 12751 Westlines Dr. ----------------------------------- Address Ft. Myers, FL 33913 ----------------------------------- City, State, Zip Michigan Internet 21863 Melrose Ave, Southfield, MI 48076 ph: (248) 355-1438 / fx: (248) 355-1488 / www.micanet / info@mica.net TERMS AND CONDITIONS The following terms and conditions govern the Michigan Internet Communication Association Ltd.'s ("MICA") provision of network services ("Services") to the company or individual ("Customer") as described on the Client Service Agreement. The Term "Services" is limited to the equipment, facilities, programming or software provided by MICA to facilitate MICA Services but does not include special access lines that may be utilized with MICA Services, or any equipment, facilities, programming or software at the Customer site. Specifically, MICA Services includes only that portion of connections on MICA-side of the telecommunications provider's demarcation. In the case of Hub Services, the complete connection to the Customer computer system is included. Hub Services are defined as network services to Customer's computer systems co-located at MICA facility receiving Internet services. If Services are, or become subject to, a tariff filed with the Federal Communications Commission or any other regulatory institution ("Tariff"), the terms and conditions of such Tariff, including rates, shall govern Customer's use of the Services. Customer shall be responsible for all connection and local access charges incurred by MICA which apply to the Connection and if MICA is providing Customer the local loop, Customer will he billed by MICA for such amounts. If MICA in providing the local loop, the WAN port on Customer's router is the demarcation point. If Customer is providing its own local loop, the demarcation point is considered to be the port on MICA's router. Customer acknowledges that is has received a Product Specification Sheet relating to the Connection. Also, Customer recognizes that this agreement does not include equipment. 1. TERM. The initial Term begins on the first day of the month following MICA's installation of MICA-side equipment or facilities and Internet service established between MICA and customer routing equipment. The Term for Services ("Term") will be 3 years. After initial Term all Internet services shall automatically renew for one month Terms unless Customer or MICA notifies the other by thirty (30) days written notice that it does not wish to renew. 2. RATES. Rates are as set forth on Client Service Agreement Contract ("Order"). MICA will provide thirty (30) days written notice of any change in base prices. Customer is responsible for service fees according to the new base prices for Customer services installed based on the most recent Service Order(s). Billing shall commence on the date the Connection is activated. Customer will be invoiced quarterly for all amounts due and owing to MICA. All payments are due within 30 days after the date of such invoice. 3. PAYMENT. Customer agrees to pay all charges incurred. Upon receipt of MICA invoice Charges shall be due on the first day of each calendar quarter for that quarter's (three months) service whether or not an invoice is received. Payment shall be made in U.S. Dollars. Interest charges of 1 3/4 percent per month or the highest rate permitted by law will accrue daily on all amounts not paid within thirty (30) days of the date due. Customer will be deemed to be in default hereunder if payment is not received within 30 days after the date of such invoice, and in addition, all Customer services will be disconnected without notice if any amounts are not paid within thirty (30) days of the date due. Customer will pay all sales and use taxes, as well as duties or levies, on Services. Customer's Services will not be initiated until Customer has paid current Customer fees, Services startup fees, and the fees for the first month of Services. If Customer wishes to cancel a Service Order before the Service is initiated, the Customer must provide notice to MICA in writing with return receipt, and such notice must be received by MICA prior to Service initiation. When a Customer cancels before initiation, the first month Service fee will be refunded but the startup fee will only be refunded when a new Service Order from any other Customer utilizes the equipment purchased with said startup fees. Because of the difficulties and inconvenience in attempting to establish the loss, if Customer breaches this Client Service Agreement with respect to any term of this agreement or terminates this contract early, MICA reserves the right, in addition to any other remedies which maybe available to it, to terminate this agreement and the services provided to Customer hereunder. In addition, upon the occurrence of any breach hereunder, 75% of the cumulative total of the balance on this agreement shall become due and payable as of that date as liquidated damages and not as a penalty. Customer acknowledges that the amounts payable pursuant to the preceding sentence are equitable compensation to MICA, and are intended to reasonably compensate MICA for the losses which are occasioned by Customer's failure to honor its obligations hereunder and that the exact amount of damages is difficult or impractical to establish. 4. TERMINATION. MICA with (30) days prior written notice may terminate this service agreement at any time. 5. RIGHTS AND OBLIGATIONS OF CUSTOMER. A. Customer shall at its own expense provide all necessary preparations required to comply with MICA's installation and maintenance specifications, and shall be responsible for the costs of relocation of any equipment or telecommunications circuits once Services are initiated. This includes a circuit from a location of Customer's choice to MICA router (for all Services except Hub Services), circuit termination and packet switching equipment to connect Customer systems or networks to Services. For Hub Services, Customer shall provide the computer system to locate at MICA facility. B. Customer shall provide information related to Services as requested by MICA to troubleshoot Services. C. Customer shall not nor shall it permit or assist others to use Services for any purpose other than that for which they are intended. D. Customer shall not nor shall it permit or assist others to abuse or fraudulently use Services, including but not limited to the following: 1. Obtaining or attempting to obtain service by any fraudulent means or device with intent to avoid payment; 2. Accessing, altering, or destroying any information of another MICA Customer by any fraudulent means or device, or attempting so do so; or 3. Using Services so as to interfere with the use of MICA network by other Customers or authorized users, intentionally or not; or in violation of the law or in aid of any unlawful act. E. Customer acknowledges that MICA's network may only be used for lawful purposes. MICA reserves the right to, from time to time, monitor Customer's activity. The transmission of any material in violation of any United States or State regulations is prohibited. This includes, but is not limited to, copyrighted material, material legally judged to be threatening or obscene, material protected by trade secret or material that is otherwise deemed to be proprietary or judged by MICA to be inappropriate or improper such as unsolicited bulk e-mail messages. MICA has zero tolerance for unsolicited bulk e-mail messages and reserves the right to terminate the Connection in the event that MICA becomes aware that Customer, or persons making use of Customer's services or using the MICA network for the distribution of unsolicited bulk e-mail messages. F. Customer acknowledges that MICA offers Customer access to the Internet. Customer hereby acknowledges that the Internet is not owned, operated, managed by or in any way affiliated with MICA or any of its affiliates, and that it is a separate network of computers, independent of MICA. Customer's use of the Internet is solely at Customer's own risk and is subject to all applicable local, state, national and international laws and regulations. Access to the Internet is dependent on numerous factors, technologies and systems, many of which are beyond MICA's authority and control. G. Customer acknowledges that access to other networks connected to MICA's network must comply with the rules appropriate for that other network. MICA exercises no control whatsoever over the content of information passing through its network. 6. EQUIPMENT OR SOFTWARE NOT PROVIDED BY MICA. A. MICA shall not be responsible for the installation, operation or maintenance of equipment or software not provided by MICA; nor shall MICA be responsible for the transmission or reception of information by equipment or software not provided by MICA. B. Customer shall be responsible for the use and compatibility of equipment or software not provided by MICA. In the event that Customer uses equipment or software not provided by MICA that impairs the Customer's use of Services, Customer shall nonetheless be liable for payment for Services. Upon notice from MICA that the equipment or software not provided by MICA is causing or is likely to cause hazard, interference or service obstruction, Customer shall eliminate the likelihood of hazard, interference or service obstruction. Customer shall if necessary pay MICA to troubleshoot difficulties caused by equipment or software not provided by MICA. MICA will notify Customer by telephone before any such charges are incurred. C. MICA shall not be responsible if any changes in Services cause equipment or hardware not provided by MICA to become obsolete, require modification or alteration, or otherwise affect performance of equipment or hardware not provided by MICA. D. MICA includes this terms and conditions so that MICA can control the performance of MICA network on an end-to-end basis and protect MICA network. MICA's intent is to manage the router on a Communication basis with Customer for leased line based services. This paragraph does not apply so dialup or Hub Services. 1. MICA reserves the right to allow or refuse the make, model and/or software revision of Customer provided router to be used as the gateway to MICA. 2. The Customer will set the initial configuration of the Customer's router interface into MICA network as provided by MICA. 3. Customer must permit MICA to access the router's SNMP variables, and Customer must, at MICA's request, permit one or more MICA network management systems to be the recipient of SNMP TRAP messages. 4 Customer must offer MICA read/write access to the router's configuration tables. Either Customer or MICA can administer the access controls (i.e., login and password) to the router's configuration editor. MICA will only modify that part of the router's configuration that controls the interface into MICA network. 7. RIGHTS AND OBLIGATIONS OF MICA. A. MICA shall install, operate and maintain Services. MICA shall not be responsible for cabling that connects equipment not provided by MICA to MICA Services. B. MICA warrants that Services will be in good working order and will conform to MICA's service specifications upon the date installed. The foregoing warranties are in lieu of all other warranties, express or implied, including but not limited to the implied warranties of merchantability and fitness for a particular purpose. For Web Hosting services, MICA will provide reasonable and industry acceptable network security measures to help protect appropriate customer data files, with respect to MICA web hosting services. C. Customer's sole remedy for performance or non-performance of Services pursuant to MICA's service specifications shall be repair or replacement of Services. D. MICA shall not be liable, either in contract or in tort, for protection from unauthorized access of Customer's transmission facilities or Customer premise equipment; or for unauthorized access to or alteration, theft or destruction of Customer's data files, programs, procedure or information through accident, fraudulent means or devices, or any other method, even should such access occur as a result of MICA's negligence. E. MICA shall not be liable for claims or damages caused by Customer's fault, negligence or failure to perform Customer's responsibilities; claims against Customer by any other party; any act or omission of any other party furnishing services; or installation or removal of equipment furnished by any service provider, except where caused by the gross negligence of MICA. F. MICA shall not be liable for damages to Customer equipment caused by the negligence or willful acts of MICA's officers, employees, agents or contractors for loss through theft or vandalism of Customer equipment on MICA's premises, and for damages caused by the use of Customer equipment or supplies . G. For any other claim, Customer's damages, if any, shall be limited to those actually proven as directly attributable to MICA, subject to the following limitation: MICA will not be liable under any circumstances for any lost profits or other consequential damages, even if MICA has been advised of the possibility of such damages to Customer for any cause whatsoever, regardless of the form of action, and whether in contract or in tort, including negligence, shall be limited to the lesser of $100,000 or the monthly charges paid for Services from the date damages were incurred, but in no event more than twelve (12) month's charges for the Services that cause the damages. H. Upon default by Customer, MICA may terminate Services and retake possession of Services (before, during or after action to recover sums hereunder), retain all payments made hereunder, and recover charges and costs owed by Customer as well as any other damages MICA may have sustained because of Customer's default. "Default" shall mean where Customer becomes subject of a voluntary or involuntary bankruptcy, insolvency, reorganization or liquidation proceeding; makes an assignment for the benefit of creditors; admits in writing its inability to pay debts when due; or fails within ten (10) days after written notice to remedy any breach of this Agreement. I. MICA may interrupt Customer Services immediately after an attempt so notify Customer by telephone at the telephone number of the technical contact specified on the Service Order in any event where MICA Technical Review Committee has determined Customer is in breach of paragraph 5 subparagraph B of this Agreement. In the event such action is taken by MICA, Customer Services will be reinstated when MICA's Technical Review Committee determines the condition has been remedied by Customer. This paragraph takes precedence over paragraph 7 sub-paragraph G. J. MICA MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THOSE OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, THIS INCLUDES LOSS OF DATA RESULTING FROM DELAYS, NONDELIVERIES, MISSED DELIVERIES, OR SERVICE INTERRUPTION HOWEVER CAUSED. USE OF ANY INFORMATION OBTAINED BY MICA'S NETWORK IS AT CUSTOMER'S OWN RISK. MICA SPECIFICALLY DISCLAIMS ANY RESPONSIBILITY FOR THE ACCURACY OR QUALITY OF INFORMATION OBTAINED THROUGH ITS SERVICES. K. Customer understands that routine maintenance and periodic system repairs, upgrades and reconfigurations may result in temporary impairment or interruption in service. As a result, MICA does not guarantee continuous or uninterrupted service and reserves the right from time to time to temporarily reduce or suspend service without notice. 8. INDEMNITIES. MICA its affiliates, officers, directors, licensees, licensers, will be indemnified and saved harmless by the Customer from and against all loss, liability, damage and expense, including reasonable attorney's fees, caused by: 1. Negligent acts or omissions of officers, employees, agents or contractors of Customer that arise out of or are caused by the construction, installation, maintenance, presence, or use or removal of systems, channels, terminal equipment or software not provided by MICA that are connected to MICA Services and that result in claims and demands for damages to property or for injury or death to persons including payments made under any Worker's Compensation Law or under any plan for employee's disability or death benefits; 2. Claims for liable, slander, invasion of privacy or infringement of copyright, and invasion and/or alteration of private records or data arising from any information, data or message transmitted over the network by Customer. 3. Claims for infringement of patents arising from the use of equipment and software, apparatus and systems not provided by MICA in connection with Services. 9. GENERAL. A. Customer shall not assign or transfer the Order without the prior written consent of MICA. MICA may, however, assign this Agreement to its parent company or an affiliate with thirty (30) days notice. No Customer is allowed to resell or redistribute Internet services provided by MICA including but not limited to the following services; dial-in asynchronous modem connections, leased line, and hub services. Retransmission of Internet connection services through microwave and radio waves for reselling is prohibited. MICA may permit Customer to provide Internet services to third parties only under an exclusive written agreement between MICA and Customer. B. MICA will not be responsible for performance of its obligations hereunder where delayed or hindered by war, riots, embargoes, strikes, or other concealed acts of workmen (whether of MICA or others), casualties, accidents or other occurrences beyond MICA's control. MICA shall notify Customer in the event of any of the foregoing occurrences. Should such occurrence continue for more than sixty (60) days, MICA or Customer may cancel the Order for the affected Services with no further liability. C. The provision of Services by MICA is subject to MICA's continuing approval of Customer's creditworthiness. Customer shall furnish financial information as MICA may from time to time request to determine Customer's credit-worthiness. D. Any legal action arising out of failure, malfunction or defect in Services shall be brought within one (1) year of the occurrence or is deemed waived. Any and all actions shall be brought in the appropriate court system in the State of Michigan. E. This Agreement may not be modified except by written amendment by the parties. No agent, employee or representative of MICA or Customer has authority to bind the parties to any representation or warranty unless such is specifically included in this Agreement, the Order, or written amendments thereto. F. Any notice required to be given hereunder shall be in writing and shall be deemed to have been delivered when deposited in the United States Mail, registered or certified mail, return receipt requested with adequate postage affixed and addressed to the person set forth in the signature block hereto or to such other address as either party may provide to the other in accordance with the provisions hereof. Notices may be sent to the administrative address of record for the Customer. Notice so MICA shall be to: Michigan Internet Communication Association, Ltd. P.O. Box 2133, Southfield, MI 41037 Attention: Contract Administration G. All users of Customer services are responsible for ensuring their use complies with any policies in effect which may apply to their use. Further, users of Customer services are responsible for determining which policies affect their specific use. This may include but is not limited to the National Science Foundation Appropriate Use Policy. H. Customer is responsible for assessing its own need for property, casualty, and liability insurance and shall obtain such insurance as it sees fit. Customer shall bear the risk of loss to its own equipment and agrees to so make any claims against the others for any property loss. I. This Agreement shall be governed by the laws of the State of Michigan. J. Should any part or portion of the Agreement be found invalid, the balance of the provisions shall remain unaffected and shall be enforceable. K. It is understood and agreed by the parties hereto that this instrument in conjunction with the Customer Agreement constitutes the entire agreement between the parties. Each party hereby specifically advises the other that any representations inconsistent with the terms and conditions contained herein made by any officer, agent or employee are wholly unauthorized and specifically repudiated. L. It is understood and agreed by the parties hereto that this instrument in conjunction with the Customer Agreement constitutes the entire agreement between the parties. Each party hereby specifically advises the other that any representations inconsistent with the terms and conditions contained herein made by any officer, agent or employee are wholly unauthorized and specifically repudiated. The parties have entered into this Agreement as of the date indicated on the first page front. M. Neither party shall disclose any of the terms and conditions of this agreement without the prior written notice of the other, provided, however, in any of its sales and marketing materials MICA may refer to Customer as its Customer. N. This agreement may be executed in two or more counterparts, each of which shall be deemed to be an original for all purposes hereof. This agreement contains the entire agreement of the parties hereto and with respect to the matters covered hereby and supersedes any other prior or simultaneous agreement related to such matters. Michigan Internet Page 2 of 2 EX-10.4 8 1999 STOCK INCENTIVE PLAN BeFirst.com 1999 Stock Incentive Plan Section 1. Purposes; Definitions. The purpose of this Plan is to enable the Company to offer to its key employees and to key employees of its Subsidiaries and other persons who are expected to contribute to the success of the Company, long term performance-based stock and/or other equity interests in the Company, thereby enhancing their ability to attract, retain and reward such key employees or other persons, and to increase the mutuality of interest between those employees or other persons and the stockholders of the Company. For purposes of this Plan, the following terms shall be defined as set forth below: (a) "Board" means the Board of Directors of BeFirst.com (b) "Cause" shall have the meaning ascribed thereto in Section 5(b)(ix) below. (c) "Change of Control" shall have the meaning ascribed thereto in Section 9 below. (d) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (e) "Committee" means the Stock Incentive Committee of the Board or any other committee of the Board which the Board may designate. (f) "Company" means BeFirst.com, a corporation organized under the laws of the State of Nevada. (g) "Deferred Stock" means Stock to be received, under an award made pursuant to Section 7 below, at the end of a specified deferral period. (h) "Disability" means disability as determined under procedures established by the Committee for purposes of this Plan. (i) "Early Retirement" means retirement from active employment with the Company or any Parent or Subsidiary prior to age 65, with the approval of the Board or the Committee, for purposes of one or more award(s) under this Plan. (j) "Exchange Act" means the Securities Exchange Act of 1934, as amended, as in effect from time to time. (k) "Fair Market Value" of a share of Stock means, as of any given date: (i) if the Stock is listed on a national securities exchange or quoted on the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), the last sale price of a share of Stock on the last preceding day on which the Common Stock was traded, as reported by such exchange or NASDAQ, or on a composite tape reflecting transactions on such exchange or by NASDAQ, as the case may be; (ii) if the Stock is not listed on a national securities exchange or quoted on the NASDAQ, but is traded in the over-the- counter market, the average of the high bid and asked prices for a share of Stock on the last preceding day for which such quotations are reported by the National Quotation Bureau, Inc.; and (iii) if the fair market value of a share of Stock cannot be determined pursuant to clause (i) or (ii) above, such price as the Board of Directors or the Committee, as the case may be, shall determine, which determination shall be conclusive as to the Fair Market Value of the Stock. (l) "Incentive Stock Option" means any Stock Option which is intended to be and is designated as an "incentive stock option" within the meaning of Section 422 of the Code. (m) "Non-Qualified Stock Option" means any Stock Option that is not an Incentive Stock Option. (n) "Normal Retirement" means retirement from active employment with the Company or any Subsidiary on or after age 65. (o) "Other Stock-Based Award" means an award under Section 8 below that is valued in whole or in part by reference to, or is otherwise based upon Stock. (p) "Parent" means any present or future parent of the Company, as such term is defined in Section 424(e) of the Code, or any successor thereto. (q) "Performance Objectives" means performance objectives adopted by the Committee pursuant to the Plan for key employees who have received awards under the Plan. With respect to any award to a key employee who is, or is determined by the Committee to be likely to become a "covered employee" within the meaning of Section 162(m) of the Code, the Performance Objectives shall be limited to specified levels of growth in or peer company comparisons based upon (i) appreciation in the price of Stock plus reinvested dividends over a specified period of time, (ii) return on assets or (iii) book value per share, as the Committee may determine, and the attainment of such Performance Objectives shall not be deemed to have occurred until certified by the -2- Committee. Except in the case of a covered employee, if the Committee determines that a change in business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts it business, or other events or circumstances under the Performance Objectives to be unsuitable, the Committee may modify such Performance Objectives or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate. (r) "Plan" means this BeFirst.com 1999 Stock Incentive Plan, as hereinafter amended from time to time. (s) "Restricted Stock" means Stock, received under an award made pursuant to Section 6 below, that is subject to restrictions imposed pursuant to said Section 6. (t) "Retirement" means Normal Retirement or Early Retirement. (u) "Rule 16b-3" means Rule 16b-3 of the General Rules and Regulations under the Exchange Act, as in effect from time to time, and any successor thereto. (v) "Section 162(m)" means Section 162(m) of the Code, as in effect from time to time, and any successor thereto. (w) "Securities Act" means the Securities Act of 1933, as amended, as in effect from time to time. (x) "Stock" means the Common Stock of the Company, par value $.001 per share. (y) "Stock Option" or "Option" means any option to purchase shares of Stock which is granted pursuant to the Plan. (z) "Subsidiary" means any present or future (A) subsidiary corporation of the Company, as such term is defined in Section 424(f) of the Code, or (B) unincorporated business entity in which the Company owns, directly or indirectly, 50% or more of the voting rights, capital or profits. Section 2. Administration. The Plan shall be administered by the Board, or at its discretion, the Committee, the membership of which shall consist solely of two or more members of the Board, each of whom shall serve at the pleasure of the Board and shall be a "Non-Employee Director," as defined in Rule 16b-3, and an "outside director," as defined in Section 162(m) of the Code, and shall be at all times constituted so as not to adversely affect the compliance of the Plan -3- with the requirements of Rule 16b-3 or with the requirements of any other applicable law, rule or regulation. The Board or the Committee, as the case may be, shall have the authority to grant, pursuant to the terms of the Plan, to officers and other key employees or other persons eligible under Section 4 below: (i) Stock Options, (ii) Restricted Stock, (iii) Deferred Stock, and/or (iv) Other Stock-Based Awards. For purposes of illustration and not of limitation, the Board or the Committee, as the case may be, shall have the authority (subject to the express provisions of this Plan): (i) to select the officers and other key employees of the Company or any Parent or Subsidiary and other persons to whom Stock Options, Restricted Stock, Deferred Stock and/or Other Stock-Based Awards may be from time to time granted hereunder; (ii) to determine the Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock, Deferred Stock and/or Other Stock-Based Awards, or any combination thereof, if any, to be granted hereunder to one or more eligible persons; (iii) to determine the number of shares of Stock to be covered by each award granted hereunder; (iv) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder (including, but not limited to, share price, any restrictions or limitations, and any vesting acceleration, exercisability and/or forfeiture provisions); (v) to determine the terms and conditions under which awards granted hereunder are to operate on a tandem basis and/or in conjunction with or apart from other awards made by the Company or any Parent or Subsidiary outside of this Plan; (vi) to determine the extent and circumstances under which Stock and other amounts payable with respect to an award hereunder shall be deferred; and (vii) to substitute (A) new Stock Options for previously granted Stock Options, including previously granted Stock Options which have higher option exercise prices and/or containing other less favorable terms, and (B) new awards of any other type for previously granted awards of the same type, including previously granted awards which contain less favorable terms. -4- Subject to Section 10 hereof, The Board or the Committee, as the case may be, shall have the authority to (i) adopt, alter and repeal such administrative rules, guidelines and practices governing this Plan as it shall, from time to time, deem advisable, (ii) interpret the terms and provisions of this Plan and any award issued under this Plan (and to determine the form and substance of all agreements relating thereto), and (iii) to otherwise supervise the administration of the Plan. Subject to the express provisions of the Plan, all decisions made by the Board or the Committee, as the case may be, pursuant to the provisions of the Plan shall be made in the Board or the Committee's sole and absolute discretion and shall be final and binding upon all persons, including the Company, its Parent and Subsidiaries and the Plan participants. Section 3. Stock Subject to Plan. The total number of shares of Stock reserved and available for distribution under this Plan shall be 1,000,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any shares of Stock that have been optioned cease to be subject to a Stock Option for any reason, or if any shares of Stock that are subject to any Restricted Stock award, Deferred Stock award or Other Stock-Based Award are forfeited or any such award otherwise terminates without the issuance of such shares, such shares shall again be available for distribution under the Plan. In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split, extraordinary distribution with respect to the Stock or other change in corporate structure affecting the Stock, such substitutions or adjustments shall be made in the (A) aggregate number and kind of shares reserved for issuance under this Plan, (B) number, kind and exercise price of shares of Stock subject to outstanding Options granted under this Plan, and (C) number, kind, purchase price and/or appreciation base of shares of Stock subject to other outstanding awards granted under this Plan, as may be determined to be appropriate by the Board or the Committee, as the case may be, in its sole discretion, in order to prevent dilution or enlargement of rights; provided, however, that the number of shares subject to any award shall always be a whole number. Such adjusted exercise price shall also be used to determine the amount which is payable to the optionee upon the exercise by the Board or the Committee, as the case may be, of the alternative settlement right which is set forth in Section 5(b)(xi) below. Subject to the provisions of the immediately preceding paragraph, the maximum numbers of shares subject to Options, Restricted Stock awards, Deferred Stock awards, and other Stock-Based awards to any employee who is employed by the Company or any Parent or Subsidiary on the last day of any taxable year of the Company, shall be 600,000 shares during the term of the Plan. -5- Section 4. Eligibility. Officers and other key employees of the Company or any Parent or Subsidiary (but excluding any person whose eligibility would adversely affect the compliance of the Plan with the requirements of Rule 16b-3) who are at the time of the grant of an award under this Plan employed by the Company or any Parent or Subsidiary and who are responsible for or contribute to the management, growth and/or profitability of the business of the Company or any Parent or Subsidiary, are eligible to be granted Options and awards under this Plan. In addition, Non-Qualified Stock Options and other awards may be granted under the Plan to any person, including, but not limited to, independent agents, consultants and attorneys who the Board or the Committee, as the case may be, believes has contributed or will contribute to the success of the Company. Eligibility under the Plan shall be determined by the Board or the Committee, as the case may be. The grants of Restricted Stock, Deferred Stock and Other Stock-Based Awards under this Plan shall be earned by a participant on the basis of the Company's financial performance over the period or periods for which the grants were awarded on the basis of pre-established performance goals determined by the Board or the Committee, as the case may be, in its sole discretion. The performance measurement criteria used for such grants shall be limited to one or more of: earnings per share, return on stockholders' equity, return on assets, growth in earnings, growth in sales revenue, and stockholder returns. Such criteria may be measured by the Company's results or the Company's performance as measured against a group of comparable companies selected by the Committee. In applying such criteria, earnings may be calculated based on the exclusion of discontinued operations and extraordinary items. The Board or the Committee, as the case may be, may, in its sole discretion, include additional conditions and restrictions in the agreement entered into in connection with awards under this Plan. Section 5. Stock Options. (a) Grant and Exercise. Stock Options granted under this Plan may be of two types: (i) Incentive Stock Options and (ii) Non-Qualified Stock Options. Any Stock Option granted under this Plan shall contain such terms as the Board or the Committee, as the case may be, may from time to time approve. The Board or the Committee, as the case may be, shall have the authority to grant to any optionee Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options, and they may be granted alone or in addition to other awards granted under this Plan. To the extent that any Stock Option is not designated as an Incentive Stock Option or does not qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock Option. The grant of an Option shall be deemed to have occurred on the date on which the Board or the Committee, as the case may be, by resolution, designates an individual as -6- a grantee thereof, and determines the number of shares of Stock subject to, and the terms and conditions of, said Option. Anything in this Plan to the contrary notwithstanding, no term of this Plan relating to Incentive Stock Options or any agreement providing for Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify this Plan under Section 422 of the Code, or, without the consent of the Optionee(s) affected, to disqualify any Incentive Stock Option under Section 422. (b) Terms and Conditions. Stock Options granted under this Plan shall be subject to the following terms and conditions: (i) Option Price. The option price per share of Stock purchasable under a Stock Option shall be determined by the Board or the Committee, as the case may be, at the time of grant but shall be not less than 100% (110% in the case of an Incentive Stock Option granted to an optionee ("10% Stockholder") who, at the time of grant, owns Stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its Parent, if any, or its Subsidiaries) of the Fair Market Value of the Stock at the time of grant. (ii) Option Term. The term of each Stock Option shall be fixed by the Board or the Committee, as the case may be, but no Incentive Stock Option shall be exercisable more than ten years (five years, in the case of an Incentive Stock Option granted to a 10% Stockholder) after the date on which the Option is granted. (iii) Exercisability. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Board or the Committee, as the case may be, at the time of grant; provided, however, that except as otherwise provided in this Section 5 and Section 9 below, unless waived by the Board or the Committee, as the case may be, at or after the time of grant, no Stock Option shall be exercisable prior to the first anniversary date of the grant of the Option. If the Board or the Committee, as the case may be, provides, in its discretion, that any Stock Option is exercisable only in installments, the Board or the Committee, as the case may be, may waive such installment exercise provisions at any time at or after the time of grant in whole or in part, based upon such factors as the Board or the Committee, as the case may be, shall determine. (iv) Method of Exercise. Subject to whatever installment, exercise and waiting period provisions are applicable in a particular case, Stock Options may be exercised in whole or in part at any time during the -7- option period by giving written notice of exercise to the Company specifying the number of shares of Stock to be purchased. Such notice shall be accompanied by payment in full of the purchase price which shall be in cash unless otherwise provided in this clause (iv) or in Section 5(b)(xi) below or, unless otherwise provided in the Stock Option agreement referred to in Section 5(b)(xii) below, in whole shares of Stock which are already owned by the holder of the Option or unless otherwise provided in the Stock Option agreement referred to in Section 5(b)(xii) below, partly in cash and partly in such Stock. Cash payments shall be made by wire transfer, certified or bank check or personal check, in each case payable to the order of the Company; provided, however, that the Company shall not be required to deliver certificates for shares of Stock with respect to which an Option is exercised until the Company has confirmed the receipt of good and available funds in payment of the purchase price thereof. Payments in the form of Stock (which shall be valued at the Fair Market Value of a share of Stock on the date of exercise) shall be made by delivery of stock certificates in negotiable form which are effective to transfer good and valid title thereto to the Company, free of any liens or encumbrances. In addition to the foregoing, payment of the exercise price may be made by delivery to the Company by the optionee of an executed exercise form, together with irrevocable instructions to a broker-dealer to sell or margin a sufficient portion of the shares covered by the option and deliver the sale or margin loan proceeds directly to the Company. Except as otherwise expressly provided in this Plan, no Option which is granted to a person who is at the time of grant an employee of the Company or a Subsidiary or Parent of the Company may be exercised at any time unless the holder thereof is then an employee of the Company or of a Parent or a Subsidiary. The holder of an Option shall have none of the rights of a stockholder with respect to the shares subject to the Option until the optionee has given written notice of exercise, has paid in full for those shares of Stock and, if requested by the Board or Committee, as the case may be, has given the representation described in Section 12(a) below. (v) Transferability; Exercisability. No Stock Option shall be transferable by the optionee other than by will or by the laws of descent and distribution; provided, however, that a Non-Qualified Stock Option shall be transferable pursuant to a qualified domestic relations order, and except as may be otherwise required with respect to a Non- Qualified Option pursuant to a qualified domestic relations order, all Stock Options shall be exercisable, during the optionee's lifetime, only by the optionee or his or her guardian or legal representative. -8- (vi) Termination by Reason of Death. Subject to Section 5(b)(x) below, if an optionee's employment by the Company or any Parent or Subsidiary terminates by reason of death, any Stock Option held by such optionee may thereafter be exercised, to the extent then exercisable or on such accelerated basis as the Board or Committee, as the case may be, may determine at or after the time of grant, for a period of one year (or such other period as the Board or the Committee, as the case may be, may specify at or after the time of grant) from the date of death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. (vii) Termination by Reason of Disability. Subject to Section 5(b)(x) below, if an optionee's employment by the Company or any Subsidiary terminates by reason of Disability, any Stock Option held by such optionee may thereafter be exercised by the optionee, to the extent it was exercisable at the time of termination or on such accelerated basis as the Board or the Committee, as the case may be, may determine at or after the time of grant, for a period of three years (or such other period as the Board or the Committee, as the case may be, may specify at or after the time of grant) from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period is the shorter; provided, however, that if the optionee dies within such three-year period (or such other period as the Board or the Committee, as the case may be, shall specify at or after the time of grant), any unexercised Stock Option held by such optionee shall thereafter be exercisable to the extent to which it was exercisable at the time of death for a period of one year from the date of death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. (viii) Termination by Reason of Retirement. Subject to Section 5(b)(x) below, if an optionee's employment by the Company or any Parent or Subsidiary terminates by reason of Normal Retirement, any Stock Option held by such optionee may thereafter be exercised by the optionee, to the extent it was exercisable at the time of termination or on such accelerated basis as the Board or the Committee, as the case may be, may determine at or after the time of grant, for a period of three years (or such other period as the Board or the Committee, as the case may be, may specify at or after the time of grant) from the date of such termination of employment or the expiration of the stated terms of such Stock Option, whichever period is the shorter; provided, however, that if the optionee dies within such three-year period (or such other period as the Board or the Committee, as the case may be, shall specify at or after the time of grant), any unexercised Stock Option held by such optionee shall thereafter be exercisable to the extent to which it -9- was exercisable at the time of death for a period of one year from the date of death or until the expiration of the stated terms of such Stock Option, whichever period is the shorter. If an optionee's employment with the Company or any Parent or Subsidiary terminates by reason of Early Retirement, the Stock Option shall thereupon terminate; provided, however, that if the Board or the Committee, as the case may be, so approves at the time of Early Retirement, any Stock Option held by the optionee may thereafter be exercised by the optionee as provided above in connection with termination of employment by reason of Normal Retirement. (ix) Other Termination. Subject to the provisions of Section 12(g) below and unless otherwise determined by the Committee at or after the time of grant, if an optionee's employment by the Company or any Parent or Subsidiary terminates for any reason other than death, Disability or Retirement, the Stock Option shall thereupon automatically terminate, except that if the optionee is involuntarily terminated by the Company or any Parent or a Subsidiary without Cause (as hereinafter defined), such Stock Option may be exercised for a period of six months from the date of such termination or until the expiration of the stated terms of such Stock Option, whichever period is the shorter. For purposes of this Plan, "Cause" shall mean (1) the conviction of the optionee of a felony under Federal law or the law of the state in which such action occurred, (2) dishonesty by the optionee in the course of fulfilling his or her employment duties, or (3) the willful and deliberate failure on the part of the optionee to perform his or her employment duties in any material respect. In addition, with respect to an option granted to an employee of the Company, a Parent or a Subsidiary, for purposes of this Plan, "Cause" shall also include any definition of "Cause" contained in any employment agreement between the optionee and the Company, Parent or Subsidiary, as the case may be. (x) Additional Incentive Stock Option Limitation. In the case of an Incentive Stock Option, the aggregate Fair Market Value of Stock (determined at the time of grant of the Option) with respect to which Incentive Stock Options are exercisable for the first time by an optionee during any calendar year (under all such plans of optionee's employer corporation and its Parent, if any, and Subsidiaries) shall not exceed $100,000. (xi) Alternative Settlement of Option. Upon the receipt of written notice of exercise, the Board or the Committee, as the case may be, may elect to settle all or part of any Stock Option by paying to the optionees an amount, in cash or Stock (valued at Fair Market Value on the date of exercise), equal to the excess of the Fair Market Value of one share of -10- Stock, on the date of exercise over the Option exercise price, multiplied by the number of shares of Stock with respect to which the optionee proposes to exercise the Option. Any such settlements which relate to Options which are held by optionees who are subject to Section 16(b) of the Exchange Act shall comply with the "window period" provisions of Rule 16b-3, to the extent applicable and with such other conditions as the Board or Committee may impose. No such discretion may be exercised unless the option agreement permits the payment of the purchase price in that manner. (xii) Stock Option Agreement. Each grant of a Stock Option shall be confirmed by, and shall be subject to the terms of, an agreement executed by the Company and the participant. Section 6. Restricted Stock. (a) Grant and Exercise. Shares of Restricted Stock may be issued either alone or in addition to or in tandem with other awards granted under this Plan. The Board or the Committee, as the case may be, shall determine the eligible persons to whom, and the time or times at which, grants of Restricted Stock will be made, the number of shares to be awarded, the price (if any) to be paid by the recipient, the time or times within which such awards may be subject to forfeiture (the "Restriction Period"), the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the awards. The Board or the Committee, as the case may be, may condition the grant of Restricted Stock upon the attainment of specified Performance Objectives or such other factors as the Board or the Committee, as the case may be, may determine. (b) Terms and Conditions. Each Restricted Stock award shall be subject to the following terms and conditions: (i) Restricted Stock, when issued, will be represented by a stock certificate or certificates registered in the name of the holder to whom such Restricted Stock shall have been awarded. During the Restriction Period, certificates representing the Restricted Stock and any securities constituting Retained Distributions (as defined below) shall bear a restrictive legend to the effect that ownership of the Restricted Stock (and such Retained Distributions), and the enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms and conditions provided in this Plan and the Restricted Stock agreement referred to in Section 6(b)(iv) below. Such certificates shall be deposited by the holder with the Company, together with stock powers or other instruments of assignment, endorsed in blank, which will permit transfer to the Company of all or any portion of the Restricted Stock -11- and any securities constituting Retained Distributions that shall be forfeited or that shall not become vested in accordance with this Plan and the applicable Restricted Stock agreement. (ii) Restricted Stock shall constitute issued and outstanding shares of Common Stock for all corporate purposes, and the issuance thereof shall be made for at least the minimum consideration (if necessary) to permit the shares of Restricted Stock to be deemed to be fully paid and nonassessable. The holder will have the right to vote such Restricted Stock, to receive and retain all regular cash dividends and other cash equivalent distributions as the Board may in its sole discretion designate, pay or distribute on such Restricted Stock and to exercise all other rights, powers and privileges of a holder of Stock with respect to such Restricted Stock, with the exceptions that (A) the holder will not be entitled to delivery of the stock certificate or certificates representing such Restricted Stock until the Restriction Period shall have expired and unless all other vesting requirements with respect thereto shall have been fulfilled; (B) the Company will retain custody of the stock certificate or certificates representing the Restricted Stock during the Restriction Period; (C) other than regular cash dividends and other cash equivalent distribution as the Board may in its sole discretion designate, pay or distribute, the Company will retain custody of all distributions ("Retained Distributions") made or declared with respect to the Restricted Stock (and such Retained Distributions will be subject to the same restrictions, terms and conditions as are applicable to the Restricted Stock) until such time, if ever, as the Restricted Stock with respect to which such Retained Distributions shall have been made, paid or declared shall have become vested and with respect to which the Restriction Period shall have expired; (D) the holder may not sell, assign, transfer, pledge, exchange, encumber or dispose of the Restricted Stock or any Retained Distributions during the Restriction Period; and (E) a breach of any of the restrictions, terms or conditions contained in this Plan or the Restricted Stock agreement referred to in Section 6(b)(iv) below, or otherwise established by the Committee with respect to any Restricted Stock and Retained Distributions will cause a forfeiture of such Restricted Stock and any Retained Distributions with respect thereto. (iii) Upon the expiration of the Restriction Period with respect to each award of Restricted Stock and the satisfaction of any other applicable restrictions, terms and conditions (A) all or part of such Restricted Stock shall become vested in accordance with the terms of the Restricted Stock agreement referred to in Section 6(b)(iv) below, and (B) any Retained Distributions with respect to such Restricted Stock shall become vested to the extent that the Restricted Stock related -12- thereto shall have become vested. Any such Restricted Stock and Retained Distributions that do not vest shall be forfeited to the Company and the holder shall not thereafter have any rights with respect to such Restricted Stock and Retained Distributions that shall have been so forfeited. (iv) Each Restricted Stock award shall be confirmed by, and shall be subject to the terms of, an agreement executed by the Company and the participant. Section 7. Deferred Stock. (a) Grant and Exercise. Deferred Stock may be awarded either alone or in addition to or in tandem with other awards granted under the Plan. The Board or the Committee, as the case may be, shall determine the eligible persons to whom and the time or times at which Deferred Stock shall be awarded, the number of shares of Deferred Stock to be awarded to any person, the duration of the period (the "Deferral Period") during which, and the conditions under which, receipt of the Deferred Stock will be deferred, and all the other terms and conditions of the awards. The Board or the Committee, as the case may be, may condition the grant of the Deferred Stock upon the attainment of specified Performance Objectives or such other factors or criteria as the Board or the Committee, as the case may be, shall determine. (b) Terms and Conditions. Each Deferred Stock award shall be subject to the following terms and conditions: (i) Subject to the provisions of this Plan and Deferred Stock agreement referred to in Section 7(b)(vii) below, Deferred Stock awards may not be sold, assigned, transferred, pledged or otherwise encumbered during the Deferral Period. At the expiration of the Deferral Period (or the Additional Deferral Period referred to in Section 7(b)(vi) below, where applicable), share certificates shall be delivered to the participant, or his legal representative, in a number equal to the shares of Stock covered by the Deferred Stock award. (ii) As determined by the Committee at the time of award, amounts equal to any dividends declared during the Deferral Period (or the Additional Deferral Period referred to in Section 7(b)(vi) below, where applicable) with respect to the number of shares covered by a Deferred Stock award may be paid to the participant currently or deferred and deemed to be reinvested in additional Deferred Stock. (iii) Subject to the provisions of the Deferred Stock agreement referred to in Section 7(b)(vii) below and this Section 7 and Section 12(g) below, -13- upon termination of participant's employment with the Company or any Subsidiary for any reason during the Deferral Period (or the Additional Deferral Period referred to in Section 7(b)(vi) below, where applicable) for a given award, the Deferred Stock in question will vest or be fortified in accordance with the terms and conditions established by the Board or the Committee, as the case may be, at the time of grant. (iv) The Board or the Committee, as the case may be, may, after grant, accelerate the vesting of all or any part of any Deferred Stock award and/or waive the deferral limitations for all or any part of a Deferred Stock award. (v) In the event of hardship or other special circumstances of a participant whose employment with the Company or any Parent or Subsidiary is involuntarily terminated (other than for Cause), the Board or the Committee, as the case may be, may waive in whole or in part any or all of the remaining deferral limitations imposed hereunder or pursuant to the Deferred Stock agreement referred to in Section 7(b)(vii) below with respect to any or all of the participant's Deferred Stock. (vi) A participant may request to, and the Board or the Committee, as the case may be, may at any time, defer the receipt of an award (or an installment of an award) for an additional specified period or until a specified period or until a specified event (the "Additional deferral Period"). Subject to any exceptions adopted by the Board or the Committee, as the case may be, such request must be made at least one year prior to expiration of the Deferral Period for such Deferred Stock award (or such installment). (vii) Each Deferred Stock award shall be confirmed by, and shall be subject to the terms of, an agreement executed by the Company and the participant. Section 8. Other Stock-Based Awards. (a) Grant and Exercise. Other Stock-Based Awards, which may include performance shares and shares valued by reference to the performance of the Company or any Subsidiary, may be granted either alone or in addition to or in tandem with Stock Options, Restricted Stock or Deferred Stock. The Board or the Committee, as the case may be, shall determine the eligible persons to whom, and the time or times at which, such awards shall be made, the number of shares of Stock to be awarded pursuant to such awards, and all other terms and conditions of the awards. The Board or the Committee, as the case may be, may also provide for the grant of Stock under such awards upon -14- the attainment of specified Performance Objectives and/or completion of a specified performance period. (b) Terms and Conditions. Each Other Stock-Based Award shall be subject to the following terms and conditions: (i) Shares of Stock subject to an Other Stock-Based may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction or period of deferral lapses. (ii) The recipient of Other Stock-Based Award shall be entitled to receive, currently or on a deferred basis, dividends or dividend equivalents with respect to the number of shares covered by the award, as determined by the Board or the Committee, as the case may be, at the time of the award. The Board or the Committee, as the case may be, may provide that such amounts (if any) shall be deemed to have been reinvested in additional Stock. (iii) Any Other Stock-Based Award and any Stock covered by any Other Stock-Based Award shall vest or be forfeited to the extent so provided in the award agreement referred to in Section 8(b)(v) below, as determined by the Board or the Committee, as the case may be. (iv) In the event of the participant's Retirement, Disability or death, or in case of special circumstances, the Board or the Committee, as the case may be, may waive in whole or in part any or all of the limitations imposed hereunder (if any) with respect to any or all of an Other Stock-Based Award. (v) Each Other Stock-Based Award shall be confirmed by, and shall be subject to the terms of, an agreement executed by the Company and by the participant. Section 9. Change of Control Provisions. (a) A "Change of Control" shall be deemed to have occurred on the tenth day after: (i) any individual, entity or group (as defined in Section 13(d)(3) of the Exchange Act), becomes, directly or indirectly, the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 25% of the then outstanding shares of the Company's capital stock entitled to vote generally in the election of directors of the Company; or -15- (ii) the commencement of, or the first public announcement of the intention of any individual, firm, corporation or other entity or of any group (as defined in Section 13(d)(3) of the Exchange Act) to commence, a tender or exchange offer subject to Section 14(d)(1) of the Exchange Act for any class of the Company's capital stock; or (iii) the stockholders of the Company approve (A) a definitive agreement for the merger or other business combination of the Company with or into another corporation pursuant to which the stockholders of the Company immediately prior to the transaction do not own, immediately after the transaction, more than 50% of the voting power of the corporation that survives, or (B) a definitive agreement for the sale, exchange or other disposition of all or substantially all of the assets of the Company, or (C) any plan or proposal for the liquidation or dissolution of the Company; provided, however, that a "Change of Control" shall not be deemed to have taken place if beneficial ownership is acquired (A) directly from the Company, other than an acquisition by virtue of the exercise or conversion of another security unless the security so converted or exercised was itself acquired directly from the Company, or (B) by, or a tender or exchange offer is commenced or announced by, the Company, any profit-sharing, employee ownership or other employee benefit plan sponsored or maintained by the Company; or any trustee of or fiduciary with respect to any such plan when acting in such capacity. (b) In the event of a "Change of Control" as defined in Section 9(a) above, awards granted under this Plan shall be subject to the following provisions, unless the provisions of this Section 9 are suspended or terminated by the Board prior to the occurrence of such a "Change of Control": (i) all outstanding Stock Options which have been outstanding for at least six months shall become exercisable in full, whether or not otherwise exercisable at such time, and any such Stock Option shall remain exercisable in full thereafter until it expires pursuant to its terms; and (ii) all restrictions and deferral limitations contained in Restricted Stock awards, Deferred Stock awards and Other Stock-Based Awards granted under the Plan shall lapse. Section 10. Amendments and Termination. -16- The Board may at any time, and from time to time, amend any of the provisions of this Plan, and may at any time suspend or terminate the Plan; provided, however, that no such amendment shall be effective unless and until it has been duly approved by the holders of the outstanding shares of Stock if the failure to obtain such approval would adversely affect the compliance of the Plan with the requirements of Rule 16b-3, Section 162(m) or any other applicable law, rule or regulation. The Board or the Committee, as the case may be, may amend the terms of any Stock Option or other award theretofore granted under the Plan; provided, however, that subject to Section 3 above, no such amendment may be made by the Board or the Committee, as the case may be, which in any material respect impairs the rights of the optionee or participant without the optionee's or participant's consent, except for such amendments which are made to cause this Plan to qualify for the exemption provided by Rule 16b-3 or to be in compliance with the provisions of Section 162(m). Section 11. Unfunded Status of Plan. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a participant or optionee by the Company, nothing contained herein shall give any such participant or optionee any rights that are greater than those creditor of the Company. Section 12. General Provisions. (a) The Board or the Committee, as the case may be, may require each person acquiring shares of Stock Option or other award under this Plan to represent to and agree with the Company in writing that the optionee or participant is acquiring the shares for investment without a view towards the distribution thereof. All certificates for shares of Stock delivered under this Plan shall be subject to such stop transfer orders and other restrictions as the Board or the Committee, as the case may be, may deem to be advisable in order to assure compliance with the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange or association upon which the Stock is then listed or quoted, any applicable Federal or state securities law, and any applicable corporate law, and the Board or the Committee, as the case may be, may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (b) Nothing contained in the Plan shall prevent the Board from adopting such other or additional incentive arrangements as it may deem desirable, including, but not limited to, the granting of stock options and the awarding of stock and cash otherwise than under this Plan; and such arrangements may be either generally applicable or applicable only in specific cases. -17- (c) Nothing contained in this Plan or in any award hereunder shall be deemed to confer upon any employee of the Company or any Parent or Subsidiary any right to continued employment with the Company or any Parent or Subsidiary, nor shall it interfere in any way with the right of the Company or any Parent or Subsidiary to terminate the employment of any of its employees at any time. (d) No later than the date as of which an amount first becomes includable in the gross income of the participant for Federal income tax purposes with respect to any Option or other award under this Plan, the participant shall pay to the Company, or make arrangements satisfactory to the Board or the Committee, as the case may be, regarding the payment of, any Federal, state and local taxes of any kind required by law to be withheld or paid with respect to such amount. If permitted by the Board or the Committee, as the case may be, tax withholding or payment obligations may be settled with Stock, including Stock that is part of the award that gives rise to the withholding requirement. The obligations of the Company under this Plan shall be conditional upon such payment or arrangements, and the Company and any Subsidiary shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the participant from the Company or any Parent or Subsidiary. (e) This Plan and all awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware (without regard to choice of law provisions). (f) Any Stock Option granted or other award made under this Plan shall not be deemed compensation for purposes of computing benefits under any retirement plan of the Company or any Parent or Subsidiary and shall not affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation (unless required by specific reference in any such other plan to awards under this Plan). (g) A leave of absence, unless otherwise determined by the Committee prior to the commencement thereof, shall not be considered a termination of employment. Any Stock Option granted or awards made under this Plan shall not be affected by any change of employment, so long as the holder continues to be an employee of the Company or any Parent or Subsidiary. (h) Except as otherwise expressly provided in this Plan, no right or benefit under this Plan may be alienated, sold, assigned, hypothecated, pledged, exchanged, transferred, encumbranced or charged, and any attempt to alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or charge the same -18- shall be void. No right or benefit hereunder shall in any manner be subject to the debts, contracts or liabilities of the person entitled to such benefit. (i) The obligations of the Company with respect to all Stock Options and awards under this Plan shall be subject to (A) all applicable laws, rules and regulations, and such approvals by any governmental agencies as may be required, including, without limitation, the effectiveness of a registration statement under the Securities Act, and (B) the rules and regulations of any securities exchange or association on which the Stock may be listed or quoted. (j) It is the intention of the Company that this Plan complies with the requirements of Rule 16b-3, Section 162(m) and all other applicable laws, rules and regulations, and any ambiguities or inconsistencies in the construction of any of the provisions of this Plan shall be interpreted to give effect to such intention. If any of the terms or provisions of this Plan conflict with the requirements of Rule 16b-3, or with the requirements of Section 162(m) or any other applicable law, rule or regulation, and with respect to Incentive Stock Options under Section 422 of the Code, then such terms or provisions shall be deemed inoperative to the extent they so conflict. With respect to Incentive Stock Options, if this Plan does not contain any provision required to be included herein under Section 422 of the Code. such provision shall be deemed to be incorporated herein with the same force and effect as if such provision had been set out at length herein. (k) The Board or the Committee, as the case may be, may terminate any Stock Option or other award made under this Plan if a written agreement relating thereto is not executed and returned to the Company within 30 days after such agreement has been delivered to the optionee or participant for his or her execution. (l) The grant of awards pursuant to this Plan shall not in any way effect the right or power of the Company to make reclassifications, reorganizations or other changes of or to its capital or business structure or to merge, consolidate, liquidate, sell or otherwise dispose of all or any part of its business or assets. Section 13. Effective Date of Plan. The Plan shall be effective as of the date of the approval and adoption thereof at a meeting of the stockholders of the Company. Section 14. Term of Plan. -19- This Plan shall terminate on the tenth anniversary of its effective date, and no Stock Option, Restricted Stock Award, Deferred Stock award or Other Stock-Based Award shall be granted pursuant to this Plan after said date. Awards granted on or prior to such date may extend beyond that date. -20- EX-10.5 9 INCENTIVE STOCK OPTION BEFIRST.COM INCENTIVE STOCK OPTION AGREEMENT AGREEMENT made as of the ____ day of ____, 1999 (the "Grant Date") by and between BEFIRST.COM, a New York corporation, having its office and principal place of business located at 121 West 27th Street, Suite 903, New York, New York 10001 (the "Corporation") and __________ residing at ______________________ (the "Holder"). W I T N E S S E T H: WHEREAS, on Grant Date, the Corporation authorized the grant to the Holder of an option to purchase an aggregate of ________ shares of the authorized but unissued Common Stock of the Corporation, $.001 par value (the "Stock"), pursuant to the Corporation's 1999 Stock Option Plan (the "Plan"), conditioned upon the Holder's acceptance thereof upon the terms and conditions set forth in this Agreement; and WHEREAS, the Holder desires to acquire said option on the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the foregoing and of the terms and conditions herein contained, the parties hereto agree as follows: 1. Subject to the terms and conditions of the Plan, a copy of which is annexed hereto, made a part hereof and the receipt thereof acknowledged by the Holder, the Corporation hereby grants to the Holder as a matter of separate agreement and not in lieu of salary, or any other compensation for services, the right and option (hereinafter called the "Option"), to purchase all or any part of an aggregate of _________ shares of Stock on the terms and conditions herein set forth. 2. This Option shall be deemed to be an incentive stock option. 3. The purchase price of each share of Stock subject to this Option shall be $______. 4. This Option shall be exercisable in whole or in part at any time or from time to time for a period terminating at the close of business five (5) years from the Date of Grant. 5. The purchase price of the shares of Stock as to which the Option is exercised shall be paid in full at the time of exercise by (a) cash or check or (b) in shares of Common Stock of the Corporation already owned by the Holder as provided in Paragraph 5(b)(iv) of the Plan. The Holder shall not have any of the rights of a stockholder with respect to the Stock covered by the Option until the date of the issuance of a stock certificate to him for such shares of Stock. 6. (a) The Option shall be exercisable during the five (5) year period commencing from the Date of Grant and terminating on the close of business on June 16, 2004 (the "Exercise Period"). (b) The Holder is an employee of the Corporation and must remain in the continuous employ of the Corporation for one year from the Date of Grant in order to exercise any part of the Option. (c) Except as provided in Paragraph 6(e) below, this Option and the rights and privileges conferred hereby may not be -2- transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Option or any right or privilege conferred hereby, contrary to the provisions hereof, or upon the levy of any attachment or similar process on the rights and privileges conferred hereby, this Option and the rights and privileges conferred hereby shall immediately become null and void. (d) In the event the Holder's employment by the Corporation or any of its subsidiaries is terminated (for any reason other than death, disability or discharge for cause, as defined in the Plan) any Option granted to him or unexercised portion thereof which was otherwise exercisable on the date of termination of employment shall terminate unless, such Option, to the extent exercisable at termination, is exercised within the earlier of six (6) months after the Holder ceases to be an employee or the date of expiration of the Option. If the Holder's employment is terminated for cause, as defined in the Plan, any Option or unexercised portion thereof granted to him shall terminate and be of no further force and effect from the date of discharge. (e) Upon the death of the Holder, any Option granted to him or the unexercised portion thereof, which was otherwise exercisable on his date of death, shall terminate unless such Option to the extent exercisable at death is exercised by the executor or administrator of his estate, within the earlier of one -3- (1) year following the Holder's death or the date of the expiration of the Option. (f) In the event the Holder's employment by the Corporation or any of its subsidiaries is terminated due to disability of the Holder (as defined in the Plan), any Option granted to him or unexercised portion thereof which was otherwise exercisable on the date of termination of employment shall terminate unless, such option, to the extent exercisable at termination, is exercised within the earlier of three (3) years after the Holder ceases to be an employee on the date of expiration of the Option. (g) The Corporation shall be obligated to sell and issue Stock pursuant to this Option and the Plan and in accordance with the terms thereof but not before the Stock with respect to which the Option is being exercised is effectively registered or the sale thereof is exempt from registration under the Securities Act of 1933, as amended (the "Act"), in the opinion of counsel for the Corporation. (h) The Board of Directors of the Corporation or the Corporation's Stock Option Committee, as the case may be, may require, as a condition to the sale of Stock on the exercise of any Option, that the person exercising such Option give to the Corporation such documents including such appropriate investment representations as may be required by counsel for the Corporation and such additional agreements and documents as the Board of Directors or the Committee, as the case may be, shall determine to be in the best interests of the Corporation. -4- 7. (a) If the outstanding shares of Stock of the Corporation are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Corporation or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Corporation's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this Option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding Options, but with a corresponding adjustment in the price for each share of Stock or other unit of any security covered by this Option. (b) Upon the effective date of the dissolution or liquidation of the Corporation, or of a reorganization, merger or consolidation of the Corporation with one or more corporations in which the Corporation will not survive as an independent, publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Stock of the Corporation to another corporation, any Option granted hereunder shall terminate unless provision be made in writing in connection with such transaction for the continuance of the Plan and for the assumption of the Option granted, or the substitution for the Options of new options covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices, in which event the Plan and the Option theretofore granted or the -5- new options substituted therefor, shall continue in the manner and under the terms so provided. In the event of such dissolution, liquidation, reorganization, merger, consolidation, transfer of assets or transfer of Stock, and if provision is not made in such transaction for the continuance of the Plan and for the assumption of this Option theretofore granted or the substitution for each Option of new options covering the shares of a successor corporation or a parent or subsidiary thereof, then the Holder shall be entitled, prior to the effective date of any such transaction, to purchase the full number of shares of Stock under the Option which he would otherwise have been entitled to purchase during the remaining term of such Option. Upon the first purchase of shares of Stock pursuant to a tender offer or exchange offer, other than by the Corporation, for all or any part of the Stock, the Holder shall be entitled, prior to the termination date of any such tender offer, to purchase the full number of shares of Stock under this Option which he otherwise would have been entitled to purchase during the remaining term of such Option. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final binding and conclusive. No fractional shares of Stock shall be issued under the Plan or any such adjustment. 8. Anything in this Agreement to the contrary notwithstanding, the Holder hereby agrees that he shall not sell, transfer by any means or otherwise dispose of the Stock acquired by him upon exercise of the Option hereunder without registration -6- under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder and (b) the Holder has furnished the Corporation with notice of such proposed transfer, and the Corporation's legal counsel, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Corporation with notice of such proposed transfer, together with an opinion of counsel reasonably satisfactory to the Corporation's legal counsel, that in such counsel's opinion such proposed transfer shall be so exempt. 9. (a) The Corporation may place stop transfer orders with its transfer agent against the transfer of the shares of Stock issuable under the Option as prohibited by Paragraph 8 hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Stock to be issued upon the exercise of the Option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an option agreement dated as of June 17, 1999, a copy of which is on file with the Corporation, and may not be transferred, pledged or disposed of except in accordance with the terms and conditions thereof." 10. Subject to the terms and conditions of this Agreement, the Option may be exercised with respect to all or any portion of -7- the Stock subject hereto at any time and from time to time to the extent determined under Section 6 hereof, by the delivery to the Corporation, at its principal place of business of (a) the written Notice of Exercise in the form attached hereto as Exhibit A, which is incorporated herein by reference, specifying the number of shares of Stock with respect to which the Option is being exercised and signed by the person exercising the Option as provided herein, and (b) payment of the purchase price. Subject to the provisions of the Plan, the Corporation shall issue and deliver a certificate or certificates representing said Stock as soon as practicable after the notice and payment is so received. The certificate or certificates for the Stock as to which the Option shall have been so exercised shall be registered in the name of the person or persons so exercising the Option, and shall be delivered as aforesaid to or upon written order of the person or persons exercising the Option. In the event the Option is being exercised pursuant to the Plan by any person or persons other than the Holder, the notice shall be accompanied by appropriate proof of the right of such person or persons to exercise the Option. 11. In the event of a conflict between the provisions of the Plan and the provisions of this Agreement, the provisions of the Plan shall in all respects be controlling. 12. All offers, acceptances, notices, requests, deliveries, payments, demands and other communications which are required or permitted to be given under this Agreement shall be in writing and shall be either delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid to the -8- parties at their respective addresses set forth herein, or to such other address as either shall have specified by notice in writing to the other. Same shall be deemed given hereunder when so delivered or received, as the case may be. 13. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other or subsequent breach. 14. This Agreement constitutes the entire Agreement between the parties with respect to the subject matter hereof. 15. This Agreement shall inure to the benefit of and be binding upon the parties hereto and to the extent not prohibited herein, their respective heirs, successors and assigns and representatives. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto and as provided above, their respective heirs, successors, assigns and representatives any rights, remedies, obligations or liabilities. 16. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the day and year first above written. BEFIRST.COM By:__________________________ Name: Title: ----------------------------- , Holder -9- EXHIBIT A NOTICE OF EXERCISE OF BEFIRST.COM INCENTIVE STOCK OPTION TO PURCHASE COMMON STOCK OF BEFIRST.COM Name __________________________ Address _______________________ _______________________________ Date __________________________ BeFirst.com 121 West 27th Street, Suite 903 New York, NY 10001 Attention: President Re: Exercise of BeFirst.com Stock Option Gentlemen: Subject to acceptance hereof in writing by BeFirst.com (the "Company") pursuant to the provisions of the BeFirst.com 1999 Stock Option Plan, I hereby elect to exercise options granted to me to purchase ________ shares of $.001 par value Common Stock of the Company under the BeFirst.com Incentive Stock Option Agreement dated as of _______________ (the "Agreement"), at $____ per share (subject to adjustment as provided in the Agreement). Enclosed is either (i) a certified check (or bank cashier's check) for $_________ for the full purchase price payable to the order of Suprema Specialties, Inc. or (ii) certificates representing _________ shares of Common Stock of the Company. As soon as the Stock Certificate is registered in my name, please deliver it to me at the above address. I hereby represent, warrant, covenant and agree with the Company as follows: The shares of the Common Stock being acquired by me will be acquired for my own account without the participation of any other person, with the intent of holding the Common Stock for investment and without the intent of participating, directly or indirectly, in a distribution of the Common Stock and not with a view to, or for resale in connection with, any distribution of the Common Stock, nor am I aware of the existence of any distribution of the Common Stock; I am not acquiring the Common Stock based upon any representation, oral or written, by any person with respect to the future value of, or income from, the Common Stock but rather upon an independent examination and judgment as to the prospects of the Company; The Common Stock was not offered to me by means of publicly disseminated advertisements or sales literature, nor am I aware of any offers made to other persons by such means; I am able to bear the economic risks of the investment in the Common Stock, including the risk of a complete loss of my investment therein; I understand and agree that the Common Stock will be issued and sold to me without registration under any state law relating to the registration of securities for sale, and will be issued and sold in reliance on the exemptions from registration under the Securities Act of 1933, as amended (the "1933 Act"), provided by Sections 3(b) and/or 4(2) thereof and the rules and regulations promulgated thereunder; The Common Stock cannot be offered for sale, sold or transferred by me other than pursuant to an effective registration under the 1933 Act or in a transaction otherwise in compliance with the 1933 Act and evidence satisfactory to the Company of compliance with the applicable securities laws of other jurisdictions. The Company shall be entitled to rely upon an opinion of counsel satisfactory to it with respect to compliance with the above laws; The Company will be under no obligation to register the Common Stock or to comply with any exemption available for sale of the Common Stock without registration, and the information or conditions necessary to permit routine sales of securities of the Company under Rule 144 of the 1933 Act may not be available with respect to any proposed sale of the Common Stock. The Company is under no obligation to act in any manner so as to make Rule 144 available with respect to the Common Stock; I have and have had complete access to and the opportunity to review and make copies of all material documents related to the business of the Company. I have examined such of these documents as I wished and am familiar with the business and affairs of the Company. I realize that the purchase of the Common Stock is a speculative investment and that any possible profit therefrom is uncertain; I have had the opportunity to ask questions of and receive answers from the Company and any person acting on its behalf and to obtain all material information reasonably available with respect to the Company and its affairs. I have received all information and data with respect to the Company which I have requested and which I have deemed relevant in -2- connection with the evaluation of the merits and risks of my investment in the Company; I have such knowledge and experience in financial and business matters that I am capable of evaluating the merits and risks of the purchase of the Shares hereunder and I am able to bear the economic risks of such purchase; and The agreements, representations, warranties and covenants made by me herein extend to and apply to all of the Common Stock of the Company issued to me pursuant to this Option. Acceptance by me of the certificate representing such Common Stock shall constitute a confirmation by the undersigned Optionee that all such agreements, representations, warranties and covenants made herein shall be true and correct at such time. I understand that the certificates representing such shares of Common Stock being purchased by me in accordance with this notice shall bear a legend referring to the foregoing covenants, representations and warranties and restrictions on transfer, and I agree that a legend to that effect may be placed on any certificate which may be issued to me as a substitute for the certificates being acquired by me in accordance with this notice. Very truly yours, ----------------------- - -------------------------------------------------------------------------------- AGREED TO AND ACCEPTED: BEFIRST.COM By: _______________________________ Title: ____________________________ Number of Shares Exercised: ________________________ Number of Shares Remaining: ________________________ Date: __________________ -3- EX-10.6 10 NON-QUALIFIED STOCK OPTION AGREEMENT BEFIRST.COM NON-QUALIFIED STOCK OPTION AGREEMENT AGREEMENT made as of the ___ day of _____, 1999 (the "Grant Date") by and between BEFIRST.COM, a Nevada corporation, having its office and principal place of business located at 121 West 27th Street, New York, NY 10001 (the "Corporation") and ______________ residing at __________________ (the "Holder"). W I T N E S S E T H: WHEREAS, on the Grant Date, the Corporation authorized the grant to the Holder of an option to purchase an aggregate of _____ shares of the authorized but unissued Common Stock of the Corporation, $.001 par value (the "Stock"), pursuant to the Corporation's 1999 Stock Incentive Plan (the "Plan"), conditioned upon the Holder's acceptance thereof upon the terms and conditions set forth in this Agreement; and WHEREAS, the Holder desires to acquire said option on the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the foregoing and of the terms and conditions herein contained and for other good and valuable consideration, the parties hereto agree as follows: 1. The Corporation hereby grants to the Holder as a matter of separate agreement and not in lieu of salary, or any other compensation for services, the right and option (hereinafter called the "Option"), to purchase all or any part of an aggregate of _____ shares of Stock on the terms and conditions herein set forth and in the Plan, which is incorporated by reference herein. The Holder acknowledges receipt of a copy of the Plan. 2. This Option shall be deemed to be a non-qualified stock option. 3. The purchase price ("Purchase Price") of each share of Stock subject to this Option shall be $_____, subject to adjustment as provided in section 7 hereof. 4. This Option shall be exercisable in whole or in part at any time or from time to time for a period commencing on the first anniversary of the Grant Date and terminating at the close of business on June 16, 2004 (the "Exercise Period"). 5. The Purchase Price of the shares of Stock as to which the Option is exercised shall be paid in full at the time of exercise by cash or check payable to the order of the Corporation. The Holder shall not have any of the rights of a stockholder with respect to the Stock covered by the Option until the date of the issuance of a stock certificate to Holder for such shares of Stock. 6. (a) Except as provided in paragraph 6(b), this Option and the rights and privileges conferred hereby may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Option or any right or privilege conferred hereby, contrary to the provisions hereof, or upon the levy of any attachment or similar process on the rights and privileges conferred hereby, this Option -2- and the rights and privileges conferred hereby shall immediately become null and void. (b) Upon the death of the Holder, any Option granted to him or the unexercised portion thereof, which was otherwise exercisable on his date of death, shall terminate unless such Option to the extent exercisable at death is exercised by the executor or administrator of his estate, within the earlier of six (6) months following the Holder's death or the date of the expiration of the Option. (c) The Corporation shall be obligated to sell and issue Stock pursuant to this Option and the Plan and in accordance with the terms thereof but not before the Stock with respect to which the Option is being exercised is effectively registered or the sale thereof is exempt from registration under the Securities Act of 1933, as amended (the "Act"), in the opinion of counsel for the Corporation. (d) The Board of Directors of the Corporation or the Corporation's Stock Incentive Committee (the "Committee"), as the case may be, may require, as a condition to the sale of Stock on the exercise of any Option, that the person exercising such Option give to the Corporation such documents including such appropriate investment representations as may be required by counsel for the Corporation and such additional agreements and documents as the Board of Directors or the Committee, as the case may be, shall determine to be in the best interests of the Corporation. 7. (a) If the outstanding shares of Stock of the Corporation are increased, decreased, changed into or exchanged for -3- a different number or kind of stock or securities of the Corporation or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, forward or reverse stock split or otherwise, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this Option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding Options, but with a corresponding adjustment in the price for each share of Stock or other unit of any security covered by this Option. (b) Adjustments under this section 7 or any other adjustment in the terms of this Agreement made in accordance with the terms of the Plan as a result of a merger, consolidation, sale of substantially all of the Corporation's assets or similar transaction affecting the Corporation as specified in section 3 of the Plan, shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final binding and conclusive. No fractional shares of Stock shall be issued under the Plan or any such adjustment. 8. Anything in this Agreement to the contrary notwithstanding, the Holder hereby agrees that he shall not sell, transfer by any means or otherwise dispose of the Stock acquired by him upon exercise of the Option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder and (b) the Holder has furnished the Corporation with notice of such -4- proposed transfer, and the Corporation's legal counsel, in its opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Corporation with notice of such proposed transfer, together with an opinion of counsel reasonably satisfactory to the Corporation or its legal counsel, that in such counsel's opinion such proposed transfer shall be so exempt. 9. (a) The Corporation may place stop transfer orders with its transfer agent against the transfer of the Stock issuable under the Option in the absence of registration of the Stock under the Act. (b) The certificates evidencing shares of Stock to be issued upon the exercise of the Option may bear the following or substantially similar legends : "The shares represented by this certificate have not been registered under the Securities Act of 1933. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an option agreement dated as of June 17, 1999, a copy of which is on file with the Corporation, and may not be transferred, pledged or disposed of except in accordance with the terms and conditions thereof." 10. Subject to the terms and conditions of this Agreement, the Option may be exercised with respect to all or any portion of the Stock subject hereto at any time and from time to time to the extent determined under Section 6 hereof, by the delivery to the Corporation, at its principal place of business of (a) the written Notice of Exercise in the form attached hereto as Exhibit A, which -5- is incorporated herein by reference, specifying the number of shares of Stock with respect to which the Option is being exercised and signed by the person exercising the Option as provided herein, (b) payment of the Purchase Price and (c) payment of any withholding tax that the Corporation may be required to withhold as a result of exercises of the Option by the Holder. Subject to the provisions of the Plan, the Corporation shall issue and deliver a certificate or certificates representing said Stock as soon as practicable after the notice and payment is so received. The certificate or certificates for the Stock as to which the Option shall have been so exercised shall be registered in the name of the person or persons so exercising the Option, and shall be delivered as aforesaid to or upon written order of the person or persons exercising the Option. In the event the Option is being exercised pursuant to the Plan by any person or persons other than the Holder, the notice shall be accompanied by appropriate proof of the right of such person or persons to exercise the Option. 11. In the event of a conflict between the provisions of the Plan and the provisions of this Agreement, the provisions of the Plan shall in all respects be controlling. 12. All offers, acceptances, notices, requests, deliveries, payments, demands and other communications which are required or permitted to be given under this Agreement shall be in writing and shall be either delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid to the parties at their respective addresses set forth herein, or to such other address as either shall have specified by notice in writing -6- to the other. Same shall be deemed given hereunder when so delivered or received, as the case may be. 13. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other or subsequent breach. 14. This Agreement constitutes the entire Agreement between the parties with respect to the subject matter hereof. 15. This Agreement shall inure to the benefit of and be binding upon the parties hereto and to the extent not prohibited herein, their respective heirs, successors and assigns and representatives. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto and as provided above, their respective heirs, successors, assigns and representatives any rights, remedies, obligations or liabilities. 16. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the day and year first above written. BEFIRST.COM By:__________________________ Name: Title: _____________________________ , Holder -7- EXHIBIT A NOTICE OF EXERCISE OF BEFIRST.COM NON-QUALIFIED STOCK OPTION TO PURCHASE COMMON STOCK OF BEFIRST.COM Name __________________________ Address _______________________ _______________________________ Date __________________________ BeFirst.com 121 West 27th Street New York, NY 10001 Attention: President Re: Exercise of BeFirst.com Stock Option --------------------------- Gentlemen: Subject to acceptance hereof in writing by BeFirst.com (the "Company") pursuant to the provisions of the BeFirst.com 1999 Stock Option Plan, I hereby elect to exercise options granted to me to purchase ________ shares of $.001 par value common stock of the Company (the "Common Stock") under the BeFirst.com Non-Qualified Stock Option Agreement dated as of June 17, 1999 (the "Agreement"), at $2.00 per share (subject to adjustment as provided in the Agreement). Enclosed is a check in the amount of $_________, representing the full purchase price, payable to the order of BeFirst.com. If applicable, I have also enclosed a check payable to BeFirst.com representing payment of applicable withholding taxes. As soon as the Stock Certificate is registered in my name, please deliver it to me at the above address. Unless the issuance of the shares of Common Stock being purchased by me pursuant to the Agreement are subject to an effective registration statement under the Securities Act of 1933 (the "Act"), I hereby represent, warrant, covenant and agree with the Company as follows: The shares of the Common Stock being acquired by me will be acquired for my own account for investment and without the intent of participating, directly or indirectly, in a distribution of the Common Stock and not with a view to, or for resale in connection with, any distribution of the Common Stock, nor am I aware of the existence of any distribution of the Common Stock; I am not acquiring the Common Stock based upon any representation, oral or written, by any person with respect to the future value of, or income from, the Common Stock but rather upon an independent examination and judgment as to the prospects of the Company; The Common Stock was not offered to me by means of publicly disseminated advertisements or sales literature, nor am I aware of any offers made to other persons by such means; I am able to bear the economic risks of the investment in the Common Stock, including the risk of a complete loss of my investment therein; I understand and agree that the Common Stock will be issued and sold to me without registration under any state law relating to the registration of securities for sale, and will be issued and sold in reliance on the exemptions from registration under the Act provided by Sections 3(b) and/or 4(2) thereof and the rules and regulations promulgated thereunder; The Common Stock cannot be offered for sale, sold or transferred by me other than pursuant to an effective registration under the Act or in a transaction otherwise in compliance with the Act and evidence satisfactory to the Company of compliance with the applicable securities laws of other jurisdictions. The Company shall be entitled to rely upon an opinion of counsel satisfactory to it with respect to compliance with the above laws; The Company will be under no obligation to register the Common Stock or to comply with any exemption available for sale of the Common Stock without registration, and the information or conditions necessary to permit routine sales of securities of the Company under Rule 144 of the Act may not be available with respect to any proposed sale of the Common Stock. The Company is under no obligation to act in any manner so as to make Rule 144 available with respect to the Common Stock; I have and have had complete access to and the opportunity to review and make copies of all material documents related to the business of the Company. I have examined such of these documents as I wished and am familiar with the business and affairs of the Company. I realize that the purchase of the Common Stock is a speculative investment, that any possible profit therefrom is uncertain and that I may lose my entire investment; I have had the opportunity to ask questions of and receive answers from the Company and any person acting on its behalf and to obtain all material information reasonably -2- available with respect to the Company and its affairs. I have received all information and data with respect to the Company which I have requested and which I have deemed relevant in connection with the evaluation of the merits and risks of my investment in the Company; I have such knowledge and experience in financial and business matters that I am capable of evaluating the merits and risks of the purchase of the shares of Common Stock hereunder and I am able to bear the economic risks of such purchase; and The agreements, representations, warranties and covenants made by me herein extend to and apply to all of the Common Stock of the Company issued to me pursuant to the Option of which this exhibit forms a part. Acceptance by me of the certificate representing such Common Stock shall constitute a confirmation by the undersigned that all such agreements, representations, warranties and covenants made herein by the undersigned shall be true and correct at such time. I understand that the certificates representing the shares of Common Stock being purchased by me in accordance with this notice shall bear a legend referring to the foregoing covenants, representations and warranties and restrictions on transfer, and I agree that a legend to that effect may be placed on any certificate which may be issued to me as a substitute for the certificates being acquired by me in accordance with this notice. Very truly yours, ___________________________ - ----------------------------------------------------------------- AGREED TO AND ACCEPTED: BEFIRST.COM By: _______________________________ Title: ____________________________ Number of Shares Exercised: ________________________ Number of Shares Remaining: ________________________ Date: ___________________ -3- EX-27.1 11 FDS --
5 6-mos DEC-31-1999 JAN-01-1999 JUN-30-1999 2,442,545 0 78,421 0 0 2,521,166 18,026 0 2,539,192 153,787 0 0 0 12,500,000 2,372,905 2,539,192 0 217,504 56,444 0 399,594 0 0 0 0 0 0 0 0 (238,534) (0.03) (0.03)
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